Document of The World Bank FIl COPY

FOR OFFICIAL USE ONLY Public Disclosure Authorized

ReportNo. P-2991-SL

REPORTAND RECOMMENDATION

OF THE

Public Disclosure Authorized PRESIDENT OF THE

INTERNATIONALDEVELOPMENT ASSOCIATION

TO THE

EXECUTIVEDIRECTORS

ON A

PROPOSED DEVELOPMENTCREDIT

TO THE Public Disclosure Authorized REPUBLIC OF SIERRA LEONE

FOR A

SECOND HIGHWAY PROJECT

March 18, 1981 Public Disclosure Authorized

lhisdocument hs A restricteddisributin and may be usedby recipientsonly Inthe performnceof their official dutles. Its contentsmay not otherwisebe disclsd without Wrld ank anho aon. CURRENCY EQUIVALENTS

Currency Unit = Leone (Le) Le 1.00 US$0.95 US$1.00 = Le 1.05 Le 1.0 million = US$0.95 million

FISCAL YEAR

July 1 to June 30

WEIGHTS AND MEASURES: BRITISH SYSTEM

British/US Metric

1 foot = 0.305 meter (m) 1 mile (mi) = 1.61 kilometers (km) 1 square mile (sq mi) = 2.59 square kilometers (km2) 1 ton (long ton) 1.016 metric tons (m tons) 1 imp gallon = 4.54 liters 1 US gallon = 3.78 liters

ABBREVIATIONS AND ACRONYMS

ADF African Development Fund adt average daily traffic ARE Area Road Engineer CARE Cooperative for American Relief Everywhere EDF European Development Fund ERR Economic Rate of Return HDM Highway Design and Maintenance Model KfW Kreditanstalt fur Wiederaufbau LTS Land Transport Survey MDEP Ministry of Development and Economic Planning MoW Ministry of Works MTC Ministry of Transport and Communications OPEC Fund OPEC Fund for International Development PPAR Project Performance Audit Report RTC Road Transport Corporation SHE Senior Highway Engineer SLA Sierra Leone Airways SLPMB Sierra Leone Produce Marketing Board SLR Sierra Leone Railway UNDP United Nations Development Programme voc vehicle operating costs FOR OFFICIAL USE UIN LI

SIERRA LEONE

SECOND HIGHWAY PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Republic of Sierra Leone

Amount: SDRs 8.1 million (US$10.0 million)

Terms: Standard

Project Description: The project aims at improvingthe efficiencyof road maintenanceoperations in Sierra Leone, preserving the links between Freetown and the provinces,and improving road transportationamong the major towns in the pro- vinces. It includes: (a) planning and implementing routine maintenance on about 4,400 miles of primary, secondary and subsidiaryroads; (b) resealing of about 200 miles of paved roads; (c) rehabilitationof some 370 miles of gravel roads; and (d) consulting services and training. The project will benefit the rural and urban population by helping to lower transportationcosts, improve accessibilityto remote agriculturalareas and increase availabilityof food. It will also help improve agriculturalextension services and facilitate the distributionof farm inputs on a more extensive scale. Further expected benefits include savings from reduced road re-constructioncosts and enhancementof institutionalcapacity to plan and execute road mainte- nance programs. The possible risks involved are mainly institutional. The successfulimplementation of the project depends on institutionalimprovements and the Government'sability to provide the necessary funds for maintenanceoperations. The risks are not unusual for this type of project.

Estimated Costs:

US$ Million Total Total with Local Foreign net of taxes Taxes Taxes

Equipment 0.4 5.1 5.5 - 5.5 Incrementaloperating costs of 0.3 2.5 2.8 0.6 3.4 routine maintenance Resealing of paved roads 0.7 5.2 5.9 0.1 6.0 Rehabilitationof gravel roads 0.9 2.7 3.6 0.7 4.3 Consultingservices and training 2.4 2.5 4.9 - 4.9 Contingencies 1.1 3.4 4.5 0.4 4.9

TOTAL 5.8 21.4 27.2 1.8 29.0

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

US$ Million Local Foreign Total

IDA 0.5 9.5 10.0 OPEC Fund 0.5 6.5 7.0 ADF 0.5 5.4 5.9 Government 6.1 - 6.1

TOTAL 7.6 21.4 29.0

Estimated Disbursements:

US$ Million FY81 FY82 FY83 FY84 FY85

Annual 0.1 1.9 3.2 3.7 1.1 Cumulative 0.1 2.0 5.2 8.9 10.0

Rate of Return: Over 100 percent

Staff Appraisal Report: No. 1923a - SL dated March 11, 1981.

Map: IBRD 13244 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT FOR A SECOND HIGHWAY PROJECT

1. I submit the following report and recommendation on a proposed development credit to the Republic of Sierra Leone for the equivalent of SDR 8.1 million (US$10.0 million) on standard IDA terms to help finance a second highway project. The OPEC Fund for International Development is expected to co-finance this project on a parallel basis with a loan of US$7.0 million for 20 years, including five years of grace, without interest. The project would also be co-financed on a parallel basis by the African Development Fund (ADF) with a loan of US$5.9 million equivalent substantially on the same terms as the IDA credit.

PART I - THE ECONOMY 1/

2. A basic economic report, "Sierra Leone - Current Economic Position and Prospects" (No. 494a-SL dated November 28, 1974) was distributed to the Executive Directors. Subsequently, two updating Economic Memoranda (No. 1106-SL dated June 25, 1976 and No. 2153-SL dated June 26, 1979) have also been distributed to the Executive Directors. A Bank economic mission visited Sierra Leone in May 1980 and its principal findings are incorporated into this report. Country data sheets are contained in Annex I.

Structural Characteristics

3. The economy of Sierra Leone is dualistic in character, a rela- tively small modern sector co-existing alongside a large traditional agri- cultural sector. For its source of income and growth, Sierra Leone relies heavily on agriculture and mining, although in recent years depletion of the country's richest mineral deposits has led to a decline in their relative contribution to the economy. Diamonds, the largest export earner, accounted for nearly 56 percent of exports in 1979.

4. The agricultural sector, still largely outside the monetized economy, provides livelihood for nearly 80 percent of the population. Its contribution to GDP, however, is around 35 percent, implying a low level of agricultural productivity and food output per capita on the average. Rice is the staple food and is grown by over 80 percent of the farmers, primarily

1/ Substantially unchanged from the President's Report for the Eastern Integrated Agricultural Development Project III dated December 19, 1980 (Report No. P-2929-SL). - 2 - for subsistence, although the country still faces rice shortages. Coffee, cocoa and oil palm products are the major export crops and also the princi- pal sources of cash income for the agricultural population.

5. Sierra Leone-s social and economic infrastructure is not yet well developed. Although the extent of the road transportnetwork is generally adequate for its present needs, there is an urgent need for improved mainte- nance and the development of feeder roads. The country has good water resources, although the hydro power potential is still relatively untapped. Only about 12 percent of the population has access to a safe drinking water supply, mostly in the urban areas. Health facilities are inadequate and infant and childhood mortality rates are among the highest in Africa. Although the Government has in recent years invested quite heavily in education, primary and secondary school enrollment ratios are low (37 percent and 11 percent, respectively) and the country's illiteracy rate remains high, around 85 percent.

6. The dualistic economic structure is reflected in income dispari- ties between the modern and traditional sectors. With a population of about 3.3 million, average per capita GNP in 1979 was estimated at about US$250. The average per capita rural income is around US$120 while it averages about US$600 in the urban centers. About 23 percent of the population lives in urban areas. The urban migration rate (4.9 percent) is relatively low compared with neighboring countries; however, approximately 30 percent of the urban population has an income level below the urban absolute poverty threshold estimated at around US$105.

Economic Performance

(1) Production and Income

7. During its first decade of independence between 1962 and 1972, the financial resources available to Sierra Leone did not come under undue pressure as a result primarily of a reasonable rate of growth in domestic resources. Throughout this period, a nearly 5 percent growth in GDP per annum provided substantial foreign exchange earnings and also contributed to a satisfactory growth in public revenues. Beginning in 1972, however, this situation changed. Diamond output began to decline, mainly as a result of the depletion of alluvial deposits; there was a sharp increase in oil prices in 1973 coupled with rising import prices of manufactured goods; and in 1975 the country lost its second largest source of export earnings when the only iron ore mine closed due to rising production costs and a declining iron ore grade. As a consequence, the GDP declined by 4 percent in 1975/76 and remained virtually stagnant thereafter. During this period (1974 and 1979) the growth of GDP was less than one percent (0.9 percent) per annum on the average. With a population growth rate of about 2.5 percent per year, this resulted in a sharp decline in already low per capita real incomes. -3-

(2) Fiscal Performance

8. From 1973, the slowdown in economic growth and the erosion of the export base were accompaniedby a marked deteriorationin fiscal performance characterizedby stagnatingpublic revenues and expandingpublic expenditure policies. During the period 1973 to 1979, while public revenues increased an average of 12 percent a year, public expendituresgrew about 21 percent per annum and the overall budget deficit widened from Le 21 million in 1973 (about 6 percent of GNP) to approximatelyLe 114 million in 1979 (about 13 percent of GNP). Fiscal and monetary expansion,financed largely by short-termexternal borrowing,led to ever widening budgetarydeficits, a further deteriorationin the balance of payments and a substantialincrease in the country'sexternal debt burden. During the last two years, the increase in expenditureswas largely attributableto civil service salary adjustments,expansion in the internal security forces and extra budgetary spending related to the OAU Conferenceheld in Freetown.

(3) Balance of Payments

9. The impact of stagnant productionon the balance of payments was masked until 1974 by favorableexport prices for Sierra Leone-s major exports. Consequently,the country's foreign exchange reserves remained at satisfactory levels until the end of 1973. Difficultiesbegan to emerge in 1974 and 1975 when import prices rose sharply as a result of the oil crisis and interna- tional inflation,while export performanceremained modest. In 1974 and afterwards,the balance of payments began to deteriorateand show increasing overall deficits. As petroleum consumptionis relativelyhigh in Sierra Leone (mining, transport,power), the balance of payments position has been parti- cularly affected by oil price increases. The cost of petroleumimports jumped from US$8 million in 1971 to about US$70 million in 1979, now claiming more than one third of the country'sexport earnings. While world diamond prices have remained strong in recent years, since the volume of Sierra Leone's diamond output declined, overall export earnings showed only modest growth. Import demand, on the other hand, rose sharplywith rising import costs and expansionaryfiscal and monetary policies.The overall balance of payments deficit rose to US$43 million in 1979 from about US$7 million in 1974. Sierra Leone's net foreign exchange reserves which stood at around US$36 million at the end of 1974, have declined steadily and remained tight since then. In December 1980 gross official reserves amounted to US$32 million, of which only US$7.7 million, equivalent to one week's imports, was freely disposable.

(4) Developmentof Objectives and DevelopmentEfforts

10. The country'sfirst National DevelopmentPlan (1974/75-1978/79) was preparedwith the assistance of the UNDP and the UN Department of Technical Cooperationfor Development. The developmentstrategy and objec- tives stated in the plan and many of its basic elements were well conceived and articulated.Priority was to be given to the expansionof the productive capacity of the economy and to a more equitable distributionof wealth and incomes. Unfortunatelythe period of the Plan coincidedwith the rapid depletionof the country'sprincipal source of foreign exchange earnings and a deteriorationin the Government'sfiscal performance. These factors undercut the economic and financialresource assumptionsunderlying the Plan. The Goverment's policies concentratedincreasingly on short-termfinancial problems and neglectedthe requirementsof longer-termstructural adjustment. More recently,the Governmentbegan to focus again on medium-termpolicies and formulated a three year public investmentprogram (1978/79-1980/81)as an interim measure and initiatedpreparation of a second National Development Plan. The public investmentprogram attempted to shift resourcesto increased commodityproduction, particularly in agriculture. The second plan, which will become operationalstarting from 1981/82, is expected to address the question of structuraladjustment and give emphasis to the productive sectors togetherwith income distributionobjectives.

11. Over the past five years, between 1974/75 and 1978/79,development spending by the public sector amounted to Le 150 million (about 45 percent less than the plan target,which was based on an annual GDF growth rate of 6 percent as comparedwith the actual growth rate of 0.9 percent). Out of this total about 22 percentwas spent on agriculture,20 percent on road transport,17 percent on energy, 15 percent on social services and 25 percent on other economic and general services. Of these expenditures,17 percent was financed by budgetary savings while the remaining83 percent came from .externaland internalborrowings.

Recent Measures for Economic Stabilization

12. Faced with increasingdifficulties with respect to balance of payments,servicing of external debt and accelerationin the domestic inflationrate, the Governmentof Sierra Leone entered into a one year standby arrangementwith the IMF in November 1979 for SDR's 17 million in the second and third credit tranches. The stabilizationprogram supported by the standby arrangementincluded revenue raising measures,a limit on public expenditures,restrictions on new external debt, tighter monetary policy and adjustmentin producer prices. The Governmentmade satisfac- tory progress in implementingthe program, especially as regards revenue raising measures and restrictionson short-termexternal borrowing. FollowingIMF review missions in January and again in April 1980, Sierra Leone has been able to purchase the full amount of the standby facility.

13. The 1979/80 budget was drawn up in the light of the Government's decision to implementa financialprogram to be supportedby the Fund. Fiscal policies under the standby arrangementwere geared towards reducing the budgetarydeficits and inflationaryfinancing, through additional revenue measures and restrictionson public spending. Sierra Leone has been success- ful in implementingthe revenuemeasures and curtailingthe net government borrowingfrom the banking system. However, there have been slippagesin the areas of governmentexpenditures. Recurrent expenditureshave so far risen faster than programtargets, while capital expenditureson OAU-related projects are estimatedto have exceeded the initiallyenvisaged amount - 5 - of Le 100 million and to have reached about Le 123 million. The faster-than- programmedincrease in recurrent expenditureshas been due primarily to unpredictedsharp increasesin oil and other import prices, high levels of rice imports, and weakness in implementingthe newly centralizedexpenditure control measures.

14. Sierra Leone's external trade balance as well as current account balance have improved modestly in 1979/80 as compared with the previous year. Export earnings have increasedby about 10 percent above the 1978/79 level as a result primarilyof favorableexport receipts from diamonds. The total import bill on the other hand has been kept at a reasonablelevel despite sharp increasesin oil prices and higher-than-expectedlevel of rice imports. This was achieved through restrictivecredit policies,intensifi- cation of administrativecontrols on low priority imports, and through centralizationof the procurementprocedures for the public sector. However, largely because of the heavy debt service obligations,the foreign exchange situationhas remained extremely tight throughoutthe fiscal year.

15. The highly expansionarymonetary and credit trends of earlier years were containedunder the stabilizationprogram. As of June 1980, the rate of expansionof money supply was substantiallylower than the year before (15 percent compared with 27 percent). During the first three quarters of the program period (June 1979-March1980), net credit to Government rose by 18 percent comparedwith an actual increase of 38 percent in the comparable period of the previous year.

16. The FY81 budget introducednew tax measures to yield an incremental tax revenue of nearly Le 20 million, about 10 percent above the estimated outturn of the last year. The growth of recurrentexpenditures is restricted to 15 percentwhich, with the current inflation rate, implies a virtually unchanged level of governmentactivity in real terms. In October 1980, a 20-30 percent generalwage and salary increase (the first since 1978) was granted by the Government. Although not provided for in the budget, this increasewas accompaniedby partiallyoffsetting revenue measures on import duties.

17. Sierra Leone has requestedfurther IMF support for a medium-term economic and financialprogram under the Extended Fund Facility to start at the end of the standby period. The Government and the IMF have recently completednegotiations and considerationby the IMF Board is expected in late March 1981. If approved by the Board, the program will enable Sierra Leone to purchase about SDR 186 million over the three-yearperiod starting from the Board approval date. The release of Fund resources in each year will be subject to annual performancereviews by the IMF and observanceof quarterly performancecriteria.

External Debt and Creditworthiness

18. In the face of slow growth in public revenues and export receipts, Sierra Leone has, since the mid-1970's,relied heavily on foreign borrowing to finance its capital expenditures. Total external public debt outstanding increasedby about US$132 million between 1975 and 1979. As of June 30, - 6 -

1979 Sierra Leone's external public debt outstanding,including arrears of principal,amounted to US$329.7 million of which US$277.6 million was *disbursed. The total debt outstanding and disbursed consisted roughly of 47 percent in commercialcredits, 28 percent bilateral loans and 25 percent loans and credit from internationalinstitutions. As of June 30, 1979, the Bank Group held about 13 percent of Sierra Leone's external debt outstanding and disbursed. Assistancefrom bilateral governmentsources came mostly from the Federal Republic of Germany, the People's Republic of China and the Netherlands.

19. The maturity structure of Sierra Leone's external public debt has deterioratedsharply since 1975 as a result of increased reliance on supplier credits. The average maturity of all new commitmentsdeclined from 16 years (in the early 1970s) to around 5 years in 1978/79. The major portion of the supplier credits obtained in 1978 and 1979 were contractedin connectionwith projects related to the OAU Conference. Based on the external debt commit- ments made until December 1979, it is estimated that, without debt relief, the external public debt service payments for 1980 would stand around US$72.0 million, equivalent to about 33 percent of expected export earnings and about 46 percent of expected governmentrevenues. Since this was unmanageable,the Governmentin November 1979 approached the creditor countries through the Paris Club and in February 1980 negotiateda second debt relief agreement. The total debt relief granted by this agreement amounts to an estimated US$10 million for 1980 and US$7.5 million for 1981. After taking the debt relief into account, actual debt service payments due declined from US$72.0 million to about US$62.0 million in 1980. This latter amount represents28 percent of expected export earnings and about 40 percent of expected governmentrevenues in 1980; debt service is expected to remain at about this level in FY81 and FY82. Thereafterit should decline, assuming Sierra Leone does not contract significant amounts of new short-term debt. Debt service on Bank Group loans and credits amounted to about 2.8 percent of Sierra Leone's total debt service liability in 1980.

Future Prospects

20. The next two to three years are likely to be extremelydifficult ones for Sierra Leone: the earliest revival of the economic activity is not expected before the mid-1980'seven with new investmentsin mining and continued investmentsin agriculture. During this period, while export earnings may at best increase modestly, the cost of imports will continue their upward trend, creating pressures on the balance of payments as well as the budget. The balance of payments situation and the budget will addi- tionally be burdened with heavy debt service obligationsfalling due on pre- viously contractedshort-term debt. At the time the Paris Club agreed to debt reschedulingfor 1980, it also committed itself to similar rescheduling for 1981 and 1982, on the condition that Sierra Leone continue to have a program with the DMF. Over the next two fiscal years, therefore,continued stabilizationefforts will be required. In the medium and longer-term,it is foreseeablethat Sierra Leone will both restore and sustain its creditworthi- ness provided the Governmentimplements policies and investmentprograms aimed at the structuraltransformation of the economy. The future outlook of the - 7 - mninirgsector in Sierra Leone is difficult to assess in view of the limited knowledge of the extent of mineral deposits. There are good prospects for kimberlite underground diamond mining; large iron ore reserves have been discovered, but these are of low ore grade; mining of rutile has just resumed and there are plans to expand bauxite production. The proposed Bumbuna hydro power project could provide lower cost energy to support these activities. A further intensification of the present efforts in the agricultural sector should strengthen the country's renewable resource base, increase export earnings from cocoa, coffee and palm oil, and raise the standard of living and incomes for the vast majority of the country's people. The implementation of programs designed to achieve structural transformation will take time to implement and will require substantial flows of external assistance on conces- sionary terms. Although the present balance of payments situation and the country's debt profile would not justify lending on normal IBRD terms, the country-s low per capita income and its recent efforts to improve economic performance justify extending IDA assistance. At the same time, to ensure an adequate flow of foreign exchange resources for the country's development program during a period of budgetary stringency, it would be appropriate to finance a portion of the local costs of projects.

PART II - BANK GROUP OPERATIONS IN SIERRA LEONE 1/

Bank Group Operations

21. Bank Group lending operations in Sierra Leone to date have total- led US$66.6 million. There have been four loans amounting to US$18.7 million and eight credits totalling US$45.8 million. IFC has provided a loan of US$2.1 million to Sierra Cement Manufacturing Company, Ltd. (SERACEM). Three loans and four credits are fully disbursed. Bank Group lending has supported agriculture (40.8 percent), education (15.9 percent), power (24.6 percent) and roads (14.7 percent) and technical assistance (4.0 percent). Annex II contains a summary statement of Bank loans and IDA credits as of January 31, 1981 and notes on the execution of ongoing projects. In general, the execu- tion of the ongoing agricultural and education projects has been satisfactory; the implementation of the institutional aspects of the third power project has encountered some problems mostly due to weak management.

Lending Strategy

22. The principal objectives of Bank Group assistance to Sierra Leone are to: (a) support improved economic management, including economic development planning and project preparation; (b) stimulate agricultural production with a view both to broadening the country's export base, e.g., cocoa, coffee and palm oil, and also to helping attain self-sufficiency in

1/ Substantially unchanged from the President-s Report for the Eastern Integrated Agricultural Development Project III dated December 19, 1980 (Report No. P-2929-SL). - 8- the production of staple foods; (c) improve the country's essential infra- structure, particularly roads and power, the inadequacy of which presently constitutes a constraint upon the country' s economic growth; (d) raise the income levels and standard of living of the poorest section of the popula- tion; and (e) broaden access to education, particularly in the rural areas, and improve its quality. At the same time, the Bank Group aims through its projects to encourage the adoption of appropriate sector pricing and tariff policies and to strengthen the management and operations of the relevant government departments and corporations.

23. Since the halt in 1975 of iron ore production and the gradual decline in the production of diamonds, it has become increasingly important to develop the agricultural and manufacturing potential of the economy. Bank Group-financed agricultural development projects have provided improved extension services, feeder roads and farm inputs to smallholders affected by the projects. These activities were started in the Eastern area under the first project, and expanded under the second project which also initiated similar assistance in the Northern area. The third agricultural development project (approved by the Executive Directors on January 13, 1981) would extend coverage of the Eastern project, which has been successfully completed, to the entire province and would place added emphasis on production of coffee and cocoa in order to diversify the country's export base. The proposed fourth agricultural project would expand smallholder activities in a second phase operation in the Northern province. These ongoing and prospective operations will complement other integrated agricultural development projects under way elsewhere in Sierra Leone with the assistance of the International Fund for Agricultural Development (IFAD) and the European Economic Community (EEC). To ensure smooth assimilation of these projects into the agriculture ministry and help rationalize agricultural policies and credit, an agricultural services project is being prepared for possible Bank Group support. A possible indus- trial development (IDF) project may be prepared to assist in financing small and medium scale enterprise development in agro-industries, manufacturing and services.

24. In infrastructure, the Bank Group's first highway project assisted in the construction of the country's main trunk road system, in implementing a maintenance program, and in preparing studies for further improvement of the road system. The proposed Second Highway Project aims at strengthening the country's capacity to program and execute road maintenance. A third project in the power sector, approved in 1977, is helping finance urgently needed extension of electric power generation and distribution facilities in Freetown and several provincial centers, thereby restoring a measure of reliability in the supply of power required for sustaining the Sierra Leone economy. The project is also intended to help strengthen the finances and management of the Sierra Leone Electricity Corporation (SLEC). At the same time, the project includes assistance for the preparation of the Bumbuna hydroelectric scheme which is aimed at reducing the country's dependence on petroleum-based power.

25. In the social sectors, two education projects approved by the Bank Group have been directed towards improving and diversifying education at the secondary level, including teacher training, modernizing curricula - 9 -

to increase the relevance of education to employment, encouraging rural and non-formal training and strengthening educational planning and management. Preparation has begun on a third education project which inter alia is expected to support the Government's efforts to increase access to primary education in the rural areas.

26. To achieve its medium and longer-term development objectives, the Government needs to improve its economic planning and project preparation capability. The Bank Group has already provided technical advice to the Government in the formulation of its current three-year public investment program (1978/9-1980/1). In response to a request from the Government, the Bank Group is also financing a technical assistance project which, in coopera- tion with UNDP/TCD, is designed to assist the Government in the formulation of a second National Economic Development Plan and the preparation of well- conceived development projects in a number of priority sectors.

27. As noted in Part I of this report, Sierra Leone has experienced serious economic difficulties in the last few years, and, as a consequence, the level of Bank Group lending has been low. Continued improvement in the Government's management of the economy will be important in determining the level of future Bank Group lending.

PART III - THE TRANSPORT SECTOR

A. Introduction

Sector Characteristics

28. The transport sector of Sierra Leone comprises a road network of about 4,400 miles of classified roads and an undetermined number of local tracks; one international airport and eight local airfields; and three sea ports. A UNDP financed land transport survey in 1966, for which the Bank was the executing agency, concluded that rail transport was uneconomic compared with road transport; since the Sierra Leone Railway (SLR) was an unprofitable enterprise, the railway was phased out in 1973. Since civil aviation does not play a prominent role in the economy, and with the railways no longer in existence, the roads and the ports are the key elements in the transport sector.

29. Compared to such neighboring countries as Guinea and Liberia, Sierra Leone's transport infrastructure is fairly extensive and until recently was adequate to meet the country-s requirements. However, the urgent need to diversify the country's export base calls for an intensification of agricul- tural development as well as improvement in the related transport system, particularly roads. In the road sub-sector, the immediate need is to maintain the existing road network, which is generally in a serious state of disrepair, and for the construction of more feeder roads and local tracks. In order to maintain the road network efficiently, some existing paved roads need new surface layers and some heavily trafficked gravel roads need to be paved. - 10 -

Policy Planning and Co-ordination

30. The Government's transport sector policy, as stated in its FY75- 79 National Development Plan, concentrates mainly on the highway sub-sector, including highway construction and improvement, feeder road construction, and road maintenance. During the five year period FY75-79, the Government invested about Le 150 million in all sectors of which about Le 30 million, or 20 percent, was invested in roads.

31. Responsibility for transport planning is shared by the Central Planning Unit of the Ministry of Development and Economic Planning (MDEP), the Ministry of Transport and Communications (MTC), and the Ministry of Works (MOW). MOW proposes roads to be built and is responsible for their construction and maintenance. MTC determines highway regulations and air and sea transport policy. MOW and the Central Planning Unit of MDEP advise on road priorities, in accordance with the objectives of the National Develop- ment Plan.

32. While the closure of the railways eliminated an uneconomic trans- port mode, the Government still needs to strike a better balance between the maintenance of existing infrastructure, the construction of new main roads, and the construction of rural access roads. In the past, because it was not adequately staffed, MDEP did not take the lead in this coordination role. However, improvements are now expected as a result of assistance being provided under three existing projects: the IDA Technical Assistance Credit (SL 970) to strengthen planning capability, project preparation and execution capacity in key sectoral ministries; the UNDP financed Planning Projects in Economic Management (SIL/79/005) and Infrastructure Planning (SIL/79/004) for which the World Bank is executing agency; and the proposed project which includes technical assistance to strengthen MOW-s capacity to plan and execute road maintenance programs.

B. The Road Transport Sub-Sector

The Road System

33. Of the 4,400 miles of roads which make up the classified road net- work of Sierra Leone, only about 17 percent or 764 miles are paved. The network is centered around the more economically developed areas such as Kenema and Makeni. Nonetheless, the average density for most areas of the country is fairly high and that of the entire network, 0.16 miles per sq. mile compares favorably with, say, Guinea (0.14) or Liberia (0.12). Traffic is high by West African standards, with an estimated 612 miles of roads having an average daily traffic (ADT) of over 400 vehicles per day and another 869 miles with an ADT of more than 150 vehicles. Only about half of the roads with an ADT of more than 150 vehicles are paved, and it is likely that paving most of the remainder would be economically justified. The vehicle fleet is estimated at about 33,000 vehicles at 1980, or about one vehicle per 100 inhabitants. This is somewhat less than in Liberia - 11 -

j. bat considerably more than in neighboring Guinea (less than 0.5). In recent years vehicle statistics have not been kept properly, and the proposed prcj>cj includes technical assistance to improve data collection and analysis.

Administration

34. Responsibility for the construction, maintenance and administration of the highway system of Sierra Leone as well as for public buildings, air- ports, jetties and ferries rests with the Ministry of Public Works (MOW). The MOW has a staff of over 10,000 employees and, apart from two expatriates in c-ltZnical positions, is almost completely indigenized. Over the years, the ability of MOW to execute its tasks effectivelyhas been severely hampered by several factors includinga persistent shortage of spare parts and fuel, inadequate and broken down equipment,overstaffing at the lower level and low work morale at the middle and upper levels. MOW has seven Area Offices each headed by an Area Engineer. At present Area Engineers are responsiblefor minor constructionworks and for maintenanceof all public infrastructure. The Area Engineers are subjected to considerablepolitical pressure to under- take a variety of new constructionworks of doubtful economic justification which often take priority over maintenanceneeds. The proposed project includes a study to recommend improvementsto MOW's organizationalstructure and procedures which should assist in overcoming some of these problems (para. 43(d) below).

The ContractingIndustry

35. Owing principally to lack of capital, managerial skills and technical expertise,no truly indigenous firms are involved in the road construction industry in Sierra Leone and participationby MOW has hitherto been limited to the building of some bridges and short sections of roads as well as the preparationof designs for and supervisionof the constructionof minor projects. Major road and bridge constructionas well as civil engineering works and technicalsupervision are still largely undertaken by foreign firms. Under the proposed project, a study would be undertaken to assess the present condition and needs of Sierra Leone's constructionindustry and what measures need to be taken to increase the competence and capacity of domestic contractors.

Road Transport Industry

36. The road transport industry of Sierra Leone operates under a mixed enterprise system. A publicly owned Road TransportCorporation (RTC) provides passenger services alongsidea sizeable number of privatelyowned small enter- prises (truckers,mini buses, taxis). Followingheavy financial losses in the freight transportationbusiness, RTC now concentrateson passenger transporta- tion alone and is finding it hard to break even in the face of government-set passenger fares that have not kept pace with inflation. Unlike passenger fares, tariffs for freight transportare determinedby the market and no private or public agency exists for organizing road freight transport. Entry into the latter industry is legally restricted to nationals of Sierra Leone, but this limitationhas in practice been largely ignored with the result that foreigners are extensivelyinvolved in the industry. To date, the road trans- port industryhas on balance managed to provide adequate services despite scarcities of spare parts and equipmentand rapidly rising operating costs. - 12 -

Road Construction and Maintenance

37. Whilst major construction works are normally executed by foreign firms, MOW is gradually developing the capability to undertake major road and bridge design work. The design standards used for road engineering are somewhat unbalanced and would be reviewed under the project. Equipment intensive methods are used for force account road construction or rehabilita- tion and for bridge works, while labor intensive methods are used for routine maintenance. There may be greater scope for labor utilization and under the proposed project a consultant study would examine the appropriate use of labor in road construction and maintenance. Because of MOW's limited construction capability, a U.S. private charitable organization, Cooperative American Relief Everywhere (CARE) is executing on behalf of Government a feeder road construction program with financial assistance from USAID and the EEC and Bank Group under ongoing agricultural development projects in the Northern and Eastern Regions of Sierra Leone. The CARE program is proceeding well and the works are of good quality. However, the roads were built to higher standards than normal, partly in the knowledge that maintenance would probably be neglected; more recently the standards have been revised downwards by an agreement between Government, CARE and IDA. Also in September 1977, the Government created a feeder road maintenance unit within MOW to be responsible jointly with CARE for maintenance of feeder roads built by the latter.

38. The effectiveness of road investment in promoting economic develop- ment, particularly in the rural areas, has been constrained by inadequate road maintenance. In some instances newly constructed feeder roads are being utilized as secondary roads because of the state of disrepair of the secondary system. Road maintenance expenditures decreased from about 4.2 percent of Government recurrent expenditures in FY71 to about 2.5 percent in FY79. Budgetary and foreign exchange constraints have resulted in lack of spare parts and equipment, and these problems have been aggravated by diversion of equipment to other activities, the relatively low priority accorded to maintenance compared with new investment, inadequate workshops, and poor training and supervision of field staff and laborers. These problems would be addressed under the proposed project.

Past Bank Group Assistance

39. Bank Group assistance in the transport sector in Sierra Leone has to date been relatively modest in financial terms. A loan and credit for the First Highway Project (Loan 710/Credit 218-SL, US$7.2 million, 1971) financed the construction of the Bo-Kenema road and a first phase of road maintenance, including equipment, technical assistance and training. The project has been completed and the loan and credit amounts fully disbursed. The project ran into cost overrun problems and a Supplementary Credit of US$2.3 million was approved in 1975. Although the ex post economic rate of return (25%) exceeded appraisal estimates, the Project Performance Audit Report dated June 13, 1978, noted that implementation of the routine and periodic maintenance component of the project fell short of expectations due to diversion of equipment for use by other Government agencies; subordination of maintenance to construction; and budgetary and personnel constraints. To the extent possible the present project tries to minimize the risk of this recurring. - 13 -

40. The Bank Group's principal objective in the transport sector is to encourage the Government to relate its transport expenditures to broader economic objectives, particularly in support of agriculture. The first priority is adequate road maintenance so that the condition of existing roads will permit efficient transport in support of rural development. The second priority is rational selection, preparation, and implementation of road investments, including feeder roads, and improvement works on primary and secondary roads. The Technical Assistance Project (Credit 970 SL) and the proposed project focus on strengthening transport planning and improving highway maintenance and is based to a significant degree on the lessons learned from the First Highway Project.

PART IV - THE PROJECT

41. The project was prepared with the help of consultants financed by UNDP and was appraised by the Bank Group in October 1977, but further pro- cessing had to be held in abeyance for over two years, pending improvements in the management of the economy. It was reappraised in May 1980. A report entitled "Sierra Leone: Second Highway Project, Staff Appraisal Report", No. 1923a-SL, dated March 11, 1981, is being circulated separately to the Executive Directors. Negotiations took place in Washington February 17-19, 1981. The Sierra Leone negotiation team was led by the Honorable E.S. Kargbo, Minister of Works. Supplementary project data are provided in Annex III.

Objectives

42. The proposed project is expected to strengthen and improve the efficiency and productivity of the road maintenance organization of the country through the provision of equipment, spare parts, technical assistance and training. It would support the country's agricultural development efforts by helping preserve the road links between farms, domestic markets and the Freetown seaport.

Description

43. The proposed project would include: (i) the planning and execu- tion of routine maintenance on the entire classified network of about 4,400 miles of paved and gravel roads by force account; (ii) the resealing of about 200 miles of paved roads by contract, or about one-quarter of the paved network, most of which requires resealing at this time; (iii) the rehabilitation of some 370 miles of gravel roads by force account, or about one-tenth of the gravel network much of which now requires regravelling; and (iv) technical assistance to MOW and studies. More specifically, the project would include the following:

(a) Routine Maintenance: At one maintenance worker per mile of road, the present ratio is excessive in relation to output. Under the project, gangs of MOW's labor force will be complemented by light mechanized units for patching, grading and minor repairs, thereby significantly increasing labor output and productivity. By September 1 of each year, during implementation, - 14 -

the Government will furnish to the Association, for its approval, a program of routine maintenance to be carried out during the next year (Credit Agree- ment, Section 3.01 (f)). In 1979, the Government purchased road equipment under suppliers' credits. Most of the equipment has been identified for use under the proposed project. During negotiations, the Government agreed that this equipment would be used exclusively for the proposed project (Credit Agreement, Section 3.06). A few additional pieces of complementary equipment, such as compactors, compressors and service equipment will be financed under the Project. To improve workshop facilities, a building currently used for equipment storage will be remodeled to become the new Freetown Central Work- shop. The latter would be fully equipped, and additional equipment for five area workshops would be obtained. Finally, MOW's soils laboratory in Free- town would be provided with new equipment, vehicles and assistance in staff retraining.

(b) Resealing of Paved Roads: 200 miles of priority road sections would be resealed under contract over a period of two years. The roads would be selected with the assistance of consultants provided under the project. A study would be undertaken by the consultants under terms of reference satisfactory to the Association to determine priority road sec- tions for resealing; by August 31, 1981, the Government will furnish to the Association for its approval a program for the resealing of the selected paved roads (Credit Agreement, Section 3.01(d)).

(c) Rehabilitation of Gravel Roads: The project provides for the regravelling of about 370 miles of gravel roads by force account. Priority sections of the country-s gravel roads will be selected for rehabilitation under the project. The roads will be selected on the basis of a study to be carried out by the consultants under the project in accordance with terms of reference satisfactory to the Association; by December 31, 1981, the Govern- ment will furnish to the Association for its approval a program for the rehabilitation of the selected gravel roads (Credit Agreement, Section 3.01 (e)).

(d) Technical Assistance Training and Studies: A consulting team comprising one senior highway engineer (39 m/m), one training specialist (15 m/m), two highway maintenance engineers (66 m/m), one mechanical (24 ra/m), one transport economist (24 m/m) and six Sierra Leonian area road engineers (ARE's, 37 m/m each) will assist MOW, during the period of implementation, to strengthen its capacity to plan and execute road maintenance projects efficiently. They will also, with the help of short-term experts (38 m/m), prepare a follow up road maintenance program, review the organizational struc- ture and responsibilities of the Ministry of Works, and submit recommendations regarding the maintenance of feeder roads and local tracks. They will also review MOW½s budgetary accounting and procurement procedures, review design standards and recommend the most appropriate labor/equipment mix for road maintenance and construction. The UNDP has agreed to finance a feasibility and preliminary engineering study of the Kenema-Pendembu-Koindu road for which the Bank is the executing agency. Detailed engineering for the economically justified section of this road will be financed under the proposed maintenance project. In view of the importance of the technical assistance in implement- ing the project, the hiring of consultants satisfactory to the Association has - 15 - been made a condition of credit effectiveness; the Government has already requested proposals from a short list of consultants approved by the Associa- tion during negotiations (Credit Agreement Section 6.01 (b)).

Recurrent Maintenance Budget

44. In view of the Government's budgetary constraints, a declining portion of the incremental operating costs of road maintenance materials required to implement the project would be financed from the credit. This would involve a total amount of US$2.6 million over a period of three years (FY82-84). An additional US$2.7 million will be made available from the Government for the same purpose over the same period. In order to avoid possible delays in project implementation, the Government will also open a special revolving fund account with a local bank for all expenditures related to maintenance materials. The Government would open this account and make an initial deposit of Le 600,000 into it as a condition of credit effectiveness and a second deposit of Le 500,000 by September 1, 1982; the account would be replenished monthly (Credit Agreement, Sections 3.01(b) and 3.01(c)).

Project Cost

45. The total cost of the project, including taxes estimated at $1.8 million, is estimated at US$29.0 million of which US$21.4 million or 74 per- cent is in foreign costs and US$7.6 million in local costs. The Government proposes to waive all taxes and duties for the project, except those on fuel, which amount to about US$1.8 million. A summary breakdown of project capital costs is given in the Credit and Project Summary. The cost estimates are based on data and experience in neighboring countries. The cost per man- month for expatriate consultants is estimated to range between US$6,000 and US$8,500, exclusive of local travel and vehicles. Price contingencies were calculated as follows: for labor and other local costs, 5 percent and 10 per- cent r .spectively for each of the four years or iplementL iJn; for foreign costs, 9 percent and 8.5 percent for the first and second years respectively and 7.5 percent for each of the last two years. No physical contingencies have been included because the physical components of the project could be cut back if the need arises.

Project Financing

46. The proposed IDA credit of US$10.0 million would finance about 37 percent of total project costs, net of taxes. IDA, OPEC Fund, and ADF together would finance about 84 percent of the cost, net of taxes, represent- ing 100 percent of foreign costs and about 26 percent of local costs. The IDA credit would cover a declining portion of incremental operating costs of routine maintenance, the foreign component of the rehabilitation of gravel roads and about 60 percent of the cost of consulting services. OPEC Fund would finance the total foreign cost and part of the local cost of resealing of paved roads. ADF would finance the total cost of equipment. Fulfillment of the conditions precedent to the effectiveness of the co-financing agreements with ADF and OPEC Fund would be a condition of effectiveness of the IDA Credit (Credit Agreement, Section 6.01(a)). - 16 -

Project Implementation

47. The proposed project is expected to be implemented over a period of about three and a half years beginning early in 1981 and ending in 1984. Supported by technical assistance, MOW would have overall responsibility for executing the project. The Area Engineers (para 34) have many responsibili- ties other than roads and current wage rates make recruitment of qualified supporting staff difficult. Therefore, Area Engineers will be assisted by Area Road Engineers to be provided under the project (para 43(d)) who would concentrate exclusively on road maintenance. The role of the ARE's upon completion of the project will be defined following recommendations on the organization and staffing of MOW by the technical assistance studies. Force account will be used for regravelling and routine maintenance under annual work programs prepared by MOW, but resealing of paved roads will be carried out under contract in order not to overstretch the capacity of MOW in terms of manpower and equipment. The execution of routine maintenance works will be closely supervised in each area by road inspectors who will be assigned specific sections of the network. To ensure effective supervision and coordi- nation, the Government has (a) appointed a high level civil servant as project coordinator and (b) agreed to pay adequate compensation for field expenditures 4ncurred by MOW's staff in carrying out the project (Credit Agreement, Sections 3.05 and 3.07).

Procurement

48. MOW's requirements for non-proprietary spare parts (about $2.6 million equivalent including Government's contribution and contingencies), lubricants ($0.9 million) and materials ($2.1 million) for routine main- tenance and the rehabilitation of gravel roads would to the extent possible be standardized and purchased in bulk under contracts awarded on the basis of international competitive bidding following Bank Group Guidelines. A 15 percent margin of preference, or the import duty if lower, would be granted for goods manufactured in Sierra Leone. Proprietary spares made by the original equipment manufacturers ($0.6 million), and fuel ($3.9 million) which is available only from a single refinery, would be procured directly by nego- tiated contracts satisfactory to the Association. Spare parts and materials which cannot be conveniently grouped for bulk purchase into lots greater than US$50,000 would be procured on the basis of competitive bidding in accordance with local procedures satisfactory to the Association up to an aggregate amount of $1.0 million equivalent. Minor items of essential and urgently needed spare parts and materials costing less than US$5,000 per purchase and aggregating not more than $150,000, would be procured by local shopping or by direct purchase in the case of a single local supplier. Regraveling and routine maintenance will be carried out by force account using MOW-s staff. Technical assistance being provided under the project will assist in the procurement process.

Disbursements

49. Disbursements from the Credit would be made for:

(a) 100 percent of the foreign costs and 15 percent of the local costs of consulting services (US$2.7 million); - 17 -

(b) 67 percent of the cost of spare parts and materials for routine road maintenanceand rehabilitationof gravel roads (US$5.3 million); and

(c) unallocated (US$2 million).

Disbursementswould be fully documentedexcept for operating costs under (b) which would be made against certified statements of expendituresigned by MOW's project coordinatorand by the Senior Highway Engineer, the documenta- tion for which would be retained by MOW for Association inspection. The Governmentwill channel expendituresfor routine maintenance and rehabilita- tion through the special account and will appoint external auditors accept- able to the Associationwho would audit these accounts annually and submit a report to the Association (Credit Agreement,Section 4.01).

Benefits and Risks

50. As structured,the proposed project will help in the improvement of the economic and social life of the rural and urban population. Its implementation will yield benefits embracing activities both in the trans- port and other sectors, especially agriculture. These benefits will include a significant reduction in vehicle operating costs, savings from reduced road reconstruction costs, enhancement of institutional capacity to plan and execute road maintenanceprograms and improved access to markets and areas that are now very difficult to reach due to poor roads. The costs consideredin the economic evaluation include the cost of routine maintenance,regravelling, resealing, and technical assistance,amounting to 98 percent of project costs. Appraisal has shown the project to be technicallyand economicallyviable with an economic rate of return of over 100 percent. The principal risks are that the MOW would not be able to achieve the planned institutionalimprove- ments or provide the necessary recurrent funds to increase maintenanceoutput. However, the project seeks to minimize these risks by the provision of techni- cal assistance and the gradual phasing-in of the Government s contribution to incrementaloperating costs.

PART V - LEGAL INSTRUMENTSAND AUTHORITY

51. The draft Development Credit Agreement between the Republic of Sierra Leone and the Association and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Associationare being distributedseparately to the Executive Directors.

52. Special conditions of the project are listed in Section III of Annex III of this Report. Special conditions of effectivenessof the Credit Agreement are (a) hiring of consultants,satisfactory to the Association, to assist in the implementationof the project, (b) fulfillment of conditions precedent to the effectivenessof the co-financingagreements betweenGovern- ment and co-financiers,and (c) opening of a special account in a local bank, with an initial deposit of Le 600,000, under arrangementssatisfactory to the Association (CreditAgreement, Section 6.01). - 18 -

53. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association.

PART VI - RECOMMENTATION

54. I recommend that the Executive Directors approve the proposed Credit.

Robert S. McNamara President

Attachment WashingtonD. C. March 18, 1981 - 19- ANNEX I Page 1 of 5 pages TABLE 3A SIERRA LEONE - SOCIAL INDICATORS DATA SHEET

SIERRA LEONE REFERENCE GROUPS (WEIGHTED AVERAGES LAND AREA (THOUSAND SQ. KM.) - HOST RECENT ESTIHATE)- TOTAL 71.7 AGRICULTURAL 63.0 MOST RECENT LOW INCOME MIDDLE INCOME 1960 lb 1970 /b ESTIHATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA

GNP PER CAPITA (US$) .. 150.0 250.0 260.0 868.0

ENERCY CONSUMPTIONPER CAPITA (KILOCRAMS OF COAL EQUIVALENT) 31.0 127.0 98.0 80.0 699.4

POPULATION AN0 VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 2.2 2.7 3.3 URBAN POPULATION (PERCENT OF TOTAL) 13.0 18. 1 23.1 17.3 28.9

POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 6.0 STATIONARYPOPULATION (MILLIONS) 14.0 YEAR STATIONARYPOPULATION IS REACHED 2160

POPULATION DENSITY PER SQ. KM. 31.0 38.0 46.0 27.4 61.7 PER SQ. KH. AGRICULTURALLAND 35.0 43.0 52.0 82.6 126.0

POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.8 42.0 43.7 44.9 45.5 15-64 YRS. 55.0 55.0 53.0 52.2 51.6 65 YRS. AND ABOVE 3. 2 3.0 3.3 2.8 2. 8

POPULATION GROWTHRATE (PERCENT) TOTAL 1.8 2.2 2.5 2.7 2.7 URBAN 3.9 5.5 5.7 6.8 4.9

CRUDE BIRTH RATE (PER THOUSAND) 47.0 46.0 46.0 47.4 46. 8 CRUDE DEATH RATE (PER THOUSAND) 27.0 22.0 19.0 19.6 16.4 GROSS REPRODUCTIONRATE .. 2. 9 2.9 3.2 3. 2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. USERS (PERCENT OF IWRIED WOMEN) .. ..

FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 99.0 98. 0 91.8 94.0

PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 85.0 96.0 93.0 90.2 92.7 PROTEINS (GRAMSPER DAY) 43.0 47.0 48.0 53.0 53.0 OF WHICH ANIMAL AND PULSE 13.0 14.0 17.0 18.4 15.6

CHILD (AGES 1-4) MORTALITYRATE 41.0 32.0 27.0 27.7 21.3

HEALTE LIFE EXPECTANCYAT BIRTH (YEARS) 37.0 42.0 46.0 45.3 50.1 INFANT MORTALITY RATE (PER THOUSAND) .. ..

ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL *- 12.0 *. 23.2 31.0 URBAN .. 75.0 .. 58.0 66.8 RURAL .. 1.0 .. 16.8

ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL ...... 28.9 URBAN ...... 67.0 RURAL .. ..

POPULATION PER PHYSICIAN 19956.0 18067.0 .. 30910.4 1450P.2 POPULATION PER NURSING PERSON 5904.0/c 3802.0 .. 5793.2 3279.5 POPULATION PER HOSPITAL BED TOTAL 1312.0 1095.0 .. 1198.9 1141.5 URBAN .. .. RURAL .. ..

ADMISSIONS PER HOSPITAL BED .. ..

HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 6.5 URBAN .. 5.7 RURAL .. 6.7

AVERAGENUMBER OF PERSONS PER ROCK TOTAL .. .. URBAN .. 2. I/d RURAL .. ..

ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL 2. Oft .. - 20 - ANNEX I Page 2 of 5 pages

TABLE 3A SIERRA LEONE - SOCIAL INDICATORS DATA SHEET

SIERRA LEONE REFERENCE GROUPS (WEIGHTED AVEAES - HDST RECENT ESTIHATE)- E

MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA

EDUCATION ADJUSTED ENROLLMENTRATIOS PRDIARY: TOTAL 23.0 34.0 37.0 57.7 61. 7 MALE 30.0 41.0 45.0 74.2 69.2 FEMALE 15.0 27.0 29.0 54.1 51.4

SECONDARY: TOTAL 2.0 9.0 11.0 10.0 20.6 MALE 3.0 13.0 15.0 13.7 29.2 FEMALE 2.0 5.0 7.0 7. 1 14. 7

VOCATIONALENROL. (1 OF SECONDARY) 9.0 3.0 2.0 6. 8 7.0

PUPIL-TEACHER RATIO PRIMARY 36.0 32.0 32.0 45.0 36.6 SECONDARY 17. 0 21.0 19. 0 25.2 24. 3

ADULT LITERACY RATE (PERCENT) 7.0 15.0 15.0 25.5

CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.0 9.0 6.0 3.6 38.8 RADIO RECEIVERS PER THOUSAND POPULATION 4.0 15.0 21.0 31. 5 83.5 TV RECEIVERS PER THOUSAND POPULATION 0. 2/e 1. 1 2.8 1.8 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSANDPOPULATION 6.0 17.0 10.0 4.6 24.2 CINEMA ANNUALATTENDANCE PER CAPITA 0.1 .1 .. .. 0. 7

LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 910.5 1055.6 1222.3 FEMALE (PERCENT) 35. 7 35.0 35.0 33. 5 38. 1 AGRICULTURE (PERCENT) 77. 7 71.5 67.0 80. 7 54.3 INDUSTRY (PERCENT) 11.7 14.8 18.0 8.1 17.8

PARTICIPATION RATE (PERCENT) TOTAL 42. 1 39.9 38.7 42.2 38. 8 14ALE 54.6 52.3 51.1 55.1 48.4 FEMALE 29.8 27.7 26.5 29.5 29.4

ECONOMIC DEPENDENCYRATIO 1. 1 1.2 1.3 1.2 1.3

INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. 33. 8/f HIGHEST 20 PERCENT OF HOUSEHOLDS .. 64.1/f LOWEST 20 PERCENT OF HOUSEHOLDS .. 4. 5/f LOWEST 40 PERCENT OF HOUSEHOLDS .. 10. I/f

POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN ...... 138.2 RURAL .. .. 54.0 86.1

ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 78.0 107.0 RURAL .. .. 67.0 65.0

ESTIMATED POPULATION BELOw ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RURAL .. .. 35.0 66.9

Not available Not applicable. NOTES

La The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978.

/c 1962; /d 1967; Le 1963; /f Population.

Most recent estimate of GNP per capita is for 1979, all other data are as of April, 1980.

October, 1980 - 21 - ANNIEXI Pag-e 3 of 5 pages DEFINITIONSOP SOCIAL IND.ICATORS

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Popaanon g196, 1970, an,d 191.dtapcts I.d..ll seating less thanight persons; Ic...lrr.d...moase, eut n Crass Pepi-dAS.a Sa1,te1 - Aveese numba of -aabtrswsantll bear. IaS mititary vehicles. ( .- i..Ii-iIi he6 ora reprda-tivereid SIf sb nnpere -tnpresen age y-seic fee- ain Reciver t (per.l tiosnd tporlottoth- Al c itpereeter far csd 1960peasn;970ll fieyerad rgn udn1is190717, o 1977. broadats no gn ,,tal pa Ifc pe di-aan ofppicin o ldsn obireh _oths devices...Ia1det sine o ..masion fsIph plunnif program satpint effct date fa 1e-1r yearnl may actbe- conpfal as sou famil PlnigIas(eonsfare ae)- enoaee are cAosrle l hlihet- cenig anltipf.tono)hl-e re g 1-CC yaes th use1 hith -t-nirf debiee top TOOcives(mtruadppltnl ''reovr o badatt almried amman insae9g6g0 a.re70 ubi per hou97dp7pLtiTo-o euclade uotoesrd, TI' -erll,

rodcIce o6al food1 -onsm97isdt.. Prdoto slae ed s ee o lct slmridteuoed tou retaring gres tentg, PIsislls"Idr

satityna -uerapera -cepIce .... s 1961-65, i 1910, en9l7i, .daha7. z I 8 I _E2 _ bsrai~t, srl off. calories(rereetof rgir fss)-i Coputed. from - and mdatly.units. oneegp ooiralessoften lnd sappienuald l is.. coannop pero a pita ..PO9CR ;dt - -- -1 . l I-P.b.i pe euot,andy.av ilablnapplies!bnr itsleb R topledoetcprdcio,lyesei sa enloebpliru ito Fed seeds,es Ttaaretoreon ao ore uepr'ndkuten u foolalyaienrtfgho non,erdHs,ecrts, oido

tentIsnANeD stimatedO byPAl o physiologIal needs fo.surmalTnei- 1070I.s.d data

fe aiaupyof p- iei (ras pee day1697(-00-Pro do. co- .en f e capiatfuustr Ipren)-Lao urehodofolsy tc,ceu ctro necnpplyf fod perday.Set spplyoftfod .. i Idefined asd afo. R- tdeeercd,nto ugna prctsae ftott isorflorte - kh alIIIo 0gam fnsa rtin -e ap n li, grams ofalrl n atrOainRfe(ecnt oa. ar n tomlt-Patiratnc putlse1 petan ofl wb- d10bgamsould he anima peor g. These siad- abtost dwaerae r s at,ot n emi aorfrea aeds ort oerta tbose.Agl.tofp1 grams r- irf prc=te in so 23. grams O perAesge A1oftctsl.nl sod female popa-aiBn of atnaoueI pottnof p antoral ..r...etsasa -nv prig Poe he. world,6popon9d0u PAd in7 dst Third 1960 19,lod 17d ash. Th-ne arcdi. dl.i-u a-tltpai-ocoesi hlo

Per o ty roteinl uafl term animali and Jp51st-Jroei sappy rf foodt LABORgO-CEnnrcue h ouain u oger rn,aOanr

qyed Fre aimal nood pulsesingram peeI..day 191-1dtfb1970. andq197 daa osnclpodryRto-Rtof popui.gha.o-u-etIt tsI ado I tries dataderiundfom life sales; 1960-1970tand1977 datalDoCO196 IST19BLT-d ooAlTO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 i o at 160.d171bith; an 1978dtta ofag pe huadliebrh.estmtdaslt oetybieLvlty e actl-ahrnfnc

o-ou pplyior o fotadPn locate sr ope ths .10 eses rnthue a h eree incmeofth oanto.llbd lorthrdehod o she curs enonideriderananable-t as beingaccessT' winbin of rural -d othnttbonee.t.tIn -seeas tesIIal.accss ip tad that1 he hoseIf ory tethers of the -hasebed leveluip.ih Rduset o.Ite.oioflvo Ic rca onetss.- .,dtb... loof 75.. ISt-atfate tK.. ofa Poalaion cio AIflustPvery IcomILeel perent - doiot av sospn a- di-eeocnionte p-1 ofpthe- day tAo fecing the h~ a ..caro -f rentto oplto rcd n"I'rll,bcue sulotye'

r lube-Ie-dl o pope toalI- ad.rualPeae seemedS by7 streets f. . i- pealmyn lustheouii tcsae isasldwthortthsttesmer to tion ofAesoly-s an Proleeton .trcaetmde.t Child(P.t th1R.t. .... dI i I.b-~~~~~~~~~~~~~~~ucaer 99 pi rfrive;h to 4eceytn simlariet.Pa"iss en aseese.bh atrbrnlyses rth Is of - 22 - ANNEXI Page 4 of 5 pages

SIERRA LEONE ECONOMICINDICATORS

GROSS NATIONALPODUCT IN 1978 P79 ANNUALRATE OF OROWTH(% 1972/73 constant prices)

US$ Mln. 1968/69-70/71 1970/7l-7/778 1978/79_j/

ON? at Market Prices 871.4 100.0 7.4 0.9 1.6 Gross Domestic Investment 135.2 15.5 1.1 -1.2 11.1 Gross National Saving 22.6 2.5 _ -6.8 -45.0 Current Account Balance -116.6 13.0 Exports of Goods, MNS 209.7 24.1 -2.0 -2.0 -3.1 Imports of Goods, NFS -313.8 36.0 1.5 -0.6 14.5

OUTPUT, LABOR FORCE AND PRODUCTIVITYIN 1978/79

Value Added Labor Force2/ V. A. Per Worker US$ Mln. A Nln. S MA$ % Agriculture 285.5 35.9 .820 67.0 348.2 53.5 Industry 174.1 21.9 .195 16.0 892.8 137.2 Services 336.0 42.2 .184 15.0 1826.1 280.7 Unallocated - .024 2.0

Total/Average 795 10 0 i1. i 65u.;5 100.

GOVERNXENTFINANCE General Govermlent Central Government ln.) 7, Of OGP (Le Mln.) % of GODFI.c. I7 197 196-7-1978/79 -19_79 1974-1975/76 Current Receipts 172.8 20.7 17.5 Current Expenditure 166.0 19.9 16.2 Current Surplus b.---B -U. Capital Expenditures 41.6 5.0 5.4 External Assistance (net) 36.2 4.2 4.7

MONEY,CREDIT and PRICES 1974 1975 1976 1977 1978 1979 (Million Le outstanding end periodT Money and Quasi Xoney 84.6 91.6 111.9 136.2 179.3 214.5 Bank credit to Public Sector 3/ 23.0 56.7 107.3 119.7 182.4 252.5 Bank Credit to Private Sector 39.7 41.1 43.7 46.8 64.9 71.0

(Percentages or Index Numbers) Money and Quasi Money as %of GDP (m.p.) 17.7 16.0 18.2 18.3 22.0 23 .0 General Price Index (1961 - 100) 4/ Annual percentage changes ins General Price Index 14.4 19.9 17.2 8.3 10.9 21.2 Bank credit to Public Sector 52.3 146.5 89.2 11.6 52.4 38.4 Bank credit to Private Sector 40.8 3.5 6.3 7.1 38.6 9.4

NOTEr All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Preliminary 2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated"' consists mainly of unemployed workers seeking their first job. 3/ Credit from the Banking System. 4/ Consumer Price Index (Freetown).

not available not applicable - 23- ANNEX I Page 5 of 5 pages SIERRA LEONE

TRADEPAYMENTS AND CAPITAL FWS

BALANCEOF PAYMENTS MERCHANDISEEXPORTS(US $ -.llion) 1973-75 1977-79 1974 1976 1979 Average % Iww.. (MillionsUS $) NYS ~153.5 120.0 230.0 Minerals 99.1 74.1 105.8 58.4 Exports of Goods, NbS 213.2 62.5 -304.2 D;amonds 80.4 60.1 597.7 53.9 imports of Goods, NFS -217.2 -16. -3. Iron Ore 14.3 10.7 - - Resource Gap (deficit - -) - Bauxite 4.4 3.3 8.1 4.5 - 63.7 - 42.5 - 74.2 Agr'l. Commod. 24.8 18.5 64.1 35.4 Interest Payments (net) Coffee 7.8 5.8 32.5 17.9 Workers' Remittances Cocoa 8.2 6.1 22.8 12.6 Other Factor Payments (net) - 18.8 - 25.2 - 40.9 Palm kernels & Prod. 8.8 6.6 8.8 4.9 Net Transfers 21.9 10.7 28.6 All other Co-modities 9.9 7.4 llj .6.7 Balance on Current Account 7-606 -757.0 -- W.5 Total 133.8 100.0 181.1 100.0

Direct Foreign Investment 10.3 8.5 7.6 EXTERNAL DEBT, June 30, 1979 Net MLT Borrowing 26.8 16.4 37.0 Disbursements 38.5 32.3 86.1 US $ Mln Amortization -11.7 -15.9 -49.0 Subtotal 3/.1 24.9 44.6 Public Debt, incl. guaranteed 277.6- Capital Grants 3.5 5.6 6.7 Non-GuaranteedPrivate Debt - Other Capital (net) 10.4 4.3 7.6 Total outstanding & Disbursed 277.6 Other items n.e.i _..8 - 21 =1C.5 I/ Increase in Reserves (+) - 7.8 -24.3 -43.1 DEBT SERVICE RATIO for 1979-'

Gross Reserves (end year) 49.2 21.8 46.7 Net Reserves (end year) 36.5 - 4.9 -26.2 Public Debt, incl. guaranteed 22,5 Non-GuaranteedPrivate Debt Fuel and Related Materials Total outstanding& Disbursed 2T25 Inporta of which: Petroleum 25.3 11.2 67.0 2/ Exports of which: Petroleum - - - IBRDIIDA LENDING, June 30, 1980 (Million US

tERn IDA RATE OF EXCHANGE IBRD _ID Outstanding & Disbursed 13.0 27.3 Through 1971 n - 1979 Undisbursed 0.8 6.3 US $ 1.00 '.8297 Lea US 1.00 - 1.050 Le Outstandingincl. Undisbursed Le 1.00 -US *1.2053 Le l.00 = US $.9518 13.8 33.6

1/ R4tio of Debt Service to Exports of Goods and Non-Factor Services. Excludes debt servicingof Arrears - ($8.4 million in principal and $2.8 million in interest). 2/ Preliminary.

not available

not applicable

August 22, 1980

(Date) - 24 - ANNEX II Page 1 of 4 pages

THE STATUS OF BANK GROUP OPERATIONS IN SIERRA LEONE

A. Statement of Bank Loans and IDA Credits (as of January 31, 1981)

Loan or US$ million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA 1/ Undisbursed

Three Loans and Four Credits Fully Disbursed 13.7 15.8

1138 1975 Sierra Leone Agriculture II 5.0 - 0.34 573 1975 Sierra Leone Education II - 7.3 1.98 734 1977 Sierra Leone Third Power - 8.2 0.20 970 1979 Sierra Leone Technical Assistance - 2.5 2.50

Total 18.7 33.8 2/ 5.02 of which has been repaid 5.0 0.2

Total now outstanding 13.7 33.6

Amount sold 0.5 of which has been repaid 0.5 _

Total now held by Bank and IDA 13.7 33.6 _

Total undisbursed 0.34 4.68 5.02

1/ Net of Exchange Adjustments.

2/ In addition,an IDA credit for US$12.0 million equivalent for the Eastern IntegratedAgricultural Development Project III (Credit No. 1094-SL) was signed on February 13, 1981, but is not yet effective. - 25 - ANNEX II Page 2 of 4 pages

B. Statement of IFC Investments (as of January 31, 1981) (in US$ million)

Fiscal Year Obligor Type of Business Loan Equity Total

1980 Sierra Cement Cement and Con- 2.1 -- 2.1 Manufacturing struction mate- Company, Ltd rials (SERACEM)

Total Undisbursed 2.1 2.1 - 26 - ANNEX II Page 3 of 4 pages

C. PROJECTS IN EXECUTION 1/

Credit No. 573-SL - Second Education Project: US$7.25 million Credit of July 29, 1975; Effective Date: Sept. 8, 1975; Closing Date: December 31, 1981

Project administration continues to be efficient and physical implementation is progressing satisfactorily. Contracts have been awarded for all civil works, equipment and furniture. Training courses for technical teachers and community development workers are well estab- lished and management training programs for private and public sector staff have recently started at the new facilities constructed under the project. Curriculum development work for secondary education has been successfully completed. The only significant project difficulties have arisen in connection with efforts to strengthen the local capacity for educational research and planning by providing assistance to the Insti- tute of Education and the Ministry of Education Planning Unit. The principal source of this problem is the lack of qualified local staff. The project includes fellowships to train local staff in these areas, but selection of suitable candidates to staff these project institutions has been delayed by the freeze on civil service recruitment. To assist the Government to finance the local cost portion of the project, the Executive Directors approved a US$1.0 million EEC Special Action Credit which became effective July 2, 1980.

Credit No. 568-SL Second Agricultural Project: US$5 million Loan No. 1138-SL Credit of July 2, 1975 and US$5 million Loan of July 2, 1975; Effective Date: January 29, 1976 Closing Date: June 30, 1981

The Eastern Province portion was completed June 30, 1980 and the Government is now carrying the full cost of maintaining project activities in that area. In the Northern Province, delays were originally encountered due to management constraints, but full momentum was later attained and completion is expected in June 1981. Because of the initial delays and rising costs, supplemental funds were needed for agricultural inputs. In addition, the original funds for feeder roads proved inadequate, in part because roads were built to a higher standard than had been anticipated at appraisal. To cover both shortfalls, the executive Directors approved a US$2 million EEC Special Action Credit which became effective July 2, 1980. A follow up Eastern Area project (Cr. 1094-SL) was approved by the Board on January 13 and a second phase project for the Northern Area will be presented to the Executive Directors shortly.

1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 27 - ANNEX II Page 4 of 4 pages

Credit No. 734-SL Third Power Project: US$8.2 million Credit of September 29, 1977; EffectiveDate: March 29, 1978; Closing Date: December 31, 1981

The extensionof the King Tom power plant (financedby IDA) has alreadybeen completedand is in operation. Progress is being made in installationof the 33 kV grid and the new generatingunits (both financed by BADEA) for the provincialcenters. The financialmanagement consultants have completedtheir studies and have submittedtheir recommendationsto SLEC's management. The feasibilitystudy of the Bumbuna hydroelectric scheme has been completed. Although some improvementhas been achieved in the technicaloperation of the corporation,there is no noticeable improve- ment in its weak financialand management condition. SLEC's financial problems stem to a large extent from the failure of the Government to settle its accounts with SLEC and the need for a tariff increasewhich the Govern- ment has not yet approved.

Credit No. 970-SL Technical AssistanceProject: US$2.5 million Credit of February 8, 1980; Effective Date: June 30, 1980 Closing Date: December 31, 1982

The project aims at strengtheningthe Governments capabilityin developmentplanning, the preparationof developmentprojects, the training of local staff, and the monitoring and evaluationof public investment programs. It includes: (a) 10 man-years of advisers; (b) 75 man-months of consultants;(c) training in developmentplanning and project preparation; and (d) project preparationand prefeasibilitystudies. Initial project implementationhas been slow due to delay in reaching decisionson the selection of suitable candidatesfor the various positions.

Credit No. 1094-SL Eastern IntegratedAgricultural Development Project III: US$12.0 million Credit of February 13, 1981; Not yet effective: Closing Date: September 30, 1986

The project aims at consolidatingand expandingthe assistance to small scale farmers in the Eastern Region which was started under the previous two Bank Group integratedagricultural projects; to further in- crease food and export crop production by providingagricultural inputs, credit, extension services,feeder roads and village wells and technical assistance to the Ministry of Agriculture to support and plan future agri- cultural developmentprojects. The credit was signed on February 13, 1981 and is not yet effective. - 28 - ANNEX III Page 1 of 2 pages

SIERRA LEONE

SECONDHIGHWAY MAINTENANCE PROJECT

SUPPLEMENTARYPROJECT DATA

Section I: Timetable of Key Events

(a) Identificationmission - June 1976

(b) Appraisal/Reappraisal- October 1977/May 1980

(c) Negotiationscompleted - February 19, 1981

(d) Planned date of credit effectiveness- 90 days after signature

Section It: Special IDA ImplementationAction

None

Section III: Special Conditions

(a) conditions of effectiveness;

(i) the hiring of consultants,satisfactory to the Association,to assist in project implementation (para. 43(d));

(ii) the fulfillmentof conditions precedent to effectiveness of co-financingagreements (para. 46); and

(iii) the opening of a special account in a local bank, with an initial deposit of Le 600,000, under arrangements satisfactoryto the Association (para. 44);

(b) channellingthrough the special account expenditures for routine maintenance(para. 44);

(c) by August 31, 1981 and December 31, 1981, respectively,the Government to furnish to the Association, for its approval, programs for the resealing of selected paved roads and the rehabilitation of selected gravel roads (paras. 43(b) and Cc)); (d) maintenance equipment to be used exclusively for the project (para. 43(a)); - 29 - ANNEX III Page 2 of 2 pages

(e) sections of Kenema-Koinduroad to be selected for detailed engineeringon the basis of their economic priority following completionof the feasibilitystudy financed by UNDP (para. 43 (d)); and

(f) agreement on an appropriatelevel of compensationfor field expendituresincurred by MOW's staff in carrying out the project (para. 47).

IBRD-V3244R

13- 12ANA1* l 0 | SEPTEMBER 19C0

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