FOR OFFICIAL USE ONLY Report No: PAD3715 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT
IN THE AMOUNT OF SDR 11 MILLION (US$ 15 MILLION EQUIVALENT)
TO THE Public Disclosure Authorized REPUBLIC OF DJIBOUTI
FOR AN
ECONOMIC MANAGEMENT AND STATISTICS DEVELOPMENT FOR POLICY MAKING PROJECT
May 7, 2020
Macroeconomics, Trade And Investment Global Practice and Public Disclosure Authorized Poverty and Equity Global Practice Middle East And North Africa Region
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.
Public Disclosure Authorized
CURRENCY EQUIVALENTS
(Exchange Rate Effective Mar 31, 2020)
US$1 = 177.72 DJF US$1 = 0.73333 SDR
FISCAL YEAR January 1 - December 31
Regional Vice President: Ferid Belhaj Country Director: Marina Wes Regional Director: Najy Benhassine Practice Manager: Kevin Carey Task Team Leader(s): Mamadou Ndione, Vibhuti Mendiratta
ABBREVIATIONS AND ACRONYMS
ANSIE Agence Nationale des Systèmes d'Information de l'Etat BEMO Bureau d’Etude et de Maitrise d'oeuvre BoP Balance of Payments CAPI Computer Assisted Personal Interview CLR Completion and Learning Review CNEP Comité National d'Endettement Public CNSS Caisse National de Sécurité Sociale CPSM Comité de Programmes Statistiques et de Méthodologies DA Designated Account DDP Direction de la Dette Publique (Department of Public Debt) DeMPA Debt Management Performance Assessment DEP Direction du Plan or Direction of Planning DFE Direction du Financement Extérieur or External Financing Department DGDDI Direction Général des Impôts Direction Général des Douanes et des Droits Indirects DGI Direction Général des Impôts DHS Demographic and Health Survey DISED Direction de la Statistique et des Etudes Démographiques DHS Demographic and Health Survey DSA Debt Sustainability Analysis DU Delivery Unit EDAM Enquête Djiboutienne auprès les Ménages EDIC Survey of Employment and the Informal Sector e-GDDS Enhanced General Data Dissemination System EPA Etablissement Public Administratif ESCP Environment and Social Commitment Plan ESMP Environment and Social Management Plan FAS Financial Access Survey FM Financial Management FSI Financial Soundness Indicators GBV Gender based Violence GEMS Geo-enabling for monitoring and supervision GIS Geographic Information Systems GoD Government of Djibouti GRS Grievance Redress Service HR Human Resources IAEG-GS Inter-Agency and Expert Group on Gender Statistics ICAS Indice du Chiffre d’Affaires des Services ICI Inclusion, Connection, and Institutions ICT Information and Communications Technology IFR Interim Financial Reports INSD Institut National de la Statistique de Djibouti IPI Industrial Production Index
KPI Key Performance Indicators MAPS Methodology for Assessing Procurement MFS Monetary and financial statistics MICS Multiple Indicator Cluster Survey MoFI Ministry of Finance of Djibouti MTBF Medium Term Budget Framework MTDS Medium-Term Debt Strategy MTFF Medium-Term Fiscal Framework NA National Accounts NDC Nationally Determined Contribution NSDS National Strategy for Development of Statistics NSS National Statistics System ODPIC Office Djiboutien de la Propriété Industrielle et Commerciale OIP Other interested parties QAF Quality Assessment Framework PAP Project affected persons PDO Program Development Objective PEFA Public Expenditure and Financial Accountability PFM Public Finance Management PFS Project Financial Statements PIM Project Implementation Manual PIMA Public Investment Management Assessment PMU Project Management Unit POM Project Operations Manual PP Procurement Plan PPG Public and publicly guaranteed PRM Presidential Road Map SAM Social Accounting Matrix SCD Systematic Country Diagnostic SCS Superior Council of Statistics SEP Stakeholder Engagement Plan SOE State owned enterprises STEP Systematic Tracking of Exchanges in Procurement STI Service Turnover Index SYGADE Système de gestion et d'analyse de la dette TADAT Tax Administration Diagnostic Assessment Tool TOFE Tableau des Opérations Financières de l’Etat UNFPA United Nations Population Fund
The World Bank Economic Management and Statistics Development for Policy Making (P171777)
TABLE OF CONTENTS
DATASHEET ...... 1 I. STRATEGIC CONTEXT ...... 7 A. Country Context...... 7 B. Sectoral and Institutional Context ...... 8 C. Relevance to Higher Level Objectives ...... 15 II. PROJECT DESCRIPTION ...... 16 A. Project Development Objective ...... 16 B. Project Components ...... 17 C. Project Beneficiaries ...... 30 D. Results Chain ...... 31 E. Rationale for Bank Involvement and Role of Partners ...... 33 F. Lessons Learned and Reflected in the Project Design ...... 33 III. IMPLEMENTATION ARRANGEMENTS ...... 34 A. Institutional and Implementation Arrangements ...... 34 B. Results Monitoring and Evaluation Arrangements...... 36 C. Sustainability ...... 36 IV. PROJECT APPRAISAL SUMMARY ...... 37 A. Technical, Economic and Financial Analysis (if applicable) ...... 37 B. Fiduciary ...... 39 C. Legal Operational Policies ...... 41 D. Environmental and Social ...... 41 V. GRIEVANCE REDRESS SERVICES ...... 42 VI. KEY RISKS ...... 42 VII. RESULTS FRAMEWORK AND MONITORING ...... 44 ANNEX 1: Implementation Arrangements and Support Plan ...... 54
The World Bank Economic Management and Statistics Development for Policy Making (P171777)
DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name
Djibouti Economic Management and Statistics Development for Policy Making
Project ID Financing Instrument Environmental and Social Risk Classification
Investment Project P171777 Moderate Financing
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Disbursement-linked Indicators (DLIs) [✓] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
28-May-2020 31-Dec-2025
Bank/IFC Collaboration
No
Proposed Development Objective(s)
To strengthen the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics in a sustainable manner and modernize the Recipient's selected economic and fiscal management tools and processes in Djibouti.
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Components
Component Name Cost (US$, millions) Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) to 11.80 produce and disseminate timely and reliable statistics in a sustainable manner Modernizing the Recipient's selected economic and fiscal management tools and 3.80 processes
Project Management 1.40
Organizations
Borrower: Republic of Djibouti Implementing Agency: Ministry of Economy and Finance in charge of Industry National Institute of Statistics of Djibouti Ministry of Budget
PROJECT FINANCING DATA (US$, Millions)
SUMMARY-NewFin1
Total Project Cost 17.00
Total Financing 17.00
of which IBRD/IDA 15.00
Financing Gap 0.00
DETAILS-NewFinEnh1
World Bank Group Financing
International Development Association (IDA) 15.00
IDA Credit 15.00
Non-World Bank Group Financing
Counterpart Funding 2.00
Borrower/Recipient 2.00
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IDA Resources (in US$, Millions)
Credit Amount Grant Amount Guarantee Amount Total Amount Djibouti 15.00 0.00 0.00 15.00
National PBA 15.00 0.00 0.00 15.00
Total 15.00 0.00 0.00 15.00
Expected Disbursements (in US$, Millions)
WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026 2027
Annual 0.02 0.67 1.00 1.55 2.77 3.89 4.69 0.41
Cumulative 0.02 0.69 1.69 3.24 6.01 9.90 14.59 15.00
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas Environment, Natural Resources & the Blue Economy, Macroeconomics, Trade and Investment Governance, Poverty and Equity
Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance Substantial
2. Macroeconomic Substantial
3. Sector Strategies and Policies Moderate
4. Technical Design of Project or Program Moderate
5. Institutional Capacity for Implementation and Sustainability Substantial
6. Fiduciary Substantial
7. Environment and Social Moderate
8. Stakeholders Moderate
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9. Other Low
10. Overall Substantial
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No
Does the project require any waivers of Bank policies? [ ] Yes [✓] No
Environmental and Social Standards Relevance Given its Context at the Time of Appraisal
E & S Standards Relevance
Assessment and Management of Environmental and Social Risks and Impacts Relevant
Stakeholder Engagement and Information Disclosure Relevant
Labor and Working Conditions Relevant
Resource Efficiency and Pollution Prevention and Management Relevant
Community Health and Safety Relevant
Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant
Biodiversity Conservation and Sustainable Management of Living Natural Not Currently Relevant Resources
Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Local Communities
Cultural Heritage Not Currently Relevant
Financial Intermediaries Not Currently Relevant
NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS).
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Legal Covenants
Sections and Description To facilitate the day to- day implementation of Project activities, MoF shall establish no later than 3 months after the Effective Date, and thereafter maintain at all times during the implementation of the Project within MoF, the Project Management Unit (“PMU”) with a composition, mandate, staffing and other resources satisfactory to the Association, all in accordance with the provisions of the Project Operations Manual
Sections and Description The Recipient, through MoF, shall no later 3 months after the Effective Date, acquire an accounting software, acceptable to the Association.
Sections and Description The Recipient, through MoF, shall no later 6 months after the Effective Date recruit and thereafter maintain throughout Project implementation; an external auditor, with qualifications, experience and terms of reference satisfactory to the Association.
Sections and Description In order to ensure the proper oversight of the Project and coordination among the Recipient’s ministries and agencies involved in the Project, the Recipient shall, not later than 3 months after the Effective Date, establish, and thereafter maintain throughout Project implementation, with terms of reference, mandate, composition and resources satisfactory to the Association, a steering committee co-chaired by Recipient’s minister of finance and minister of budget or their representatives, as further detailed in the Project Operations Manual (“Steering Committee”).
Sections and Description In order to ensure the effective technical implementation of INSD’s Respective Part, the Recipient, through MoF, shall no later than three (3) months after the Effective Date, enter into an implementation agreement INSD, under terms and conditions approved by the Association
Sections and Description The Recipient shall by no later than three (3) months, after the Effective Date, prepare and adopt a Project operations manual (“Project Operations Manual” or “POM”) containing detailed guidelines and procedures for the implementation of the Project
Sections and Description For purposes of implementation of the Project, the Recipient shall by no later than three (3) month after the Effective Date, prepare a draft work plan and budget for Project implementation, setting forth, inter alia: (i) a detailed description of the planned activities, including any proposed conferences and Training, under the Project for the period covered by the plan; (ii) the sources and proposed use of funds therefor; (iii) procurement and environmental and social safeguards arrangements therefor, as applicable and; (iv) responsibility for the execution of said Project activities, budgets, start and completion dates, outputs and monitoring indicators to track progress of each activity
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Conditions
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The World Bank Economic Management and Statistics Development for Policy Making (P171777)
I. STRATEGIC CONTEXT
A. Country Context
1. Djibouti is the smallest state in the Horn of Africa. About a million inhabitants reside in the country, which covers a land area of 23,000 square kilometers. Since it gained its independence in 1977 from France, the country is politically organized as a republic, with an executive branch led by the President who is elected by universal suffrage every five years, and a legislative power vested to the National Assembly consisting of 65 members, also elected every five years. The country is politically and socially stable but is surrounded by areas in conflict or in fragile situations. Officially, Djibouti hosts close to 30,000 refugees and asylum seekers from Somalia, Ethiopia, Eritrea, and Yemen, the equivalent of 3 percent of its population, mainly in three camps outside the capital city of the country (Ali-Addeh, Hol-Hol and Merkazi). The country hosts also around 150,000 non-registered migrants1, five military bases with around 10,000 staff in total, and more than 300 enterprises in its free trade zones, representing 20 percent of GDP. The past decade, Djibouti has also become a country of transit for economic migrants and forcibly displaced populations over the Gulf of Aden to and from Yemen and other neighboring countries. In 2019, 240,000 movements were observed at 5 flow monitoring points in Djibouti2. 2. On the eve of the outbreak of the COVID-19 pandemic, Djibouti had achieved steady, albeit less inclusive, economic growth for two decades. According to revised national accounts, per capita GDP3 increased by an average of 4.4 percent per year in real terms in the last two decades to nearly US$3,000 in 2018. This impressive growth performance was a clear break from the poor economic record of the 1990s4 when real per capita GDP contracted by 4.2 percent on average per year between 1990 and 1998. At the dawn of its independence, power imbalances between different ethnic groups led to a civil conflict in 1991 between the government and a rebellion group. As peace was brokered in 1994, an equilibrium was found between belligerents in a power sharing agreement that contributed to bring and maintain peace in the ensuing two decades. Economic growth since 2000 has been driven by export of services, with transportation and logistics, telecommunication and banking sectors being the main contributors. In these three sectors, Djibouti’s strategy leveraged the country’s most valuable and significant asset, its geography, generating extensive value in its main and fast- growing economic partnership with Ethiopia. Djibouti serves as the main port and handles about 90 percent of the external trade of landlocked Ethiopia, the East Africa’s largest and fastest growing economy. On the social front, the share of population living with less than US$1.90 2011 PPP a day was estimated at 17.1 percent in 2017, down from 22.7 percent in 2013. The poverty gap also declined from 7.6 percent in 2013 to 5.7 percent in 2017. Even though the Gini coefficient declined from 44.1 in 2013 to 41.6 in 2017, regional disparity remains significant between Djibouti city and the rest of the country. 3. The ongoing COVID-19 outbreak will have significant impact on Djibouti. With the disruption in global supply chains and the preventive social distancing measures implemented by the Government such as restriction on movement and gatherings, there will be constraints on both the supply and demand for goods and services and slowing economic growth. Under the most recent World Bank baseline, growth will fall to 1.3 percent in 2020 from 7.5 percent in 2019 before a rapid rebound to 9 percent in 2021 as global trade catches up to the pre-crisis pattern. Under a downside scenario, GDP could decline by 1 percent in 2020. Scenarios are strongly dependent
1 Estimates from Ministry of Social Affairs 2 https://displacement.iom.int/system/tdf/reports/DJI_FMR_Dashboard_Mars20_EN.pdf?file=1&type=node&id=8220 3 With support from AFRISTAT, the World Bank Group (WBG) and the International Monetary Fund (IMF), the Government of Djibouti has revised of its national accounts, focusing on the period 2013-2017 and applying the general principles of the UN’s Systems of National Accounts of 2008 (SNA2008), with 2013 as the base year. GDP was revised upward by 50 percent. 4 Part of the period was marked with civil war which lasted from 1991 to 1994, resulting in thousands of fatalities.
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on outcomes in Ethiopia and the speed of resumption of activities in sectors of the Ethiopian economy which are closely linked to Djibouti, such as construction, light manufacturing, and agricultural commodities. 4. Improvements in the quality of public policy and significant strengthening of institutional capacity are key to making growth sustainable and more inclusive. Over the past decade, Djibouti has significantly upgraded its infrastructure platform. With major facilities (ports, railway, submarine cables, water pipe, electricity interconnection network, international free trade zone) in place and operational, the Government is implementing critical reforms to boost productivity and efficiency and modernize its administration to sustain growth and make it broad-based and more inclusive. The Government has already announced that the new decade will be dedicated to implementing reforms aiming at fostering inclusion, connection, and institutions (ICI), under the second development plan of the Vision 2035. This would require building a strong and integrated feedback mechanisms that inform policymakers on what works and what doesn’t for greater effectiveness of government’s decision-making processes. For this to happen, Djibouti must upgrade the analytical capacity of the administration and close the huge knowledge and data gaps the country is currently facing. The proposed project will contribute to closing these gaps and foster transparency, accountability, efficiency and effectiveness of public policies. 5. Climate change poses a significant threat to Djibouti policy planning across many sectors. Djibouti needs also to reinforce its resilience as recent events has increased the country’s climate change vulnerability. The flooding caused by heavy rainfalls in November 2019 underscored Djibouti’s vulnerability to climate change and the need to be structurally prepared for similar events in the future. The last major drought claimed nearly four percent of GDP annually between 2008 and 2011 and impacted more than half of Djibouti’s population. People’s livelihoods and lifestyles are affected through different pathways. In the short term, the impacts of extreme weather events contribute to injuries, household food insecurity, disease and disability, increased population displacement, and insecurity. In Djibouti, longer and more intense dry seasons will place significant pressure on existing low-income rural communities. Health, for instance, suffers due to less favorable conditions for water and food and the potential increase in vector borne diseases, for example. Therefore, augmenting the availability and reliability of environmental data and increasing capacities on macroeconomics of climate change and data availability is increasingly needed and modeling choices can influence the results and adequate policies. Updated and reliable data will decrease the impact of climate shocks by allowing to plan for optimal resource allocation ahead of extreme events to mitigate their damage to infrastructure assets and vulnerable people.
B. Sectoral and Institutional Context
Statistics development 6. Timely and reliable data are critical for decision making. When data are uncertain or unreliable, policymakers tend to base their decisions on assumptions, prevailing ideology and anecdotal information. This creates an environment where decisions are taken and implemented without attention to empirical evidence and with weak monitoring and evaluation practices. This in turn further depresses the demand for data and the need to strengthen the NSS. By fully aligning with the National Statistical Development Strategy (NSDS 2018-2022) which has four strategic pillars: (i) improvement of the institutional, regulatory and organizational framework of the National Statistics System (NSS); (ii) strengthening the human, material and financial resources of the NSS; (iii) improvement of statistical production and consolidation of the archiving; and (iv) dissemination system and improvement of communication, the project strengthens the demand for statistics and contributes to break the vicious cycle presented above. By strengthening the capacity of National Institute of Statistics of Djibouti (INSD) to ensure timely production and dissemination of good quality data and statistics on economic, financial, social
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and environmental topics, the project will also strengthen the supply side and improve the availability and quality of data needed to support evidence-based planning and decision making. 7. Djibouti’s statistical capacity is very weak with a score on the World Bank’s Statistical Capacity Indicator of 60 in 2018, placing it 123rd out of 180 countries which had data available. The Djibouti National Statistical System (NSS) produces limited foundational data on an irregular basis, core surveys are not conducted at regular intervals, and analytical capacity is weak, making it difficult to discern major trends and their policy implications. The low statistical capacity score is not a surprise as the country has not been able to perform its core function, that is, production of good quality foundational data on a timely basis. The data collection activities have primarily been ad hoc and driven by demand from international development partners. The Population Census is now 11 years old, a business census has never been conducted, the last health survey was conducted in 2012, the last household budget survey was conducted in 2017 and the last labor force survey was conducted in 2015 with no plans to repeat the exercise. Even if data collection efforts have been undertaken, they have been mired by issues of reliability. Moreover, the data collected and monitoring of field work activities do not benefit from quality controls and supervision in real time. 8. The irregularity of foundational data collection poses challenges for the reporting of indicators and publications to the point that is difficult to predict when most publications will be disseminated and accessible on an online platform. The weak statistical score is also highlighted by the low level of production and dissemination of statistics and indicators using the data collected. The capacity of INSD staff to convert data into analytical insights is limited and they often rely on international development partners to produce even basic indicators like the SDGs. In addition, the publications do not sometimes follow the required statistical methodologies and a statistical release calendar despite the country’s adhesion to the Enhanced General Data Dissemination Standard (e-GDDS5). Specifically, the former Office of Statistics (Direction de la Statistique et des Etudes Démographiques or DISED) had only 10 publications with only 2 published on a regular basis on the Office’s website: the monthly Consumer Prices Index (CPI) and the annual yearbook (Annuaire Statitique6). The CPI follows the standard format and methodology applied by AFRISTAT members and it is published 10 days after the end of the month. However, the content of the annual yearbook is not standardized and varies from publication to publication with no specific calendar. A trade statistics yearbook is sometimes produced but its content varies, and its publication is irregular. The website of INSD is poorly kept and statistics on the country are rarely updated on it. Furthermore, population and labor statistics are not reliable. There are no environmental and climate statistics produced in the country, except temperature, rainfall, and fish landings, even though Djibouti is highly prone to drought, characterized by a desert climate with sporadic rainfall. 9. The shortages of human resources in quantity and quality (skills) at INSD contributes to the low equilibrium of irregular and seldom unreliable data collection. Not only is the number of qualified statisticians and demographers insufficient for INSD, but there is also a dearth of a variety of skills. There were 88 staff working at the INSD, out of which only 4 are qualified statisticians (Ingénieur des Travaux Statistiques), 7 demographers, 1 informatician, and 1 cartographer, and a dozen of undergraduate statisticians. Thus, there are very few specialists in critical fields such as geographers and IT personnel. This staff was working across 3 technical directions: the general director, direction of demographic and social studies and direction of national accounts. A wide variety of skills and more staff is a crucial requirement for INSD. 10. Another contributor to INSD’s weak statistical capacity is the physical infrastructure which houses its staff. The offices are dilapidated, and the ICT (Information and Communications Technology) system is obsolete.
5 The e-GDDS was established by the IMF in 2015 to guide countries in data dissemination by supporting transparency, encouraging statistical development, and helping create strong synergies between data dissemination and surveillance. 6 http://www.insd.dj/assets/doc/Annuaire_Statistique_2019.pdf
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INSD’s premises are insufficient and disparate over different venues, hindering data production, its ability to attract new talent and its visibility. The current physical structures are also in a terrible condition to house a statistics institution and do not respond to the aspirations of the government. INSD currently has 20 rooms that serve as offices for 88 staff. Four rooms are not usable and there is no meeting room, no archive room, and no library accessible to citizens. Statistical activities and operations are severely constrained by poor facilities and the shortage of ICT equipment. While all staff are equipped with a laptop, there is no IT network and intranet available to share working documents and information, and there is no server to store databases, though there is an internet cable that connects INSD’s main building to the Cité Ministérielle. Only four offices have a fixed phone line, the others use personal mobile phones to call outside the office, including for business purposes. INSD has six vehicles of which three are used in day-to-day data collection activities (CPI, Trade Statistics etc.). Also, the abnormal rainfall in November 2019 significantly flooded INSD’s premises limiting access and damaging several equipment exacerbating the need to adapt administrative building to the changing climate. Having a decent and well-functioning and climate resilient office building is vital for improved performance and sustainability of the INSD. Recent experience from Burkina Faso, Senegal and Tanzania demonstrates indeed a strong link between the provision of an office building and the long-term sustainability and performance of the national statistical office. The Government is committed to provide US$ 2 million toward the construction of a building for INSD, but this leaves a need of US$ 4 million to be filled by the proposed project. 11. The need for foundational data collection in a timely and reliable manner, which is the core work of INSD, is urgent. Since the evaluation of the National Statistical Development Strategy 2011-2015 that classified Djibouti as a data deprived country, the production of statistics required for the monitoring of living conditions of households improved due to the completion of several surveys, particularly by INSD7. Nevertheless, a much wider set of data collection efforts are needed if INSD is to fulfil its core mandate, including the collection of a Population Census and an Economic Census. The Population Census is a key source of information for economic, social, and environmental development planning, research, administrative purposes, and commercial or other uses. It also serves as the master sampling plan for household surveys conducted in the country. The last population Census was conducted in 2009 and as such the accuracy of all statistics that incorporate population dimensions, including macroeconomic statistics (such as GDP per capita), labor statistics (unemployment rate), and service access, is currently questionable. A business census is another key foundational dataset that the country needs to establish for the first time. The exact size of the informal sector is currently unknown, and a business Census will help to understand the extent and nature of this sector in Djibouti8. In addition, monitoring of formal businesses is highly fragmented with four institutions each maintaining a separated registry with limited coordination. The four institutions are the Office Djiboutien de la Propriété Industrielle et Commerciale (ODPIC), the Caisse National de Sécurité Sociale (CNSS), the Direction Général des Impôts (DGI) and the Direction Général des Douanes et des Droits Indirects (DGDDI). Finally, the absence of a business census has prevented the development of business monitoring data tools such as the Industrial Production Index (IPI), the Service Turnover Index (STI) or Indice du Chiffre d’Affaires des Services (ICAS), and Business Economic and Financial Databank. In addition, in the context of
7 These include the Survey of Employment and the Informal Sector (EDIC 2015), the Household Budget Survey or EDAM4-IS (2017), the Household Access to ICT Survey (2018) and nutrition survey (2019). INSD has been using Computer Assisted Personal Interview (CAPI) to collect data since 2017. In addition, Djibouti revised its national accounts focusing on the period 2013-2017 and applying the UN’s Systems of National Accounts of 2008 methodology (SNA2008), with 2013 as the base year. Production of trade statistics has also improved with the use of ASYCUDA world by customs officials. Consumer price index as well as fiscal and financial statistics are produced on a monthly basis. 8 According to a WB report, « Challenges to inclusive growth: a poverty and equity assessment of Djibouti”, the most recent household survey (EDAM IV 2017) estimated that the percentage of those employed in the informal sector stands at around 45 percent of total employment while the labor survey (EDIC 2015) indicated that it was 90 percent.
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crisis preparedness, the country needs to invest in its capacity to conduct data collection remotely (using telephone or web surveys) as well as the ability to rapidly assess the impact of the shocks on welfare. 12. Djibouti has some specific features that make producing timely and reliable economic, financial, social and environmental statistics more challenging. The country is a major transit area for a significant number of people (displaced, nomads and migrants) and goods (through the free trade zones) that are not easy to track. In addition, there are several territorial enclaves (five military bases) within the country that maintain economic relationships with the country’s residents. In addition, some institutional settings such as the free movement of capital under the currency board arrangement, though relevant and appropriate, increase the complexity of the systems to monitor. These features make the estimation of the exact size and composition of the population and of the economy more difficult than usual. 13. The lack of relevant gender data and statistics hinders the country’s effort to track progress on gender inequality over time and design policies to address it. Djibouti needs gender statistics that reflect the many areas where women and men may not enjoy the same opportunities because these statistics help inform policies, design intervention and monitor progress toward gender equality. The magnitude of gender inequality in Djibouti is large. The AFDB’s Gender Equality Index in 2015 ranks Djibouti at 47th place out of 52 African countries. The FGM prevalence rate in the country is estimated to be as high as 98 percent. In economic sphere, the gap in labor force participation between men and women is substantial (32% for women vs 57% for men, according to EDAM 2017, INSD). Moreover, only 22% of firms have women among their owners and 14% of firms have a woman as the top manager (Enterprise Survey 2013). In this regard, having data on firm characteristics by sex of owner can help the government and stakeholders for creating a more enabling environment for women entrepreneurs. In addition, to help guide countries produce gender statistics, the minimum set of gender indicators was prepared by the Inter-Agency and Expert Group on Gender Statistics (IAEG-GS). However, the national statistics produced by INSD still fall short. Therefore, the plan to support statistical system development in the county will improve the availability of relevant gender statistics, specifically the indicators listed under the minimum list. 14. A law passed in February 2019 has created the INSD9 as the legal public institution, with financial autonomy, to replace the Direction de la Statistique et des Etudes Démographiques (DISED) which was dissolved by the same law. The Institute is responsible for ensuring the technical coordination of the NSS and for carrying out statistical production and dissemination activities for the needs of the public authorities, the private sector, the development partners and the public. The new Institute is mapped to the Ministry of Finance (MoFI) with the objectives to provide statistics for the long-term country strategy, Vision 2035, and its related five-year action plan, for decision making. The demand for a well-functioning statistical system that is able to produce evidence for policy making is clear. The Government has also created a Delivery Unit (DU) as an innovation to help Governments foster coordination and solve implementation problems. The DU is designed to function at the center of government with a mandate to use the authority of the Prime Minister to expedite implementation of a set of prioritized areas of focus. The DU will instill a new sense of accountability amongst civil servants through results and outcome-based monitoring and evaluation. It will monitor Key Performance Indicators (KPIs) of a set of prioritized initiatives and regularly updates the Head of Government on the progress of those initiatives. 15. The setting up of INSD is currently ongoing and hence provides an important opportunity to address the problem of low statistical capacity by investing in the basics: a functioning office space, skilled and motivated staff and data collection with best practices. INSD is being operationalized in the context of the new legal
9 Loi N° 26/AN/18/8ème L relatif à la création de l'Institut National de la Statistique de Djibouti (INSD) https://www.presidence.dj/texte.php?ID=26&ID2=2019-02-27&ID3=Loi&ID4=4&ID5=2019-02-28&ID6=n
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framework10 governing the establishment, functioning and reporting lines of public agencies (Etablissements Publics Administrative, EPA). The new legal framework was approved in July 2019 and makes mandatory the approval of an objective and performance contract, covering at least three years, between all public agencies and the ministry in charge of its oversight. Thus, an objective and performance contract will be signed between INSD and MoFI. All agencies will be governed by a board and will have an accounting agent (Agent Comptable) who is fiduciarily responsible. The activities to be included into the performance contract will be validated first by INSD’s board and the Superior Council of Statistics (SCS) as part of the annual statistical program, to ensure that INSD remains autonomous. The Government created also a Committee in charge of Methodology and Statistical Program (Comité de Programmes Statistiques et de Méthodologies – CPSM) and the development of concepts, definitions and methodologies to be used across the NSS and a Quality Assessment Framework (QAF) which, however, is not operational. As a result, different definitions and concepts are being used by different members of the NSS maintaining the existence of different indicators in several domains. 16. In Djibouti, the regulatory framework governing the collection, processing, and dissemination of statistical information is clearly defined. The 2011 Statistics Law clearly defines the fundamental principles and institutional framework governing the production and dissemination of official statistics. The law and the decree related to it define the general way the National Statistics System (NSS) is operational and coordinated. The recognized fundamental principles include data confidentiality and privacy, citizens’ access to official statistics without discrimination, obligation to answer questionnaires, impartiality, objectivity and transparency, duties related to the frequency and dissemination schedules of statistics, as well as their alignment with international methods and concepts. Macroeconomic modeling 17. Demand for sound macroeconomic assessment has been historically low. Djibouti has enjoyed a reasonably stable macroeconomic situation in the last two decades, except during the food and fuel prices hike in 2008 where the need to mitigate the effects of the shock was the highest. The inflation rate was relatively low, with an average of 2.5 percent per annum between 1999 and 2019 and a peak of 11.9 percent in 2008, the only year where the rate exceeded 5 percent. With the small size of the economy (US$3 billion), the country has chosen an exchange rate as the price-based nominal anchor for its monetary policy. The Djibouti Franc, the country’s currency, is pegged to the US dollar at the fixed exchange rate of FDJ177.72 per US$1, in a currency board arrangement in place since 1949. The exchange rate was at FDJ214.4 for US$1 in the 1960s, but progressively appreciated in early 1970s and was adjusted to FDJ177.72 per $US1 in 1974, a rate at which it has remained up to date. The currency board regime accounts for much of the price stability that the country has enjoyed in the last two decades and remains a critical element of the country’s overall strategy and vision of becoming trade, logistics and financial hub in East Africa. It provides predictability of international transactions that clearly differentiates the country from its neighbors, which, in turn, enhances investors’ confidence and contributes to growth. 18. Maintaining the currency board arrangement stable required the conduct of prudent fiscal policy that was made easy by the availability of new revenue stream. Until recently, Djibouti managed to keep its fiscal deficit very low, thanks to the incoming stream of revenue from military bases (rental fees). From 1999 to 2013, the overall fiscal deficit averaged 0.9 percent of GDP only. As a result, external public and publicly guaranteed debt declined to 34 percent of GDP in 2013, down from 43 percent of GDP in 2008. At the same time, the domestic debt, composed mainly of arrears accumulated before 1999, was being repaid regularly.
10 Loi N° 56/AN/19/8ème L portant régime juridique des Etablissements Publics Administratifs. https://www.presidence.dj/texte.php?ID=56&ID2=2019-07-23&ID3=Loi&ID4=14&ID5=2019-07-31&ID6=n
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19. With the rapid debt accumulation since 2014, the need to conduct proper macroeconomic assessment to inform public policy has increased. In the context of the implementation of the SCAPE, the five-year action plan 2015-2019, Djibouti embarked on the development of ambitious infrastructure projects and the implementation of a reform program to upgrade the business environment that narrowed significantly the country’s fiscal space. The pace of implementation of the reform program, which included a significant tax incentive package, and the building of the infrastructure was very fast and led to a rapid accumulation of external PPG debt, reaching 71 percent of GDP in 2018. This in turn created the need to build domestic capacity to monitor key macroeconomic variables on a regular basis at the Ministry of Finance (MoFI). The country has been relying on international organizations such as the WBG and IMF, even for the short to medium-term macroeconomic forecast. 20. To respond to the demand, the MoFI’ s forecasting model was updated with the new national accounts data, but important gaps remains. MoFI uses a financial programming type of model that produces short to medium-term forecast (three years) for four main macroeconomic tables (real sector, government fiscal, balance of payments and monetary statistics) with established linkages between them. The model has neither a debt nor an employment module. It is written on a spreadsheet which allows for flexible integration of new information or hypothesis. However, it is not suitable for policy simulation or ex-ante estimation of impact of exogenous shocks such as an increase in oil prices, or the impact of policy measures such as wage subsidies, change in tariffs, trade liberalization, as a macro-econometric, partial or general equilibrium model would do. As the country moves toward the implementation of its ambitious reform program which is expected to have substantial distributional effects, having a simple and flexible micro-simulation model in its analytical tools becomes increasingly more critical. 21. In addition, in January 2019, the Government has created a Committee to foster coordination between the different units in charge of the preparation of the macroeconomic framework. The Committee meets on a quarterly basis to discuss macroeconomic developments and approves any update of the model’s forecasts. Strengthening of macroeconomic and fiscal modeling capacity of the members of the Committee is a priority for the Government. The creation of the committee allowed to gather data in an extensive manner and contributed significantly to the coordination of different ministerial and public entities. Medium Term Budget Framework (MTBF) and investment planning 22. The budget framework has not evolved since 2000 despite recent improvements in strategic planning. Budget preparation is still done on an annual basis as framed by the organic law of finance, the law 107/AN/00 of October 2000. Its process is still purely mechanical. The SCAPE includes a medium-term macroeconomic framework with a costing of the selected programs by pillar but there is no three-year rolling MTBF that link it to the annual budget. However, the maintenance of adequate revenue mobilization and aggregate expenditure control is important for the Government, not only to preserve fiscal sustainability, but also to create fiscal space for higher developmental expenditure, economic growth, climate adaptation and ultimately poverty reduction. 23. There is no integrated investment planning process. There is no defined process for domestically financed investment project while each donor follows its own project cycle. A more efficient allocation and more effective use of public expenditure is required to justify and underpin higher developmental expenditure. With the high level of debt, Djibouti needs to significantly improve the quality of public investment to compensate for the expected decrease in the volume of public investment. Efficient investment planning requires institutions that ensure that public investments are fiscally sustainable and effectively coordinated across sectors. Also, allocating public investment to the most productive projects requires comprehensive, unified, medium-term planning and objective criteria for appraising and selecting projects. Timely and cost-effective implementation of public
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investment projects requires institutions that ensure projects are fully funded, transparently monitored, and effectively managed throughout their implementation. New investments will also need to be climate resilient. 24. The Government is committed to upgrading its Public Finance Management (PFM) systems and has already started with tax policy and administration. The Public Administration Modernization Project financed by the WB supports the revision of various tax legislation for more coherent and efficient tax and customs administration. It will also ensure that tax and customs systems are upgraded and integrated, and a sound digital architecture for revenue collection is established. Several assessments have been recently completed, including a Tax Administration Diagnostic Assessment Tool (TADAT), a Debt Management Performance Assessment (DeMPA) and a Methodology for Assessing Procurement (MAPS). A Public Expenditure and Financial Accountability (PEFA) report will be prepared in 2020 and a Public Investment Management Assessment (PIMA) in 2021. These will help the government develop a comprehensive PFM reform plan that will create an opportunity for the country to catch up to the best and suitable practices. 25. On the transparency front, fiscal statistics are produced on a monthly basis, but the data are not published on the Government official website and cover only the central government. Since 2012, the annual budget is based on a chart of accounts aligned to the IMF GFS 2001. The central government fiscal table (Tableau des Opérations Financières de l’Etat – TOFE) is produced on a monthly basis but with delay. Its coverage is limited to the operations of the central government and does not include State Owned Enterprises (SOEs) as well as the social security fund. SOEs represent a significant percentage of the economy and the government action. However, there is no clear delimitation of their mandates, that very often mix commercial activities with public service provision responsibility, making difficult to conduct a comprehensive fiscal analysis, on both revenue (tax and dividend collection) and expenditure sides (SOEs’ investment and infrastructure program). SOE’s budgets are approved by the Government’s Cabinet before the starting of each fiscal year, but there are no consolidated public sector’s accounts (Central Government and SOEs) that would allow a broader understanding of public section interventions and their impacts. Debt management 26. Djibouti’s stock of external public and publicly guaranteed (PPG) debt is high. From 2013 and 2017, the government contracted three large loans to finance the construction of the Addis Ababa–Djibouti railway, a water pipeline from Ethiopia, and the construction of a multipurpose port. As a result, total PPG debt increased from 34 percent of GDP in 2013 to 71 percent of GDP in 2018. The share of the SOE debt rose from 27 percent to 71 percent of external debt. The most recent joint WB-IMF Debt Sustainability Analysis (DSA11) concluded that Djibouti continues to face high risks of debt distress, but the debt trajectory remains sustainable. The baseline scenario showed significant breaches of the present value of debt-to-GDP until 2026. The debt service to revenue ratio was also projected to breach its threshold starting in 2022, but there is indication that the ratios were overestimated as SOEs’ net revenue are excluded from the denominator since there is no consolidated public sector’s accounts. 27. Nevertheless, the size of public debt remains the main macroeconomic risk. The authorities are aware of the risks and have engaged to reform the country’s public debt management system and develop a medium- term debt management strategy to avoid falling into debt distress. Most of the risks are coming from the SOEs. Djibouti needs to build institutional capacity for the monitoring of the SOEs and the identification and control of the contingent liabilities emanating from them. The process of providing state guarantees and on lending must also be ramped up.
11 https://www.imf.org/en/Publications/CR/Issues/2019/10/23/Djibouti-2019-Article-IV-Consultation-Press-Release-Staff-Report-and- Statement-by-the-48743
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28. Djibouti undertook institutional changes that resulted in a fragmentation of debt management functions between the two ministries (finance and budget). Resource mobilization and debt contracting fall under the purview of the Ministry of Finance, while debt recording systems and payments are managed by the debt unit within the Ministry of Budget. Coordination and information sharing between different agencies responsible for contracting and managing debt could be improved. The split led to coordination challenges in the execution of debt management processes and weakened the flow of information within the government, while creating a duplication of some functions across the two ministries. Nevertheless, debt recording systems remain adequate and reliable but analytical capacity needs to be bolstered. Public debt data are produced on a regular basis providing a good overall picture of its composition, but they are not published on an official Government website. However, the coverage of debt statistics is limited to central government and central government guaranteed debt but does not include non-guaranteed SOEs’ debt. 29. The authorities have recognized the need to consolidate the various laws and regulations related to debt management and have drafted a comprehensive law to manage public debt. The new reform plan intends to address current shortcomings and strengthen the country's debt management system. The proposed legal framework focuses on filling the gaps of the existing legal and institutional framework. It strengthens the framework for issuance and monitoring of government on-lent and guaranteed loans, reporting and monitoring risks associated with contingent liabilities as well as debt sustainability analysis and a debt management strategy. In April 2019, the Government issued a decree establishing a national debt committee (CNEP12) supported by a technical sub-committee to ensure better coordination of decision making. The capacity of the CNEP must be built quickly to make it effective. In addition to the improving the coordination and information sharing processes among the debt management units, the new reform plan includes borrowing targets, requirements for the development of a debt management strategy and reporting to Parliament.
C. Relevance to Higher Level Objectives
30. The proposed Project is aligned with the strategic goals of the World Bank Group (WBG) to end extreme poverty and boost shared prosperity in a sustainable manner, the pillar of the enlarged MENA strategy emphasizing the social contract and with the forthcoming CPF covering FY21-FY2025, particularly in its state building focus area. The SCD noted concerns with the reliability and timeliness of statistics in Djibouti, which limits the Government’s capacity to monitor results and adapt public policies to the rapidly changing environment. The SCD also emphasizes the importance of sex-disaggregated statistics. It weakens Government’s accountability to Parliament and citizens. It also noted concerns about the weak link between planning and budgeting, as well as the rapid increase in the ratio of public debt to GDP. In view of these challenges, the CPF noted that considerable efforts must be made to (i) improve the strategic allocation of resources and quality of expenditure; (ii) modernize tax and customs administration, (iii) strengthen debt management, and (iv) develop accountability mechanisms. The CPF also remains mindful of broader gender issues and outlines objectives that seek to address gender inequality in Djibouti. 31. The project will contribute to the achievement of WBG corporate and regional objectives in the area of gender and environment. It will improve the availability of relevant gender statistics which will enable to monitor and address gender inequality in the country. The project will also increase the availability of data on climate change related issues and improve modeling and analytical capacity to better anticipate and/or mitigate climate shocks and their damage to infrastructure assets and vulnerable people. Building knowledge around economic
12 Décret N° 2019-085/PR/MB portant création d'un Comité National d'Endettement Public (CNEP). https://www.presidence.dj/texte.php?ID=2019-085&ID2=2019-04-22&ID3=D%E9cret&ID4=8&ID5=2019-04-30&ID6=n
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issues, gender, and climate change will shape policy reforms and will strengthen the social contract between the State and its citizens. 32. The proposed operation is also well aligned with the May 2019 Presidential Road Map (PRM) instituting the Government to focus more on results and the National Statistical Development Strategy (NSDS 2018-2022). Government has now created a Delivery Unit (DU13) to solve coordination and implementation problems within the public sector. The DU will focus on two sectors (energy and tourism) to start and scale-up its coverage gradually. The Government will also progressively shift toward performance-based budgeting which is a critical part of the management for results. The Government’s objective is to improve the efficiency and effectiveness of public expenditure by linking the funding of public sector organizations to the results they deliver. The Government has now clearly prioritized data collection to strengthen its policy monitoring systems and has adopted its second NSDS that the project will support. The NSDS 2018-22 is centered on four strategic pillars: (i) improvement of the institutional, regulatory and organizational framework of the NSS; (ii) strengthening the human, material and financial resources of the NSS; (iii) improvement of statistical production and consolidation of the archiving; and (iv) dissemination system and improvement of communication. The project is fully aligned to these pillars. 33. The operation is also aligned with 2030 Agenda for Sustainable Development, which encourages member states to conduct regular and inclusive reviews of progress at the national and sub-national levels, which are country-led and country-driven. Quality data are vital for governments, development partners, international organizations, civil society, the private sector and the general public to make informed decisions and to ensure an accurate review of the implementation of the 2030 Agenda. Tracking progress on the SDGs requires the collection, processing, analysis and dissemination of an unprecedented amount of data and statistics at subnational, national, regional and global levels, including those derived from official statistical systems and from new and innovative data sources. The SDG 17 seeks to increase the proportion of countries with a fully funded national statistical development plan through stronger partnership.
II. PROJECT DESCRIPTION
A. Project Development Objective PDO Statement
34. To strengthen the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics in a sustainable manner and modernize the Recipient's selected economic and fiscal management tools and processes in Djibouti.
PDO Level Indicators 35. The PDO-level results indicators are as follows: Number of reports/publications disseminated on a government’s official website (including INSD) as per the adopted statistical release calendar, by each of the 5 departments
13 https://www.presidence.dj/texte.php?ID=2019-278&ID2=2019-11-03&ID3=D%E9cret&ID4=21&ID5=2019-11-14&ID6=n
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Number of statistical quality assessments conducted, and quality assessment reports or certificates issued Number of ministries with approved budget anchored to a Medium-Term Expenditure Framework Percentage of contracted loan that are included in the Medium-Term Debt Strategy (MTDS)
Intermediary Indicators 36. Key intermediary results indicators are: Component 1: Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics in a sustainable manner Steps taken for the construction of an energy efficient building Number of statutory meetings held by the Superior Council of Statistics (SCS) per year Performance contract between INSD and MoFI signed Number of new staffs hired by INSD, by sex Number of INSD staff trained in the regional francophone schools of statistics, by sex Number of download requests of micro-datasets (anonymized) of Census/surveys that are publicly available on INSD data access portal Number of UNSD Minimum List gender indicators available using data collected within the past 5 years Delay in the publication of final national accounts (Comptes nationaux définitifs) Number of reports with the results of survey on user satisfaction with statistics are published on INSD website Percentage of beneficiaries reportedly satisfied with the progress of the project Component 2: Modernizing the Recipient's selected economic and fiscal management tools and processes Number of relevant policy notes/documents that refer to the macroeconomic model’s outputs Number of policy notes based on the macroeconomic simulation model’s output Number of years with published consolidated public sector fiscal tables (Tableau des Opérations du Secteur Public) Percentage of projects monitored with the new electronic monitoring system Percentage of external loan agreement exceeding US$50 signed with the approval of the CNEP
B. Project Components
37. The proposed project is structured into three components. They are: (i) Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics; (ii) Modernizing the Recipient's selected economic and fiscal management tools and processes; and (iii) Project management. There is a strong linkage between the first two components of the project. By strengthening the capacity of INSD to ensure timely production and dissemination of good quality data and statistics on economic,
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financial, social and environmental topics, the first component will improve the availability and quality of data needed to support evidence-based planning and decision making, which is the aim of the second component. When data are uncertain or unreliable, ideology and anecdotal information prevail in decision making which in turn depresses the demand for data and the need to strengthen the statistical system. An important step to break this vicious circle is to provide policy makers with relevant, reliable and timely data and modernized tools to use them in their planning and budgeting decisions. The project will focus on making statistical data easier to find and use, and to equip data users with the necessary tools and processes to base decisions on facts. The project also intends to address climate vulnerabilities in Djibouti and to increase resilience to climate change. The project will finance activities that will reinforce preparedness to conduct more accurate assessment of impacts by making more relevant data and information available. For example, the project would aim to better understand areas and households in the country that are exposed to climate-induced shocks in order to better plan mitigation and adaptation measures in the event of disasters, along with other climate measures introduced in various activities financed by the project. This will enable quicker response to climate shocks by promoting planning for contingency support to rehabilitate critical public infrastructures such schools and hospitals and help affected populations. The project will also adapt the statistical agency INSD’s (Institut National de la Statistique de Djibouti) physical infrastructure and equipment to climate change to ensure that data and information are available even during extreme climate shocks while considering energy efficiency consideration in the building design. Component 1: Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics in a sustainable manner (US$11.8 million) 38. The objective of this component is to invest in the basics: INSD’s physical and human resources, build capacity of its staff as well as core data collection using best practices. These, in turn, should create the preconditions for INSD to produce and disseminate timely and reliable foundational statistics. When, at the end of the project, INSD has reached a stage where it can comfortably engage in core statistical production, it will be ready to take the next step towards modernization and innovation in statistics production. This component has two subcomponents: (i) setting up of the National Institute of Statistics of Djibouti (INSD) and (ii) strengthening statistical production and dissemination. Subcomponent 1.1: Operationalization of the National Institute of Statistics of Djibouti (INSD) (US$8.3 million) 39. Statistical capacity is weak, hindered by lack of resources that are foundational in nature: physical infrastructure, staff and skills that are needed to produce and disseminate reliable data and key statistics. The activities financed by this sub-component will aim to address these challenges by supporting the upgrade of working conditions of INSD staff, invest in staff to improve capacity and support to improve INSD’s organizational structure and management. 40. The project will achieve short term objectives of and strengthening capacity of INSD through the financing of 4 activities: a. Upgrading the physical infrastructure and equipment of the INSD (US$6 million). Recent experience from Burkina Faso, Senegal and Tanzania show that having good physical working environment is a critical factor for sustainable reform of national statistical systems. The existing premises for INSD are dilapidated and extremely cramped, and severely constrain the ability of staff to perform their duties effectively. The entrance to the premises gets flooded in periods of excessive rain while certain offices become unusable due to water leakages. This is the result of a prolonged period (at least two decades) of underinvestment in statistical infrastructure and development of skills. The Government is now committed to changing this situation. New office buildings will be constructed for INSD and other departments of MoFI as part of the project. The Ministry of Finance has an allocated piece of land to construct the building and a master plan (cahier des charges) has already set the key features required for buildings to be constructed in the area. The activities to be financed include:
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i. Work for the construction of a smart and environment-friendly building with modern and energy efficiency characteristics. INSD staff of 130 individuals will be on the lower floors while other departments of MoFI comprising 70 staff will be housed on the upper floors, thereby ensuring physical separation between INSD and other departments. INSD will also have a separate entrance. This set up will foster integration across ministerial departments and statistics producers and primary users, while maintaining autonomy of INSD. The building will primarily serve INSD as it not only houses a larger number of INSD staff, but also the construction of an open free WIFI space and library along with a computer center, conference and training rooms and library facilities. The project will attempt to introduce, as far as possible, requirements for the construction of the building such as the use of resource efficient material, and environmentally friendly design such as north facing windows which allow more light penetration as well as energy efficiency guidelines, reducing the carbon footprint. It is expected that 75 percent of the electricity consumption of the building will be from solar energy during daylight. Renting new office space has been considered but has been found to be uneconomical in the long-term. The estimated cost of the building and its equipment, at appraisal, is at US$6 million. IDA financing for the construction of the building will amount to US$4 million. The Government will complement with US$2 million. To minimize the risk of inaccurate cost estimates, the Ministry of Finance has hired a civil engineer and an engaged procurement and financial management staff of the ministry at the inception of the project. The Ministry has gained recent experience when carrying out the construction of the Leadership and Entrepreneurship Center (Centre de Leadership et de l’Entrepreunariat) inaugurated in 2019 and is using the same team for the planning and the implementation of the building. In addition, the Government has agreed that the project fund for this activity be reallocated to other components in the case of implementation progress not satisfactory to the World Bank Group during supervision. ii. Procurement of office furniture and enhancement of the electrical system. iii. Acquisition of ICT equipment, primarily computers, servers and networking equipment, and other equipment needed to collect, process and disseminate data and statistics. b. Strengthening the institutional framework of INSD. The operation will finance activities that will help INSD comply with the new legal framework governing public agencies. The Government has already advanced in the setting up of the institute. A review of the organizational chart and human resources structure and an assessment of human resources needs to fulfil INSD’s mandate has helped to define a new organigram and a list of 23 publications to be published by INSD, along with a fixed periodicity and calendar of publication. Respecting the calendar of publications will be part of the performance contract which will be validated first by the Superior Council of Statistics (SCS) as part of the annual statistical program. To this end, the project will finance: i. Technical assistance to INSD in the development and implementation of a three-year performance contract with MoFI. This would foster accountability wherein INSD will provide an account of its activities (such as statistical production) done annually based on a timeline in exchange for the budget allocated by MoFI to INSD. ii. Trainings to strengthen the Superior Council of Statistics (SCS). The activities to be included into the performance contract will be validated first by INSD’s board and the SCS as part of the annual statistical program. The training is intended to ensure that INSD remains autonomous and a trustworthy source of objective, relevant, accurate, and timely information. iii. Operationalization of the Committee in charge of Methodology and Statistical Program (Comité de Programmes Statistiques et de Méthodologies – CPSM) and the development of concepts, definitions
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and methodologies to be used across the NSS and a Quality Assessment Framework (QAF). The framework will set standards and guidelines that need to be applied by any institution that produces statistics and the measures that have been put in place to ensure the quality of the production process. These standards are taken from international best practices and modified to fit the country’s situation and facilitate the regional data harmonization effort. The project will finance a long-term adviser with international experience in quality insurance in the domain of statistics and managing a CPSM, as well as the preparation of quality assessment reports. The project will thus support quality improvement activities. c. HR policy on staffing. INSD has inherited 88 staff from DISED, out of which 30 are qualified statisticians, economists or demographers, 1 informatician, and 1 cartographer. It is estimated that only half of the inherited staff have the skills to be recruited by INSD to fulfil its mandate and produce high quality data and publications in a timely manner, while the other half will be deployed to other civil service institutions. With the creation of INSD, the size of the office is expected to increase to 130 staff of which 70 will be qualified statisticians, economists and demographers, 5 informaticians, 3 qualified GIS specialists/cartographers, 2 communication specialists and 1 environmental specialist. These diverse set of skills are likely to help in gathering a wider variety of statistics including environment related statistics. The government intends to launch an open recruitment process to fill the remaining vacant positions of INSD over the medium term. The project will facilitate this process by financing: i. Support to develop a recruitment plan consistent with the data and publication production schedule of INSD. Gender quotas would be put in place to ensure a minimum number of skilled female staff is employed. ii. Technical assistance to develop a human resources (HR) policy, a results-based management system and a staff evaluation and monitoring approach that provides incentives and career development opportunities to well-performing staff. d. Training. The project will finance trainings for INSD staff on several topics. In particular, the project will finance: i. Three international experts to be at INSD over 2 years to ensure a successful transition to the new organizational structure. These 3 individuals will be experts in the field of social and demographic studies, GIS and environmental statistics and overall functioning of a statistical office. The project will attempt to attract these experts from an advanced statistical office. Through the development of a partnership or consortium, experts from the advanced statistical office will provide technical assistance on a wide set of topics ranging from advising on the practical aspects of setting up INSD to provide technical assistance on the best practices for statistical production. Training would also be provided to use GIS tools to map all areas in Djibouti that are prone to flooding and drought to understand vulnerability to climate change and to plan mitigation measures thereof. This would help INSD to learn lessons, plan for early warning systems in case of natural disasters, for example, and leapfrog whenever feasible. ii. Training of INSD staff at the schools of statistics in francophone Africa and the University of Djibouti. The project will finance skill upgrading and basic hands-on training for 30 staff in one of the three regional francophone schools of statistics14, to boost INSD’s technical capacity. The project will provide scholarships (tuitions and stipends) to Djiboutian candidates who successfully pass the competitive entrance examination to study abroad in the regional statistical schools’ degree-granting institutions
14 The three regional schools are located in Abidjan (Cote d’Ivoire), Dakar (Senegal) and Yaoundé (Cameroun).
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that are supported by international quality assurance standards. The project will attempt to promote gender balance by ensuring 50 percent participation for women, with a set minimum quota. iii. Trainings on leadership for senior management as well as communication, Big data and other themes that may be considered relevant for the rest of the staff. 41. The expected results from the implementation of the activities of this subcomponent will be tracked by the following results indicators: (i) steps taken for the construction of an energy efficient building; (ii) number of statutory meetings held by the Superior Council of Statistics (SCS) per year; (iii) performance contract between INSD and MoFI signed; (iv) number of new staff hired by INSD, by sex; and (v) number of INSD staff trained in regional francophone schools of statistics, by sex. Subcomponent 1.2: Strengthening statistical production and dissemination (US$3.5 million) 42. The second subcomponent will finance foundational statistical production and quality improvement activities of INSD (refer to Table 1 for the list). The activities financed in this subcomponent are foundational in nature. At the same time, the use of newer methods (such as Gerographic Information Systems/ GIS cartography and real time monitoring) will be embedded into these foundational data collection activities to bring INSD’s data collection efforts up to par to basic levels internationally but more advanced levels for the country itself. The basic and key host of statistical production activities that an advanced statistical office performs has 6 components: i) collecting Censuses (Population, Economic); (ii) conducting surveys such as household budget survey, labor force survey, health survey, business survey etc.; (iii) conducting economic and services data collection; (iv) producing statistics, socio-economic indicators etc.; (v) access to administrative data and building links to it; and (vi) building statistical registers such as population register, business register etc.. 43. The choice of the surveys to be financed by the project was driven by the foundational nature of these statistical products as well as the urgency of conducting a Population Census and an Economic Census. The two Censuses provide the master sampling framework for several surveys and are an input into several indicators such as GDP per capita. In addition, they create an avenue to explore links to administrative data to update the population and business registries, thus pushing INSD to perform activities that a more advanced statistical office is normally able to do. At the same time, EDAM is a multi-topic household budget survey and is expected to produce a host of SDG indicators on welfare, education, gender, labor force and access to basic services highlighting its importance15. To improve the robustness and accuracy of NA, development of price and production indices, surveys on free zone companies and military bases are of paramount importance and thus have been chosen to be financed by the project. New and innovative ways to collect and disseminate this data will be explored throughout. In addition to those listed in table 1, there are other critical and foundational data collection efforts that INSD should engage in such as Demographic and Health Survey (DHS) or Multiple Indicator Cluster Surveys (last done in 2005), labor force survey (last done in 2015), learning and test results (never done) as well as gaining access to and building links to administrative data. These data collection efforts will not be financed as part of the project, as we expect that these activities will be increasingly funded through the budget, as part of the performance contract between MoFI and INSD.
Statistical Production activity financed by the project 1. Population and Housing Census 2. Economic Census
15 Some indicators of SDGs that could be calculated by EDAM include “Goal 1: End poverty in all its forms everywhere”, “Goal 4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all”, “Goal 6. Ensure availability and sustainable management of water and sanitation for all”, “Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all”, “Goal 10. Reduce inequality within and among countries”.
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3. Household budget survey (EDAM), poverty maps 4. Publications and socio-economic statistics, including on NA, SDG indicators, gender 5. National Accounts (NA) (annual and quarterly) 6. Social Accounting Matrix (SAM) 7. Consumer Price Index/ CPI (rebasing and regional coverage) 8. Industrial Production Index, Service Turnover Index, Cost of Construction Index, Industrial Production Price Index 9. Survey of free zone companies 10. Monography (light survey) of foreign military bases
a. Third population census. The last population and housing census was conducted in 2009, raising an urgent need for the next round. The new population census will provide basic demographic and socioeconomic data, access to basic services and basic infrastructure which is key for the planning and monitoring of the Government’s development programs. It also provides basic information for the monitoring of SDG indicators the master sampling frame for household surveys and supports sector planning and monitoring. The project will finance: i. The entire set of activities for the Census, grouped into three phases: (a) cartographic activities and preparation; (b) enumeration using CAPI; and (c) data processing, analysis, and dissemination. For the different phases, a national and an international expert will be hired to support the Census. A study tour will also be organized for key INSD staff that will be involved in the carrying out of the Census. Timely delivery of inputs and payment of various service providers will require mature logistics processes and full-time staff dedication. This is an enormous activity and will be implemented from 2021-2022. The proposed project will support all three phases to ensure not only a sound preparation and the production of a quality product but also that the data collected are publicly available in a usable manner. The new census will also include questions16 that would help to understand vulnerability to disasters and exposure levels across the country. This will ensure quicker response times and allocation of adequate resources when climate induced disasters occur. ii. Geographical Information Systems (GIS) cartography. In the new organigram of the institute, a new technical directorate in charge of GIS, Satellite imagery and environmental statistics has been created. This directorate would be involved in the first phase of the Census, namely cartographic activities as well as in the production of environment related statistics. The project will finance the development of GIS based cartography by acquisition of new software as well as building of capacity of INSD staff to conduct this task. In addition to cartography, this directorate will be embedded in all data collection and statistical production activities of INSD to ensure that GIS technology is leveraged wherever possible. This would include producing a spatial distribution of households to determine more disaster- prone areas and model impacts more accurately in the event of a disaster and determine relief measures, for example. This will also enable the creation of early warning mechanisms for disasters. In particular, this directorate will be strengthened to work on: 1. improving the quality of primary data collection, sampling, and supervision—enhancing the core functions of the Statistics Bureau; 2. creating a sustainable geospatial data ecosystem17; and 3. providing new analyses, faster, thus enabling a shorter ministerial decision-making cycle. The types of skills that would be necessary in this cell would be such that would help carry out activities like database management, GIS Data curation, creation, and editing,
16 These questions include: Building Construction types- Steel, Concrete, Height, No. of storey and age of the Buildings, occupancy and Type of Occupancy, Type of Building - Residential, Commercial, Industrial, Type of Structure, Built area and non-built area of the building. 17 These foundational data sources include shapefiles of various data: administrative boundaries, various infrastructure components such as roads, rails, schools, hospitals, ports, mines as well as geographical components such as land cover, elevation, soils, hydrography etc.
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topology (Data rules) as well as graphic design. Undoubtedly, the technical requirements for the directorate to perform the above-mentioned activities would be manifold including connectivity/ bandwidth, powerful computers as well as applications/software. iii. Technical assistance for the development of paradata systems for quality control of data collected. The recording, plotting, and monitoring the paradata produced by Census/ surveys can be used for controlling the quality of the data produced. The set of activities to be financed include the training of INSD staff to identify paradata metrics that are most useful, to develop an automated system designed to provide progress and status information through dashboards and to develop GIS operational dashboards. These systems will be employed in all data collection activities, thus instituting real time monitoring of data and improving the reliability of data and statistics. b. First Economic Census. The project will finance the entire set of activities to conduct an economic census. In particular, the project will finance: i. The three phases of the Census including preparation, enumeration as well as processing, analysis and dissemination. The Census will be conducted in 2023, after the third population census and will involve the same set of activities as the Population Census. The Economic Census would involve taking stock of formal and informal establishments. To reduce costs, the cartography work of this activity will be done concurrently with the Population Census as the place of business of much of the informal sector work is the household. The realization of the business census will pave the way to produce more comprehensive business statistics. It will serve as a sample frame to produce the Industrial Production Index (IPI) and the Services Turnover Index (STI). This will also help to understand this sector better and plan for adaptation and mitigation policies that improves the vulnerability of informal sector workers to unprecedented natural disasters, for example by providing special disaster relief financing mechanisms. A large majority of women in the labor force in Djibouti are employed in the informal sector. The Census would help produce statistics on firm characteristics by sex of owner which can prove very useful for creating a more enabling environment for women entrepreneurs. ii. Technical assistance to map all economic units in the country including hospitals, schools and other public services on the same map. Tablets used for data collection will record GPS coordinates which will be used to generate this map. This will be combined with OSM data and shapefiles for other public amenities to generate a comprehensive map. This spatial distribution of economic assets also helps to determine more disaster-prone industrial areas and model losses and impacts more accurately in the event of a disaster and determine relief measures. The new census will also include questions that would help to map vulnerability to disasters and exposure levels across the country. iii. Technical assistance to make an attempt to establish the first comprehensive business registry that will be updated using ODPIC, DGI, DGDDI, and CNSS administrative data. It will be the reference for the collection of the annual financial statements needed for to prepare the national accounts. c. The fifth Djibouti Household Budget Survey (EDAM). All activities conducted under this operation will have the objective of supporting the successful implementation of the design, data collection and analysis of EDAM. The objective of EDAM is not only to produce poverty estimates, but also measures of households' welfare, and nationally representative indicators of labor force, education and dwellings. The project will finance: i. All activities to field EDAM survey including the preparation of CAPI questionnaire, procurement of tablets, sampling, update of enumeration areas mapping, listing, training for field personnel, pilot survey, data collection for the sampled households, preparation of the associated datasets, preparation of a welfare and poverty report describing the findings from the EDAM as well its publication on the
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INSD website. The datasets from EDAM 2017 will be made available publicly through the INSD website. The findings of the report will be disseminated through workshops, presentation to stakeholders, line ministries and development partners. ii. Production of poverty maps and SDG indicators using latest information from the Census and EDAM. The identification of the location of poor households will help determine their exposure to climate related risks and help to better plan climate adaptation measures. iii. A light welfare survey will be conducted soon after the COVID-19 outbreak to update the country’s consumption distribution in response to this crisis. This is in the context of providing capacity to INSD to collect data remotely in order to assess the impact of shocks such as COVID-19, floods, droughts in real time through phone or web surveys as well as after the crisis passes to assess the impact on consumption distribution. d. Production of sex-disaggregated statistics. Through the collection of a Population Census, a household budget survey and integrated business establishment survey, the project will support the questionnaire design, survey methodology to ensure an increase in the production of gender statistics (as per the UNSD minimum list). Sex segregated data related to education, employment, firm/land ownership will be generated. The project will also build capacity of the INSD to calculate the gender statistics from such surveys and census and disseminate them in the publications, which will be posted on INSD’s website. e. Production of national accounts and Social Accounting Matrix (SAM). Djibouti made significant progress in recent years in the production of national accounts. The project will support all activities that further improve production by financing: i. Activities that will reduce the delay in publication of final NA to the international standards which is two years Rapid NA estimates (comptes rapides) for 2018 were produced in January 2020, semi-final NA (comptes semi-définitifs) are available for 2015, 2016 and 2017 and final NA (comptes définitifs) produced for 2013 and 2014. This yield a six-year delay between the current year and last available final NA. The methodology of NA was recently upgraded to ensure compliance with the SNA 2008 and its coverage extended to the ports and free zones. To ensure medium-term sustainability, the project will provide inhouse technical assistance by extending the existing partnership with AFRISTAT and IMF to continue building the capacity of the existing staff. The NA will benefit from the economic census and the updated business register. The project will specifically finance the (i) production of the final accounts for years between 2015 and 2023; (ii) production of the social accounting matrix for 2017 and 2023; and (iii) production of the historic series from 1990 to 2012. ii. Preparation of quarterly NA after the business census is completed in 2023 and quarterly business surveys established to produce the Industrial Production Index (IPI) and the Service Turnover Index (STI). iii. Assistance to extend the coverage of the Consumer Price Index (CPI) to two regions to capture the spatial difference in prices. Currently, price information is collected only the capital city which accounts for 75 percent of Djibouti’s population. iv. The preparation of the Social Accounting Matrix (SAM) will be possible due to a reduction in the delay in the production of NA and the final NA available for 2017. The SAM will build on the detailed input-output table for 2017 and will use the last household survey data (EDAM IV) to enable the development of a micro- simulation module. The SAM will be published to provide critical inputs for researchers that are interested in developing a CGE model for Djibouti.
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f. Trade statistics and Balance of payments (BoP). The project will finance all activities that improve the quality of trade statistics and BoP. In particular, the project will finance: i. An IT application for BoP and a technical assistance from a more advanced central bank in Africa. This task will be closely coordinated with the IMF. ii. A survey of free zone companies to complete trade statistics to produce the balance of payments accounts iii. Technical assistance in the development of an IT application to automatize data collection for free zone companies will be supported. iv. A monography (light survey) of the foreign military bases to understand their financial interactions within Djibouti will also be undertaken. It will build capacity to use trade statistics from ASYCUDA World to produce trade indicators and do their analysis. g. Development of dissemination practices: The 5 departments that are involved in the project are committed to the production and dissemination of reports and publications. For example, INSD will produce and disseminate 23 publications, with pre-defined frequency. To this end, the set of activities that will be financed by the project include: h. Technical assistance in the preparation of an advanced release calendar of publication of all statistics (INSD and other 4 departments) with defined periodicity. For economic statistics, this would be in line with the IMF enhanced General Data Dissemination System (e-GDDS). i. Technical assistance in the redesign of the INSD website. The new one will include a micro-data portal accessible online and based on open-data principles. j. Technical assistance in the development of ICT tools and technical assistance to access, process, archive and disseminate data and host all anonymized datasets on the servers of INSD/ e-government platform agency (Agence Nationale des Systèmes d'Information de l'Etat or ANSIE). 44. The expected results from the implementation of the activities of this subcomponent will be tracked by the following results indicators: (i) number of download requests of micro-datasets (anonymized) of Census/surveys that are publicly available on INSD data access portal; (ii) number of UNSD Minimum List gender indicators available using data collected within the past 5 years; (iii) delay in the publication of final national accounts; (iv) number of reports with the results of survey on user satisfaction with statistics published on INSD website; and (v) percentage of beneficiaries reportedly satisfied with the progress of the project. Component 2: Modernizing the Recipient's selected economic and fiscal management tools and processes (US$3.8 million) 45. The objective of this component is to modernize the Recipient’s selected economic and fiscal management tools and processes. This component will modernize three economic and fiscal management tools or processes, each corresponding to a subcomponent: (i) macroeconomic modeling; (ii) budget preparation and investment planning, and (iii) debt management. 46. Subcomponent 2.1: Building macroeconomic modeling capacity. The first subcomponent will develop macroeconomic modeling capacity for short, medium, and long-term forecasting, macroeconomic and microeconomic simulation, as well as debt sustainability analysis. These will also lead to improved policy dialogue environment and knowledge on country resilience to climate change effects. For example, the macroeconomic tools can help identify socially and environmentally sustainable growth pathways, especially in sectors such as fisheries, livestock and tourism. This component will benefit from the upgrading of the national accounts, the
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business census and quarterly business surveys (IPI, STI, etc.), the SAM, the BOP coverage improvement, and the fifth household surveys financed under the first component. 47. The expected long-term impact of this subcomponent is an improved policy dialogue environment and its progressive shift toward evidence-based discussion. This will be done through improved assessments of current macroeconomic situations, which will allow for better judgments in deriving policy alternatives. Increasing capacities to develop macroeconomic modeling for short, medium and long-term forecasting will also aid to improve resilience to some of the climate vulnerabilities such as drought, flooding or other natural disaster especially and its impact on the country’s debt sustainability. The medium-term outcome will be that more timely macroeconomic policy assessments inform more relevant policy advice to policy makers. The macroeconomic monitoring and analytical tools will allow for a better evaluation of macroeconomic forecasts that underlie policy recommendations. 48. The project will finance the following activities under this component: Forecasting model. The project will finance the development of a new forecasting model based on the IMF financial programming framework with a debt and employment modules and provide training for a wide range of stakeholders, including all members of the Comité de Cadrage18. The project will finance the timely production and publication of the tableau de bord (dashboard) which is a critical input for the model’s update. This activity will be coordinated closely with IMF who will provide financial programming course. Training will be provided to senior management to increase capacity for using analyses and data in improved economic management - resource allocation, planning, control over treasury and budget. Macroeconomic Simulation Model. The project will finance the development of a simple macroeconomic simulation model based on the national accounts produced by INSD. The model will have a micro simulation module to assess expected social impact of a policy and/or a natural shock such as drought on income and consumption distribution. The project will provide training for a wide range of stakeholder, including all members of the Comite de Cadrage and selected Djiboutian researchers. To complete this activity, the government will draw on existing human resources at the Department of Economics and statistics of the University of Djibouti and from the Djiboutian diaspora. This model and the trainings offered will help to identify the influence of climate change on productivity, households’ demand, and production factors such as labor and land. Debt Sustainability Analysis (DSA) Model. The project will finance the development of a DSA model based on and integrated with the macroeconomic framework of the forecasting model. The DSA model can use the WBG/IMF debt sustainability framework that has recently been adopted (September 2017). The project will provide training for a wide range of stakeholders, including all members of the CNEP19 and its technical committee as well as selected Djiboutian researchers. This activity will also be coordinated closely with IMF. 49. The expected results from the implementation of the activities of this subcomponent will be tracked by the following results indicators: (i) the number of relevant policy documents (budget speech, budget law, Debt
18 The Committee is in charge of the macroeconomic framework (Comité de Cadrage Macroéconomique, arrêté N° 2019-027/PR/MEFI) and responsible for the adequacy of the overall macroeconomic framework. The committee is composed of representative from the Ministry of Finance, the Ministry of Budget, the Central Bank and the Port and the Free Zones Authority and is chaired by the President economic adviser. 19 National Committee is charge of Public Borrowing (Comité National d'Endettement Public (CNEP), décret N° 2019-085/PR/MB).
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Sustainability Analysis report, and economic and financial rapports) that refer to the macroeconomic model’s outputs; and (ii) the number of policy notes based on the macroeconomic simulation model’s outputs. Subcomponent 2.2: Budget preparation and investment planning 50. The subcomponent on budget preparation will support the Government's commitment to transition toward performance budgeting and Medium-Term Budget Framework (MTBF). This component will build linkages between the country's medium-term development plan and the budget, which is the country's main policy instrument. It will also support the development of investment planning capacity within the central ministries (budget and finance). 51. The expected long-term impact of this subcomponent is a transition toward a fiscally sustainable and results-based budgeting and a greater efficiency and effectiveness in public investments. The medium-term outcome will be that the national budget is anchored into a consistent, adequate medium-term fiscal framework. This will be done through the institutionalization of a Medium-Term Budget Framework (MTBF) and a new Public Investment Management Framework (PIM) which will strengthen investment planning, implementation, monitoring and evaluation. 52. The project will finance the following activities: Development of a new budget framework, with technical assistance for the revision of the existing legal and regulatory framework, the revision of a new organic law and its adoption and implementation. The project will support a partnership between the Ministry of Budget and advanced regional or international institutions which has developed a rich and relevant experience in MTEF and program budgeting, including in francophone countries in West Africa. The project will finance study tours and travel and subsistence cost for international and regional experts of MTEF. Preparation of a Medium-Term Fiscal Framework (MTFF) and a Medium-Term Budget Framework (MTBF), based on the approved macroeconomic framework. A model MTBF could be added to the macroeconomic forecasting model or developed as a stand-alone model, using the output of the forecasting model as an input to produce the expenditure breakdown by sectors and ministries. The MTBF will include specific measures about how climate adaptation and mitigation measures will be financed. Djibouti will be disproportionally affected by the rising trend of losses from climate related events. This will contribute to meeting Djibouti’s Nationally Determined Contribution (NDC). Support to pilot ministries. The project will support line ministries (health and education) selected as pilot to implement the MTBF. Lessons leant from this experience will inform later the extension of the MTBF, MTEF and program budgeting. Public Investment Management Assessment (PIMA). The project will support the assessment of the public investment management framework, using the PIMA methodology developed by the IMF and the development of an action plan to reform the PIP. This will strengthen public investment planning, implementation, monitoring and evaluation. Public Investment Plan and Resources Mobilization Strategy. The project will support the preparation of a resource mobilization strategy consistent with the MTDS and MTBF. This will integrate grants from bilateral donors that are currently managed at the Ministry of Foreign Affairs. The project will finance the extension of the electronic platform at the Directorate of External Financing (Direction du Financement Extérieur, DFE) to cover bilateral grants. The project will support also the formatting of the PIP and its publication on the revamped MoFI’s website.
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Developing project design, monitoring and supervision capacity. The project will provide training on project design for the DFE and the pre-identification of selected projects in the next medium-term development strategy. The project will also upgrade the electronic monitoring of the projects using geo-enabling for monitoring and supervision (GEMS) technology developed by The World Bank. Consolidated Public Sector Fiscal Accounts. The project will support the collection of SOEs’ annual financial statement and the preparation of a consolidated public sector fiscal tables. This will provide a comprehensive analysis of state’s actions. The project will provide training on consolidated public sector fiscal tables as well as balance sheet approach to fiscal accounting. 53. The expected results from the implementation of the activities of this subcomponent will be tracked by the following results indicator: (i) percentage of projects monitored with the new electronic monitoring system. Subcomponent 2.3 Debt Management 54. The second subcomponent will support debt management. It will support the revision of the existing public investment framework and the development of a medium-term debt strategy to finance it. A debt management action plan has already been developed with WBG support. 55. The expected long-term impact of this subcomponent is a sustainable debt. The medium-term outcome will be that the borrowing policy of the national budget is anchored into a Medium-Term Debt Strategy (MTDS) consistent with an adequate medium-term macroeconomic framework and national Debt Sustainability Analysis. This will be done through the institutionalization of the MTDS into the country’s debt law and the operationalization of the institutions in charge of its implementation, specially the National Committee is charge of Public Borrowing and the strengthening of the Public Debt Department. 56. The project will support full implementation of the action plan. Preparation of the Medium-Term Debt Strategy (MTDS). The project will finance the preparation of the MTDS20 which will benefit from the DSA and will inform the macroeconomic framework that underlines the MTBF and MTEF. A MTDS sets out how the government intends to borrow and manage its debt to achieve a portfolio that reflect its cost and risk preferences, while meeting financing needs. It guides debt management decisions and on-going debt management operations. MTDS is critical to helping a government manage the risk exposures arising from its debt portfolio, particularly variations in debt servicing cost and roll-over risk. Moreover, the implementation of a sound MTDS can help reduce macro-financial risks, support fiscal policy, and complement the established prudent monetary and exchange rate policy. Support the secretariat of the CNEP. The design and implementation of a MTDS requires strong coordination with other public sector policies. The project will finance the activities of the secretariat in charge of the preparation of the National Committee, which will be the coordination entity in charge of Public Borrowing (Comité National d'Endettement Public (CNEP), created by presidential decree in 2019 (décret N° 2019-085/PR/MB). The Committee will be supported by a technical sub- committee to ensure better coordination among public entities. The CNEP will provide a clearance on major guarantee to SOEs of critical project. To facilitate this, training will be provided to build or improve capacity to carry out cost benefit analysis of selected projects, including some PPP projects.
20 This activity requires also the reform of the organic law of finance and the development of a new budget framework referred on component 2.2.
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The committee will also clear the debt law under preparation by the Debt unit. The CNEP will approve the MTDS and all major loans. Upgrading of the IT system of debt management unit. The Public debt unit is currently using an old and obsolete version of the Debt IT system (SYGADE and DAD) and needs to upgrade to the most recent system to secure continued maintenance by UNTAD. 57. The expected results from the implementation of the activities of this subcomponent will be tracked by the following results indicator: (i) percentage of external loan exceeding US$50 million signed with the approval of the CNEP.
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Component 3: Project management (US$1.4 million) 58. The Project will support the establishment and operation of a Project Management Unit (PMU) overseen by the Ministry of Finance to support coordination and manage project implementation. Details of the implementation arrangements are outlined below. Activities will include (a) the development of annual work programs and corresponding Procurement Plans (PPs), (b) the management of fiduciary and monitoring activities, (c) the coordination of technical work and the provision of support services to the technical units within the relevant ministries, (d) the monitoring of and reporting on the implementation of the project’s activities, (e) acquisition of office equipment and accounting software, and (f) the payment of the activities related to project coordination and monitoring as well as project audit. The PMU will only have a supporting role in the execution and activities will be largely implemented by public institutions. The technical department will drive the reform and governance changes introduced through the project to encourage ownership and sustainability. 59. Project Cost: The cost of the project is given by component below. The largest share of cost is dedicated to statistical production by INSD, including foundational data such as the Population Census, Economic Census, EDAM, NA and other economic statistics. Another big component of the project is related to the construction of the building for departments under the Ministry of Finance.
USD (million) Component 1: Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) to 11.8 produce and disseminate timely and reliable statistics in a sustainable manner (US$9.6 million) Subcomponent 1.1: Setting up of the National Institute of Statistics of Djibouti (INSD) 8.3 Subcomponent 1.2: Strengthening statistical production and dissemination 3.5 Component 2: Modernizing the Government's selected economic and fiscal management tools and 3.8 processes Subcomponent 2.1: Building macroeconomic modeling capacity 0.8 Subcomponent 2.2: Budget preparation and investment planning 2.0 Subcomponent 2.3: Debt Management 1.0 Component 3: Project management 1.4 Total 17.0 IDA financing 15.0 Government financing 2.0
C. Project Beneficiaries
60. The ultimate beneficiaries of the project will be the citizens of Djibouti as they will have timely access to better quality and more reliable economic, financial, social and environmental statistics online and in a user- friendly format. The intermediary beneficiaries will consist of technical institutions of the central government and the Central Bank of Djibouti. Component 1 will target the National Institute of Statistics of Djibouti (INSD) for the production and dissemination of actual statistics and the unit in charge of the Balance of Payments and Monetary Surveys at the Central Bank. The beneficiaries of Component 2 will include the Planning and Macroeconomic Forecasting directorate within the Ministry of Economy and Finance for the macroeconomic modeling and forecasting, the Directorate of Budget in charge of the preparation of budget laws, the Directorate of Debt and Directorate of External Financing, both involved in the planning, execution and monitoring of public investments.
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D. Results Chain
61. The chart below summarizes the changes that are expected to happen with the implementation of the project. The main change agents involved in the change process are the project primary beneficiaries (INSD, DEP, DFE, DDP, DB, the Central Bank, and the PMU). The link between the activities to be carried out by the change agents and the expected outputs is well established and clear. There are nevertheless some critical assumptions made in this results chain. One critical assumption would be that the INSD will be adequately funded, particularly with respect to staffing in line with the HR policy. It is also assumed that the counterpart (MoFI) funds allocated to the building will be made available on time. The causal link between activities and the quality of the outputs is less obvious. A national statistical system is a social system made of people and organizations involved in the production, dissemination, and use of data and other statistical products and services within a given institutional environment. The institutional environment includes organizational factors that have an influence on the performance of the system. Clearly, the quality of statistical outputs hinges critically on the quality of the institutional environment as well as the quality of the production and dissemination processes. It is assumed that a quality assurance mechanism integrated into the system will help detect and correct quality problems progressively, but this will be a slower process. Furthermore, it is assumed that statistics and analytical reports made available to the public and policy makers will be effectively used and decision by the CNEP about the country’s borrowing profile will be implemented. While the project does not focus on the demand side, beyond the need for Government’s fiscal management, there are dissemination activities and well as communication and outreach activities financed by the project that will help sensitize and educate the user.
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E. Rationale for Bank Involvement and Role of Partners
62. The rationale for public sector provisioning and financing is strongly justified for the proposed project. Official statistics are a public good and the public sector remains the sole source of financing of its production. However, in most developing countries, data collection, processing and dissemination are not prioritized by governments and therefore are underfunded. The Government of Djibouti sees substantial economic and social returns to public investment in statistics development and evidence-based policy making. It has established a delivery unit recently and is fostering policy monitoring in all ministerial departments. Other benefits to increasing access to information, especially to disadvantaged populations, include raising public awareness, constructive policy debate, greater support to public policy, improved democracy and social stability. These positive externalities of the project provide an additional rationale for investment. 63. The value added of the World Bank's support comes in two forms. First, the World Bank, recognized for its experience in supporting comprehensive economic management and statistical development projects will help introduce innovative solutions and an ability to mobilize international expertise and build partnerships with advanced institutions. Second, the World Bank has a recognized footprint in the country that will help identify and address bottlenecks and provide closer support in the existing low capacity context. 64. The World Bank’s support is complementary to development partners’ areas of intervention. The IMF is providing support to the development of National Accounts, Balance of Payments statistics, fiscal and debt statistics, monetary and financial statistics (MFS), Financial Access Survey (FAS), and Financial Soundness Indicators (FSIs). The Agence Française de Developpement is financing budget execution, reporting and audit. The project will coordinate with United Nations Population Fund (UNFPA) on the activity related to the population and census statistics.
F. Lessons Learned and Reflected in the Project Design
65. The general lesson learned from the experience of the design team in developing statistical capacity is that fragmented, uncoordinated programs of support do not result in sustainable systems. In addition, effective investments in information technology infrastructure, or improved methodologies, require accompanying organizational and management change. These lessons guided the project design in developing the statistical system through the NSDS and focusing its capacity building support to central agencies. The initial central focus will give the project coherence and accountability. 66. Another lesson learned from development projects is that the benefits of projects tend to be limited to the lifetime of the project, due to the absence of a long-term strategy and a well-planned integration mechanism. This project focuses on strengthening legal and institutional frameworks, building human resources, and improving physical and statistical infrastructure. This ensures that appropriate assistance and investments are provided to all areas of the statistical system, with the active involvement of a wide range of users and producers. New demand for high-quality data, stimulated by training, producer-user dialogue, and data dissemination, will provide an additional impetus for sustainability. 67. The proposed operation builds also on lessons learned from previous operations in Djibouti and reflected in the Completion and Learning Review (CLR). The project supports institution building and enhancing country systems to ensure ownership and sustainability. It focuses on few areas with well-prioritized interventions, where the government seeks transformational impacts, including through support of institutional and policy reforms, and try to avoid fragmentation and promote consolidation through multi-GP operations.
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68. To achieve a fundamental institutional change, it is important to plan for a long-term endeavor and ensure that incentives are aligned with that change. The INSD HR policy and results-based approaches and performance contracts supported by the proposed project is expected to provide these incentives. 69. Effective long-term capacity building requires sustained inputs of specific expertise. Lessons learned from projects implemented by other ministries show that enough support needs to be programmed when introducing new concepts, systems and approaches. Participating departments will benefit from international experts who will work within the ministries to accompany them on specific tasks such as social and demographic studies, GIS and environmental statistics, management of a modern statistical office, and program budgeting. 70. Operations that relied on Project Implementation Units needs strong ownership by counterparts and an effective steering committee. Project steering committees must be cognizant of and able to influence decision- making authorities. In past projects, the project steering committee was not sufficiently empowered to resolve significant issues and would often defer to Ministers, which led to delays in making key decisions. In this project, a project implementation arrangement with directors responsible for related project activities will be put in place with the Secretary Generals overseeing project progress. 71. Enhanced voice and accountability mechanisms are needed to broaden support and build coalition for policy and institutional reforms. Successful Bank engagement in both social safety nets, urban and rural development benefited from strong stakeholder engagement during preparation. Success is owed, in large part, to systematic stakeholder consultation but also on the ensuing transparency on the knowledge created on economic issues and governance.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
72. The Project will support the establishment and operation of a Project Management Unit (PMU) within 3 months from effectiveness overseen by the Ministry of Finance through a project steering committee to foster coordination and manage project implementation, as indicated in the chart below. There are four technical departments (two departments under MOFI namely the Economic and Planning Department and the External Financing Department, as well as two departments under the Ministry of Budget namely the Budget Preparation Department and the Public Debt Department) and INSD or the national statistical office that will benefit directly from the project and are in the charge of the implementation of most of the activities financed by the project. The INSD and 4 technical departments will have the responsibility of the implementation of the operations that are grouped in the first two components (component 1 and component 2) and will be responsible for the preparation of the concept notes, term of references, quality control of the outputs and the overall management of the deliverables. They will prepare annual work plans that are specific to their departments, the corresponding procurement plans and will be in charge for the implementation and the first level monitoring of their activities and outputs to be reported to the project management unit. In order to ensure the effective technical implementation of INSD’s Respective Part, the Recipient, through MoF, shall no later than three (3) months after the Effective Date, enter into an implementation agreement INSD. 73. Construction of the building. The activities related to the construction and equipment of the building will be carried out by the Project Management Unit. INSD will be involved in all the aspects related to the design to ensure the required specifications are met before construction. The major works will require the awarding of two contracts. The first contract will be awarded to the Bureau d’Etude et de Maitrise d'oeuvre (BEMO) or the design
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and implementation supervision company which works with multilateral agencies. BEMO will prepare all the bidding documents required to hire the construction company. To help in the selection of the BEMO, the project will hire a local civil engineer or architect in the first year of implementation. The Ministry of Finance has already carried out similar activities in the recent past, including during the construction of the Centre de Leadership et de l’Entrepreunariat. An engineer has already helped the Ministry of Finance prepare a concept note for the building. A civil engineer consultant will be hired by the World Bank team to monitor progress. If the project fails to make resolute progress on the construction in the first 12 months after effectiveness, the project will be restructured. The project finances several activities that will require close monitoring and as such it is expected that the activities will have a dynamic nature and possibilities for course-correction will be explored, whenever necessary. 74. The project management unit will be responsible for the overall coordination of the project and will have the fiduciary responsibility. The PMU will only have a supporting role for technical department to let public institutions with only activities linked to their responsibilities. PMU staffs could be reassigned high level civil servant or external consultant recruited for their experience. Activities to be carried out by the PMU will include (a) the development of annual work programs at the project level and corresponding Procurement Plans (PPs), (b) the management of fiduciary and monitoring activities, (c) the coordination of technical work and the provision of support services to technical units within the relevant ministries, (d) the monitoring of and reporting on the implementation of the overall project’s activities, (e) acquisition of office equipment and accounting software, and (f) the payment of the activities related to project coordination and monitoring, as well as project audit. The PMU will be staffed with (i) a project coordinator; (ii) a financial management specialist; (iii) a procurement specialist, and (iv) a monitoring and evaluation specialist. 75. The PMU will develop a communications strategy and plan based on the information needs of different stakeholder groups. The messages will be tailored to the information needs of stakeholder groups and will be delivered using appropriate media. Different tools will be considered, including press releases, the Internet, newsletters, workshops, discussion groups, radio, and television. The PMU may hire, if necessary, a communication specialist who will assist in developing and implementing the communications strategy. 76. The PMU will, with the assistance of the participating ministries, implement the Project in accordance with an operational manual satisfactory to the World Bank (the Project implementation Manual, PIM). The manual will include, among other things, (a) the performance indicators described in the results framework; (b) the procedures for implementing and monitoring of the Project; (c) the procurement and financial requirements of the Project; (d) the roles and responsibilities of each department; (e) the Project chart of accounts, internal controls, reporting procedures, and the format of the unaudited IFRs; and (f) grievance mechanisms. 77. The project will be overseen by a steering committee. To ensure adequate coordination between the two ministries involved in the Project, a Steering Committee composed of representatives of the two ministries and agencies involved in the Project will be instituted to support overall project monitoring, within 3 months from effectiveness. A member of civil society as well as a representative of the University of Djibouti will be members. This committee will be co-chaired by the Minister of Economy and Finance and the Minister of Budget or their representatives. The Project Steering Committee shall be responsible for, among other things, overall guidance of the Project; overall approval of the annual work programs and the PPs; follow-up on the project’s implementation progress; approval of all reports for the Project (including project reports, IFRs, and audit reports); recommendations for mitigation measures, when necessary; and support to departments involved in project implementation.
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Building
B. Results Monitoring and Evaluation Arrangements
78. The results chain and theory of change presents the main activities that will be financed by the project and the outputs those activities are expected to produce. Each of these outputs have realistic, specific, time-bound and measurable targets. 79. The PMU will be responsible for carrying out project monitoring activities. These include: (a) periodic project progress reviews, (b) preparing and disseminating project progress reports (including reporting on the fiduciary and safeguards requirements of the project), (c) reporting on achievements of intermediate and PDO indicators, and (d) other studies, evaluations and reports. In particular, the PMU will produce project indicators at the frequency highlighted in the project results framework and monitoring.
C. Sustainability
80. Sustainability of the project benefits depends critically on the commitment of the government to provide budgetary support beyond the implementation phase, particularly for activities not directly connected with data collection but indispensable for maintaining the improved statistical process: staff training, statistical
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research, maintenance of newly installed statistical and physical infrastructure. In this respect, experiences in other countries show that when the statistical office shows improved performance an increase in government funding follows. The Government has shown a strong commitment to strengthening the capacity of INSD and the statistical system and sent clear signals on how important it considers statistics, through the reform it is engaged in. Thus, the delivery of needed statistics for decision making, expected from the project activities, could make the case for continued domestic financing of statistics and help maintain the Government’s willingness to support the NSS. In addition, delivering data that are timely, of good quality, and of use to decision makers will stimulate the demand for statistics from the Government, development partners, civil society, and other stakeholders. In turn, the increasing demand for statistical information is expected to translate into sustained budgetary support from the Government. In addition, the enhancement of staff skills and investment in capacity building at the INSD through in-situ trainings directly linked to statistical production will contribute to the technical sustainability of the project.
IV. PROJECT APPRAISAL SUMMARY
A. Technical, Economic and Financial Analysis (if applicable)
81. The project is expected to have a transformative and significant development impact. While it is difficult to assess the economic and financial benefit of the project, the construction of the building will generate significant savings in the long run. Renting new office space has been considered but has been found to be uneconomical in the long-term. In addition, the project will attempt to introduce, as far as possible, requirements for the construction of the building such as the use of resource efficient material, and environmentally friendly design such as north facing windows which allow more light penetration as well as energy efficiency guidelines, reducing the carbon footprint. It is expected that 75 percent of the electricity consumption of the building will be from solar energy during daylight. This will reduce significant savings in terms of energy consumption given level of the electricity tariffs in Djibouti (US$0.31 per KWh). 82. The project will strengthen the capacity of INSD, DEP, Direction of Debt, DFE as well as Direction of Budget. National accounts will be produced and published in time, they will cover a larger part of the economy and will be published periodically. The quality of macroeconomic modeling, including regular forecasts of macroeconomic indicators, is expected to improve significantly as well. The planned Population and Housing Census as well as the Economic Census will close major data gaps and lay the master sampling framework for surveys that will follow. The internal capacity built in the process will reduce the dependence of the NSS on technical assistance from external consultants in the future. Capacity will also be strengthened through physical and ICT system improvements. The revamping of the institutional framework of INSD will help it to attract talent and invest in the training of its staff which in turn is likely to affect the quality and dissemination of statistical production. 83. In effect, these activities will lead to more informed evaluation of the macro and socio-economic situation in the country, which will form the basis for effective monitoring and evaluation of development policies and programs. Finally, it is expected to promote and foster a culture of evidence- based policy making. 84. Provision of data and official statistics are public goods and are key factors that make the Government accountable to its citizens. The private sector is unlikely to engage in the production of official statistics as it has little to gain from it—for example, by selling or licensing access to the data collected. The users of the output (statistical data and modeling) of this project include not only the government itself but also the private sector, the civil society, development partners and the citizens at large.
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85. The Bank brings to this proposed project a potent combination of experience in international statistical operations, macroeconomic modeling, Public Finance Management, convening power, as well as leading global technical experts. The WBG’s value added includes: (i) excellent relationship with the client and (ii) technical expertise.
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B. Fiduciary
Financial Management 86. The proposed Credit will be implemented in line with World Bank policies that are standard for project implementation, including the July 2016 “Procurement Framework”. The Ministry of Finance (MOFI) will be the main implementing agency with technical support from the Ministry of Budget. A Project Management Unit (PMU) will be established within MOFI for the purpose of the project. The Financial Management (FM) assessment conducted during appraisal found the FM risk, as a component of the fiduciary risk, to be rated as Substantial. With the proposed mitigating measures, MOFI will have the financial management requirements as per OP/BP 10.00 and will have an acceptable FM system and the residual FM risk rating would be moderate. 87. A single segregated Designated Account (DA) in US Dollars will be opened at a commercial bank in Djibouti acceptable to the World Bank. Payments and withdrawal of eligible expenditures accompanied by supporting documents or statements of expenditure (SOE) for sums less than predefined thresholds for each expenditure category, following the applicable procedures and the World Bank's Disbursement Handbook. MOFI, through the PMU, will be responsible for submitting replenishment requests on a monthly basis. All requests for withdrawals should be fully documented, maintained and made available for review by the Bank and project auditors. All disbursements will be subject to the terms of the Financing Agreement and to the procedures defined in the Disbursement Letter. 88. The general accounting principles for the project will be as follows: (a) project accounting will cover all sources and uses of project funds, including payments made and expenses incurred. Project accounting will be based on accrual accounting; and (b) project transactions and activities will be separated from other activities undertaken by MOFI. 89. The project financial reporting will include unaudited Interim Financial Reports (IFRs) and yearly Project Financial Statements (PFS). IFRs should include data on the financial situation of the project. These reports should include: (i) a statement of funding sources and uses for the period covered and a cumulative figure, including a statement of the bank project account balances; (ii) a statement of use of funds by component and by expenditure category; (iii) a reconciliation statement for the DA; (iv) a budget analysis statement indicating forecasts and discrepancies relative to the actual budget; and (v) a comprehensive list of all fixed assets. The PMU will produce the IFRs every quarter and submit to the Bank within 45 days at the end of each quarter. The annual PFS should include: (i) a cash flow statement; (ii) a closing statement of financial position; (iii) a statement of ongoing commitments; (iv) analysis of payments and withdrawals from the grant account; and (v) a complete inventory of all fixed assets acquired under the project. (c) IFRs and PFSs will be produced based on the accounting system and submitted for an external financial audit. 90. The PMU will be responsible for preparing periodic reports and maintaining the project bookkeeping and will produce annual Project Financial Statements (PFS) and quarterly Unaudited Interim Financial Reports (IFRs). 91. The project’s financial statements will be audited annually and will cover all aspects of the project, uses of funds and committed expenditures. The audit will also cover the financial operations, internal control and financial management systems and a comprehensive review of statement of expenditures. The annual audit report will include: (i) the auditor’s opinion on the project's annual financial statements; (ii) a management letter on the project internal controls; and (iii) a limited yearly review opinion on the IFRs. The annual reports will be submitted to the World Bank within six months from the closure of each fiscal year and the limited review opinion will also be submitted to the World Bank with the IFRs.
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Procurement
92. Works, goods, consulting and non-consulting services will be procured in accordance with the requirements set forth or referred to in the “World Bank Procurement Regulations for IPF Borrowers” dated July 2016, revised November 2017 and August 2018; Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” (dated October 15, 2006 and revised as of July 1, 2016); and provisions stipulated in the Financing Agreement. 93. As per the current implementation arrangements, a PMU will be established at the Ministry of Finance with full responsibility of procurement handling and contract management. It will be supported technically by other beneficiary ministries, including Ministry of Budget. A pivotal involvement of INSD (Djibouti National statistics Institute) is expected as main project beneficiary. While the latter has built some experience on WB funded project by management a small grant, the new PMU will need to outsource its staff and a seasoned procurement specialist is expected to be hired for coordinating procurement activities. 94. A risk assessment was carried out using PRAMS system. It revealed the following major risks: limited familiarity with World Bank procurement procedures by the new implementing agency, delay in definition of technical specifications and in construction of the INSD building, inappropriate procurement record keeping and documents management. Mitigations measures proposed include hiring of a dedicated procurement officer conversant with World bank procurement procedures, project implementation manual to cover extensively procurement processing, contract management and records keeping, regular support and capacity building to PIU by the World Bank team, hiring of a civil engineer as member of PIU and select a well-qualified firm to conduct technical study and works supervision. 95. A short form was prepared by the client with support from the World Bank and finalized during appraisal. The main critical contracts envisioned in the project relate to construction of a building (3.5 million $) to host INSD, consultants for construction’s technical study and supervision (0.35 million $), furniture for the building (1 million $), Information system for Debt management (0.5 million $). The market analysis of the PPSD concluded that all these contracts should approach international market given the weak and limited size of the local market. Also, the information system for Debt management would benefit from direct contracting with UN agency CNUCED given it will be an upgrade of the system SYGADE initially developed successfully by the same agency. 96. In a country context and market small size of Djibouti, procurement for construction of such a building with innovative features (energy and environmentally friendly) may be seen as risky but mitigation measures are already proposed, including selection of international firm for a technical study and works supervision coupled with hiring of civil Engineer and procurement specialist within the team of the PMU. It is worth noting that the Government has already a master plan of the proposed building and the proposed new technology was implemented on another building hosting a department of the Ministry of Finance (Leadership and Excellence Center). 97. A detailed procurement plan for the first 18 months was agreed as part of appraisal. It should be registered into Systematic Tracking of Exchanges in Procurement (STEP), with detailed scheduling of different procurement milestones, for formal approval by the Bank prior to initiate procurement processing. 98. The Bank will provide a close implementation support on regular basis (Task Team Leader and Procurement Specialist are based in Country Office) with formal supervision every six months and an annual post procurement review including capacity building on main findings and recommendations.
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.C. Legal Operational Policies . Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No .
D. Environmental and Social
99. The project is classified as Moderate Risk as no activities to be funded under the project have high potential for harming the people or the environment. The project is localized in an urban area away from sensitive areas. The potential adverse risks and impacts are predictable and expected to be temporary, site specific and easily mitigated in a predictable manner. 100. Impacts/Risks. The anticipated environmental Risks/impacts are linked to activities to be funded under Subcomponent 1.1: by construction activities of a new building with modern characteristics, procurement of office furniture, and enhancement of the electrical and information and communications technology (ICT) system. These risks during construction phase may include Occupational Health and Safety hazards, Community Health and Safety risks and some Environmental risks due to solid waste generation, hazardous material management, noise and vibration, wastewater discharges and air quality. The building construction will be situated in only one geographical area. The land for the construction of the new building is already known. Contractors will prepare construction ESMPs (Environment and Social Management Plan) before any commencement of works. Other Risks/Impacts are related to the third population census activities, which will be nationwide. These risks are related to road safety following the use of vehicles for the transportation of census agents exposing them as well as the population to road accidents. A road safety plan will be prepared prior the launching of Third population census. Other impacts are related to greenhouse gas emissions during transportation. 101. ESMF. The PMU will engage contractors, an ESMP that sets out all the requirements to be followed by contractors is prepared. The ESMP will be incorporated in the bidding documents as part of the contract between the PMU and the contractors, together with appropriate monitoring and enforcement provisions. The ESMP includes mitigation measures, monitoring plan, capacity development and training plan and implementation schedule and cost estimate. The contractor will prepare a detailed work-ESMP before any commencement of works. 102. The ESMP is part of the ESCP (Environment and Social Commitment Plan) approved by the Government. Due to the risk of road accidents during the third population census, a road safety plan will be prepared prior the launching of the third population census and a GBV prevention action plan will also prepared. The ESMP and the Gender based Violence (GBV) prevention action plan will be part of the Project Operations Manual (POM). Other potential social risks and impacts related to project investments may include, but not be limited to social exclusion; poor management of labor in project units and for contractors, exclusion of groups which are economically or socially vulnerable; and poor management of grievances and expectations. 103. Stakeholder Engagement. The Government has prepared a stakeholder engagement plan (SEP). The SEP includes both other interested parties (OIPs), various beneficiaries, including disadvantaged and vulnerable groups. Primary stakeholders include: Ministry of Budget, Ministry of Economy and Finance in charge of Industry, and INSD. Additional stakeholders will include neighbors to the construction site; staff member representatives and unions; representation of enterprises and employees; other CSOs involved in urban planning; NGOs, and directly impacted project affected persons (PAPs) including disadvantaged and vulnerable groups. The draft SEP
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was subject to a meaningful stakeholder consultation and inputs. The PMU will put in place, as part of the ESMS, procedures for external communications on environmental and social matters proportionate to the risks and impacts of project activities consistent with the requirements of ESS10. The ESMP includes a project-level grievance mechanism to respond to public enquiries and concerns.
V. GRIEVANCE REDRESS SERVICES
104. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance- redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
VI. KEY RISKS
105. The overall risk to the project is rated as Substantial. The four categories of risks that are considered most likely to materialize are: (i) Political and Governance; (ii) Macroeconomic; (iii) Institutional Capacity for Implementation and Sustainability; and (iv) Fiduciary. 106. Political and governance risks are rated as Substantial due to the prevailing political economy challenges. An erosion of public trust in state institutions could undermine the Government’s ability to implement its Vision 2035, which, in turn, could affect the implementation of the project. These risks will be mitigated to the extent possible through policy dialogue and a systematic reliance on citizen engagement interventions. Vision 2035 currently benefits from a very strong and broad consensus among stakeholders inside and outside the State and is likely to remain the backbone of the social contract during the implementation period. 107. Macroeconomic risks are rated substantial due to the small size of the country and the public sector’s high level of indebtedness. Unexpected economic shocks could affect the implementation of the project. The country is highly vulnerable to exogenous economic and climate shocks, such as price hikes on its high food and fuel imports, and cyclones and floods, as well as political developments in Ethiopia. At the same time, the level of public and publicly guaranteed debt is high (71 percent of GDP), which leaves little room to absorb future shocks. To mitigate these risks, Djibouti is committed to implement prudent fiscal policy and debt management. The project itself include activities that will strengthen the country’s capacity to conduct sound macroeconomic policy. The Government is committed to provide enough funds to hire skilled staff for INSD and complete the financing of the building. The level of funding can be lower in the case of major exogenous shocks. 108. There are also risks related to low institutional capacity for implementation and sustainability, which are rated substantial. Low capacity and lack of adequate coordination across Djibouti’s public-sector entities could lead to either stalling or incoherent public policies. Strong Government commitment and continued dialogue will
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mitigate this risk. The WBG will work upstream with the highest level of government, building on the good practice examples such as the Doing Business reforms and CPIA framework, which have horizontal coordination mechanisms. The Government has created a Delivery Unit with WBG support to foster planning, implementation, coordination and monitoring. 109. Another risk associated with the project is the ability of INSD to remain autonomous, given that it would be hosted on the same premises as MOFI departments. A statistical bureau must remain independent from any political and external influence in producing and disseminating statistics. In the new law instating INSD, it is clearly mentioned that INSD will have financial autonomy, thus mitigating the risk to some extent. Another aspect that is likely to ensure that INSD remains an independent institution is that the project will ensure that the offices of INSD are physically separated from the those of other departments on MoFI. The two will have different gateways, even though they are in the same building. 110. Fiduciary risks are rated as Substantial. Financial management: The fiduciary environment is very weak, and the risk that required procedures will be circumvented is real. Most of the institutions established to ensure oversight of governance functions—such as the State Inspector General, the SAI (Court of Accounts), the Anti- Corruption Commission, and the judiciary—are not adequately funded, and this undermines their effectiveness. The internal control mechanisms within the Government are also weak, and there is limited participation of, or contribution from, non-state actors. The implementation arrangement of this project, its focus on PFM, together with the Public Administration Modernization Project, will help mitigate some of the fiduciary risks. Procurement: the procurement project level residual risk is assessed as moderate after implementation of mitigation measures of risks identified and highlighted under section IV above on project appraisal summary.
Risk Category and Rating
Risk category Risk rating (H, S, M or L) 1. Political and governance S 2. Macroeconomic S 3. Sector strategies and policies M 4. Technical design of project and program M 5. Institutional capacity for implementation and sustainability S 6. Fiduciary S 7. Environmental and social M 8. Stakeholders M 9. Other L . Overall S
.
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VII. RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Djibouti Economic Management and Statistics Development for Policy Making
Project Development Objectives(s) To strengthen the capacity of the National Institute of Statistics of Djibouti (INSD) to produce and disseminate timely and reliable statistics in a sustainable manner and modernize the Recipient's selected economic and fiscal management tools and processes in Djibouti.
Project Development Objective Indicators
RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Project Development Objective
Number of reports/publications disseminated on a government’s official 13.00 54.00 78.00 112.00 website as per the adopted statistical release calendar (Number)
Of which INSD (Number) 13.00 22.00 30.00 45.00
Of which Department of Planning 0.00 4.00 8.00 12.00 (Number)
Of which Department of External 0.00 4.00 8.00 12.00 Financing (Number)
Of which Department of Debt 0.00 12.00 20.00 28.00 (Number)
Of which Department of Budget 0.00 12.00 12.00 15.00
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RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 (Number)
Number of ministries with approved budget anchored to a Medium-Term 0.00 0.00 0.00 3.00 Expenditure Framework (Number)
Percentage of contracted loan that are included in the Medium-Term Debt 0.00 0.00 30.00 50.00 Strategy (MTDS) (Percentage)
Number of statistical quality assessments conducted, and quality assessment 0.00 0.00 1.00 2.00 reports or certificates issued (Number)
PDO Table SPACE
Intermediate Results Indicators by Components
RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Strengthening the capacity of the National Institute of Statistics of Djibouti (INSD) Steps taken for the construction of an INSD's personnel have moved into Not started The construction company is hired Building completed energy efficient building (Text) the building Number of statutory meetings held by the Superior Council of Statistics (SCS) 0.00 2.00 2.00 2.00 per year (Number) Performance contract between INSD and No Yes Yes Yes MoFI signed (Yes/No) Number of new staffs hired by INSD 0.00 10.00 30.00 60.00 (Number) Percentage of women among new staffs hired by INSD (Percentage) 0.00 30.00 30.00
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RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 Number of INSD staff trained in the regional francophone schools of statistics 0.00 10.00 30.00 (Number) Percentage of women among INSD staff trained in the regional francophone 0.00 50.00 50.00 50.00 schools of statistics (Percentage) Number of UNSD Minimum List gender indicators available using data collected 5.00 10.00 12.00 20.00 within the past 5 years (Number) Number of download requests of micro- datasets (anonymized) of Census/surveys that are publicly available on INSD data 25.00 70.00 access portal (Number) Delay in the publication of final national accounts (Comptes nationaux définitifs) 6.00 6.00 4.00 2.00 (Years) Number of reports with the results of survey on user satisfaction with statistics 0.00 1.00 2.00 are published on INSD website (Number) Percentage of beneficiaries reportedly satisfied with the progress of the project 0.00 50.00 90.00 (Percentage) Modernizing the Recipient's selected economic and fiscal management tools and processes Number of relevant policy notes/documents that refer to the 0.00 5.00 macroeconomic model’s outputs (Number) Number of policy notes based on the macroeconomic simulation model’s 0.00 5.00 output (Number) Percentage of external loan exceeding US$50 million signed with the approval of 0.00 30.00 80.00 the CNEP (Percentage)
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IO Table SPACE
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The project is supporting five government departments, each of which have committed to the release of a fixed number of publications with a defined periodicity (monthly, quarterly, annual). There are also some publications that will be Census/survey specific and will be release Number of reports/publications Government' once during the period of disseminated on a government’s official Annual s official World Bank the project. In total, there website as per the adopted statistical website are 50 publications by 5 release calendar departments that will be released as per the statistical release calendar. This indicator will be collected annually for each of the 5 departments. For example, if INSD was supposed to release 1 publication monthly and 1 publication quarterly, then the target number of
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publications for INSD in that year would be 16 (12 + 4). INSD's Annual World Bank Of which INSD website
Department Annual of Planning's World Bank Of which Department of Planning website
Department of External Of which Department of External Annual World Bank Financing's Financing website
Department Annual of Debt's World Bank Of which Department of Debt website
Department Annual of Budget's World Bank Of which Department of Budget website
Number of ministries with Law of Number of ministries with approved approved budget anchored Annual Finance for Department of Budget budget anchored to a Medium-Term to a Medium-Term 2024 Expenditure Framework Expenditure Framework Percentage of contracted MTDS for Percentage of contracted loan that are loan that are included in the Annual following DDP included in the Medium-Term Debt Medium-Term Debt Strategy year Strategy (MTDS) (MTDS) Number of statistical quality assessments Cumulative number of Once every 2 Annual INSD conducted, and quality assessment statistical quality years activity reports or certificates issued assessments conducted, and report of
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quality assessment reports INSD or certificates issued ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Measured as visible progress in the construction Mission Steps taken for the construction of an Annual World Bank of the building, as measured report energy efficient building by target values over the course of the project. Minutes of the meeting/ Number of statutory Number of statutory meetings held by the report prepar meetings held by the Annual INSD Superior Council of Statistics (SCS) per ed Superior Council of Statistics year summarizing (SCS) the meeting.
A 3 year performance contract between MoFI and Mission Performance contract between INSD and INSD needs to be signed. Annual World Bank report MoFI signed The indicators will be
recorded as "YES" when the contract has been signed. Cumulative number of new Annual staffs hired by INSD. INSD is activity Annual INSD Number of new staffs hired by INSD planning to hire 82 new staff report of
with a diverse set of skills in INSD the medium term Percentage of women among new staffs Among the new staff hired, Annual Annual INSD hired by INSD this indicator measures the activity
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percentage of women report of among new technical staff INSD hired by INSD Annual Cumulative number of staffs activity Number of INSD staff trained in the of INSD that get basic and Annual INSD report of regional francophone schools of statistics on the job training in INSD francophone schools
Among number of staffs of INSD that get basic and on Annual Percentage of women among INSD staff the job training in activity Annual INSD trained in the regional francophone francophone schools, this report of schools of statistics indicator measures the INSD percentage of women who get this training Cumulative number of Number of UNSD Minimum List gender UNSD Minimum List gender Annual INSD website INSD indicators available using data collected indicators available using within the past 5 years data collected within the past 5 years This indicator measures the cumulative number of Number of download requests of micro- download requests of datasets (anonymized) of Census/surveys micro-datasets Annual INSD website INSD that are publicly available on INSD data (anonymized) of access portal Census/surveys that are publicly available on INSD data access portal. This indicator measures the INSD's Delay in the publication of final national number of years of delay in Annual World Bank website accounts (Comptes nationaux définitifs) the publication of final
national accounts.
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This indicator measures the publication of the cumulative numbers of reports with the results of survey on user satisfaction with statistics are published on INSD website. A user satisfaction survey will be carried out annually by INSD, as an online survey. The key respondents of this survey will include Data will be collected Ministerial departments, by INSD in the form of donors, international an online survey from Number of reports with the results of organizations, academia, INSD's Annual January to March each INSD survey on user satisfaction with statistics NGOs and private sector. website year, to assess are published on INSD website This survey would help to satisfaction in the capture the satisfaction of previous calendar year. various stakeholders with
the outputs/ reports/ statistics provided by INSD in a given calendar year. The results of this survey will be published on INSD’s website. The results from these surveys will inform the areas where more work needs to be done, and will help improve the work program of INSD in subsequent years. Percentage of beneficiaries reportedly An online survey will be Annual Report on Annual web survey World Bank satisfied with the progress of the project carried out each year to beneficiary
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monitor the satisfaction of assessment beneficiaries with the progress that the Project is making. The respondents of this survey will include beneficiaries of the project, namely the staff of INSD and 4 ministerial departments (Direction of Debt and Direction of Budget in the Ministry of Budget as well as External Financing department and Direction of Planning in the Ministry of Finance). This survey will be designed to capture . Cumulative number of DEP annual Number of relevant policy relevant policy Annual activity DEP notes/documents that refer to the notes/documents that refer report macroeconomic model’s outputs to the macroeconomic
model’s outputs Cumulative number of DEP annual Number of policy notes based on the policy notes based on the Annual activity DEP macroeconomic simulation model’s macroeconomic simulation report output model’s output The number of projects DDP annual Percentage of external loan exceeding using GEMS technology for Annual activity DDP US$50 million signed with the approval of monitoring divided by the report the CNEP total number of projects ME IO Table SPACE
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ANNEX 1: Implementation Arrangements and Support Plan
COUNTRY: Djibouti Economic Management and Statistics Development for Policy Making
Financial Management Assessment The Republic of Djibouti has a body of texts for a sound management of its public finances. The legal framework of Djibouti includes notably: (i) the Constitution of September 4, 1992; and (ii) the law n°107/AN/00 relating to the finance laws which fixes the rules relating to the determination of the resources and expenses, the preparation and the vote on annual budget, the execution, and the control of the budget. The institutional framework contains the structures necessary for public financial management. The institutional framework meets the needs as regards preparation as well execution and control of the budget. However, some practices affect the efficiency of the texts. This is the case in particular for: (i) the use of the derogatory procedures of public expenditure; and (ii) a certain lack of budgetary discipline. The Economic Management and Statistical Development Project will be implemented in Djibouti according to the World Bank guidelines and through the Ministry of Finance (MOFI) with Technical support from the Ministry of Budget. A Project Management Unit (PMU) will be created to handle project execution and it will be housed at the Ministry of Finance. The PMU will be overseen by a steering committee containing representatives from both the Ministry of Finance and the Ministry of Budget. The project funds will be disbursed from project bank account established by IDA using advance to designed account, direct payments, and withdrawal for eligible expenditures accompanied by supporting document or for statements of expenditure for sums less than predefined thresholds for each expenditure category, following the applicable procedures and the World Bank's Disbursement Handbook. Interim Un-audited Financial Reports (IFRs) and Annual Project Financial Statements (PFS) will be used as a financial reporting mechanism and not for disbursement purposes. The FM team reviewed the Financial Management (FM) arrangement at the Ministry of Finance (MOFI). MOFI has limited experience in implementing Bank financed operations. Based on the result of the assessment, the FM risk, as a component of the fiduciary risk, is rated as Substantial. With the proposed mitigating measures, MOFI will have an acceptable financial management system and the residual FM risk rating would be moderate. In view of the risks identified and the weaknesses observed, the overall financial management risk is deemed to be Substantial. The following are the risks identified: (i) MOFI does not have an accounting software but does have a budgeting software to record budget execution and produce budget reports, the software does not adhere to the specifications required by the Bank; (ii) currently MOFI has limited human resources capacities and also lacks experience in implementing Bank financed projects; (iii) MOFI has specific internal controls based on bylaws and decrees, these internal controls are specific to MOF and may not apply to external financed operations; and (iv) MOFI falls under the audit conducted by the Court of Accounts (CoA). Although CoA has the technical expertise, it has limited human resources capacity and may not specifically audit the project as part of MOFI’s operations which would give limited assurance on the project’s use of funds. Based on the above risks, the following mitigating measures have been agreed upon in order to reduce the FM risk level and have an adequate FM system in place: (i) a Project Implementation Unit (PMU) will be created within
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MOFI to handle project execution. The PMU will include a Financial Officer (FO) who will be handling the FM aspects of the project. The Bank will provide the necessary training to the FO on Bank FM procedures; (ii) MOFI through the PMU will acquire an accounting software specific for the purpose of the project and will utilize the software to record the daily transactions and produce the Interim Un-audited Financial Reports (IFRs). The format of the IFRs will be agreed upon with the Bank. The IFRs will be submitted to the Bank no later than 45 days after the end of each quarter; (iii) for the purpose of the project, MOFI through the PMU will develop an operational manual which will contain an FM chapter describing in details the FM procedures including internal controls: and (iv) MOFI through the PMU will get into a contract with an independent external auditor with Terms of Reference (ToRs) acceptable to the Bank to audit the Project Financial Statements (PFS). The auditor will prepare an audit report and management letter. The project will submit the annual audit report and management letter to the Bank no later than six (6) months after the end of each fiscal year. Financial Management and Disbursement Arrangements Staffing: A Project Management Unit (PMU) will be established at MOFI with technical support from the Ministry of Budget. The PMU will comprise a project coordinator, a Financial Officer (FO) and a procurement specialist. The PMU will be overseen by a steering committee which will include representatives from the Ministry of Finance and Ministry of Budget. The FO will be handling the FM aspects of the project and will be reporting to the project coordinator. The Bank will provide the necessary training to the FO on Bank FM procedures. Internal control: For purpose of the project, the PMU will prepare a Project Operational Manual (POM) which will define the roles, functions and responsibilities for the implementing agency. The POM will contain a separate FM chapter detailing the FM and accounting procedures and will include internal controls procedures. Budgeting: MOFI prepares its budget on an annual basis. The consolidated budget of MOFI is prepared after inputs from the various departments. For the purpose of the project, the PMU will be preparing a separate annual budget and a disbursement plan. The budget will be prepared on an annual basis and submitted to the Bank in November/December of each year covering the subsequent year. The disbursement plan will cover each fiscal year and will be divided by quarter and submitted with the quarterly Interim Un-audited Financial Reports (IFRs). The PMU will monitor the variances in the disbursement plan and will provide justification on any major divergence. Project accounting system: The PMU will acquire an accounting software for the purpose of the project. The PMU will utilize the accounting system to record daily transactions and produce the Interim Un-audited Financial Reports (IFRs). The project Financial Officer is responsible for preparing the IFRs before their transmission to the Project Coordinator for approval. Periodical reconciliation between accounting statements and IFRs will also be done by the Financial Officer. The general accounting principles for the project are as follows: (i) project accounting will cover all sources and uses of project funds, including payments made and expenses incurred. All transactions related to the project will be entered into the accrual accounting system. Disbursements made from the project Designated Accounts (DA) will also be entered into the project accounting system; (ii) project transactions and activities will be separated from other activities undertaken by MOFI. IFRs summarizing the commitments, receipts, and expenditures made under the project will be produced quarterly using the templates established for this purpose; and (iii) the project chart of accounts will be in compliance with the classification of expenditures and sources of funds indicated in the project cost tables and the general budget breakdown in addition to the POM. The chart of accounts should allow for data entry to facilitate the financial monitoring of project expenditures by component, sub-component and category. Project reporting: The project financial reporting includes quarterly IFRs and yearly Project Financial Statements
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(PFS). IFRs should include data on the financial situation of the project, including: 1) Statement of Cash Receipts and Payments by category and component. 2) Accounting policies and explanatory notes including a footnote disclosure on schedules: (i) “the list of all signed Contracts per category” showing Contract amounts committed, paid, and unpaid under each contract, (ii) Reconciliation Statement for the balance of the Project’s Designated Account, (iii) Statement of Cash payments made using Statements of Expenditures (SOE) basis, (iv) a budget analysis statement indicating forecasts and discrepancies relative to the actual budget, and (v) a comprehensive list of all fixed assets. The IFRs should be certified by the external auditor on a yearly basis. The IFRs should be produced every quarter and send to the Bank within 45 days from the end of each quarter. PFS should be produced annually. The PFS should include (a) a cash flow statement; (b) a closing statement of financial position; (c) a statement of ongoing commitments; and (d) an analysis of payments and withdrawals from the project’s account; (e) a statement of cash receipts and payments by category and component; (f) reconciliation statement for the balance of the Project’s Designated Account; (g) statement of cash payments made using Statements of Expenditures (SOE) basis; and (h) the yearly inventory of fixed assets acquired under the project. Flow of funds: Payment will be instructed by three signatures: the Project Coordinator, the Director of the External Financing Department at the MOFI and the Director of the Debt Department at the Ministry of Budget. Funds will be transferred from the Bank based on Withdrawal Applications submitted by the project. The funds will be channeled from the Bank through the single segregated Designated Account (DA) in US$ opened at a commercial bank in Djibouti acceptable for the World Bank. Advances from the IDA account will be disbursed to the designed account to be used for the project expenditures. Audit of the project financial statements: An annual external audit of the project financial statements will cover the financial transactions, internal control and financial management systems and will include a comprehensive review of statements of expenditures (SOEs). An external auditor will be appointed according to Terms of Reference acceptable to the Bank and should conduct the audit in accordance with international auditing standards. The auditor should produce: (i) an annual audit report including his opinion on the project's annual financial statements; (ii) a management letter on the project internal controls; and (iii) a limited review opinion on the IFRs on a yearly basis. The annual reports will be submitted to the World Bank within six months from the closure of each fiscal year and the limited review opinion will be submitted to the Bank along with the yearly audit report. Since the project will include a component to construct a building , the terms of references for the external auditor will be expanded to include technical and quality audit of the work done under this component. The auditor will verify the quality and technical aspects of the work done and will ensure that this activity is carried out with due regards to efficiency and economy. The PMU will ensure that the recruitment of the external auditor will be done 6 months after project effectiveness in order for the auditor to start early his field work so to deliver the audit report and management letter within the deadlines and avoid any delays in this regard. Flow of information: The PMU will be responsible for preparing periodic reports on project implementation progress and on both physical and financial achievements. These reports will be based on project activity progress (by component and expenditure category), including technical and physical information reported on a quarterly basis. The PMU will maintain the project bookkeeping and will produce annual PFSs and quarterly IFRs.
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Summary of actions to be implemented: Actions Deadline
Recruit a Project Financial Officer as part of the PMU Three months from effectiveness
Prepare an FM chapter as part of the POM detailing the FM and accounting Three months from effectiveness procedures
Acquire an accounting software 3 months from effectiveness
Hire an external auditor with ToRs acceptable to the Bank 6 months from effectiveness
Disbursement The IDA funds will be disbursed according to the World Bank guidelines and should be used to finance project activities. The proceeds of the project will be disbursed in accordance with the traditional disbursement procedures of the Bank and will be used to finance activities through the disbursement procedures currently used: i.e., Advances, Direct Payment, Reimbursement accompanied by appropriate supporting documentation (Summary Sheets with records and/or Statement of Expenditures (SOEs)) in accordance with the procedures described in the Disbursement Letter and the Bank's "Disbursement Guidelines". The ceiling of the project Designated Account (DA) is set at US$ 750,000. The IFRs and the PFS will be used as a financial reporting mechanism and not for disbursement purposes. The minimum application size for direct payment, reimbursement will be equal to 20% of the ceiling advance. Allocation of the Credit’s Proceeds: Category Amount Allocated Percentage of Expenditures to be (US$) Financed (inclusive of taxes) (1) Goods, works, non-consulting services, and consulting 11,000,000 100% services, Training, and Operating Costs, for of the Project except Part 1.1(A) for the Project (2) Goods, works, non-consulting services, consulting 4,000,000 67% services and Operating Costs for Part 1.1(A) for the Project
Total 15,000,000
Designated Account On behalf of the PMU, the Department of External Financing will open a segregated DA in a Commercial Bank in Djibouti acceptable to the World Bank in US Dollars to cover the Project's share of eligible project expenditures. The Ceiling of the DA will be US$ 750,000 of the Credit’s amount. The PMU will be responsible for submitting monthly replenishment applications with appropriate supporting documentation. Statement of Expenditures (SOEs): For requests for Reimbursement and for reporting eligible expenditures paid from the Designated Account: - Statement of Expenditures (attachment xx of the Disbursement Letter) - Form of payments for contracts subject to World Bank’s prior review (attachment xx of the Disbursement Letter).
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- Bank reconciliation statement (attachment xx of the Disbursement Letter) For requests for direct payments: records evidencing eligible expenditures e.g., copies of receipts, copies of suppliers’ invoices above the minimum application size. Governance and anti-corruption Fraud and corruption may affect the Project resources, thus impact negatively the Project outcomes. The World Bank FMS worked closely with Project’s Task Team Leader (TTL) as well as project’s consultants and developed with the team an integrated understanding of possible vulnerabilities and agreed on actions to mitigate the risks. The above proposed fiduciary arrangements, including POM with a detailed FM chapter, reporting and auditing and review arrangements are expected to address the risk of fraud and corruption that are likely to have a material impact on the Project outcomes. Supervision Plan: The financial management of the Project will be supervised by the Bank in conjunction with its overall supervision of the Project and conducted at least three times a year. Supporting Documentation and Record Keeping: All supporting documentation was obtained to support the conclusions recorded in the FM Assessment.
Procurement Applicable procurement rules and procedures: Procurement will be carried out in accordance with the “World Bank Procurement Regulations for IPF Borrowers” (dated July 2016, revised November 2017 and August 2018); “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” (dated October 15, 2006 and revised as of July 1, 2016); and provisions stipulated in the Financing Agreement. As they stand now, Recipient own national open competitive procurement arrangements do not yet meet requirements set out in paragraph 5.4 of the Procurement Regulations, particularly with regard to ineffective complaints mechanism and non-application of the Bank’s anti-corruption guidelines. Hence, those procurement will use the World Bank procurement procedures and standard documents. When other national procurement arrangements other than national open competitive procurement arrangements (i.e. request for quotations and direct selection) are applied by the Recipient, such arrangements will be subject to paragraph 5.5 of the Procurement Regulations. Procurement arrangements for delivery of value for money in achieving the PDOs: As per the current institutional arrangements, the project will be implemented by the Ministry of Finance with support from the Ministry of Budget. Other departments will be involved, particularly the Djibouti national institute of statistics (INSD) in preparing TORs and controlling the quality of the deliverables. A PMU will be established within the Ministry of Finance to coordinate project implementation. From the PPSD as finalized, it is foreseen that the main critical contracts envisioned in the project relate to construction of a building to host INSD and Ministry of Finances, consultants for construction technical study and works supervision, furniture for the building, Information system for Debt management. It was also noted a high value activity related to censuses and surveys (population, economic, households, data collection, etc) which may not be complex from the procurement perspective but need a close monitoring with due flexibility and fit-for- purpose for contracts involved in the implementation of the component. Procurement risk assessment: The main risks associated to procurement include limited familiarity with World Bank procurement procedures by the new implementing agency, delay in definition of technical specifications and construction of the INSD building, inappropriate procurement record keeping and documents management. These
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risks would be mitigated by the following measures: hiring of a procurement specialist conversant with World Bank procedures in project implementation, ensure procurement aspects (procurement processes and applicable regulations, contract management, records keeping) are covered in the project implementation manual, selection (approaching international market) of a consultants firm to undertake technical study and supervision of construction works of the INSD building, regular support and capacity building from the World Bank team (including technical specialists) to minimize delay and costs overrun particularly in construction of the building. From the current PPSD and the market analysis, the critical contracts referred to above will approach international market. With regard to Information system for debt management, the PPSD has proposed a direct contracting with the UN agency CNUCED given the contract will consist of migrating of the existing information system executed by the same agency. The remaining small value and less complex contracts would be procured through national market. It was also noted that no contract would require the review from the Operational Procurement Review Committee (OPRC) or involve the use of the new complex selection methods like negotiations or competitive dialogue.
Based on the above risk analysis and mitigation measures, the residual risk is assessed as moderate at this stage of project preparation. It will be monitored throughout project implementation for update if justified.
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