AFRICAN DEVELOPMENT BANK BENIN ECONOMIC COMPETITIVENESS SUPPORT PROGRAMME (PACEB) APPRAISAL REPORT Public Disclosure Authorized Public Disclosure Authorized Authorized Disclosure Public Authorized Disclosure Public Translated Document ECGF/RDGW/PGCL DEPARTMENTS October 2018 Table of contents PROGRAMME INFORMATION .......................................................................................................... ii LOAN INFORMATION ......................................................................................................................... ii I. PROPOSAL ....................................................................................................................................1 II. COUNTRY AND PROGRAMME CONTEXT .............................................................................1 2.1 Political Situation and Governance Context ...................................................................................1 2.2 Recent Economic Developments, Macroeconomic and Fiscal Analysis ........................................2 2.3 Benin’s Economic Competitiveness ...............................................................................................4 2.4 Public Financial Management ........................................................................................................4 2.5 Inclusive Growth, Poverty Status and Social Context ....................................................................5 III. GOVERNMENT DEVELOPMENT PROGRAMME ...................................................................5 3.1. Government's Overall Development Strategy and Medium-Term Priorities .................................5 3.2 Weaknesses and Challenges in Implementing the National Development Agenda .......................6 3.3 Consultation and Participation Processes .......................................................................................6 IV. BANK SUPPORT FOR GOVERNMENT STRATEGY ...............................................................6 4.1 Linkages with Bank Strategy ..........................................................................................................6 4.2. Compliance with Eligibility Criteria ..............................................................................................7 4.3. Collaboration and Coordination with Other Partners .....................................................................7 4.4. Linkages with Other Bank Operations ...........................................................................................7 4.5. Analytical Work Underpinning the Programme .............................................................................8 V. PROPOSED PROGRAMME .........................................................................................................9 5.1. Programme Purpose and Objective ................................................................................................9 5.2. Programme Components ................................................................................................................9 5.3 Expected Programme Implementation Outcomes ........................................................................13 5.4. Policy Dialogue ............................................................................................................................13 5.5. ADF Loan/Grant Conditions ........................................................................................................14 5.6. Good Practice Principles Applied to Conditionality ....................................................................15 5.7. Financing Needs and Mechanisms ...............................................................................................15 5.8. Application of Bank Policy on Non-Concessional Debt Accumulation .......................................16 VI. IMPLEMENTATION ..................................................................................................................16 6.1 Programme Beneficiaries .............................................................................................................16 6.2 Social and Gender Impact .............................................................................................................16 6.3. Impact on Environment and Climate Change ...............................................................................16 6.4. Implementation, Monitoring and Evaluation. ...............................................................................17 6.5. Financial Management and Disbursement ....................................................................................17 VII. LEGAL FRAMEWORK ..............................................................................................................18 7.1. Legal Instrument ...........................................................................................................................18 7.2. Conditions Associated with Bank Intervention ............................................................................18 7.3. Compliance with Bank Group Policies.........................................................................................18 VIII. VIII. RISK MANAGEMENT ......................................................................................................19 IX. RECOMMENDATION ................................................................................................................19 ANNEX 1: Government Development Policy Letter ANNEX 2: Programme Measures Matrix ANNEX 3: Benin-IMF Relationship ANNEX 4: Key Macroeconomic Indicators Tables Table 1 – Key macroeconomic indicators .................................................................................... Table 2 –PACEB - PACEB I prior measures .............................................................................. Table 3 – Estimated financing requirements and sources (in CFAF billion) ............................... Table 4 – Risks and mitigation measures ..................................................................................... CURRENCY EQUIVALENTS As at 31 July 2018 Currency Unit UA1 = XOF 791.4 UA 1 = EUR 1.19 UA 1 = USD 1.44 UA 1 = SDR 1.0 FISCAL YEAR [1January – 31 December] ACRONYMS AND ABBREVIATIONS ADF African Development Fund AFD French Development Agency AfDB African Development Bank BCEAO Central Bank of West African States BOAD West African Development Bank CEB Benin Electricity Community CEET Compagnie Energie Electrique du Togo (Togo electric power company) CPIA Country Policy and Institutional Assessment CSP Country Strategy Paper DGE Energy Directorate DPEBEP Multi-year Budget and Economic Programming Paper DPPD Multi-year Expenditure Planning Document EBID ECOWAS Bank for Investment and Development EU European Union GDP Gross Domestic Product GPRS Growth and Poverty Reduction Strategy HDI Human Development Index IMF International Monetary Fund JICA Japan International Cooperation Agency MCC Millennium Challenge Corporation MDG Millennium Development Goals MEF Ministry of Economy and Finance MEME Ministry of Energy, Mines and Water MSME Micro Small and Medium Enterprises PAG Government Action Program PBA Performance-Based Allocation PEFA Public Expenditure and Financial Accountability PGRGFP Comprehensive Public Financial Management Reform Plan PIMA Public Investment Management Assessment PPA Power Purchase Agreement PPP Public-Private Partnership RMC Regional Member Countries SBEE Société Béninoise d’Energie Electrique (Benin electric power company) SME Small and Medium Enterprises TFP Technical and Financial Partners UA Unit of Account UNDP United Nations Development Programme VAT Value Added Tax WAEMU West African Economic and Monetary Union WAPP West African Power Pool WB World Bank i PROGRAMME INFORMATION INSTRUMENT : General Budget Support (GBS) PBO DESIGN MODEL : Programmatic Operation in 2 phases LOAN INFORMATION Client Information BORROWER : Republic of Benin EXECUTING AGENCY : Ministry of Economy and Finance Financing Plan 2018 2019 ADF Grant in UA 2 170 000 1 950 000 ADF Loan in UA 4 830 000 4 050 000 Total 13 000 000 Financing through budget support by technical and financial partners (*) 2018 2019 Partner in FE in CFAF in FE in CFAF I- Grants European Union EUR 48 000 000 31 486 000 000 EUR 44 800 000 29 387 000 000 AfDB UA 2 170 000 1 717 000 000 UA 1 950 000 1 543 000 000 Saudi Arabia 10 000 000 000 TOTAL GRANTS 43 203 000 000 30 930 000 000 II-loans World Bank EUR 12 900 000 8 475 000 000 EUR 25 800 000 16 900 000 000 AfDB 4 830 000 UC 3 822 000 000 4 050 000 UC 3 205 170 000 TOTAL LOANS 12 297 000 000 20 105 170 000 GRAND TOTAL 55 500 000 000 51 035 170 000 (*) The financings are general budget and sector (energy, agriculture, governance, decentralization) supports Key ADF Financial Information ADF LOAN Loan currency UA Interest type Fixed Interest rate margin* % Service fee 0.75% per year on the loan amount disbursed and not yet repaid 0.5% on the undisbursed loan amount 120 days after signature of the loan Commitment fee Agreement Other charges Maturity 40 years Grace period 5 years Due date Half-yearly ii ADF GRANT GRANT Currency UA Commitment fee N/A Other charges (service) N/A Due date Implementation Schedule – Milestones (expected) Programme approval 31 October 2018 Effectiveness November 2018 Last disbursement 30 June 2020 Completion 30 June 2020 iii Executive Summary Programme Country : BENIN overview Programme name: Benin- Economic Competitiveness Support Programme (PACEB) Overall implementation schedule