Document of the World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 57565-BJ INTERNATIONAL DEVELOPMENT ASSOCIATION SUPPLEMENTAL FINANCING DOCUMENT FOR A PROPOSED SUPPLEMENTAL FINANCING Public Disclosure Authorized IN THE AMOUNT OF SDR 14 MILLION (EQUIVALENT TO US$ 22 MILLION) TO THE REPUBLIC OF BENIN FOR THE SIXTH POVERTY REDUCTION SUPPORT CREDIT Public Disclosure Authorized (March 21, 2011) Poverty Reduction and Economic Management 4 Country Department AFCF2 Public Disclosure Authorized 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. BENIN - GOVERNMENT FISCAL YEAR January 1 – December 31 CURRENCY EQUIVALENTS (Exchange Rate Effective as of December 2, 2010) Currency Unit = CFA Franc (CFAF) US$1.00 = CFAF500 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CARE Cooperative for Assistance and Relief Everywhere (Care International) CGC Cellule de Gestion de Crises CFAF CFA Franc ECF Extended Credit Facility GDP Gross Domestic Product GFDRR Global Fund for Disaster Risk Management GFRP Global Food Response Program IDA International Development Association IFRC International Federation of the Red Cross IMF International Monetary Fund NGO Non Governmental Organization ONASA Office Nationale d’Appui à la Sécurité Alimentaire (Food Security Support Office) PDNA Post-Disaster Needs Assessment PER Public Expenditure Survey PRSC Poverty Reduction Support Credit PSIA Poverty and Social Impact Assessment SBEE Société Béninoise d’Énergie et d’Électricité (Energy and Electricity Company of Benin) SCO Société de Ciments d’Onigbolo (Onigbolo Cement Company) SCRP Stratégie de Croissance pour la Réduction de la Pauvreté (Poverty Reduction Strategy Paper) SDR Special Drawing Right SONAPRA Société Nationale pour la Promotion Agricole (National Cotton Company) UN United Nations UNDP United Nations Development Program UNHCR United Nations High Commission for Refugees UNICEF United Nations Children‟s Fund WASH Water, Sanitation and Hygeine WFP World Food Program Vice President : Obiageli Ezekwesili (AFRVP) Country Director : Madani M. Tall (AFCF2) Sector Director Marcelo Guigale (AFTPM) Sector Manager : Miria Pigato (AFTP4) Task Team Leader : Cal MacWilliam (AFTP4) i REPUBLIC OF BENIN SUPPLEMENTAL FINANCING FOR THE SIXTH POVERTY REDUCTION SUPPORT CREDIT TABLE OF CONTENTS 1. BACKGROUND ................................................................................................................................................ 1 2. THE IMPACT OF THE CRISIS ........................................................................................................................ 3 3. THE GOVERNMENT‟S RESPONSE TO THE CRISIS .................................................................................. 5 4. BANK‟S RESPONSE AND STRATEGY ......................................................................................................... 7 5. THE REFORM PROGRAM SUPPORTED THROUGH THE SIXTH POVERTY REDUCTION SUPPORT CREDIT: AN UPDATE ................................................................................................................................ 8 A. Economic Performance Since the Approval of PRSC6...................................................................... 8 B. Reform Progress Since the Approval of PRSC6 .............................................................................. 11 C. Poverty and Social Impact Analysis ................................................................................................. 13 D. Environmental Issues ........................................................................................................................ 14 6. RATIONALE FOR PROPOSED SUPPLEMENTAL FINANCING ............................................................. 14 7. IMPLEMENTATION ARRANGEMENTS .................................................................................................... 16 A. Terms of the Supplemental Financing .............................................................................................. 16 B. Funds Flow and Auditing Requirements for the Supplemental Financing ...................................... 17 8. BENEFITS AND RISKS .................................................................................................................................. 18 A. Benefits .............................................................................................................................................. 18 B. Risks .................................................................................................................................................. 18 List of Annexes Annex 1: IMF Relations Note ....................................................................................................................................... 20 Annex 2: Progress on PRSC 4-6 Monitoring Indicators .............................................................................................. 21 Annex 3: Country at a Glance ........................................................................................................................................ 22 List of Figures Figure 1: Affected Areas ................................................................................................................................................. 2 List of Tables Table 1: Key Economic Indicators, 2007-2013 ............................................................................................................. 10 ii REPUBLIC OF BENIN SUPPLEMENTAL FINANCING FOR THE SIXTH POVERTY REDUCTION SUPPORT CREDIT Grant and Program Summary Recipient: Republic of Benin Implementing Agency: Ministry of Economy and Finance Operation Type: Supplemental Financing Amount: SDR 14 million (US$ 22 million equivalent) Terms: Grant on standard IDA terms. Main Policy Areas: As in PRSC-6, to support implementation of the Government's reform agenda in the following areas: (i) improving the regulatory framework and policy environment for private investment, including support for completion of cotton sector and infrastructure reforms; (ii) pursuing progress towards the MDGs by improving access to quality basic services and ensuring greater efficiency of public expenditures on human capital formation; and (iii) promoting better governance, notably through public financial management reforms. 2010 Key Outcome Indicators: • Private sector investment share in GDP 15.8% • Access to electricity 30% • Cotton production Kg/Ha 1,311 • Access to safe water for rural population 53% • Visit rate to health centers by children under 5 85% • Visit rate to health centers by pregnant women 88% • Primary education completion rate (girls) 67% (56%) • Payment delay for public expenditures <24 days • Public contract bidding process time 5 months Program Development The PRSC series is an integral part of the Bank Group's Country Objectives and Assistance Strategy (CAS) for 2009-2012. The proposed Contribution to CAS: Supplemental Financing builds on the foundation of progress achieved during the previous PRSCs and to date with PRSC-6. The overall objective is to support implementation of Benin's poverty reduction strategy. Specifically, it supports: (i) modernizing the regulatory framework and policy environment for private investment and infrastructure; (ii) increasing progress toward the MDGs by raising the quality, efficiency and access for basic social services; and (iii) promoting better governance through public financial management reforms. iii Risks and Risk Mitigation: The risks facing this operation primarily include: (i) the risk of further external shocks, including future flood incidents; and (ii) political risk in light of upcoming elections. These risks are mitigated by concurrent Bank and donor partner investments in providing medium term support to Benin to prevent and mitigate the impact of future flood-related damage. In addition close Bank/Fund and donor coordination and collaboration around policy dialogue, together with close cooperation in planning and implementing flood relief measures will limit political risk. Operation ID: P125114 iv REPUBLIC OF BENIN SUPPLEMENTAL FINANCING FOR THE SIXTH POVERTY REDUCTION SUPPORT CREDIT 1. BACKGROUND 1.1. Several countries in Central and West Africa experienced devastating floods over the course of the 2010 rainy season. Nearly 2 million people were affected and 377 deaths were recorded. The floods led to significant losses in terms of economic and social infrastructure, such as roads, schools and health clinics, serious losses in housing, and large agricultural losses, both to crops and livestock. Benin was the country most severely affected by floods in West Africa. 1.2. Torrential rainfall combined with record-high water levels on all the major rivers in Benin (Niger, Ouémé, Couffo and Mono) caused severe flooding throughout the country over late September, throughout October and into November, with flood waters remaining in some areas into 2011. For example, whereas 136 mm of rain fell from January to September 2009, 128 mm was recorded on one day in September 2010 and the September monthly total was 344mm. Damage to dwellings, livestock, crops, and social and economic infrastructure was extensive. In addition to immediate relief operations provided by several UN and international agencies, including civil society groups, extensive reconstruction efforts