## Togo: Joint Staff Advisory Note on the Interim Poverty Reduction Strategy Paper — Section 1 (_cr08166)

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### I. Overview
- I-PRSP prepared by the Government of Togo, adopted March 7, 2008 and submitted March 19, 2008.
- Sets an ambitious three-year program to strengthen political and economic governance, support economic recovery and reduce poverty.
- Preparation timeline:
  - Began in 2001, interrupted by political tensions in 2005, resumed August 2006, concluded March 2008.
  - Inclusive process involving government and civil society (unions, religious organizations, private sector and NGOs); donors engaged in the second phase and supported quantitative and qualitative poverty surveys.
- Near-term implementation support and steps:
  - IMF Staff-Monitored Program already underway, paving the way for a Poverty Reduction and Growth Facility (PRGF) for IMF Board consideration in April 2008.
  - World Bank development policy operation to support economic governance reforms for Board consideration in May 2008.
  - Operation to clear arrears to the African Development Fund; resumption of EU financial support; increased donor interest after a decade and a half of modest activity.
- Strategic axes of the I-PRSP:
  - (i) Strengthening political and economic governance, focusing on institutional reform and fiscal governance.
  - (ii) Promoting economic recovery and sustainable development: reforming state-owned enterprises and financial institutions, improving the business environment, strengthening regional integration and trade, reviving agriculture, rehabilitating infrastructure, improving natural resource and environmental management.
  - (iii) Developing social sectors, human resources and employment: improving access to and quality of basic education and health services.
- Staffs’ overall view:
  - I-PRSP contains most elements of a full PRSP and concurs with the macroeconomic policy scenarios and economic and social objectives.
  - Presents poverty diagnosis, macroeconomic framework, sectoral plans, reform policy measures, costing, and a 2008-10 policy matrix, plus institutional framework and timeline toward a full PRSP (planned completion by early 2009).
- JSAN purpose: provide feedback to strengthen the full PRSP, focusing on (i) poverty diagnosis; (ii) sector policies and reform priorities; and (iii) implementation, monitoring and evaluation framework and implementation risks.

### II. Poverty Trends and Diagnosis
- Data sources: comprehensive household survey conducted in 2006 and several sector surveys from 2000–2006.
- Key statistics and findings:
  - About 62 percent of the population lives below the poverty line (2006 household survey).
  - Rural areas account for the majority of the poor: 74 percent in rural areas versus 37 percent in urban areas.
  - UNDP Human Development Index failed to improve in recent years, unlike gradual increases in sub-Saharan Africa.
  - 2006 survey respondents perceived a worsening of living conditions between 2000 and 2006, mainly due to economic difficulties and health problems.
  - Public spending on basic services was constrained and favored urban areas; limited rural infrastructure investment; persistent high urban unemployment.
- Staff recommendations for the full PRSP:
  - Better assess growth and distributional impacts of sectoral programs and expenditures.
  - Adopt a coding to track pro-poor expenditures in the budgetary nomenclature.
  - Monitor closely budget execution and publish regular reports on expenditures in priority sectors.
  - Deepen analysis on links between growth policies, sectoral programs/expenditures and poverty reduction, including food security considerations and reflecting these in full PRSP policies.

### III. Sector Policies and Reform Priorities
- Macroeconomic framework and fiscal outlook:
  - Projects increase in real GDP growth to 4 percent (about 2 percent per capita) during 2008-10; staffs believe this is realistic given low capacity and planned reforms.
  - Framework based on prudent tax revenue growth projections and assumption that Togo’s external financing will reach the regional average.
  - Medium-term budget framework targets a modest primary fiscal adjustment combined with increased external assistance and HIPC debt relief to allow a significant increase in spending on infrastructure and basic social services.
  - Authorities have identified non-priority spending that could be reduced to safeguard social sectors and public infrastructures in case of revenue or financing shortfalls.
  - Despite projected increases in external assistance and spending, resources would still be insufficient for Togo to meet the MDGs.
- Sequencing and timing concerns:
  - Time frames for several reforms appear ambitious and frontloaded given limited institutional capacity and reform complexity; staffs recommend appropriate sequencing and realistic deadlines.
  - Some public finance management measures are critical short-term priorities to ensure transparent and effective use of reengagement and debt relief resources.
  - Strengthening governance and stabilizing fragile state banks and key public enterprises are urgent and critical.
  - Deeper structural reforms to improve public enterprise performance and promote private sector growth will require more time and analytical underpinning.
- Recommendation to exploit regional connectivity:
  - PRSP should outline a growth agenda leveraging Togo’s transit corridor, deep port facilities at Lomé, past reputation as a regional financial center, and services sector promotion.
- Sector-specific observations and recommendations to be elaborated in the full PRSP:
  - Cotton sector:
    - Government decided to liquidate the loss-making cotton company and create a new company partly owned by producers as an interim step toward private strategic investment.
    - Full PRSP should provide clarity on governance and performance, social impact, management, accounting and financial control systems, farmer productivity measures, input credit and supply mechanisms, pricing, rural infrastructure, and transition arrangements until entry of strategic partner.
  - Phosphates:
    - PRSP should set out a clearer strategic vision linked to the investment program to modernize phosphate sector equipment.
    - Vision should specify the critical role of investments to restore and boost production capacity in the medium term given low capacity utilization.
    - Staffs encourage the Government to pursue membership in the Extractive Industries Transparency Initiative (EITI).
  - Financial sector:
    - Full PRSP should elaborate on near-term restructuring plan for banks with negative net worth and long-term strategic objectives for the financial sector, including microfinance and non-bank financial institutions (social security, insurance).
    - PRSP should outline measures to secure a stable pension system and strengthen the financial sector to restore its role as a regional financial center.
  - Energy:
    - Region-wide energy crisis constrains Togo as an electricity importer; limited options outside a regional context.
    - Full PRSP should articulate an integrated energy strategy balancing national and regional solutions, distinguishing near-term steps to improve supply and long-term elements: investments, new electricity import sources, pricing and demand management, institutional questions related to partnership with Benin, and linkage to the West Africa regional power pool.
  - Education:
    - Full PRSP should fully consider results of analytical work from the Country Status Report on Education.
    - Prepare and adopt a credible and financially viable education sector plan as basis for Togo to apply to the Education For All – Fast Track Initiative.
  - Health:
    - Strategic goals in I-PRSP are relevant; achieving the MDGs by 2015 is very ambitious and should be presented as overall programmatic goals rather than specific targets.
    - Full PRSP should emphasize pro-poor health policies: transfer substantial financial and human resources to rural remote areas, promote access to primary health care centers, and strengthen decentralized health services to ensure quality.
  - Community development:
    - I-PRSP emphasizes role of civil society in education, training, health and basic services and facilitating community-level development.
    - Authorities should identify development partners to support specific community programs beyond Millennium Village initiative and support community development as part of decentralization.
- Budget and sector program costing:
  - I-PRSP links reform agenda to the medium-term budget at the aggregate level.
  - Staffs recommend regular updates to estimates as reforms/projects take shape and enter implementation.
  - Authorities urged to elaborate costs of key sector programs through sector medium term expenditure frameworks consistent with the medium-term budget framework.
- External assistance and debt sustainability:
  - Staffs urge identification of development partners for specific reforms and prioritization of the investment program.
  - Specify coordination mechanisms to align donor financing and technical assistance with PRS priorities.
  - Full PRSP should emphasize maintaining debt sustainability after debt relief by relying on highly concessional financing (mainly grants) and improving external debt management.
  - Full PRSP should provide an estimate of external assistance required beyond 2010.
- Areas needing further analytical work:
  - Energy sector: role in regional power pool.
  - Agriculture: reassess sub-sector support/reform programs to enhance product supply chain competitiveness.
  - Phosphate sector: financial and strategic audit to inform vision and reform program.
  - Trade: diagnostic trade integrated study (DTIS) for growth and diversification agenda.
  - Health: identify demand for health services, public/private supply capacity and gaps.
  - Transport and telecommunications: strategic review of port’s future in regional integration context.
  - Microfinance and pensions: actuarial reviews to inform pension reform measures.

### IV. Implementation, Monitoring and Evaluation
- Institutional monitoring framework:
  - Lead entity: National Council for the PRSP Monitoring chaired by the Prime Minister, with representatives from legislative branch, civil society and private sector, charged with coordinating PRSP implementation.
  - Other entities: inter-ministerial committee, technical steering committee, permanent technical secretariat, and sectoral committees.
  - Government aims to establish local and regional participatory monitoring committees after installation of local elected officials.
  - A Government-Donor committee is envisioned once priority national entities are in place and consolidated.
- Capacity and inclusiveness:
  - Staffs acknowledge inclusive institutional framework but note limited current capacity of civil society to fully engage in national policy discussions.
  - Staffs encourage authorities to explore, with donors, options to strengthen civil society capacity.
- Monitoring indicators and statistical systems:
  - I-PRSP includes a set of economic and social indicators to track progress.
  - Monitoring and MDG information system to be based partly on existing sectoral information systems (health, education, HIV/AIDS, finance, rural development).
  - Staffs concur on need to strengthen the national statistics system in production and use of statistical information.

### Statistical capacity and monitoring (Section 2)
- Assessment:
  - Economic and poverty data are adequate for preparing a full PRSP, but need to build statistical capacity in key economic sectors, notably agriculture and services, to inform policymakers during implementation.
- Monitoring system recommendations:
  - Staffs recommend focusing the monitoring system on a limited number of indicators to facilitate global monitoring of PRS implementation progress.
  - For the full PRSP, authorities are encouraged to:
    - elaborate the program for strengthening the statistical information system; and
    - develop a practical monitoring and evaluation framework that takes full account of existing systems and capacity levels.

### Risks to PRS implementation and mitigation measures (Section 2)
- Key risks that could slow down implementation:
  - capacity constraints;
  - political tensions; and
  - adverse economic shocks.
- Recommended mitigation actions:
  - (i) continue reaching out to local stakeholders, in particular in preparing the full PRSP;
  - (ii) coordinate closely with donors to ensure sufficient technical and financial assistance is forthcoming for the country’s identified priority needs;
  - (iii) incorporate analysis and measures to strengthen social protection, including food security and disaster risk management considerations; and
  - (iv) maintain sound fiscal policies and continue and deepen governance reforms to increase the efficiency, effectiveness and transparency of public resource use.
- Additional recommendation for the full PRSP:
  - further develop the scenario analysis by assessing the potential impact of lower (and higher) external assistance and of economic shocks, including impact of further oil and food price increases.

### Issues for discussion by the Executive Directors (Section 2)
- Staffs’ assessment of the I-PRSP:
  - clearly identifies the major obstacles to poverty reduction in Togo and outlines a reasonable framework for implementing the Government’s growth and poverty reduction agenda over the period 2008-10;
  - recognizes the considerable challenges to achieve the MDGs and the risks to its implementation; and
  - adequately outlines the institutional framework for the I-PRSP implementation, monitoring and evaluation, and planned timeline and participatory process for the preparation of the full PRSP.
- Questions for Executive Directors:
  - Whether they agree with the main areas identified by staffs as priorities for strengthening the PRS and its implementation.
  - Whether they concur with the areas identified by staffs where additional specificity could be added for the preparation of the full PRSP, i.e. public financial management, financial sector, cotton, phosphate and energy, and the key implementation risks, notably capacity constraints, political tensions and adverse economic shocks.

*Prepared by the Staffs of the International Monetary Fund (IMF) and the International Development Association (IDA); Approved by Robert Sharer and Adnan Mazarei (IMF) and Obiageli K. Ezekwesili (IDA); April 17, 2008.*

### Section 1

### Togo: Joint Staff Advisory Note on the Interim Poverty Reduction Strategy Paper — Section 1

### I. Overview
- The JSAN reviews the Interim Poverty Reduction Strategy Paper (I-PRSP) prepared by the Government of Togo, adopted March 7, 2008 and submitted March 19, 2008.
- The I-PRSP sets an ambitious three-year program to strengthen political and economic governance, support economic recovery and reduce poverty.
- Preparation timeline:
  - Began in 2001, interrupted by political tensions in 2005, resumed August 2006, concluded March 2008.
  - Inclusive process involving government and civil society (unions, religious organizations, private sector and NGOs); donors engaged in the second phase and supported quantitative and qualitative poverty surveys.
- Key near-term implementation support and steps noted:
  - IMF Staff-Monitored Program already underway, paving the way for a Poverty Reduction and Growth Facility (PRGF) for IMF Board consideration in April 2008.
  - World Bank development policy operation to support economic governance reforms for Board consideration in May 2008.
  - Operation to clear arrears to the African Development Fund; resumption of EU financial support; increased donor interest after a decade and a half of modest activity.
- Strategic axes of the I-PRSP:
  - (i) Strengthening political and economic governance, focusing on institutional reform and fiscal governance.
  - (ii) Promoting economic recovery and sustainable development: reforming state-owned enterprises and financial institutions, improving the business environment, strengthening regional integration and trade, reviving agriculture, rehabilitating infrastructure, improving natural resource and environmental management.
  - (iii) Developing social sectors, human resources and employment: improving access to and quality of basic education and health services.
- Staffs’ overall view:
  - I-PRSP contains most elements of a full PRSP and concurs with the macroeconomic policy scenarios and economic and social objectives.
  - I-PRSP presents poverty diagnosis, macroeconomic framework, sectoral plans, reform policy measures, costing, and a 2008-10 policy matrix, plus institutional framework and timeline toward a full PRSP (planned completion by early 2009).
- JSAN purpose: provide feedback to strengthen the full PRSP, focusing on (i) poverty diagnosis; (ii) sector policies and reform priorities; and (iii) implementation, monitoring and evaluation framework and implementation risks.

### II. Poverty Trends and Diagnosis
- Data sources: comprehensive household survey conducted in 2006 and several sector surveys from 2000–2006.
- Key statistics and findings:
  - About 62 percent of the population lives below the poverty line (2006 household survey).
  - Rural areas account for the majority of the poor: 74 percent in rural areas versus 37 percent in urban areas.
  - UNDP Human Development Index failed to improve in recent years, unlike gradual increases in sub-Saharan Africa.
  - 2006 survey respondents perceived a worsening of living conditions between 2000 and 2006, mainly due to economic difficulties and health problems.
  - Public spending on basic services was constrained and favored urban areas; limited rural infrastructure investment; persistent high urban unemployment.
- Staff recommendations for the full PRSP:
  - Better assess growth and distributional impacts of sectoral programs and expenditures.
  - Adopt a coding to track pro-poor expenditures in the budgetary nomenclature.
  - Monitor closely budget execution and publish regular reports on expenditures in priority sectors.
  - Deepen analysis on links between growth policies, sectoral programs/expenditures and poverty reduction, including food security considerations and reflecting these in full PRSP policies.

### III. Sector Policies and Reform Priorities
- Macroeconomic framework:
  - Projects increase in real GDP growth to 4 percent (about 2 percent per capita) during 2008-10; staffs believe this is realistic given low capacity and planned reforms.
  - Framework based on prudent tax revenue growth projections and assumption that Togo’s external financing will reach the regional average.
  - Medium-term budget framework targets a modest primary fiscal adjustment combined with increased external assistance and HIPC debt relief to allow a significant increase in spending on infrastructure and basic social services.
  - Authorities have identified non-priority spending that could be reduced to safeguard social sectors and public infrastructures in case of revenue or financing shortfalls.
  - Despite projected increases in external assistance and spending, resources would still be insufficient for Togo to meet the MDGs.
- Sequencing and timing concerns:
  - Given limited institutional capacity and reform complexity, time frames for several reforms appear ambitious and frontloaded; staffs recommend appropriate sequencing and realistic deadlines.
  - Some public finance management measures are critical short-term priorities to ensure transparent and effective use of reengagement and debt relief resources.
  - Strengthening governance and stabilizing fragile state banks and key public enterprises are urgent and critical.
  - Deeper structural reforms to improve public enterprise performance and promote private sector growth will require more time and analytical underpinning.
- Recommendation to exploit regional connectivity:
  - PRSP should outline a growth agenda leveraging Togo’s transit corridor, deep port facilities at Lomé, past reputation as a regional financial center, and services sector promotion.
- Sector-specific observations and staff recommendations (to be elaborated in the full PRSP):
  - Cotton sector:
    - Government decided to liquidate the loss-making cotton company and create a new company partly owned by producers as an interim step toward private strategic investment.
    - Full PRSP should provide clarity on steps to strengthen governance and performance, social impact, management, accounting and financial control systems, farmer productivity measures, input credit and supply mechanisms, pricing, rural infrastructure, and transition arrangements until entry of strategic partner.
  - Phosphates:
    - Staffs recommend the PRSP set out a clearer strategic vision for the sector linked to the investment program to modernize phosphate sector equipment.
    - Given low capacity utilization, the vision should specify the critical role of investments to restore and boost production capacity in the medium term.
    - Staffs encourage the Government to pursue membership in the Extractive Industries Transparency Initiative (EITI).
  - Financial sector:
    - Confidentiality limits detail, but full PRSP should elaborate on near-term restructuring plan for banks with negative net worth and long-term strategic objectives for the financial sector, including microfinance and non-bank financial institutions (social security, insurance).
    - PRSP should outline measures to secure a stable pension system and strengthen the financial sector to restore its role as a regional financial center.
  - Energy:
    - Region-wide energy crisis constrains Togo as an electricity importer; limited options outside a regional context.
    - Full PRSP should articulate an integrated energy strategy balancing national and regional solutions, distinguishing near-term steps to improve supply and long-term elements: investments, new electricity import sources, pricing and demand management, institutional questions related to partnership with Benin, and linkage to the West Africa regional power pool.
  - Education sector:
    - Full PRSP should fully consider results of analytical work from the Country Status Report on Education.
    - Prepare and adopt a credible and financially viable education sector plan as basis for Togo to apply to the Education For All – Fast Track Initiative.
  - Health sector:
    - Strategic goals in I-PRSP are relevant; achieving the MDGs by 2015 is very ambitious and should be presented as overall programmatic goals rather than specific targets.
    - Full PRSP should emphasize pro-poor health policies: transfer substantial financial and human resources to rural remote areas, promote access to primary health care centers, and strengthen decentralized health services to ensure quality.
  - Community development:
    - I-PRSP appropriately emphasizes role of civil society in education, training, health and basic services and facilitating community-level development.
    - Authorities should identify development partners to support specific community programs beyond Millennium Village initiative and support community development as part of decentralization.
- Budget and sector program costing:
  - I-PRSP links reform agenda to the medium-term budget at the aggregate level.
  - Staffs recommend regular updates to estimates as reforms/projects take shape and entering implementation.
  - Authorities urged to elaborate costs of key sector programs through sector medium term expenditure frameworks consistent with the medium-term budget framework.
- External assistance and debt sustainability:
  - Staffs urge identification of development partners for specific reforms and prioritization of the investment program.
  - Specify coordination mechanisms to align donor financing and technical assistance with PRS priorities.
  - Full PRSP should emphasize maintaining debt sustainability after debt relief by relying on highly concessional financing (mainly grants) and improving external debt management.
  - Full PRSP should provide an estimate of external assistance required beyond 2010.
- Areas needing further analytical work to detail policies:
  - Energy sector: role in regional power pool.
  - Agriculture: reassess sub-sector support/reform programs to enhance product supply chain competitiveness.
  - Phosphate sector: financial and strategic audit to inform vision and reform program.
  - Trade: diagnostic trade integrated study (DTIS) for growth and diversification agenda.
  - Health: identify demand for health services, public/private supply capacity and gaps.
  - Transport and telecommunications: strategic review of port’s future in regional integration context.
  - Microfinance and pensions: actuarial reviews to inform pension reform measures.

### IV. Implementation, Monitoring and Evaluation
- Institutional mechanism for PRS monitoring and evaluation:
  - Lead entity: National Council for the PRSP Monitoring chaired by the Prime Minister, with representatives from legislative branch, civil society and private sector, charged with coordinating PRSP implementation.
  - Other entities: inter-ministerial committee, technical steering committee, permanent technical secretariat, and sectoral committees.
  - Government aims to establish local and regional participatory monitoring committees after installation of local elected officials.
  - A Government-Donor committee is envisioned once priority national entities are in place and consolidated.
- Capacity and inclusiveness concerns:
  - Staffs acknowledge inclusive institutional framework but note limited current capacity of civil society to fully engage in national policy discussions.
  - Staffs encourage authorities to explore, with donors, options to strengthen civil society capacity.
- Monitoring indicators and statistical systems:
  - I-PRSP includes a set of economic and social indicators to track progress.
  - Monitoring and MDG information system to be based partly on existing sectoral information systems (health, education, HIV/AIDS, finance, rural development).
  - Staffs concur on need to strengthen the national statistics system in production and use of statistical information.

*Prepared by the Staffs of the International Monetary Fund (IMF) and the International Development Association (IDA); Approved by Robert Sharer and Adnan Mazarei (IMF) and Obiageli K. Ezekwesili (IDA); April 17, 2008.*

### Section 2

### _cr08166 - Section 2

### Statistical capacity and monitoring
- While the economic and poverty data are adequate for preparing a full PRSP, there will still be a need to build statistical capacity in key economic sectors, notably agriculture and services, to inform policymakers as they implement the strategy.
- The monitoring system relies on relatively comprehensive indicators and staffs recommend that the authorities focus it on a limited number of indicators to facilitate global monitoring of PRS implementation progress.
- For the full PRSP, the staffs encourage the authorities to:
  - elaborate the program for strengthening the statistical information system; and
  - develop a practical monitoring and evaluation framework that takes full account of existing systems and capacity levels.

### Risks to PRS implementation and mitigation measures
- Key risks that could slow down implementation of the PRS:
  - capacity constraints;
  - political tensions; and
  - adverse economic shocks.
- To mitigate these risks, it will be important to:
  - (i) continue reaching out to local stakeholders, in particular in preparing the full PRSP;
  - (ii) coordinate closely with donors to ensure sufficient technical and financial assistance is forthcoming for the country’s identified priority needs;
  - (iii) incorporate analysis and measures to strengthen social protection, including food security and disaster risk management considerations; and
  - (iv) maintain sound fiscal policies and continue and deepen governance reforms to increase the efficiency, effectiveness and transparency of public resource use.
- Additional recommendation for the full PRSP:
  - further develop the scenario analysis by assessing the potential impact of lower (and higher) external assistance and of economic shocks, including impact of further oil and food price increases.

### Issues for discussion by the Executive Directors
- The I-PRSP:
  - clearly identifies the major obstacles to poverty reduction in Togo and outlines a reasonable framework for implementing the Government’s growth and poverty reduction agenda over the period 2008-10;
  - recognizes the considerable challenges to achieve the MDGs and the risks to its implementation; and
  - adequately outlines the institutional framework for the I-PRSP implementation, monitoring and evaluation, and planned timeline and participatory process for the preparation of the full PRSP.
- Executive Directors’ views are sought on:
  - whether they agree with the main areas identified by staffs as priorities for strengthening the PRS and its implementation; and
  - whether they concur with the areas identified by staffs where additional specificity could be added for the preparation of the full PRSP, i.e. public financial management, financial sector, cotton, phosphate and energy, and the key implementation risks, notably capacity constraints, political tensions and adverse economic shocks.

*Source: _cr08166 - Section 2*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08166.pdf_