Document of The World Bank

Report No: ICR00003332

IMPLEMENTATION COMPLETION AND RESULTS REPORT(IDA-H6240)

ON A

GRANT

IN THE AMOUNT OF SDR 7.5 MILLION(US$ 11.0 MILLION EQUIVALENT)

INCLUDING SDR 4.1 MILLION IN PILOT CRW RESOURCES

(US$ 6.0 MILLION EQUIVALENT)

TO

THE REPUBLIC OF LIBERIA

FOR A

THIRD REENGAGEMENT AND REFORM SUPPORT PROGRAM

September 8, 2016

Macroeconomics and Fiscal Management Global PracticeCountry Department AFCW1Africa Region

CURRENCY EQUIVALENTS(Exchange Rate Effective July 21, 2016)

Currency Unit = Liberian Dollar (LDR)1.00 LRD = US$0.011US$1.00 = 89.99 LRD

FISCAL YEARJuly 1 – June 30

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankAIDS Acquired Immune Deficiency SyndromeASYCUDA Automated System for Customs DataCAF Common Assessment FrameworkCAS Country Assistance StrategyCNDR Center for National Documents and Records Agency CRW Crisis Response WindowDPO Development Policy Operation ECOWAS Economic Community of West African StatesEGIRP Economic Governance and Institutional Reform ProjectGAC General Auditing Commission GDP Gross Domestic ProductGEMAP Governance and Economic Management Assisted ProgramGFS Government Finance StatisticsHIPC Heavily Indebted Poor Countries HIV Human Immunodeficiency VirusIAA Internal Audit AgencyIAS Internal Audit ServiceIDA International Development Association IFMIS Integrated Financial Management Information SystemIGPSPL Interim Guidelines and Procedures for the Sale of Public LandIMF International Monetary FundIPTP Intensive Procurement Training Program IPSAS International Public Sector Accounting StandardsITAS Integrated Tax Administration SystemJCAS Joint Country Assistance Strategy KRI Key Results Indicators LCC Land Coordination CenterLERN Liberia’s Early Warning and Response NetworkLIPA Liberia Institute for Public Administration LRDC Liberia Reconstruction and Development Committee LTPC Liberia Trade Policy and CustomsM&A Ministries and AgenciesMTEF Medium Term Expenditure FrameworkNTGL National Transitional Government of LiberiaPPCC Public Procurement and Concessions Commission PDO Program Development ObjectivesPEFA Public Expenditure and Financial Accountability AssessmentPFM Public Financial ManagementPRGF Poverty Reduction and Growth Facility

ii

PRS Poverty Reduction StrategyRIA Roberts International AirportRRSP Reengagement and Reform Support ProgramSDR Special Drawing RightsSPF State and Peace Building FundUN United NationsUNDAF United Nations Development Assistance FrameworkUNDP United Nations Development ProgramUNMIL United Nations Mission in LiberiaUSAID United States Agency for International Development

Vice President: Makhtar Diop  Country Director: Henry G. Kerali

Senior Practice Director: Carlos Felipe JaramilloPractice Manager:Seynabou Sakho

Task Team Leader:Errol George Graham   ICR Team Leader: Daniel Kwabena Boakye

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REPUBLIC OF LIBERIA

THIRD REENGAGEMENT AND REFORM SUPPORT PROGRAM (P117279)

CONTENTS

A. Basic Information.......................................................................................................................vi

B. Key Dates....................................................................................................................................vi

C. Ratings Summary........................................................................................................................vi

D. Sector and Theme Codes...........................................................................................................vii

E. Bank Staff...................................................................................................................................vii

F. Results Framework Analysis......................................................................................................vii

G. Ratings of Program Performance in ISRs...................................................................................ix

H. Restructuring (if any)..................................................................................................................ix

1. Program Context, Development Objectives and Design.............................................11.2 Original Program Development Objectives (PDO) and Key Indicators.............31.3 Revised PDO and Key Indicators, and Reasons/Justification.............................51.4 Original Policy Areas Supported by the Program...............................................51.5 Revised Policy Areas..........................................................................................61.6 Other significant changes....................................................................................6

2. Key Factors Affecting Implementation and Outcomes...............................................62.1 Program Performance..........................................................................................62.2 Major Factors Affecting Implementation:...........................................................92.3 Monitoring and Evaluation (M&E)...................................................................102.4 Expected Next Phase/Follow-up Operation (if any):........................................11

3. Post-Approval Experience and Reasons for Cancellation of the RRSP IV...............113.1 Main Events Leading to Cancellation...............................................................123.2 Steps Taken to Mitigate Problems...............................................................123.3 Implications of Loan Cancellation...............................................................13

4. Assessment of Outcomes...........................................................................................134.1 Relevance of Objectives, Design and Implementation.....................................134.2 Achievement of Program Development Objectives..........................................144.3 Justification of Overall Outcome Rating...........................................................174.4 Overarching Themes, Other Outcomes and Impacts........................................174.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops. 19

5. Assessment of Risk to Development Outcome.........................................................196. Assessment of Bank and Borrower Performance......................................................20

6.1 Bank Performance.............................................................................................206.2 Borrower Performance......................................................................................22

7. Lessons Learned........................................................................................................238. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...........24Annex 1. Bank Lending and Implementation Support/Supervision Processes.............25

iv

Annex 2. Beneficiary Survey Results............................................................................26Annex 3. Stakeholder Workshop Report and Results...................................................27Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR......................28Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders........................29Annex 6. List of Supporting Documents.......................................................................30

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REPUBLIC OF LIBERIA

THIRD REENGAGEMENT AND REFORM SUPPORT PROGRAM (P117279)

DATA SHEETA. Basic Information

Country: Liberia Program Name:Third Reengagement and Reform Support Program

Program ID: P117279 L/C/TF Number(s): IDA-H6240ICR Date: 05/25/2016 ICR Type: Core ICR

Lending Instrument: DPL Borrower:REPUBLIC OF LIBERIA

Original Total Commitment:

XDR 7.50M Disbursed Amount: XDR 7.50M

Revised Amount: XDR 7.50MImplementing Agencies: Ministry of Finance Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 03/25/2010 Effectiveness: 11/16/2010 Appraisal: 05/26/2010 Restructuring(s): Approval: 09/30/2010 Mid-term Review: Closing: 06/30/2011 06/30/20131

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)Bank Ratings Borrower Ratings

1 The closing date for programmatic series was revised due to the extension of the closing date for RRSP IV; the legislature delayed ratification until it was finally cancelled.

vi

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: ModeratelySatisfactory

Implementing Agency/Agencies:

Moderately Satisfactory

Overall Bank Performance:

ModeratelySatisfactory

Overall Borrower Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators QAG Assessments (if any) Rating:

Potential Problem Program at any time (Yes/No):

NoQuality at Entry (QEA):

None

Problem Program at any time (Yes/No):

NoQuality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

D. Sector and Theme Codes Original Actual

Sector Code (as % of total Bank financing) Central government administration 100 100

Theme Code (as % of total Bank financing) Land administration and management 33 33 Public expenditure, financial management and procurement

67 67

E. Bank Staff Positions At ICR At Approval

Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Henry G. R. Kerali Ishac Diwan Practice Manager/Manager:

Yaye Seynabou Sakho Edward Philip English

Program Team Leader: Errol George Graham Errol George Graham ICR Team Leader: Daniel Kwabena Boakye ICR Primary Author: Mathurin Gbetibouo

F. Results Framework Analysis

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Program Development Objectives (from Program Document)The objectives of the proposed grant were to support government-owned ongoing reforms to strengthen governance and improve the environment for private sector-led growth that is more broadly shared. More specifically, the RRSPIII focused on: (i) improving budget planning and execution; and (ii) improving land administration to reduce conflicts and enhance the investment climate. 

Revised Program Development Objectives (if any, as approved by original approving authority)No changes. 

PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1: Average difference between out-turn and legislated budget for each Ministry as measured by PEFA indicator PI-2

Value (quantitative or Qualitative)

16% 10% 8.4%

Date achieved 06/30/2009 06/30/2011 06/30/2011Comments (incl. % achievement)

Fully met Average budget deviation for FY10/11 was 8.4%. (Source: PEFA 2012). Since FY12/13, the average budget deviation has remained less than 10%.

Indicator 2: The timely production of IPSAS compliant financial statements to facilitate complete audit of the final accounts of the budget in keeping with the PFM Act.

Value (quantitative or Qualitative)

No complete financial statement produced.

Complete IPSAS compliant financial statements for FY09/10 produced for auditing.

IPSAS compliant FY09/10 complete financial statements submitted

Date achieved 06/30/2009 06/30/2011 11/30/2011

Comments (incl. % achievement)

Partially met. The IPSAS compliant financial statement for FY09/10 was submitted in November 2011, thus exceeding the target date of June 2011. However, since FY2014/15 the time for submission has reduced considerably to less than 6 months after close of fiscal year. Statutory requirement is four months after end of fiscal year.

Indicator 3 : Consolidation of land deeds in the National ArchiveValue (quantitative or Qualitative)

65% of land deeds in National Archive.

90% of land deeds in National Archive

85%

Date achieved 06/30/2009 06/30/2011 6/30/2011Comments (incl. %

Partially met. 85% of total, 53,261, land deeds were consolidated and archived at the National Archives (CNDRA.) by June 2011.

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achievement) Indicator 4 : Number of deeds digitized and filed in the National ArchivesValue (quantitative or Qualitative)

0 % 75% 90%

Date achieved 06/30/2009 06/30/2011 06/30/2011Comments (incl. % achievement)

Fully met. 90% of archived land deeds were digitized by end June 2011. This was increased to 95% by May 2016.

Indicator 5 : Percentage decrease in the number of land dispute cases in the docket.Value (quantitative or Qualitative)

To be determined50 percent decrease from baseline

56 percent decrease from baseline

Date achieved 06/30/2011 06/30/2011Comments (incl. % achievement)

Fully met. The outstanding number of land disputes in 2011 was 556 compared a baseline of 1183 in 2010. Thus 627 cases were dropped, representing 56% of the baseline.

G. Ratings of Program Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements(USD millions)

H. Restructuring (if any) Not Applicable

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REPUBLIC OF LIBERIA

THIRD REENGAGEMENT AND REFORM SUPPORT PROGRAM (P117279)

IMPLEMENTATION COMPLETION AND RESULTS REPORT

1. Program Context, Development Objectives and Design 1. The Third Re-engagement and Reform Support Program (RRSP III) was the first Development Policy Operation (DPO) in a two-tranche programmatic series for the Government of Liberia. This budget support operation, financed by a US$11million IDA grant, was approved in September 2010 and became effective in November 2010. It was proceeded by two stand-alone DPOs to Liberia, at the end of the protracted civil war and after the installation of a new democratically elected Government in 2006. The first Re-engagement and Reform Support program (RSSP I), financed by a single tranche grant, was approved in December 2007. It provided (i) direct reimbursement of a bridge loan of US$376 million to clear Liberia’s arrears, and (ii) cash flow needed in the period immediately after arrears clearing, including future debt obligations. The Second Re-engagement program (RRSP II), which was also financed by an IDA grant of US$ 4 million was approved in April 2009. It was designed to support the improvement of the country’s fiduciary environment, rebuilding of public institutions and improvement in the environment for private sector-led growth.

2. This document presents the Implementation Completion and Results Report (ICRR) for RRSP III and the Note of Cancelled Operation (NCO) for the RRSP IV. The document assesses the achievements of the expected results of the RRSP III, over the period 2010-2011.However the narrative goes beyond this period, in order to show the extent to which reforms were sustained beyond the closing date of the DPO.The RRSP III aimed at deepening the government’s ongoing reforms by strengthening economic governance and improving the environment for private sector-led growth that is more broadly shared. The successor, second operation of the programmatic series, RRSP IV, which was expected to be financed by an IDA credit of US$5 million, was approved on October 18, 2011 after all prior actions and triggers were met. However the DPO was cancelled on June 30 2013, because the Liberian lawmakers failed to ratify its financing credit agreement. The lawmakers disagreed with the Bank’s policy of changing the second operation of the programmatic series from grant to credit financing; upon reaching HIPC completion point and completion of the debt buy-back operation, Liberia’s status moved from high to low risk to debt distress. The country was therefore obliged to move from IDA grant to credit.

1.1 Context at Appraisal

3. Poor governance and nearly fifteen years of brutal conflict destroyed lives, key institutions, infrastructure, and grounded the Liberian economy to a halt. Approximately 270,000 people were killed and about a third of the total population was displaced by the conflict. Infrastructure and social institutions were damaged or destroyed and key services were severely disrupted. The 2003 Accra Comprehensive Peace Accords and deployment of a strong United Nations (UN) peacekeeping force and the activities of the several donors provided much-needed space to lay a solid foundation for recovery. World Bank engagement since 2003 has

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focused on providing emergency stabilization support rebuilding state institutions and restarting public service delivery. During that period, the World Bank’s programs focused on basic economic governance reforms, community-driven development for service delivery, and emergency infrastructure rehabilitation.

4. In January 2006 Liberia entered into a new era of democratic governance. The inauguration of a new democratic government on January 16, 2006 following a period of ineffective rule by a National Transitional Government of Liberia (NTGL) brought renewed hope and new dynamism to the recovery efforts. The country was at an inflection point, moving from the transitional post-conflict recovery phase to laying the foundations for long-term development. The government’s main focus was on sustaining economic growth and securing social peace dividends. Employment generation was a key priority in that context, to ensure that citizens experience the tangible benefits of peace and reforms and to reduce the number of at-risk youth. Moreover, this priority received heightened consideration in the wake of the negative impact of the 2008/09 global crisis on employment in key sectors in Liberia. On the policy side, the government’s focus was on consolidating economic governance reforms and moving beyond the transitional Governance and Economic Management Assisted Program (GEMAP) which ended at HIPC completion point in June 2010, to a fully-owned Governance framework.

5. Despite strong postwar recovery, the 2009 global financial crisis created substantial challenges for Liberia’s fledging economy. At the macro level, the global crisis resulted in a much weaker economy than envisaged under the PRS, which called for an average growth of 11.5 percent over the period 2008-2010. However, following the global financial crisis, the lower exports and investment as well as lower demand in the domestic economy from the reduced remittances and credit resulted in growth slowing to 5.9 percent over the same period. The nascent growth had been curtailed through lower and delayed investments, fiscal space had been severely eroded as a result of the lower economic activity and the trade balance and overall balance of payments had also deteriorated. The RRSP III operation therefore provided timely financial support to the government in the context of the severe global environment. The amount of the grant was increased from US$5 million to US$11 million through the addition of US$6 million from the Crisis Response Window (CRW) to help mitigate the ongoing effects of the global slowdown on key priorities reflected in the Poverty Reduction Strategy.

6. The economic context during the RRSP III implementation period is summarized in Table 1. The strong postwar recovery continued in 2008 but the difficult international environment towards the end of 2008 through most of 2009, created substantial challenges for Liberia’s fledgling economy. The global crisis which emerged in the latter half of 2008 and deepened in 2009 had considerable impact on the Liberian economy. The fiscal impact of the global financial crisis was a slowdown in tax revenue and public expenditures. Despite the challenges however, the government pursued prudent fiscal and monetary policies and as a result has maintained broad macroeconomic stability. However, there were downside risks to the maintenance of economic stability; given significant domestic risks (security and political—given the pending 2011 elections) as well as external economic shocks, including that from a slower than expected recovery in the global economy. Mitigating factors, included the maintenance of broad macroeconomic stability and the government’s focus on growth enhancing structural reforms, and support provided by donors, including through the RRSP III operation.

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Table 1: Liberia Key Economic Indicators -2008-2014Liberia - Selected Economic Indicators

Indicator 2008 2009 2010 2011 2012 2013 2014Real GDP (% growth), 7.1 5.3 6.1 8.2 8.0 8.7 0.7GDP per Capita (US$) 231 302.0 326 378.8 414.2 453.3 457.9

Consumer prices (annual average % growth) , 17.5 7.4 7.6 3.9 5 7.6 9.9Consumer prices (end of period %), 9.4 9.7 4.8 4.7 5 8.5 7.7Exchange rate (end of period L$/US$), . 63.2 68.3 71.7 72.2 74.5 77 80.5Exports, f.o.b (US$Million), 254 153 249 312 405 559 437Imports, f.o.b (US$Million), 709 563 690 963 1,061 1020 1,178External Current Account Balance, incl. grants (% of GDP), -57.4 -33.3 -39.9 -55.8 -56.5 -28.2 -31.4Foreign Direct Investment (% of GDP) 35.5 14.8 35.0 85.0 37.3 35.7 18.0

Broad Money (% Change), 41.4 43.1 12.6 10.2 11.5 7.6 2.1

Revenues and Grants (% of GDP), 25.9 27.3 23.5 26.4 28 29.9 27.4 Tax Revenue 25.1 24.6 22.5 23.6 24.2 27.5 23.5 Grants (% of GDP) 0.8 2.7 1 2.8 3.8 2.4 3.9Expenditures (% of GDP), 24.7 28.9 23.1 27.00 31.4 31.5 29.3 Capital Expenditure (% of GDP), 3 3.9 2.6 5.2 4.7 4.9 5Overall surplus or deficit (incl. grants, cash basis), 1.2 -1.6 0.4 -0.6 -3.4 -1.6 -1.9

Public sector domestic debt (% of GDP), 39.3 34.4 24 20.6 17.8 16.7 15.1Public sector external debt (incl. arrears US$ Mn, ) 3,203 1677 114 166 214 195 264Public sector external debt (% of GDP), 377 191.9 137.3 8.0 10.0 9.9 13.1Nominal GDP (US$ Millions), 798 861.9 1,292 1,545 1,735 1962 2,013Sources: Liberian Authorities, WDI and IMF Estimates

7. The grant for RRSP III was an integral part of IDA’s Country Assistance Strategy for the period FY09-11 presented to the Board in April 2009. The operation was closely coordinated with assistance provided to support government’s reforms through the ongoing Economic Governance and Institutional Reform Project (US$11 million equivalent), the Liberia Land Sector Reform Project (US$2.98 million equivalent), the EU budget support operation and the IMF ECF. Designed as the first operation of two single tranche DPO programmatic series, RRSP III was expected to cover the period 2010-2011, a short period largely reflecting the fact that the Government’s medium-term strategy was due in 2011 and that presidential elections were also due in 2011. The follow-up, cancelled second operation of the series, RRSP-IV was meant to maintain the overarching focus on the two pillars under RRSP III, while adding on other key complementary policy areas including: (i) improving the capacity for and transparency of public procurement, (ii) improving internal control measures and the capacity for internal audit, and (iii) improving revenue administration. Despite the cancellation of the credit under RRSP-IV, Government continued the implementation of the reforms in these policy areas as well.

1.2 Original Program Development Objectives (PDO) and Key Indicators

8. The RRSP III grant aimed at supporting government-owned reforms by strengthening economic governance and improving the environment for a private sector-led growth that is more broadly shared. More specifically, the RRSP III focused on; (i)

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improving budget planning and execution to ensure transparency and accountability and (ii) improving land administration to reduce conflicts and enhance the investment climate.

9. Budget planning and execution in a transparent and accountable manner is critical for ensuring improved economic governance and efficiency of public spending. The guidelines for implementation of the MTEF were meant to ensure that the budgetary process is transparent and aligned with the country’s development agenda. Liberia’s major challenge in the context of the post-conflict era has been the financing of reconstruction and development budget within the constraints of limited fiscal space. Secondly, prior to the adoption of the IPSAS based financial reporting, Government of Liberia was only producing revenue and expenditure statements that could not be subjected to auditing reviews; hence exposing the country to high risks of financial mal-practice.

10. Improved Land Administration is critical to reducing land disputes, thereby ensuring better investment climate, private sector investment and pro-poor growth. More than half of the 4.5 million people live on land under customary tenure, which provides traditional rights to land but not recognized by law. The lack of legal recognition of customary rights to land has been one of the drivers of the 14-year civil war and has been one of the key sources of court disputes in the post-conflict era. Government’s decision to reform the land tenure system was therefore considered key to the reduction of land disputes and promotion private sector participation in economic development.

11. The prior actions under the two areas of overall reforms supported by the RRSP III and corresponding five key results indicators of the program are shown in Table 2.

Table 2: Liberia RRSP-III Prior Actions and StatusPrior-Actions for RRSP-III Triggers for RRSP-IV

(2010-11) Status of RRSP-III

prior actions at Approval

Progress since end of Program (2012 -2016)

Improving budget planning and execution

(i) A multi-year budgeting strategy has been prepared by the Ministry of Finance and approved by theCabinet.

Met The Government has developed an MTEF Manual which provides guidelines on the institutional framework for the implementation of the budgeting process. The MTEF budget planning process ensures participatory, integrated and comprehensive budgeting process. It also helps to align resource allocations to the country’s development priorities under the Agenda for Transformation (AfT).

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(ii) Adopt International Public SectorAccounting Standards (IPSAS-cash basis) and adopt Public Financial Management enabling regulations and manuals on the basis of the new PFM law.

Internal Audit Units established and well-resourced in terms of staffing (a least two professional audit staff) and operational budget in 5 high risk M+As using GAC risk profile and producing quarterly internal audit reports for the Internal Audit Governance Board.

Met Since end of fiscal year 2014/15, the timeliness and quality of IPSAS-cash basis, annual financial reports have improved. It now takes less than 6 months after close of fiscal year to prepare the annual financial statement compared to 14 months for fiscal year 2009/10.

Internal Audit units were established as part of the prior actions agreed under the RRSP IV.

Improving land administration to reduce conflicts and enhance the investment climate

(v)Establish and adequately resource a Land Commission to identify, guide and facilitate reforms in land policy, law and program.

Completion of assessment of the legal framework for land (both statutory and customary law) to determine amendment required to existing land laws.

Met As at end 2015, close to 95 percent of land deeds have been archived in the National Archives. Subsequently a draft Land Rights Act, which will acknowledge customary rights to land, was submitted to the legislature in September 2014. The bill is however yet to be passed into law.

1.3 Revised PDO and Key Indicators, and Reasons/Justification

11. No change in PDO and key indicators

1.4 Original Policy Areas Supported by the Program

12. The program supported the implementation of policy and institutional reforms in two main areas: (i) strengthening governance and re-building core state functions, and (ii) Facilitating pro-poor growth.

Strengthening Governance and Rebuilding Core State Functions and Institutions

13. Liberia’s efforts to transition from post conflict-recovery to laying the foundations for long-term development depended on the government’s ability to rebuild core state functions and institutions. In this area of policy and institutional reforms, RRSP-III focused on strengthening governance through improved budget planning and execution and financial reporting. With RRSP III, Liberia moved from a single year to a multi-year budget and adopted the International Public Sector Accounting Standards (IPSAS-cash basis) and public financial management enabling regulations and manuals on the basis of the new Public Financial Management (PFM) law enacted in September 2009.

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Facilitating Pro-Poor Growth

14. As the government strengthened and deepened governance reforms, there was a need to also focus on a set of second generation reforms aimed at improving the environment for private sector investments to spur growth. Thus under this area, the government shifted to a more programmatic approach initially focusing on the core areas of establishing and adequately resourcing a Land Commission to identify, guide and facilitate reforms in land policy and law.

1.5 Revised Policy Areas

15. A minor change to the policy area involved the shifting of the reforms on the modernization of the taxpayer identification system to the subsequent operation in the series—RRSP-IV. The shift was necessary because, while the government made good progress toward the implementation of the Integrated Tax Administration System (ITAS), there were delays beyond its control relating to the availability of the consulting firm to undertake the work on the ITAS.

1.6 Other significant changes

16. There were no other significant changes in the design, scope and scale, implementation arrangements or funding of the operation.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance

17. Overall, the Government made substantial progress in strengthening budget planning and execution as well as improving the land administration system. The targets for five key results indicators (KRI) in the two policy and institutional reforms areas under the program were fully or partially met and sustained beyond the closing date of the operation, June 2011. Three of the KRIs were fully met (KRIs 1, 4,5) and the other two were partially met (KRIs 2,3).

18. The Government’s budget execution rate (measured by KRI 1) has improved since FY10/11. Government met its overall average budget deviation target, with only 8.4 percent difference between out-turn and legislated budget by end June 2011, compared to a baseline of 16 percent in FY08/09 and a target of 10 percent. Budget execution rate has further improved in subsequent years, despite expenditure pressures generated by the Ebola Virus Disease (EVD) in FY2014/15. Government was able to shift resources to priority spending through cutting non-essential capital and discretionary recurrent expenditure. Also, positive revenue performance offset shortfalls in budget support to some extent.

19. The target for timeliness for the submission of consolidated financial statements for external audit (KRI 2) was not fully met by original closing of end June 2011, but has since improved significantly. Submission of financial statement for FY 2009/10 was 17 months after end of the fiscal year, thus exceeding the target of 12 months (end June). The delay was partly due to the fact that IPSAS-cash basis financial reporting was being used for the first time.

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However, after the initial period of capacity building, the financial statements have been produced within 10 months of lead time after the closing of fiscal years. For instance, the financial statements for FY2012/13 and FY2013/14 were submitted within nine and ten months respectively after end of fiscal year. Subsequently, the FY2014/15 financial statement was submitted within six months after end of the fiscal year.

20. The targets for assessing the performance of land administration system (KP3 to KPI 5) were not all fully met within program deadline but remained largely on track. The established Land Commission was resourced to carry out a number of studies to inform the policy and legal reforms; rebuild and improve deed registration system so that records are restored, ordered and can be tracked; build the institutional and technical capacity for a modern land registration system. It also contributed to the creation of the capacity for cadaster and land information system which can be used for developing a land management system. The assessment of individual results indicator targets of land administration under RRSP III is as follows.

a. KRI 3 –Consolidation of land deeds in the national archives target-- was partially met. As much as 85 percent of the total land deeds, 53,261, were consolidated and archived at CNDRA, compared to the target of 90 percent anticipated by June 2011. The archiving process continued earnestly beyond original program closing date.

b. KRI 4 –Number of deeds digitized and filed in the National Archives target-was fully met. As much as 90 percent of the 53,261 archived land deeds were digitized, compared to the 75 percent share targeted for June 2011. The share further increased to 95 percent by May 2016.

c. KRI 5 – Percentage decrease in number of land dispute cases target – was fully met. The number of land dispute cases registered in 2010 was 1183; it dropped by 56% at the end of 2011 and even further thereafter. This decrease arose largely from the establishment of the Alternative Dispute Resolution (ADR) centers in five major counties.

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Table 3: Liberia RRSP-III Key Indicators and OutcomeKey Results Indicators Base-line Target Actual Outcome (as of May 2016).

I. Governance and Rebuilding Core State Functions and Institutions Strengthen governance through improved budget planning and execution

KRI 1. Average difference between out-turn and legislated budget for each Ministry, as measured by PEFA indicator PI-2.

16% (FY08/09)2 10% (FY10/11) Fully met Average budget deviation for FY10/11 was 8.4%. (Source: PEFA 2012). Since FY12/13, the average budget deviation has remained less than 10%. See table below;

FY. Budget(US$M)

Act.(US$M)

P1-1

FY13 672 594 11.6%

FY14 583 530 9.1%

FY15 635 622 2.1%

Average (FY13-15) 7.6%

Source: PEFA Report- May 2016KRI 2 The timely production of IPSAS compliant financial statements to facilitate complete audit of the final account of the budget in keeping with the PFM Act.

No complete financial statement produced and audits are transactional audits (2008/09)

Complete IPSAS compliant financial statements for FY09/10 produced for auditing (June 2011)

Partially met. The IPSAS compliant financial statement for FY09/10 was submitted in November 2011, thus exceeding the target date of June 2011. However, since FY2014/15 the time for submission has reduced considerably to less than 6 months after close of fiscal year. Statutory requirement is four months after end of fiscal year.Source: MFDP Admin. Records

II. Facilitating Pro-Poor Growth Improving land administration to reduce conflicts and enhance the investment climateKRI 3 Consolidation of land deeds in the National Archive.

65 percent of Land deeds in national archive (2009)

90 percent of land deed in national archive (June 2011)

Partially met. 85% of total, 53,261, land deeds were consolidated and archived at the National Archives (CNDRA.) by June 2011.

KRI 4 Number of deeds digitized and filed in the National Archive.

0 percent (2009) 75 percent (June 2011)

Fully met. 90% of archived land deeds were digitized by end June 2011. This was increased to 95% by May 2016.

KRI 5 Percentage decrease in the number of land dispute cases in the docket.

To be determined 50 percent decrease from baseline (June

Fully met The number of land disputes, representing 1183 cases by 2010,

2 The baseline data of 16% represents overall variance (P1-1) between actual expenditures and the approved budget in FY 2008/09 as per the 2011 PEFA Guidelines.

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2011) dropped by 56% at the end of 2011.

2.2 Major Factors Affecting Implementation:

21. The overall implementation of program reforms under the RRSP III was adequate, with strong commitment from Government, despite coordination and capacity challenges. The two major factors, which positively affected the implementation of the program were; (i) the strong government ownership and (ii) the considerable support from donors including timely technical assistance. The joint Country-Donors coordination platform also played a positive role on the implementation of RRSP III. On the other hand, the two key factors, which negatively affected the implementation of the program were; (iii) weak capacity within government and (iv) limited fiscal space. It should also be noted that implementation and ultimate outcomes of RRSP III (first operation of a programmatic series) were hampered by the unexpected cancellation of RRSP IV, the follow-up operation. These factors are discussed and analyzed in turn below:

22. Strong Government Ownership: The Government of Liberia demonstrated strong ownership of the reforms under RRSP-III. Economic governance reforms and particularly improvement in public financial management have been at the center of government’s efforts to improve accountability. The Government was strongly committed to meeting the requirements of the 2009 Public Financial Management (PFM) law, which states that: “The National Budget is to be prepared in the context of a medium-term fiscal framework with the aim of achieving national objectives over a multi-year period”3. The government’s ownership was also reflected in its commitment to transparent and accountable financial management, coupled with fiscal policy in part aimed at ensuring that the benefits from growth are widely-shared, as stated in its 2008-2011 Poverty Reduction Strategy (PRS).

23. Effective Donor Support: Since the Accra Peace Accord in 2003, donor coordination in Liberia has been strong and there has been substantial financial support from donors, generally aligned with the pillars that the Government established in its PRS. The financial support from the donor community was especially critical for the operation of the Land Commission. Indeed, although the Government was fully committed to the establishment and operation of the Land Commission, funds were sorely lacking –see below; thus the Peace Building Fund and UN-HABITAT especially were instrumental in funding some staff positions as well as virtually all of the first-year program of the Commission4.

24. Support from both Government and Donors was further reinforced through the Liberia Reconstruction and Development Committee (LRDC), the main Government-partners’ forum that coordinated Liberia’s national reconstruction agenda. The LRDC Steering Committee chaired by the President of Liberia herself, consisted of the Ministers of Defense, Finance, Planning and Economic Affairs, and Public Works, as well as major partners including the United Nations, the United States, China, the World Bank Group, the European Commission, the IMF, the African Union and ECOWAS. The Steering Committee was designed to make broad policy decisions in relation to the national reconstruction and development

3 Sections 2 and 8 of the PFM law.4 See Annual Report (2010) of the Land Commission at http://www.landlib.org/

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agenda, and to ensure coordination across key ministries and between the Government and its partners. It was supported by a small Secretariat.

25. The technical assistance and analytical work provided by the World Bank played a key role in supporting the implementation of the program and tracking its results. The Economic Governance and Institutional Reform Project (EGIRP), approved in 2008 for US$11 million provided technical assistance to improve public financial management through assistance for: (i) drafting the detailed procedure or operating manuals, taking into account the evolution of the computerized accounting system; and (ii) disseminating of the PFM law, regulations and manuals. The World Bank’s efforts to build technical capacity through support for the establishment of a Financial Management training school was also a positive factor, not only affecting implementation of the public financial management actions under the program but also helping to ensure sustainability.

26. On the down side, weak capacity within government have been perennial key factors constraining the implementation of projects and programs in Liberia in general, including for this operation. The loss of institutional memory and the erosion of systems following the 14-year civil conflict weakened inter-ministerial and inter-agency coordination in Liberia, which has been slow to re-build despite best efforts from donors, including through the Governance and Economic Management Assisted Program (GEMAP) which ended at HIPC completion point in June 2010. Therefore, efforts to arrive at a multi-year budgeting strategy from a bottom-up approach involving individual ministries and agencies was particularly challenging.

27. Limited fiscal space in the face of many critical priorities also affected the implementation of the program. With a total budget of just US$347 million in FY2010, a third of which was non-discretionary spending on wages and salaries, fiscal space was very limited. As a result, the Government was able to only allocate US$600,000 for the establishment and operation of the Land Commission. This amount was clearly inadequate as the Land Commission pointed out in its first annual report: “…. the Commission is faced with huge financial challenges. The LC allotment in the National Budget can only support operational costs and salaries of the Commissioners and some members of the Technical Secretariat.”

28. The unexpected cancellation of the planned successor operation of the programmatic series somewhat negatively impacted RRSP III, inasmuch as it did not allow for follow through. Although all of its triggers and prior actions were met, the second planned operation of the programmatic series was cancelled as Liberian lawmakers did not ratify its financing agreement. The lawmakers objected to the fact the financing of RRSP IV was a loan rather than a grant as was the case for its predecessor and other post-conflict assistance programs.

2.3 Monitoring and Evaluation (M&E)

29. M&E Design: Liberia’s capacity for monitoring and evaluation remains weak although some progress has been made in building this capacity. The government formulated a comprehensive framework for the M&E of its first full PRS in 2008. Support in this area has been provided by the World Bank Institute and the UNDP. However, the weaknesses reflect not only the lack of statistical capability more broadly, and the absence of reliable base-line data from surveys but also weaknesses in coordination across ministries and agencies. Considerable

  10

efforts have been made by donors—with some success—to improve fiscal data collection and publication within the Ministry of Finance and Development Planning. This was possible because, since 2006, donors have consistently supported projects which helped in promoting public financial management reporting in the country; namely GEMAPS project which helped with the systematic introduction of IT systems to automate budget management, accounting and financial statement reporting. Successor projects, namely the EGIRP and IFMIS, have contributed in further strengthening the entire public financial management system, comprising budgeting, execution, financial reporting and auditing: This has facilitated in-year as well as annual fiscal data reporting.

30. M&E Implementation: Despite the limited capacity for M&E, the government was consistent in tracking progress on the key results indicators. Given this limitation, and the relative high demands for reporting from the joint CAS and the UNDAF, the M&E for the RRSP III was aligned to the process which the government designed for the overall monitoring and evaluation system for its own poverty reduction strategy (PRS). The latter system itself was not without challenges, due to lack of reliable baseline data for key performance indicators for the PRS. Nevertheless, the Government managed to effectively monitor progress under RRSP III.

2.4 Expected Next Phase/Follow-up Operation (if any):

31. The next phase for this operation was to continue with the second operation of the series. However, even though all prior actions were met and the Financing Agreement was signed, the Government did not ratify the credit. Therefore the operation was cancelled and the amount was not disbursed.

32. It was expected that as Liberia transitioned from post-conflict recovery to long-term development, it would need to maintain and deepen reforms on governance as well as reforms to improve the environment for private sector development. These long term development objectives are reflected in Government’s second Poverty Reduction Strategy (2013-17), which seeks to lay the foundation for achieving a broader national vision for Liberia to attain middle income country status by 2030. It was therefore expected that a follow-up series of operations would support the second PRS. Furthermore, the analytical work done in 2012 including the Inclusive Growth Diagnostics study and the Public Expenditure and Financial Accountability Assessment (PEFA), which supported the formulation of the second PRS, suggested that there should be continued focus on governance reforms as well as reforms to `improve the environment for private sector development.

3. Post-Approval Experience and Reasons for Cancellation of the RRSP IV.33. The RRSP IV operation was cancelled due to the non-ratification of the credit by the national Legislature. The RRSP IV was approved by the board on October 18, 2011 and the financing agreement covering a loan of US$5m (SDR 3.2m) was signed on December 6, 2011. Thereafter the Legislature was expected to ratify the loan by March 5, 2012 –the original effectiveness deadline - and the closing date was supposed to be June 30 th 2012. Six months after signing of loan agreement, the legislature had still not ratified the loan. Following a request for extension by the executive branch of Government, the closing date of RRSP IV was extended to December 31, 2012. Subsequently, in various sessions with the legislature, the loan was

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presented and discussed, but due to the latter’s continued disagreement with the Bank policy over the switch from grant to credit financing, as explained further below, the Bank terminated the loan agreement as of June 30, 2013.

3.1 Main Events Leading to Cancellation

34. While the RRSP IV was an integral part of IDA’s Country Assistance Strategy (CAS) for the period FY09-11, the expectation was that it would be provided as a grant. When the CAS was approved by the Bank’s Board in April 2009, Liberia was a classified as HIPC and therefore was only eligible for IDA grants. Thus the first operation of the two- tranche programmatic series (RRSPIII) was disbursed as an IDA grant and therefore did not require ratification by the legislature. By June 2010, Liberia attained HIPC completion point, where its external debt of close to US$3.2 billion was cancelled. Subsequently, at the time of negotiations for RRSPIV in September 2011, Liberia was no longer eligible for IDA grants, based on Bank policy for post-HIPC countries with low risk of debt distress.

35. At the time of signing of the Financing Agreement, the Government gave assurances that the operation would be ratified and that a legal opinion provided on timely basis would allow for the declaration of effectiveness. However the formation of the new cabinet in early 2012, following the presidential and legislative elections, resulted in the change in the Finance Minister and most of the senior management within the Ministry. The delays in the submission of the operation to the legislature for ratification; arising from the ambivalence of the new Legislature in contracting new loans soon after the attainment of HIPC completion point and the inertia created by changes in key government officials including the Minister of Finance and the absence a timely request to extend the effectiveness deadline, led to the lapsing of Financing Agreement.

36. To avoid cancellation of the loan, the Government made a request for the extension of the closing date of RRSPIV on June 6, 2012 for the following six months . The Finance Minister then followed up and tried intensely to convince the Legislature, that the credit was consistent with the budget plan and had been fully accounted for in the Government Strategy. All these efforts were however to no avail. On November 22, 2012, Government made a further request for extension of closing date for the DPO till June 30, 2013. Finally, the mandatory deadline of 18 months after Board Approval elapsed and the Bank terminated the Loan Agreement.

3.2 Steps Taken to Mitigate Problems

37. The Ministry of Finance has decided to engage with the legislature at an early stage of the preparation of Bank DPOs, so as to mitigate a recurrence of this problem . Delays in the ratification and final cancellation of RRSPIV highlighted the importance of the risks associated with the political economy, especially in a post-conflict situation where deep differences persist among the different political stakeholders. The political economy risk was therefore considered as one of the important risks to mitigate during the preparation of the subsequent DPOs for Liberia (PRSC1-IV). Part of the engagement was to explain how the operation contributes to Liberia’s development agenda and in particular, the implementation of the Agenda for Transformation. The engagement with the Legislature was also meant to subsume

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the proposed DPO credit under the discussions on the financing for the national budget, as part of the package presented for approval by the legislature. Finally, to the extent possible, the Bank team was to align the preparation and disbursement of the DPO with the national budget cycle.

3.3 Implications of Loan Cancellation

38. The cancelation of the loan did not affect the implementation of the reforms . The Government continued the implementation of the reforms in the two key policy areas under RRSPIII and met the prior actions under RRSPIV. In terms of funding, Government mobilized alternative funding sources in grants that did not require approval from the legislature. As can be seen from table 1, inflows of grants increased significantly from 1 percent of GDP in 2011, to 2.8 and 3.8 percent of GDP in 2012 and 2013 respectively.

4. Assessment of Outcomes

4.1 Relevance of Objectives, Design and Implementation

(a) Relevance of Objectives: Substantial

39. The objectives, design, and implementation of RRSP-III were highly relevant to Liberia’s development priorities as expressed in Liberia’s PRS. In addition, the program was also consistent with the joint Country Assistance Strategy, was complementary with other Bank activities in Liberia, reflected the Bank’s global priorities, and was closely coordinated with IMF, AfDB, the European and other key donors in Liberia. The joint Country Assistance Strategy was fully aligned to the government’s PRS. The implementation of the program was not without challenges and risks including political risks. Most of the risks were adequately mitigated as discussed under section 4. However, the level of political risks related to the ratification of the first credit DPO—RRSP-IV (all previous DPOs were grants) were not anticipated. Hence, despite Liberia having successfully completed all the prior actions for the second operation in the series—RRSP-IV, the government was unable to have the credit ratified by the Legislature. Finally the Bank had to cancel the operation.

Consistency with Government Priorities

40. The program of reforms covered under RRSP-III was fully consistent with the Government’s priorities as outlined in the Poverty Reduction Strategy. The government’s priorities established under the four pillars of the PRS emanated from the extensive consultations that the government undertook. The consultations revealed concerns over the lack of inclusive growth; the prevalence of corruption at all levels of government; and problems with land tenure. The specific reforms supported by the program as reflected in Table 1 were key elements of the government’s own strategy.

(b) Relevance of Program Design: Substantial

The design of the program of reform took full cognizance of Liberia’s internal situation including its fragility, limited capacity in ministries and agencies as well as the external situation impacting Liberia. The global crisis of 2008/09 resulted in a much weaker economy

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than envisaged under the government’s PRS framework. To help mitigate the fiscal impact of the global crisis, the original amount of the IDA grant was increased from US$5 million (equivalent) to US$11 million (equivalent) through the addition of US$6 million from the Crisis Response Window (CRW). Efforts were also made to simplify the design of the program by keeping the elements of the program “light” and doable given the country’s capacity and also to “unpack” reforms into simple parts. The key performance indicators were restricted to two key policy areas, where Government had demonstrated strong commitment and had on- going technical assistance support from donors.

41. The program was designed to support the objectives of the Joint Country Assistance Strategy (JCAS) with the African Development Bank, which was fully aligned with the Government’s PRS. The JCAS, which was designed to support Liberia’s transition from post-conflict recovery to long-term development focused on three strategic themes: (i) rebuilding core state functions and institutions; (ii) rehabilitating infrastructure to jump-start economic growth; and (iii) facilitating pro-poor growth. Under the first theme, the World Bank and the African Development Bank focused specifically on further strengthening the core public financial management system and reforming and modernizing the civil service.

(c ) Relevance of Implementation: Substantial

42. The program was implemented in close collaboration with other IDA interventions including analytical work and technical assistance to support the reforms. On economic governance, the Economic Governance and Institutional Reform Project (EGIRP-US$11 million) approved in May 2008 provided complementary technical assistance in support of the public financial management reforms. This included the implementation of the PFM Law; support for the integrated tax administration system and public procurement reform. An IFMIS project (US$3.7 million) provided assistance for strengthening financial management systems through the provision and installation of a computerized financial management information system and the strengthening of the manual accounting systems in line ministries. The Bank also provided support through a Land Sector Reform Project (US$2.9 million) financed by the State and Peace Building Fund (SPF) to rehabilitate land records and improve the adjudication of land disputes.

43. The program was substantially relevant in the three areas, therefore the overall relevance rating is Substantial.

4.2 Achievement of Program Development Objectives

Rating: Substantial

44. The achievement of overall Program Development objectives of building core state functions and institutional framework for improving governance and facilitating pro-poor growth was Substantial. As per key results indicators, substantial progress was achieved in improving budget formulation and execution. Secondly, Government adopted the practice of producing timely IPSAS-based annual financial statements, thus improving transparency and accountability in the use public financial resources. Thirdly, the establishment and resourcing of the Land Commission, has facilitated reforms in land policy, including the creation of land deed registry and the establishment of Alternative Dispute Resolution (ADR) Centers. This has

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contributed significantly to reducing tensions around land ownership, thereby improving the environment for investment and pro-poor growth in Liberia. The results indicators and their current status are discussed in detail below. Though some results indicators were met with a delay, they were broadly achieved and the program’s objectives were largely met.

Objective 1: Improving budget planning and execution: Substantial

45. Under the objective of improving budget planning and execution, the program supported the following actions:

The preparation of a multi-year budgeting strategy; and

The adoption of International Public Sector Accounting standards and the adoption of enabling regulations and manuals for the new PFM Law.

46. Up to June 2010, Liberia’s budgets were single-year budgets and there was no medium-term expenditure framework (hence the 2007 PEFA score of D+ for multi-year perspective in budgeting). However, the Government had a strong commitment to move to multi-year budgeting and this was reflected in the 2009 Public Financial Management (PFM) law, which required that: “The National Budget is to be prepared in the context of a medium-term fiscal framework with the aim of achieving national objectives over a multi-year period”5. The two prior actions under the objective of improving budget planning and execution were initial steps towards adopting multi-year budgeting based on international standards. In June 2010, the Cabinet of the Government of Liberia adopted a multi-year budgeting strategy. Prior to that, in November 2009, the Cabinet adopted PFM regulations and IPSAS and subsequently PFM and IPSAS manuals were prepared and circulated. Templates to report in accordance with International Public Sector Accounting Standards (IPSAS) were prepared and deployed to M&As. These actions, some of which were reported on in the local media6, essentially laid the ground for the implementation of multi-year budgeting strategy.

47. The government has been implementing its multi-year budgeting strategy that places the annual budgets in the context of the medium-term fiscal framework. Although a one-year budget was prepared for 2010/11, for the first time the budget was cast in a medium-term context as set out in the Budget Framework Paper published on the Website of the Ministry of Finance. As a component of the PRS, the government undertook a three-year costing exercise, yielding costing estimates by fiscal year and sector required to meet the PRS objectives. It also provided estimates of the anticipated budgetary resources to be devoted to achieving the PRS objectives, and in doing so made a first step towards a multi-year budget. The costing exercise also illuminated the multi-year financing gap that would affect the government’s ability to rebuild the economic and social infrastructure needed to underpin economic revitalization and combat poverty. Currently, all appropriations lapse at the end of the fiscal year, except for certain sensitive appropriations such as the County Development Fund (which is transferred into an escrow account if unallocated in the current fiscal year).

5 Sections 2 and 8 of the PFM law.6 http://allafrica.com/stories/200911191124.html

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48. There has been significant improvement in the quality and timeliness of IPSAS-based annual financial statements since FY2011/12, even though the initial report for FY09/10 delayed. In terms timeliness of submission of financial statements, that for FY2009/10 was submitted 17 months after close of fiscal year, thus missing the program target of 7 months after the end of the fiscal year. However from FY 2011/12 onwards, the quality and timeliness of financial statements have improved significantly, largely as a result of the establishment of IFMIS helped to automate key financial transactions of Government. The consolidated financial statements for FY 2011/12 were prepared with adequate information on revenue, expenditure and bank account balances. Secondly, the financial statements were submitted for external audit, within the acceptable limit of 7 months after the end of the fiscal year. This positive trend has significantly contributed to improving transparency and accountability in the use public financial resources.

Objective 2: Improving land administration to reduce conflicts and enhance the investment climate. Substantial

49. The program supported the establishment of a Land Commission to identify, guide and facilitate reforms in land policy, law and program. The Land Commission was launched in March 20107. Since its establishment the Commission has: (i) developed interim policy guidelines and procedures as a pre-condition to the lifting of the moratorium on the sale of public land by the government; (ii) and completed an inventory of land dispute cases in Circuit and Magisterial Courts in the following five counties: Bomi, Montserrado, Margibi, Nimba and Lofa, respectively. The Commission has conducted consultations in all 15 Counties to build awareness of its mandate.

50. Since its launch, the Commission completed the development of Interim Guidelines and Procedures for the Sale of Public Land (IGPSPL), which was presented to and approved by the President and Cabinet. These IGPSPL provide a more transparent and thorough process for facilitating the sale of public land, which has allowed the vetting of a number of Public Land Sale Deeds. There has been notable progress on the strengthening of the National Archive for land deeds. First, the Archive has been allocated expanded office and storage space. Second, some progress has been made on the consolidation of the deeds in the Achieve with approximately 75 percent of the total deeds in the Archive up from an estimated 65 percent in 2009. This is below the program target of 90 percent by 2011. Third, 95 percent of the deeds at the Archive have now been digitized compared to none in 2009. This will enable faster deed search by name or plot number and facilitate land transactions.

51. The Commission completed the compilation of a draft document on Guiding Principles for Dispute Resolution. The compilation was based on recommendations advanced by participants in consultative discussions with traditional chiefs and elders from several counties. In 2012, the Land Commission established four additional Land Coordination Centers (LCCs) in Bong, Maryland, Margibi, and Nimba Counties following the establishment and operations of the first LCC in Zorzor, Lofa County in 2011. These LCCs provide a portal and referral system for disputants to learn about and access a number of different options, including mediation and arbitration, for resolving land disputes. The number of reported land disputes have

7 The Act to establish the Land Commission was passed in August 2009.

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dropped substantially since 2009. Based on data reported by the Liberia’s Early Warning and Response Network (LERN)8 the number of reported land disputes dropped from 1,183 in 2010 to 556 in 2011 and further to 318 in 2012.

4.3 Justification of Overall Outcome Rating

Rating: Satisfactory

52. The program is rated satisfactory. The program’s objectives and design were fully aligned to Liberia’s development agenda as articulated in the Government’s Poverty Reduction Strategy. Furthermore, the implementation of the operation took full cognizance of Liberia’s prevailing circumstances including the country’s technical capacity. In addition, the operation was fully consistent with the Joint Strategy of the World Bank and the African Development Bank. The operation also reflected the Bank’s current global priorities; was complementary with other Bank interventions in Liberia and was closely coordinated with activities of the IMF and other donors.

53. The program’s development objectives were broadly met, albeit with minor delays. First, budget planning and execution has improved. In general, the 2012 PEFA assessment9 found that “Liberia has made significant improvements against the PEFA benchmarks. The scores show progress compared to the 2007 PEFA assessment, with 26 out of the 30 assessed indicators reporting ratings higher or equal to those obtained in 2007.” More specifically, on budget planning the adoption of the multi-year, policy-based budget planning has resulted in an improvement in the related PEFA score (PI-12) from “D+” to “C+” and on budget execution the PEFA report found that “Important advances have been made regarding predictability and control in budget execution, notwithstanding the continuing weaknesses in cash planning and in payroll control.”; Second, the framework for land administration has improved and there has been a sharp reduction in land-related conflicts as well as some enhancement to the investment climate. In 2010 when the operation was prepared, Liberia was listed on the World Bank’s Doing Business Survey as one of the 10 countries where it was most difficult to register a property. However, in 2012/13 Liberia was cited in the Doing Business Survey for making registering property easier through the introduction of computerized procedures.

4.4 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

54. The gains in these areas are difficult to measure, in large part because the expectation of the improvement in the statistical capacity and consequently the availability of key indicators to measure progress in these areas have not materialized. The operation had anticipated significant direct impact on poverty through the creation of additional fiscal space, from the disbursement of the grants, to allow the government to commit additional fiscal resources to its PRS priorities. It was also expected that measures supported by the operations would also contribute to economic revitalization and consequently increased employment and

8 See http://lern.ushahidi.com/main9 See https://www.imf.org/external/pubs/ft/scr/2012/cr12273.pdf

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therefore a positive impact on reducing poverty. In addition, it was anticipated that improved land administration would lead to greater access to land, with increased security of tenure and consequently increased productivity and income for farmers who are mostly the rural poor.

55. Changes in the overall budget as well as its distribution in favor of the core poverty ministries including Education, Health, Agriculture and Public Works have been noticeable. For example, the FY2012 budget of US$516.4 million represented a 26 percent increase over the FY2011 budget. In addition, the total spending on subsidies, grants and social benefits increased by 56 percent, from US$81.7 million to US$127.5 million. Total spending on the core poverty ministries increased by more than 40 percent between 2009 and 201210. Between 2009 and 2012, budgetary expenditure on education and health, on average, grew faster than total budgetary expenditure suggesting changes in budget distribution favoring these two sectors. In general, it was expected that increased expenditure in these areas would have led to better educational outcomes, expanded access to the basic package of health services and improved agriculture.

(b) Institutional Change/Strengthening

56. When RRSP-I was prepared, the Liberian Government was characterized by exceptionally weak capacity, largely the result of the prolonged conflict. Furthermore, institutional capacity building was made difficult by the almost total loss of institutional memory, poorly educated and unqualified staff made up largely of political appointees. However, by the time RRSP-III was prepared, there were notable progress in the strengthening of public institutions, particularly in economic governance. This in large part reflects the World Bank’s deliberate strategy of complementing the DPO operations with intensive technical assistance in the areas covered by the operations. RRSP-III was no different in this respect.

57. The RRSP-III supported further improvements in institutions. A key pillar of the RRSP-III focused on governance and the rebuilding of core state functions and institutions. Under this pillar, progress was made in establishing a framework for multi-year budgeting in keeping with the PFM law passed in 2009. The Government began implementing the Medium Term Expenditure Framework (MTEF) with the FY2013 budget. It also adopted public finance management enabling regulations and manuals to help ensure effective implementation of the PFM law. Furthermore, the Government adopted International Public Sector Accounting Standards (IPSAS) and modernized the Chart of Accounts to establish the basis for the implementation of the Integrated Financial Management and Information System (IFMIS), which went live in 2011. IFMIS has automated much of the budget preparation and execution processes and has resulted in improved efficiency. Finally, the Government made progress on a key institution for land tenure reform with the establishment of the Land Commission in 2010.

58. The RRSP-III was complemented by substantial IDA technical assistance in the areas of focus. On governance and re-building of institutions to perform core state functions, the Economic Governance and Institutional Reform Project (EGIRP-US$11 million) approved by the Bank’s Board in May 2008, provided considerable technical assistance to support financial management reforms including strengthening the payment system, enhancing the audit function 10 See Liberia Public Expenditure Review, Human Development. World Bank Report No. 67188-LR, November 2012.

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and improving the monitoring of aid flow. An IFMIS project (US$3.7 million) provided support for the strengthening of the financial management system including the provision of hardware and software. Technical assistance was also provided for the work of the Land Commission through a Land Sector Reform Project (US$2.98 million) supported by the State and Peace Building Fund, specifically to rehabilitate land records, improve the adjudication of land disputes and increase land registration.

(c) Other Unintended Outcomes and Impacts

None.

4.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

Not applicable

5. Assessment of Risk to Development Outcome

Rating: Moderate

59. There was a candid assessment of the risk to the development outcomes of the operation as well as the proposed mitigation measures. Importantly, the reforms achieved under the operation are likely to be sustained over the long term, in large part because they have been fully owned by the government and have already begun to have some tangible demonstration effects. For example, the operation of the Land Commission since its establishment in 2010 has had a remarkable positive impact on reducing the number of land-related conflicts in Liberia through increased transparency and alternate dispute resolution mechanisms. Based on information from Liberia’s Early Warning and Response Network11, in 2010 some 1183 land disputes were reported, by 2011 it was down by half to 556 and by 2013 only 92 disputes were reported. Notwithstanding this positive outcome, Liberia, as an open, fragile, post-conflict state, is subject to many domestic and external shocks which could adversely affect the sustainability of the reforms over the long-term. Some of the more probable and weighty of these risks, along with the mitigating measures, which have been employed are discussed below.

60. The security situation in Liberia was fragile at the time the RRSP-III was prepared and though there has been some progress the situation is still fragile, partly due to youth unemployment and the perception of high levels of corruption. At the same time, there are few resources to help build or strengthen the domestic institutions to prevent of mediate conflicts. Mitigating the risk to the sustainability of reforms supported under the operation will require Liberia to continue to promote increase transparency in government as well as continue to build professional security institutions that have the confidence of the public. Donor support for training of the local police force has also been an effective measure.

61. Political risk: As the civil conflict recedes further into the past, the political risks to the reforms have abated somewhat but are nevertheless non-trivial in terms of the potential for reversal of important reforms. An effective mitigating measure employed by the government 11 See http://lern.ushahidi.com/

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was to engage in open and inclusive communication to explain its policy positions and to build support from civil society for the reforms. Donors, including the World Bank have also played an important role in providing training for legislatures and legislative staff.

62. Macroeconomic risk: Given Liberia’s openness and dependence on primary exports and imported food and fuel it remains vulnerable to external shocks. The 2008 food crisis was a stark reminder of this vulnerability. In addition, limited fiscal space and relatively low level of net international reserves limit the government’s degree of freedom for counter-cyclical responses. A key mitigating factor to macroeconomic shocks has been the government’s demonstrated commitment and relatively good track record of prudent fiscal policy. Another important mitigating factor was the consistent and close monitoring of the economy by the World Bank and the IMF.

63. Fiduciary risk: Though the government has made notable progress in improving economic governance, the overall fiduciary control environment still has elements of weaknesses, which create opportunity for fraud and corruption. An important area of fiduciary risk where progress has been slower than anticipated is with regards to the payroll. The most effective mitigating measure has been the consistent and continuous improvements in financial management and procurement systems and procedures supported by technical assistance from the World Bank and other donors. In 2010 Liberia ranked 87th out of 178 countries with a score equivalent to 33 out of 100 on the Transparency International Corruption Index but by 2012 its ranking improved to 83rd out of 177 countries with a score of 38 out of 100.

64. Natural disaster risk: Liberia is subject to potential natural disaster risks that could indirectly affect the development outcomes associated with reforms supported under RRSP-III. Disasters arising from climate related hazards, including floods, landslides, droughts and coastal erosion could draw resources, even if temporarily from key reform areas thereby slowing the pace of such reforms.

65. Implementation risks: Despite notable and consistent efforts by donors, including the World Bank, implementation capacity remains limited in Liberia. This capacity deficit, though narrowing, is manifest across all levels of the bureaucracy and results in overly centralization of decision and actions leading to inordinate delays and increased costs. Short term mitigation measures have relied on the use of external consultants, externally finance interns and short-term senior executive civil servants. These measures while helpful in the short-term, are not sustainable over the long term. Longer term mitigating measures have focused on training as supported by the World Bank and other donors such as USAID.

6. Assessment of Bank and Borrower Performance

6.1 Bank Performance(a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory

66. For the preparation of RRSP-III, quality at entry was ensured through alignment of the operation with the World Bank’s Joint Country Assistance Strategy as well as and the

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Governments own Poverty Reduction Strategy. The specific reforms supported by the operation were critical elements of the Government’s own strategy strongly advocated by the President and the Finance Minister in donors’ fora. In addition, mindful of the weak implementation capacity, efforts were made to limit the number of prior actions to reflect criticality as jointly agreed by the World Bank and the Government, with inputs from other donors.

67. The design of RRSP-III drew on lessons from previous operations but was also closely coordinated with the on-going and planned programs of technical assistance from the World Bank, the African Development Bank, the IMF and other donors. This approach not only allowed the operation to benefit fully from the complementarity with the technical assistance operations but also from the wider cross-sectoral policy dialogue.

(b) Quality of Supervision

Rating: Moderately Satisfactory

68. The supervision of the operation was conducted within the context of the Common Assessment Framework (CAF). The CAF increasingly became the primary mechanism for harmonizing budget support to Liberia as the Governance and Economic Management Program (GEMAP) was gradually phased out after Liberia achieved HIPC completion point in June 2010. The CAF approach achieved two principal objectives. First, it helped to reduce the transaction cost on the government in dealing with donors and particular those providing budget support including the World Bank, the African Development Bank and the European Union. Second, it helped the government to ensure that the program from donors were in keeping with the government own priorities. In addition, the policy meetings held in the context of the CAF provided the fora for discussing and resolving implementation issues.

69. The completion of this ICRR was initially due for June 30 2014, however it was delayed due to multiple reasons including the Ebola crisis in the region, which halted most routine tasks, lack of staff, and delays in obtaining Government data and comments on the ICRR.

70. With the advent of the Ebola epidemic in 2014 the Government shifted its focus to addressing the epidemic. The majority of the spending was directed towards health and social welfare. This resulted in a sharp reversal of growth, plunging the country into a period of social and economic turmoil. The rapid spread of the Ebola virus constituted a public health emergency throughout the country and threatened macro stability, growth prospects and gains made on poverty and human development. As Ebola spread, private sector activity came to a halt as businesses closed, and movement of goods and people was restricted. There were sharp job losses in the private sector.

(c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory

71. The RRSP-III was relatively well designed drawing heavily on the experience from previous operations in Liberia as well as from best practice across the World Bank. As

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discussed above, quality at entry was assured through the focus on reforms fully owned by the government. Implementation of these reforms were supported by strategic technical assistance, absolutely necessary given weak technical capacity within the country. In terms of supervision, the Bank team made sure to follow up on the implementation of the program and worked closely with the Government to ensure continuity of reforms, however the due to reasons explained above this ICRR was delayed for a considerable period of time. Consequently, the overall bank performance is rated moderately satisfactory.

6.2 Borrower Performance

(a) Government Performance

Rating: Moderately Satisfactory 72. The government performance is rated as Moderately Satisfactory in working with the Bank to support the program. Government commitment and ownership of reforms were key to achieve the majority of result indicators. Overall, the GoL’s continued commitment is demonstrated by its support for the new Poverty Reduction Support Credit Programmatic Series for which the third operation is currently under preparation.

73. However, the unexpected cancellation of the planned successor operation of the programmatic series somewhat negatively impacted RRSP III, inasmuch as it did not allow for follow through. Although all of its triggers and prior actions were met, the second planned operation of the programmatic series was cancelled as Liberian lawmakers did not ratify its financing agreement. The lawmakers objected to the fact the financing of RRSP IV was a loan rather than a grant as was the case for its predecessor and other post-conflict assistance programs. The Bank team followed up in several instances with the Government and made tremendous efforts to achieve a successful resolution, however no indication of cancellation was provided by the Government until later in the implementation period.

(b) Implementing Agency or Agencies Performance

Rating: Moderately Satisfactory

74. Implementation was led by the Ministry of Finance, while day to day oversight was done by the PFM Coordination unit and the Governance Commission. Implementing agencies were able to implement reforms despite coordination challenges and limited capacity within government. The coordination among the different departments under the Ministry of Finance- budgeting, expenditure, accounts and auditing departments- were fairly weak. There was also limited capacity within government, particularly in the area of Information Technology (IT) and financial accounting. Government however managed to make progress in implementing the reforms due to technical assistance from donor –sponsored projects as mentioned in section 2.2.

(c) Justification of Rating for Overall Borrower Performance

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Rating: Moderately Satisfactory

75. With the GoL performance Satisfactory, the implementing agency’s rating Moderately Satisfactory and the outcome rating is moderately satisfactory the overall rating for borrower performance is moderately satisfactory.

7. Lessons Learned

76. Lesson 1. Government ownership is paramount in obtaining positive results. An overarching lesson from this operation is that meaningful and sustained reforms can be achieved even in fragile, low capacity, post-conflict states if there are government ownership and commitment and strategic technical assistance from donors, including the World Bank. Of paramount importance though is the need for good assessment of political economy issues which impact on the ownership of reforms at the level of the Legislature.

77. Lesson 2. Prior actions in fragile countries need to be selected carefully and with regard to implementation capacity. A critical success factor for DPOs in fragile countries with limited implementation capacity is to have clear a-priori filters, which allow for the selection of a few focused prior actions that are critical to the Government’s overall reform program. Selectivity is absolutely necessary, not only to reduce the transaction tax on the already limited government capacity, but also to increase the probability of the actions being implemented and sustained over time. Under RRSP-III only three prior actions were selected all of which were critical to the Government’s overall program, and fully owned. Consequently, they have been fully implemented as prior actions and have been sustained over time with no back-sliding.

78. Lesson 3. The use of technical assistance as a complement to DPOs is beneficial to ensure the achievement of outcomes. A consistent lesson from this and previous operations is that where capacity is weak, a critical mass of well targeted technical assistance is a vital complement to DPOs. Full ownership of, and commitment to reforms are necessary, but not sufficient conditions for success of the reform. If capacity is weak, the best intentions can come to naught. Well targeted technical assistance can effectively bridge the gap between ownership/commitment and results. In the case of RRSP-III, well targeted technical assistance under the Economic Governance and Institutional Reform Project (EGIRP), the IFMIS project, the Land Reform Project and others provided the vital technical assistance necessary to support the government in moving from ownership and commitment to results.

79. Lesson 4. The harmonization of donor support contributes to the reduction of transaction cost on the Government. The Common Assessment Framework (CAF) could play an important role in harmonizing donor support. The effect of the CAF in reducing the transaction cost on the government could be greater with more commitment to the instrument. Even in the case of a fairly well-functioning CAF, as in the case of Liberia during the implementation of the operation, there was still much bilateral dialogue, both on demand from the government as well as from donors. This was more so the case when the CAF dialogue was “delegated down” on the government side, resulting in donors needing to validate and confirm decisions at the upper levels. Amongst donors though, the instrument appears to be more useful especially since the dialogue is centered on a single agreed matrix.

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80. Lesson 5. Specific mechanisms to ensure completion of the series should be put in place in high political risk environments. In fragile countries where political risks are high, the design of DPO Series should consider approving the total amount of the DPL series all at once during the first operation and provide that the specific amounts for each operation be activated and disbursed gradually once compliance with the relevant medium term triggers occur. This measure has actually been suggested in the ICRR for El Salvador First Broad-Based Growth DPO series which underwent a similar situation.

81. Lesson 6. It is important to engage with other political actors outside the Executive, particularly the legislature and civil society. The Bank learned rather late that the political economy of Liberia was such that even though the president’s party was in the majority in the Legislature, the president was not necessarily the leader of the party in the legislature. Thus, in spite of the Executive’s endorsement of a successor operation, the legislature could easily override it. An earlier engagement with political party leaders and other key players would have been useful.

82. Lesson 7. Bank teams should seek alternative avenues to comply with ICRR requirements in a timely manner even in the case of external shocks or internal difficulties. Bank teams must ensure compliance with OPCS guidelines in case of cancelled operations, which envisage that an NCO (Note on Cancelled Operation) should be prepared and distributed to the Board no later than six months after the cancellation of the Loan. If the second or third operation of the series is cancelled, an ICRR must nonetheless be prepared for the full series. The Bank is expected to remain sensitive to the country situation, as in the Ebola crisis, however, since this is mostly an internal procedure the team should find alternative ways to complete the ICRR, even if that means a lower quality of evidence or the lack of borrower comments. A request for extension in the ICRR due date should also be considered. Regarding staff issues, compliance with Bank policies, despite internal obstacle, must be ensured even if that entails for example delegating he ICRR responsibility to a different team in the Bank.

8. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies

See Annex 4.

(b) Cofinanciers

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

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Annex 1. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team membersNames Title Unit Responsibility/

SpecialtyLending Esther Bryant Program Assistant AFMLR Ismaila B. Ceesay Lead Financial Management Spec GGODR

Giulio De Tommaso Sr Public Sector Mgmt. Spec. AFTP1 - HIS

Glaucia Reis Ferreira Language Program Assistant GMFDR Emmanuel Doe Fiadzo Senior Economist GMFDR Errol George Graham Senior Economist GMFDR Boutheina Guermazi Lead Operations Officer AFCRI

Anna Kristiina Karjanlahti Jr Professional Officer AFTP4 - HIS

Barbry R. Keller Senior Operations Officer GSURR Nathalie Lahire Senior Education Economist GEDDR Nyaneba E. Nkrumah Sr Natural Resources Mgmt. Spe GENDR Gylfi Palsson Lead Transport Specialist GTIDR Jonathan David Pavluk Senior Counsel LEGOP Allan Rotman Lead Procurement Specialist GGODR Rajiv Sondhi Senior Finance Officer CTRLASupervision Errol George Graham Senior Economist GMFDR Sona Varma Lead Economist GMFDR Mathurin Gbetibouo Consultant GMFDR Daniel Kwabena Boakye Economist GMFDR

(b) Staff Time and Cost

StageStaff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending2010 45.14 287,644.38

Supervision/ICR2012 2.55 14,049.30

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Annex 2. Beneficiary Survey Results (if any)

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Annex 3. Stakeholder Workshop Report and Results Not Applicable

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Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR

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Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders

Not applicable

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Annex 6. List of Supporting Documents

GovernmentPublic Financial Management Act, 2009 Annual Report of the Land Commission, 2010. Available at: http://www.landlib.org Amended and Restated Public Procurement and Concessions Act, 2005- Approved September 16, 2010. Available at: http://www.ppcc.gov.lr

World Bank

Liberia Poverty Reduction Strategy, Government of Liberia IDA Program Document, Re-engagement and Reform Support Program, Report No. 40307-LR, November 20, 2007.Joint IDA-IMF Staff Advisory Note on the Poverty Reduction Strategy Paper; Report No. 44153-LR, June 24, 2008. IDA Program Document, Second Reengagement and Reform Support Program, Report No. 46508-LR, April 2009.Supervision of RRSP-II and Identification of RRSP-III Aide Memoire, November 2009. Joint IDA-IMF Staff Advisory Note on the First Annual Progress Report on the Implementation of the Liberia Poverty Reduction Strategy. Report No. 54544-LR, June 9, 2010. IDA Program Document, Third, Reengagement and Reform Support Program, Report No. 54493-LR, September 13, 2010. Liberia Public Expenditure Review, Human Development. Report No. 67188-LR, November 2012. Liberia-Land Tenure and Property Rights Profile. USAID, 2012Liberia Land Policy and Institutional Support Project (LPIS) Document. USAID, 2012

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MAP

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