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T h e date o f the last World B a n k Country Assistance Strategy was M a r c h 6,2003

T h e date o f the last African Development Bank Country Strategy Paper w a s July 2003

CURRENCY EQUIVALENTS (As o f 28 January 2008)

Currency Uni t : Dalasi 1 US$=22.39 GMD

1 UA = US$1.59 1 SDR = US$1.59

BUDGET YEAR January 1 - December 3 1

ABBREVIATIONS AND ACRONYMS

AAA AfDB ADF APR APRC BADEA

C F A A CPIP CSD cso DFID DOSFEA D P L D S A D T I S ECOWAS EFA EU FDI F IAS GAMTEL GBOS GDA GDM-PMF

GDP GNI GPOBA GRA HIPC I C A IDA IEF

Analytical and Advisory Activities Afr ican Development Bank Afr ican Development Fund Annual Progress Report Alliance for Patriotic Reorientation and Construction Banque Arable pour le Ddveloppement Economique de 1 'Afrique (Arab Bank for Economic Development o f Africa)

Country Financial Accountability Assessment Country Program Implementation Plan Central Statistics Department Civil Society Organization Department for International Development (UK) Department o f State for Finance and Economic Affairs Development Policy Lending Debt Sustainability Analysis Diagnostic Trade Integration Study Economic Community o f West Afr ican States Education for All European Union Foreign Direct Investment Foreign Investment Advisory Services Gambia Telecommunications Gambia Bureau o f Statistics Gambia Divestiture Agency Government Debt Management - Performance Management Framework Gross Domestic Product Gross National Income Global Program for Output-Based Aid Gambia Revenue Authority Highly Indebted Poor Country Investment Climate Assessment International Development Association Index o f Economic Freedom

IFC I F M I S IMF ISRT JAS JSAN L I C MMR MCA MDG MDRI M&E M S M E MTEF N A W E C NGO NPC NASS OMVG

OPEC PBL PER PHRD PPIAF PPP PRGF PRSP PSIP PURA SNFO SPACO UNDP WAMZ WAPP WBI WEF

International Finance Corporation Integrated Financial Management Information System International Monetary Fund Inter-State Road Transit Joint Assistance Strategy Joint Staff Assessment Note L o w Income Country Maternal Mortal i ty Rate Mi l lennium Challenge Account Mi l lennium Development Goal Multilateral Debt Reduction Init iative Monitor ing and Evaluation Micro, Small and Medium Enterprises Medium Term Expenditure Framework National Water and Electricity Company Non-governmental Organization National Planning Commission National Agricultural Sample Survey Organisation Mise en Valeur Fleuve Gambie (Gambia River Basin Development Organization) Organization o f Petroleum Exporting Countries Policy-based Lending Public Expenditure Review Policy and Human Resources Development Public-Private Infrastructure Advisory Facil ity People’s Progressive Party Poverty Reduction and Growth Facil ity Poverty Reduction Strategy Paper Peri-Urban Smallholder Improvement Project Public Util i t ies Regulatory Authority Senegal Front Off ice (Regional Bureau for Senegal at AfDB) Strategy for Poverty Alleviation Coordinating Off ice Uni ted Nations Development Programme West African Monetary Zone West Africa Power Pool Project Wor ld Bank Institute Wor ld Economic Forum

World Bank Vice President: Obiageli Katryn Ezekwesili Country Director: Madani M. Tal l Task Team Leader: Francoise Perrot

African Development Bank Vice President: Joseph B. Eichenberger Regional Director: El len Goldstein Task Team Leader: Jamal Zayid

THE REPUBLIC OF THE GAMBIA JOINT ASSISTANCE STRATEGY

TABLE OF CONTENTS

EXECUTIVE SUMMARY

I INTRODUCTION

I1 COUNTRY CONTEXT AND DEVELOPMENT CHALLENGES

A - Country Context

Political Context Economic Context Poverty and Status on Achieving the MDGs Growth Dynamics Impact o f Growth on Poverty Reduction

B - Development Challenges

Maintaining Macroeconomic Stability Governance Public Spending and Efficiency Delivery o f Social Services Gender Infrastructure Bottlenecks and Regional Integration Investment Climate

I11 GOVERNMENT DEVELOPMENT PROGRAM

A - PRSP-I1

B - Macroeconomic Outlook

C - Debt Sustainability and Management

I V WORLD BANWAfDB STRATEGY FYOS-11

A - Lessons from Past WB/AfDB Assistance

Page

i

1

2

2

2 2 3 4 5

7

7 7 8 9 10 11 12

13

13

14

15

16

16

B - Framework for World BanWAfDB Engagement in The Gambia

C - Proposed World BanMAfDB Programs and Expected Outcomes

D - Estimated Resource Envelopes

17

21

29

V RESULTS MONITORING AND EVALUATION 30

V I PARTNERSHIPS and PARTICIPATION 31

VI1 MANAGING R I S K S 31

Tables in Text Table 1 : PRSP Targets and Achievement o f MDGs Table 2: Exports/GDP (2004-5) Table 3: Main Exports o f The Gambia Table 4: Poverty by Sector o f Employment o f Household Heads Table 5: Additional Earnings from Potential Export Growth, 2005-20 15 Table 6: Projections o f Key Macroeconomic Indicators, 2006-201 1 Table 7: Ongoing and Proposed JAS Program o f Lending and Analytical

Table 8: World Bank and AfDB Allocations (FY08-11) Work (2008-201 1)

Boxes Box 1: Country Profile

Figures Figure 1 : Contribution to GDP by Sector (200 1-2005) Figure 2: Poverty-Reducing Expenditures and Interest Payments

Annexes Annex 1 : JAS Results Matrix for The Gambia Annex 2: The Gambia at a Glance Annex 3 : The Gambia Poverty Indicators Annex 4: Selected Economic and Financial Indicators Annex 5: Trade Indicators Annex 6: Governance Indicators Annex 7: Growth and Competitiveness Annex 8: Donor Interventions Annex 9: IDA Portfolio Annex 10: ADF Portfolio Annex 1 1 : Ongoing AfDB Rural Development Projects Annex 12: Consultation Process Annex 13: The Gambia CAS (FY03-07) Completion Report

Map IBRD 33409R

Page

3 4 5 6 7 15

22 29

1

4 8

33 37 40 41 42 43 44 54 56 57 58 59 60

Acknowledgements This Joint Assistance Strategy benefited from contributions by various people from the World Bank and the Afr ican Development Bank.

From the World Bank: Massimiliano Paolucci, Brian Ngo, Iradj Alikhani, Hoon Soh, Badara Joof, Lily Mulatu, Aissatou Diack, John May, Renato Nardello, Christian Diou, Michaela Weber, Gilbert0 de Barros, Jean- Michel Marchat, Philip English, Ronnie Hammad, Dana Rysankova, Thor-Jurgen Greve Loberg, Aida der Hovanessian, Margrit Nzuki.

From the African Development Bank: Harouna Dosso, Abdul Nashiru Issahaku, Hemchand Heeroo, Lydie Ehouman, Clark Arrington, and Rex Situmbeko.

i

EXECUTIVE SUMMARY

(i) This JAS was prepared jo int ly by the Wor ld Bank and the AfDB and represents the first step o f an effort t o harmonize donor assistance in The Gambia in line with the Paris Declaration on Aid Effectiveness.

(ii) The Gambia i s a small state in continental Africa. I t stretches 450 km along the Gambia River and i s surrounded by Senegal, except for a 60 km Atlantic Ocean Front. The situation in The Gambia exemplifies challenges faced by small states. The country’s economy i s undiversified and l imi ted by a tiny internal market. The Gambia also faces some o f the problems confronting Sub-Saharan Africa: inadequate infrastructure, deficiencies in the business climate, and institutional capacity constraints. As a result, living conditions for most Gambians are difficult, with poverty estimated at 57.9 percent. The country i s o n target to reach the Mi l lennium Development Goal (MDG) on primary school enrollment, but most other MDGs could be missed, unless major interventions are implemented.

(iii) Yet, The Gambia has strengths. For decades, relatively open trade policies and l imi ted administrative barriers reinforced the country’s position as a trading center. Tourism has been the most dynamic sector and i s the country’s most significant foreign exchange earner. Fishing, horticulture, sesame and cashew nuts are promising areas o f export diversification. The challenge for The Gambia i s to consolidate i t s position as a gateway to the region on a more sustainable basis, while strengthening and diversifying domestic production o f goods and services. Attainment o f a positive medium-term economic outlook will require the continued implementation o f sound macro-economic policies, market-oriented structural reforms, and an efficient Government investment program.

(iv) environment to promote growth and poverty reduction; (b) enhancing the capacity and output o f productive sectors; (c) improving coverage o f the basic social services and social protection needs o f the poor and vulnerable; (iv) enhancing governance systems; and (v) mainstreaming cross- cutting issues. The Government’s overarching objective i s to eradicate poverty. T o achieve this goal, i t i s committed to continue macroeconomic reforms to facilitate private sector growth; to improve public sector management; and to increase priority for human development.

The Gambia’s second PRSP i s based on five pillars: (a) improving the enabling pol icy

(v) This jo in t assistance strategy (JAS) has been prepared by the Wor ld Bank and the Afr ican Development Bank, as a result o f consultations with the Government, as wel l as lessons learned f rom previous strategies prepared by both institutions, and consultations with the c iv i l society and other partners. The approach emphasizes selectivity, takmg into account the comparative advantage o f each institution and other donors. The JAS strategic objectives are in line with the PRSP. The JAS focuses on: (i) strengthening economic management and public service delivery, and (ii) enhancing productive capacity and accelerating growth and competitiveness.

(vi) The International Development Association’s (IDA) indicative allocation during the JAS period i s about US$15 mill ion, and that o f the African Development Fund (ADF) i s expected to be about UA 5.5 mi l l ion ($10 mill ion) under ADF 11 and the f i rs t year o f ADF 12. Collaboration with IFC o n the Wor ld Bank Group side, and possible funding through the Private Sector Window o n the AfDB side, will strengthen the impact o n private sector development and support to MSMEs. The use o f trust funds and other co-financing will be vigorously pursued.

*. - 11 - The Government has also applied for continued financing under the EFA Catalytic Fund in the education sector for the period 2008-2010. Finally, to the extent possible, the JAS will make provisions for ensuring that conditions are put in place for financing regional programs under the next IDA and ADF financing cycle.

(vii) The results framework contained in Annex 1 shows the results chain for the JAS. Outcome indicators wil l be used for monitoring and evaluation o f the implementation o f the Joint Assistance Strategy, and both institutions wil l be held jo in t ly accountable for these results. The newly established National Planning Commission (NPC) wil l strengthen the monitoring and evaluation system in The Gambia. Also, the active involvement o f Pro-PAG, an NGO, in the monitoring and evaluation process, will bring in a civil-society dimension into the monitoring and evaluation process.

(viii) There are more than 15 donors in the country providing assistance through a variety o f governmental and non-governmental entities. Donor coordination i s weak, and whi le development partners align their strategies with PRSP 11, they continue to prepare separate strategies. This JAS i s an important step in the process o f harmonization. This JAS supports the Government taking the lead in coordinating donor assistance, in particular through the newly established Central Project Management and Aid Coordination Directorate. Progress in terms o f donor coordination will be measured at the time o f the JAS Progress Report to see to what extent a further consolidation o f strategic frameworks could be envisaged for the next cycle (2012- 2015), notably with the U N D P and the EU.

(ix) This JAS carries significant r isks. The country’s macroeconomic stability can come under pressure fi-om overly optimistic fiscal programs and continued high levels o f domestic and external debt. The Gambia has a high risk o f external economic and natural shocks. One-party dominance limits public accountability and could potentially increase polit ical r i sks to the reform momentum. Governance remains an important factor, with possible increasing levels o f corruption and inadequate fiduciary controls. The capacity o f public institutions remains extremely weak and sustained support to public sector reforms i s crucial. Among other measures, the AfDB and the Wor ld Bank will continue to engage in pol icy and institutional reform and will strengthen project and portfolio supervision efforts.

THE GAMBIA WORLD BANK AND AFRICAN DEVELOPMENT BANK

JOINT ASSISTANCE STRATEGY 2008-201 1

I - INTRODUCTION

1. This Joint Assistance Strategy (JAS) lays out how the World Bank and the African Development Bank intend to support the implementation o f the Gambia’s PRSP-I1 for the next four years (FY08-11). On the World Bank side, the JAS follows a Country Assistance Strategy (CAS) that was discussed by the Board o f Executive Directors in March 2003, and on the AfDB side, a Country Strategy Paper discussed by the AfDB Board in July 2003

2. This JAS was prepared jointly by the World Bank and AfDB and represents the f i rst step o f an effort to harmonize donor assistance in The Gambia in line with the Paris Declaration on Aid Effectiveness. It wil l allow the two institutions to align their development programs, avoid duplication o f efforts, and combine their technical expertise. Under this joint strategy, the World Bank and the AfDB have developed shared objectives and a common platform for lending and non-lending services. These will include coordinated contributions to budget support, complementary investments in growth and competitiveness, and joint analytical work in the areas o f public finance, civi l service reform and governance.

3. The Gambian economy has been strong in recent years, with an average annual real GDP growth rate o f about 6 percent during 2003-2006. The beginning o f a new presidential and legislative cycle, the completion o f an MDG-based PRSP-II(2007-201 l), the completion point under HIPC in December 2007 and eligibility under MDRI in early 2008, and indications o f increased project aid from development partners provide an opportunity for the country to build on recent achievements and accelerate growth. The Government i s committed to continuing economic improvements while creating space for finding o f poverty reduction efforts.

(ADB/BD/WP/2003/57-ADF/BD/WP/2003/53).

Box 1: Country Profile

The Gambia i s the smallest country in continental Africa. I t stretches 450 km along the Gambia River with an area o f 11,285 sq. kms. It i s surrounded by Senegal, except for a 60 km Atlantic Ocean front. The current population o f 1.6 million has been growing at a fairly high rate o f 2.8 percent per year over 1993-2006. The population i s concentrated around urban and peri- urban centers (57 percent). Sixty percent o f the population i s under 25 years of age. The situation in The Gambia exemplifies challenges faced by small states. The country i s faced with institutional capacity constraints. Due to a narrow resource base and small domestic market, i t s production base and exports are undiversified. Like other small states, it tends to rely heavily on external trade and foreign investment to overcome its scale and resource limitations. The Gambia also faces some of the problems confronting Sub-Saharan Africa: inadequate infrastructure (energy, transport, telecommunications), and deficiencies in the business climate. As a result, living conditions for most Gambians are difficult, with poverty estimated at 57.9 percent. Yet, The Gambia has strengths. For decades, relatively open trade policies and limited administrative barriers reinforced the country’s position as a trading center. Recently, however, this position has been challenged due to a combination o f tensions with Senegal, and improved trade facilitation in neighboring countries. Tourism has been the most dynamic sector and i s the country’s most significant foreign exchange earner. Fishing, horticulture, sesame and cashew nuts are promising areas of export diversification. By improving its business climate and implementing sector-specific reforms, The Gambia can strengthen and diversify its domestic production.

- 2 - I1 - COUNTRY CONTEXT AND DEVELOPMENT CHALLENGES

A - COUNTRY CONTEXT

Political Context

4. The country benefits from a relatively stable political system. For three decades fol lowing independence from the United Kingdom in 1965, The Gambia was led by President Dawda Jawara and evolved as a multi-party democracy led by the People’s Progressive Party (PPP). A military coup in 1994 by Yahya Jammeh brought about the current regime. President Jammeh has since remained in power. In September 2006, he was reelected as the candidate o f the ruling Alliance for Patriotic Reorientation and Construction (APRC) with 67 percent o f the votes cast. International observers described the election as fair. Legislative elections in January 2007, which were marked by splits in the opposition, returned the APRC to power with 60 percent o f the votes. With a strong mandate, the President retains firm control over government pol icy formulation.

5. The country has made good progress in restoring its image of peace and stability in the last decade, but concerns about governance remain’. Although the 1997 Constitution provides for separation o f powers, the system o f checks and balances on the executive could be strengthened. The President closely oversees the public administration, and the pol icy environment i s characterized by frequent changes in Cabinet assignments and turnover o f personnel in the Government and the c iv i l service. The National Assembly i s financially dependent o n the Government and suffers f rom lack o f resources, which limits i t s monitoring and accountability functions. International organizations have raised concerns about intervention o f the executive in the judiciary. There i s a perception o f l imited press freedom which undermines transparency o f Government operations and has resulted in the country’s ranking o f 130 out o f 169 countries in the Reporters Without Borders’ 2007 Wor ld Press Freedom Index. In 2006, The Gambia’s suspension f rom the United States Mi l lennium Challenge Account (MCA) because o f human rights, polit ical repression, and worsening corruption, deprived the country o f much needed aid (see Sections 11-B and IV for more details on governance).

Economic Context

6. The country’s macroeconomic performance has passed through three phases in the last decade:

- A period o f economic growth with stability during 1998-2001, reflecting strong agricultural sector performance;

- A period o f fiscal slippages and monetary expansion during 2002-2003, resulting in inflation reaching 17 percent in 2003, the dalasi depreciating sharply against the US. dollar, the IMF program being off-track soon after it was negotiated in 2002, and The Gambia being unable to reach HIPC completion point as originally envisaged; and

- A period o f pol icy adjustment and macroeconomic stability restored during 2004-2007, with the approval o f a new PRGF program in February 2007 and progress in structural reforms.

7. The Gambia’s PRSP stresses the Government’s interest in sustaining the macro- economic gains o f the last few years. I t i s particularly interested in promoting a participatory pro-poor growth strategy to foster economic growth and to reduce the level o f poverty, which

’ See governance issues in paras 23-27 and paras 77-91.

- 3 - continues to be a major challenge for the country. T h i s long-term goal i s t o be achieved by promoting a conducive environment for private sector growth, improved public sector management, and human development.

Poverty and Status on Achieving the MDGs

8. The Gambia remains a poor country, with a GNI per capita of US$290 in 2005. The country ranks 155 out o f 177 countries in the 2006 United Nations Human Development Index and 81 out o f 95 developing countries. According to the 2003 National Integrated Household Survey (NIHS) the overall poverty rate, or headcount ratio, i s 57.9 percent. The Gini coefficient o f 0.484 i s relatively high.

9. There are large geographical variations to poverty. Rising urbanization i s causing stress o n social services provided in urban areas with consequences o f increasing urban poverty. The poverty rate i s 39.6 percent in urban areas and 67.8 percent in rural areas. There are wide regional variations in the headcount ratio, ranging f rom 8 percent for the capital Banjul to 95 percent for the Kuntaur local government area (see Annex 3).

10. There i s a clear gender2 dimension to poverty as female-headed households are significantly poorer than male-headed households. The poverty head count ratio for female- headed households i s 60.5 percent while i t i s 40.7 percent for male-headed households. Also, the severity o f poverty has been observed to be greater for female-headed households. Households that are larger and headed by individuals with n o education are much poorer (see Annex 3).

11. The Gambia i s on target to reach some MDGs by 2015, such as the goal to increase primary school enrollment. However, given current improvements, i t i s unlikely that health-related targets, such as reducing by two thirds the under-five mortality rate by 2015, could be reached. As part o f PRSP-11, The Gambia has conducted an MDG Needs Assessment for 2007-201 1 to assess requirements for keeping the country o n track. The report notes that most MDGs could be missed, unless major interventions are implemented.

Table 1: PRSP Targets and Achievement o f MDGs3

Source: 1/ 2003 Household Survey data 2/ 2004 data ,World Bank 31 Government MDGs Needs Assessment (November 2006) 5/ Update o f MDG Assessment (January 2008)

4/ 2006 Nutrition Survey (preliminary)

Gender issues are also addressed in para. 35. I t i s difficult to compare poverty indicators from the 2003 Household Survey to previous surveys, given the difference

2

in survey and estimation methodologies.

- 4 - 12. The Government has set a target poverty index o f 40 percent for 2011 (from the current 58 percent - see Table 1 below) which does not seem attainable given the historical record. I t should be noted that under-five mortality has declined f rom 129 per 1,000 in 1990 to 99 in 2006. The target for 2015 i s 43 which can be achieved i f the needed resources materialize and are used effectively. The target for infant mortality o f 28 per 1,000 in 2015 seems very ambitious in view o f the modest decline f rom 84 in 1990 to only 79 in 2006. However, there are hopeful s igns given that the country was recently declared pol io free and i s getting technical support and health services f rom a number o f bilateral donors. The same argument holds for maternal mortality which declined f rom 1,050 per 100,000 in 1990 to 574 in 2006, with a target o f 150 for 2015.

14. The Gambia being a small country cannot re ly o n i t s

large share o f i t s GDP from external trade, and has therefore

services f rom The Gambia are equivalent to roughly 30 percent

favorably with countries in Sub-Saharan Africa, it compares less favorably with other small state comparator countries outside the Region (see Table 2). For decades, The Gambia has served as a regional entrepat. Liberal trade policies and an efficient port infrastructure have allowed the country to act as a re-export hub. About 80 percent o f Gambian merchandise exports consist of re-

internal market to create growth and wealth. I t must generate a

maintained a relatively open economy. Exports o f goods and

o f GDP. In this regard, although The Gambia compares

Growth Dynamics

Table 2: Exports/GDP 2004-5 (Yo)

58 Barbados Mauritius 57 Costa Rita 48 CGte d’Ivoire 44 Ghana 38 WAEMU 31 The Gambia 30

28 23 Guinea

Source: DTIS

2001 2002 2003 2004 2005 It

15. Looking ahead, i t i s expected that The Gambia will develop ways to establish a more sustainable foundation for the country’s position as a gateway to the Region by

- 5 - improving the transport system and reinforcing i t s efficient trade facilitation services. However, there are r isks that re-exports may decline over time due to a number o f factors, including harmonization o f taxes in the Region, and improved port and customs operations in Senegal and other neighboring countries4.

16. There i s good potential for sustained growth in other areas (see Table 3). Efforts are being made to strengthen and diversify domestic production o f goods and services in the areas of tourism, groundnuts, other agriculture, and fishing, by improving the business climate as wel l as implementing sector-specific reforms. Significant investments are expected to continue in the tourist sector, which i s the key driver o f the economy and has become the country’s most significant foreign exchange earner. In addition to tourism, sustained growth i s expected to come from: (i) telecommunications, particularly the mobile phone market which has three competitors5, (ii) construction, financed by FDI in the hotel sector and also remittances, which represent about 10 percent o f GDP, and (iii) groundnuts and the rest o f the agricultural sector. Groundnuts have been a traditional pil lar o f the economy, but the sector now confronts severe domestic and international challenges, and exports have dropped sharply in recent decades. The success o f the pro-poor growth strategy in the Gambia will depend on reforming this sector because groundnut constitute the country’s most important crop and groundnut farmers are the poorest. The Government has prepared a comprehensive groundnut reform roadmap. Fishing, horticulture, sesame and cashew nuts are promising areas o f export diversification (see Annex 7 for more details). Education attainment has risen and should have an impact o n growth in the long term. Progress in developing infrastructure i s mixed, with the port and airport exhibiting good results, but with less momentum in the roads and energy sectors. However, large investments are expected f rom the EU and BADEA in the road sector, and progress has been made in the energy sector, with NAWEC now under private management, and with the commissioning o f rural electrification projects funded by AfDB.

Table 3: Main Exports of The Gambia (US% million.)

Source: OD1 Tourism Study, and DTIS Estimates

Impact of Growth on Poverty Reduction

17. The above growth dynamics has a direct impact on poverty. A recent analysis6 shows that poverty i s substantially higher for households working in the agriculture and fishing industries, with 76.4 percent classified as poor compared to 46.2 percent for other households, and with over ha l f o f a l l those living in extreme poverty in The Gambia (see

World Bank, “The Gambia, From Entrepot to Exporter and Eco-Tourism,” Diagnostic Trade Integration Study (DTIS), July 2007 ’ A new competitor entered the mobile telephone market in 2007, increasing the total to three.

World-Bank fimded Capacity Building for Economic Management Project). The National Integrated Household Survey was done in 2003. Other surveys are also conducted, such as annual National Agricultural Sample Surveys (NASS), and qualitative surveys such as Participatory Poverty Assessments.

A Poverty Analysis o f the Integrated Household Survey was conducted in June 2006 (financed under

- 6 - Table 4). I t i s lower among social and personal service workers, public and private financial services, and trade, hotels, and restaurants. Therefore, i t i s critical that the agriculture sector be revitalized, including through the definition o f an overall strategic direction.

Industry Agriculture and fishing Manufacturing and energy Construction Trade, hotels and restaurants Transport and communication Private and Dublic financial admin.

Table 4: Poverty by Sector o f Employment o f Household Heads

YO below poverty line 76.4 50.0 63.6 48.8 52.4 49.2

Social and personal services N o t stated Overall Average

45.4 53.5 57.9

18. Tourism plays a major role in poverty reduction in The Gambia, both indirectly through i t s contribution to growth, and directly through purchases o f labor and goods from the poor7. The sector has attracted a l o t o f investment. I t s estimated net revenues - which stay in the country - o f about US330 mi l l ion far exceed those o f any other sector. Of this, i t has been estimated that some US$14 mi l l ion goes directly to the poor, or rather the poor and some who would be poor if not for tourism'. This includes non-managerial hotel staff, local wholesale purchases o f food, souvenirs and gifts purchased f rom the informal sector, informal sector excursions and local taxis. The US$14 mi l l ion going directly to the poor f rom tourism i s roughly equal to the total net earnings from a l l agricultural and fish exports combined, o f which not a l l accrues to the poor. The challenge i s to exploit this opportunity in a sustainable manner, promoting even stronger linkages to poor communities.

19. Agriculture i s a crucial sector for shared growth, improved food security and poverty reduction. In the last decade, the rise in rural poverty has been associated with poor performance o f the agricultural sector and the inabil ity o f farmers to access markets and social services due to poor infrastructure. Revitalization o f the groundnut sector has the greatest potential to alleviate poverty. The share o f households engaged in groundnuts i s variously estimated at between 63 and 80 percent o f the 82,000 rural householdsg. Groundnut farmers are among the poorest members o f Gambian society (76 percent are estimated to be poor, as compared to a national average o f 58 percent). Groundnut exports can boost farmer incomes substantially, and the Government i s committed to implement reforms in order to lift the sector f rom i t s current crisis.

20. Other areas offer interesting possibilities. Cashew, a smallholder crop, can have a positive effect on incomes in producing areas. Rough estimates suggest that feasible growth in cashew exports over the next ten years could offer income to some 30,000 households, generating annual revenues almost twice as high as for groundnut farmers. Horticulture can also contribute to poverty reduction through increased employment in rural areas.

2007 DTIS * Overseas Development Institute (ODI) report, The Gambia Tourist Value Chain and Prospects for Pro- Poor Tourism, 2006.

2003 Household Survey gives the lower estimate.

- 7 -

Increase in Gross Net Area Exports Earnings Earnings Tourism arrivals 100,000 arriv $100 mi l l ion $50 mi l l ion

Groundnuts 50,000 mt $24 mi l l ion $19 mi l l ion

Cashew nuts 26,000 mt $14 mi l l ion $12 mi l l ion

Households Yearly Earn/ Household Benefiting

10,000 GMD30,OOO

50,000 GMD5,OOO

30,000 GMD7,5 00

B - DEVELOPMENT CHALLENGES

21. Reducing the levels o f poverty continues to be a major challenge for The Gambia and the rate o f progress wil l have to be stepped up. The country's development challenges can be grouped into the fo l lowing areas:

Maintaining Macroeconomic Stability

22. Earlier slippages in macroeconomic policies have been corrected and the external debt position has improved fol lowing HIPC and MDRI debt relief". Sustained macroeconomic stability and strengthened public financial management provide the foundations for sustained growth and poverty reduction. For this to continue, The Gambia wi l l need to continue to adopt prudent policies.

Governance

23. Strengthening governance i s considered one o f the keys to improving public service delivery. Since 1996, three out o f six measures o f governance on The Gambia by the Wor ld Bank Institute have shown declines in government effectiveness, rule o f l aw and control o f corruption. Three have shown progress in voice and accountability, polit ical stability, and regulatory quality (see Annex 6), although they remain l o w even by SSA standards.

24. In terms o f administrative accountability, the capacity o f the Gambian public sector to deliver quality public services has progressed, but remains limited, as executive interference undermines performance. Attrit ion rates are high and there i s frequent turnover o f senior government officials in central and line ministries, leading to many unfi l led positions, which i s compounded by the migration o f skilled staff (see para. 32). T h i s frequent reshuffling o f high- level officials in government departments i s l ikely to hamper the effectiveness o f economic policy implementation.

25. An overall c iv i l service reform strategy i s being prepared based o n an analysis o f the major constraints in the public sector in effectively delivering public services. A governance profi le has been prepared by AfDB and a jo int analytical work on c iv i l service reform i s under way by the Wor ld Bank, AfDB and UNDP. The strategy examines: (i) the fiscal impact o f the c iv i l service, including the wage bill and the incorporation o f non-wage benefits and allowances; (ii) the reform o f pay and career structures; (iii) performance management; (iv) pension reform; (v) capacity strengthening, including training; and (vi) improving governance. The exercise allows for engaging the authorities at the highest possible levels on issues related to governance and government commitment to the reform process.

26. Financial accountability has made progress due to technical assistance by development partners. The Government has successfully introduced a number o f significant

lo HIPC Completion Point Board presentation took place on December 18, 2007.

- 8 - reforms in public financial management. These reforms have improved the transparency and accountability in the use o f public resources, and reduced the opportunities for corruption. These reforms include (i) Budget Management and Accountability Ac t (2004), (ii) Central Bank reforms, (iii) public procurement reforms, (iv) the establishment o f the semiautonomous Gambia Revenue Authority (GRA), (v) the establishment o f an Integrated Financial Management Information System (IFMIS), and (vi) the preparation o f public accounts, which have been updated to 2006, thanks to considerable efforts to reduce the backlog. Progress has been made in terms o f reporting: the authorities have consistently produced annual public reports on budget execution, as wel l as reports on the utilization o f poverty-reducing expenditures. However, the figures have been preliminary due to the large backlog in preparing the public accounts. With IFMIS, i t i s expected that the 2007 accounts will be prepared by end-March 2008, so that firm actual figures will be incorporated in the next year’s budget. Ant i -compt ion measures need to continue to be strengthened. The Gambia i s ranked 121 among 163 countries by Transparency International. Access to information and freedom o f the press are limited.

27. On the legal and judicial front, challenges remain for the judiciary to exercise and uphold i t s independence (see Annex 6). The overall legal framework related to business operations i s largely consistent with international best practices. I t should be noted that poor functioning o f the judiciary i s not perceived by the business community as a major impediment to business, and the country i s ranked relatively high in the Doing Business survey o n enforcing contracts. The authorities enacted an Alternative Dispute Resolution Ac t in 2005, and they are piloting the system. In addition, the authorities have been planning to develop a Case Management Information System which should eventually expedite resolution o f commercial disputes, but progress has been slow.

Public Spending and Efficiency

28. Since 2000, a series o f annual Public Expenditures Reviews (PERs) have been jo in t ly conducted by the authorities, IDA and other development partners. I t should be noted that the share o f poverty-reducing expenditures declined in the early 2000s because o f efforts to restore fiscal and monetary discipline and rising domestic interest payments. It has increased since 2005 in response to the expanded fiscal space due to a decrease in the share o f interest payments in total recurrent expenditures (see Figure 2 below).

Figure 2. Poverty-Reducing Expenditures and Interest Payments” (percent o f total local ly funded expenditures)

50 0

40 0

p 300 v)

C

g 200 n

10 0

0 0 2001 2002 2003 2004 2005 2006 2007

-+-Poverty reducing expenditures Merest payments

29. An analysis o f budget outturns shows that the Government allocates between one quarter and one third o f total locally-funded expendituresI2 to poverty-reducing spending. I t

2004 figure i s missing because the data are unavailable. 11

- 9 - goes up to approximately ha l f o f total expenditures when interest payments are excluded. As an indication o f their prioritization, the Departments o f State for Education and Health have large budgets.

Delivery of Social Services

30. Service Delivery in Education. Expansion o f access to education i s a high priority for the Government, particularly for girls. The Government has adopted a National Education Policy for the period 2006-2015, which focuses o n expanding and improving the quality o f education. Education benefits f rom (i) the largest government budget among most ministries; (ii) support f rom donors, including the IDA-financed second phase Education Project, and the PHRD co-financing grant f rom the Government o f Japan administered by the Wor ld Bank; and (iii) funding f rom the EFA FTI Catalytic Grant.

31. The education sector has benefited f rom an extensive government program o f expanding infrastructure, teacher training and school materials. Over 1,000 classrooms were built under the f i rst phase o f the IDA-financed project. The sector has seen some important gains over the past f ive years. The Gambia has made tremendous success in expanding access to education, across a l l levels o f the school system, with a gross enrollment rate (GER) o f 76 percent in 2006. Gender parity was attained at the basic cycle level. At the senior secondary level, the overall GER almost doubled, but the gender gap at that level i s s t i l l significant. The Government has programs to recruit and retain qualified staff, including hardship allowances and improved working conditions for teachers assigned to rural areas. But education quality remains the biggest challenge. It i s important to also consider the limitations in the sk i l ls development and education o f the work force, which are seen as impediments for growth.

32. Service Delivery in Health. Provision o f adequate, effective and affordable health care for a l l Gambians i s important for poverty reduction and growth opportunities. Several key policies, including a National Health Policy, a National Drug Policy, and a National Nutr i t ion Policy, have been either updated or designed. But the translation o f these policies into actual implementation has been less than satisfactory. The major problems confronting the health sector include: shortage o f motivated and qualified personnel; high attrition rates and departure o f health personnel to the United Kingdom and other places; inequitable distribution and inefficient utilization o f existing human resources; l imi ted financial resources to provide essential drugs, medical supplies, equipment, transport and fuel; inadequate capacity in the sector, including managerial capacity to manage health delivery systems; high costs o f meeting basic health care delivery services; and problems o f transportation. Basic health services are managed in line with the Bamako Initiative. Health has the third largest budget among government ministries. The share o f primary and secondary health care within the recurrent budget for health has in~reased'~.

33. The overall l i fe expectancy in the country, estimated at 53 years, i s better than the Sub-Saharan Afr ica average. The Gambia has also performed relatively wel l o n chi ld health indicators. The under-5 mortality rate was estimated at 129 per thousand l ive births in 199014 and has declined very rapidly since 1960. However, the infant mortality rate, currently estimated at 75 per thousand l ive births as o f 200715, remains considerably higher than in

These expenditures are recurrent expenditures and parts o f development expenditures that are directly

I t was 42 percent in 1999, the baseline year. F r o m 2001 up to 2002, th i s share remained relatively stable,

Government 2006 MDG Needs Assessment

12

h n d e d by the Government's own resources.

but subsequently, i t increased to 50 percent in 2003 and has generally maintained this higher level.

l5 Source: Population Reference Bureau

13

14

- 10 - Senegal and Ghana, the best performers o f West Africa. Moreover, there i s some evidence o f a possible decline in the rate o f improvement in chi ld health. The Maternal Mortal i ty Ratio (MMR) i s high, but has significantly improved over recent years.

34. The prevalence o f malaria and diarrhea i s estimated to be 15 percent and 22 percent, respectively. The annual incidence o f tuberculosis i s estimated at 118 per 100,000 persons, but more reliable data are needed. The latest sero-surveillance data (2005) indicate that H IV /A IDS prevalence has decreased to 1.1 percent for HIV-1, an indication that the education and prevention programs have had some effect16. However, the HIV prevalence may have increased in more recent years. Efforts will be needed to keep these levels low”. The overall coordination o f the fight against H IV /A IDS requires a national and effective institution that can muster the support f rom the highest level o f leadership. Recent claims by the President o f The Gambia o f a cure for AIDS are alarming public health workers and the international donor community.

Gender

35. The Government acknowledges that the realization o f gender equality requires empowerment o f the most affected (women and girls) and mainstreaming o f gender perspectives in al l sectors by al l actors in the development process18. The country has been promoting equal access for men and women to human capital development opportunities. Important policies, including strengthened nutrition and antenatal care, have contributed to a lowering o f the maternal mortality rate. Girls enrollment in education has increased significantly, including through a scholarship program for senior secondary students, and girl- focused initiatives for basic schools. Although there i s n o discrimination by law, traditional views continue to constrain access to productive resources and opportunities for women, particularly in rural areas where education i s less readily available, especially in cycles beyond lower basic. Women have l imi ted access to credit and land, and are generally poorer than men. Gender development i s a key element o f JAS support in The Gambia in various dimensions, including in education, health at local levels, promoting women-owned businesses, and identifying legal and regulatory obstacles. Furthermore, a Gender Profile will be prepared by the AfDB in 2009 to in form policy decisions related to gender.

36. The Gambia i s one of the 35 countries in the world where the total fertility rate i s st i l l above 5 ( i t is estimated at 5. I for 2007). The onset o f ferti l i ty decline in The Gambia in recent years i s explained by an increasing age at marriage triggered by higher levels o f female education. The Gambian population i s projected by the Uni ted Nations to double by 2050. Rapid population growth presents a major challenge for The Gambia, namely the need to muster large amounts o f public and private resources to finance human capital investments. An acceleration o f the demographic transition in the country would mitigate the risk o f The Gambia not achieving significant poverty reduction over time. This will require an array o f sound multi-sectoral actions and public policies, particularly in the areas o f health (supplying family planning services, and family planning demand-creation dimensions), education (targeting young girls more consistently, especially in completion rates for post-basic cycles), gender (providing more autonomy and economic opportunities to women), and the provision o f infrastructure, notably in rural areas. This JAS focuses o n these strategic directions,

l6 However, the estimated prevalence rate i s based on data collected at prenatal care clinics, and actual rates o f the general population could be much higher. The decrease to 1.1 percent could also indicate that more patients have died over the past years.

The World Bank supported the country’s efforts to combat the epidemic through an HIV/AIDS project (Credit 3455-GM - closed in December 2006), in conjunction wi th additional funding from the Global Fund for AIDS, Tuberculosis and Malaria.

For details, see PRSP-11.

- 11 - notably in the education s e ~ t o r ' ~ , in health at the community level2', and in rural development2'.

Infrastructure Bottlenecks, and Regional Integration

37. Transport infrastructure i s particularly important in the case o f T h e Gambia, given i t s ambition to serve as a regional trading hub. Improving access to markets i s a key objective.

38. The Banjul Port i s efficient in terms o f speed and cost o f clearance o f goods, although improvements could s t i l l be made. The AfDB i s preparing a Banjul Port Detailed Design Study to that effect. The River Gambia was the init ial basis o f The Gambia's role as a regional hub, and the main mode o f transporting groundnuts. However, river transport has shown a steady downward trend and i s underutilized at present. Some rehabilitation work will be supported by the Wor ld Bank and the European Union (EU) in the context o f the reform in the groundnut sector. The airport benefited f rom a major overhaul in 1997. It i s performing wel l and has the capacity to expand flights considerably. Roads are the dominant mode o f transport, accounting for more than 90 percent o f the total motorized fkeight and passenger movement, and therefore being a key to trade and growth.

39. Electricity. The high cost and unreliability o f electric power i s one o f the most severe problems confronting a l l industries in The Gambia according to the recent Enterprise Survey. Firms in the manufacturing and tourism sector seem to be the most affected22. Reliabil ity o f supply improved in early 2007, but at the cost o f a 30 percent increase in tariffs, making electricity far more expensive in The Gambia than in most other African countries. Electricity services are only available in urban and provincial centers23. N A W E C inefficiency i s reflected in system losses (35 to 45 percent), far above industry norms, leading to a severe strain o n the utility's as wel l as the government's finances. Even with the new Independent Power producer (IPP) at Brikama, the power situation remains strained, with total available capacity o f 60 MW against a suppressed peak power demand o f perhaps 150 MW. Adding further generating capacity by i tsel f will not accomplish much, given the overloaded transmission and distribution system, with a transmission capacity o f about 50 MW24. Also, the rural poor face access problems that hinder attainment o f social objectives.

40. The Government has requested support for the preparation o f a master plan to expand the generation, transmission and distribution o f electricity to meet existing and projected energy demand. The 2004 Electricity A c t liberalizes the sub-sector and opens it up for private sector investment, but it has only been partially implemented. NAWEC i s slated for divestiture under the Track I privatization category. The Gambia Divestiture Agency (GDA) i s currently assessing the possibility o f divesting N A W E C through publidprivate partnerships. The Government signed a 5-year management contact with a private firm to assist in this task and to improve services (the selection process was not conducted through an open and competitive process). The JAS provides financing for the preparation o f the master plan as a way to reengage in the sector and may opt to pursue pol icy dialogue under the Development Policy Lending. Investment lending i s expected to be provided by other donors, including the European Union.

l9 Education I11 2nd phase project (financed by IDA) and Japan PHRD Grant

21 Peri-Urban Agriculture Project (financed by ADF) 22 Respectively 79 percent and 85 percent o f the firms.

less than 25 percent, with electricity consumption representing some three percent o f total energy consumed in the country. 24 For more details, see DTIS, Excensia report (2006) and FIAS report (2004)

Community-Driven Development Project (fmanced by IDA) 20

Electricity is available mostly in the urban areas and provincial centers o f rural areas with coverage o f 23

- 12- 41. Telecommunications. The situation i s far superior to electricity, although s t i l l in need o f improvement. The proposed telecommunications bill further liberalizes the market. Recently, a private management contract was awarded for the public telecommunications enterprise, GAMTEL. I t was done under suboptimal procedures and some concerns were raised about the transparency o f the transaction.

42. Regional Integration. The Gambia’s geography and overall policy environment stress the need for The Gambia to take advantage o f the benefits o f regional integration” and make i t s relationship with i t s neighbor strategically important, for the re-export trade and for a variety o f other economic issues o f mutual concern. T o this end, the one time Senegalo- Gambian Secretariat i s being revived (an interministerial committee headed by the two heads o f government meets to reinforce bilateral issues). In the energy sector, the integration o f energy systems under the umbrella o f the West Afr ica Power Pool Project (WAPP) in general, and The Gambia River Basin Development Project (OMVG) in particular, would be critical for energy sector development in The Gambia. The OMVG Power Program consists o f two dams with hydropower plants and 1700 lun transmission line.

43. The capacity o f The Gambia to serve neighboring countries beyond Senegal i s constrained by two major hurdles beyond i ts control - the quality o f Senegalese roads and the willingness o f Senegalese authorities to facilitate transit trade. The regional dimension o f trade and growth i s to be highlighted. For example, an ECOWAS Regional Transport and Transit Facilitation Program i s being implemented, with jo in t border control posts to be put in place, and the application o f a single transit document under the Inter-State Road Transit (ISRT) convention, which should facilitate smooth road services to eastern Senegal, M a l i and Guinea-Bissau. In the same vein, plans for a bridge over the River Gambia may be revived, with possible financing from the EU and AfDB, and the OMVG providing the administrative structure to manage the necessary external financing. A useful parallel development could be the setting up o f a dry port up-country, to receive river-transported goods and dispatch them by road to Mal i .

Investment Climate

44. International comparisons o f development experiences suggest that countries with a better investment climate enjoy higher private investment rates and therefore reach higher growth rates26 (see Annex 7).

45. The Gambia i s in the middle o f the ranlungs vis-a-vis other Afr ican countries in widely-used indicators o f the business climate and economic competitiveness2’. In the 2008 Doing Business indicators, The Gambia i s ranked 113’ out o f 175 countries, better than neighbors, notably Senegal, but below some better-performing countries in Africa, such as Ghana, Kenya and Uganda. For international trade, the DB indicators show that The Gambia i s the third best in Sub-Saharan Africa. Overall, these results are consistent with those o f the I C A and WEF: customs administration and international trade procedures more generally are not seen as key problems in The Gambia. This explains in a large part the large inf lows o f FDI in recent years, due to positive returns in the construction area and tourism industry. The

25 The Gambia i s a member o f the Economic Community o f West Afr ican States (ECOWAS), the West Afr ican Monetary Zone (WAMZ), and the Afr ican Union. I t has bilateral cooperation arrangements with many countries. 26 2005 Wor ld Development Report

Do ing Business indicators, and other cross-national measures o f competitiveness such as the W o r l d Economic Forum’s (WEF) Competitiveness Index and the Heritage Foundation’s Index o f Economic Freedom (IEF).

These include the W o r l d Bank’s Investment Climate Assessment (ICA - July 2007), the W o r l d Bank’s 27

- 1 3 - Gambia i s ranked favorably in the areas o f labor regulation, but poorly o n investor protection, tax rates and procedures.

46. The recently completed Wor ld Bank Enterprise Survey for The Gambia shows that electricity i s the most serious obstacle, followed by credit, land access and taxation. As noted above, electricity supply improved significantly in 2007, but costs remain high. The JAS will support the Government in the design o f an energy master plan, whi le AfDB will provide assistance in rural electrification. Tax rates are cited as a major constraint by a third o f formal sector firms surveyed”. Taxes include those on profits, labor income taxes, withholding and levies. The JAS will support the Government in the areas o f access to credit and to land by f i rms.

47. Financial Services. Long-term financing for productive investment i s o f course vital for economic development, but i s largely unavailable in The Gambia, especially for small and medium enterprises (SMEs). The Government has attempted in the past to establish development banks, but this has proved unsuccessful, as the banks have suffered large losses f rom non-performing loans, due to poor management and polit ical interference. Microfinance institutions have grown over the years, but are constrained by l o w capacity and inadequate resources. Currently, commercial bank lending to the private sector i s mostly short term. There i s l imited competition in the financial sector, which i s dominated by two banks. Finally, there i s poor technical capacity for ski l ls in the sector.

I11 - GOVERNMENT DEVELOPMENT PROGRAM

A - PRSP-I1 48. The Country’s Vision. The Gambia’s longer term pol icy objectives are sketched in the ambitious Vis ion 2020 which seeks to transform The Gambia into a dynamic middle income country in six major activity areas relating to agriculture, industry, trade, tourism, financial services and human resource development.

49. The country’s leadership i s well aware that it needs to achieve more to address the challenges in the next few years, and thus accelerate growth and poverty reduction. Cognizant o f the need for increased growth and improved competitiveness o f i t s economy, i t s susceptibility to external shocks, and the lack o f progress in social gains, The Gambia has set out an ambitious medium-term strategy derived f rom the country’s Vis ion 2020. In November 2006, the Government finalized the second Poverty Reduction Strategy Paper (PRSP-11) for 2007-20 1 1.

50. (i) Improving the enabling pol icy environment to promote growth and poverty reduction; (ii) Enhancing the capacity and output o f productive sectors, namely: agriculture, fisheries, industry, trade, tourism, and infrastructure, with emphasis on productive capacities o f the poor and vulnerable; (iii) Improving coverage o f the basic social services and social protection needs o f the poor and vulnerable; (iv) Enhancing governance systems and building the capacity o f local communities and c iv i l society organizations to play an active role in economic growth and poverty reduction; and (v) Mainstreaming cross-cutting issues l ike gender, youth, population, HIV/AIDS, environment, and nutrit ion into the development process.

The PRSP-I1 i s based upon the same five pillars of PRSP-I:

28 T h e tax burden o f a firm in T h e Gambia i s about six times higher than in comparator countries.

- 14- 51. The Government’s overarching objective i s to eradicate poverty in the long run. To achieve this goal, i t i s committed to continue macroeconomic reforms to facilitate private sector growth; to improve public sector management; and to increase priority for human development. During the PRSP-I1 period, the Government i s focused o n sustaining the strong level o f economic growth o f the last few years, notably with a special focus o n agriculture, tourism, trade, energy and infrastructure, including I C T and housing. To strengthen implementation o f i t s poverty-reduction programs, the Government i s putting in place policies aimed at removing inequities in access to sources o f economic opportunities. I t recognizes that the l o w rates o f progress so far in attaining the MDGs signals the need to strengthen and expand MDG-related interventions.

52. The PRSP-I1 includes an implementation action plan that outlines costed priority activities, which should allow for improved monitoring and results orientation. In particular, the Government i s taking action to prepare sector strategies to better guide and prioritize implementation. The newly created National Planning Commission i s expected to take a leadership role in preparing and implementing PRSP programs and integrating them with the budget. Close collaboration with the Department o f Finance and Economic Affairs and with a l l l ine ministries will be crucial. Involv ing local communities in implementation and building the capacity o f c iv i l society organizations to take part in the development process was a government objective under PRSP-I and wil l continue under PRSP-11. Community scorecards on service delivery monitoring were piloted in the health and education sectors in 2004, with assistance from the Wor ld Bank. Capacity building o f stakeholders including local communities will be supported under the Wor ld Bank and AfDB projects during the JAS period.

B - MACROECONOMIC OUTLOOK

53. The country has enjoyed robust growth and l o w inflation over the last four years, thanks in large part to substantially improved macroeconomic policy implementation. Annual growth has averaged 6 percent, and inflation fe l l f rom 17.6 percent in 2003 to 1.4 percent in 2006. The basic primary balance averaged 9.1 percent o f GDP and fiscal performance has been strong (see Annex 4).

Medium-Term Prospects

54. The medium-term outlook i s generally positive. I t i s based on real GDP annual growth o f about 6-7 percent. Inflation stabilized at 6 percent at end 2007 after accelerating markedly in the f i r s t ha l f o f the year when food prices surged as a result o f increases in import costs (e..g., rice). The inflation rate i s expected to remain in the 4-5 percent range in the medium term. The fiscal basic balance i s expected to register a surplus o f 3 percent o f GDP a year to help bring down domestic public debt to a sustainable path. I t i s anticipated that domestic revenues will remain at around 21 percent o f GDP, reflecting progress in tax administration reforms. Progress has been slow but the growth o f domestic debt has been contained. The stock o f gross domestic debt stood at 31.2 percent o f GDP at end-2006 and has come down to 29.1 percent o f GDP in 2007, reflecting sustained good fiscal performance. I t i s projected to fa l l to less than 21 percent by the end o f 2009, to 13.7 percent o f GDP in 2012, and to 8.4 percent o f GDP in 2027. Over the longer term, lower debt service i s expected to provide additional space for increased priority expenditures and to partially offset the downward trend in externally-funded projects.

55. The Gambia’s economy remains vulnerable to exogenous shocks, including higher o i l prices and droughts. Attainment o f the positive outlook wil l require the continuous implementation o f sound macroeconomic policies, market-oriented structural reforms, and an

- 1 5 - efficient Government investment program. However, the economy i s s t i l l expected to annually grow at approximately 6-7 percent, benefiting fkom recent high levels o f foreign direct investment, a projected increase in official project aid, and continued opportunities in the services and industry sectors. Reflecting these trends, the external current account deficit (including official transfers) i s expected to decline f rom 12 percent in 2008 to 9 percent o f GDP in 201 1, a s ign o f strong growth in tourism earnings and a slowdown o f import growth. Continued fiscal discipline wil l be critical. The authorities have reiterated their resolve to contain the fiscal deficit, better align budget priorities with their poverty strategy, and improve the efficiency and transparency in the use o f public resources.

Table 6: Projection of K e y Macroeconomic Indicators - 2006-201 1’’ I2006 I2007 I2008 I2009 I2010 I2011 1

Source: IMF

c - DEBT SUSTAINABILITY AND MANAGEMENT

56. The Gambia recently became eligible for additional debt rel ief under the Multilateral Debt Rel ief Initiative (MDRI) upon reaching the Completion Point under the Enhanced H P C Initiative3’. Whi le full delivery o f the above debt rel ief significantly reduces external public debt, there i s a high risk that The Gambia will remain in debt distress, according to the L I C DSA3’. The large domestic debt stock further supports the assessment that the risk o f debt distress remains high. Sensitivity analysis shows that the country’s external public debt indicators would substantially worsen in the presence o f large adverse shocks to export performance and increased external financing on less concessional terms. The risk o f remaining in debt distress underscores the importance o f continued fiscal prudence, policies to support broad-based growth and export diversification, sustained donor support and improved debt management.

57. The Government has initiated plans to strengthen debt sustainability. The second PRSP outlines a national development strategy that will encourage continued economic growth, particularly exports o f goods and services, which will strengthen the country’s capacity to service its debt. The PRSP also prioritizes prudent fiscal and debt management policies. The Government has increased the minimum grant element in new external borrowing to 45 percent, and it plans on limiting the volume o f non-concessional borrowing for the foreseeable future. I t wil l further prioritize PRSP initiatives in l ine with available funding. The Government has committed to developing a comprehensive debt management

These IMF figures dif fer f r o m those in the PRSP. Revised off icial data and recent economic developments suggest a significantly higher outlook for the GDP growth rate than original ly anticipated. This largely explains the differences in projections. In their assessment o f the PRSP, IMF and W o r l d Bank staff have recommended that the PRSP macroeconomic framework be updated with the latest available data. This can be done in the next Annual Progress Report (APR). 30 See H I P C Report 41413-GM o f November 28,2007 (Board presentation on December 18,2007).

The updated Low Income Country (LIC) Debt Sustainability Analysis (DSA) shows that the NPV o f debt-to-exports ratio falls t o 108 percent after the full delivery o f H IPC and MDRI assistance, which i s above the pol icy dependent threshold o f 100 percent.

29

3 1

- 1 6 - strategy. I t s debt management capacity was assessed by the W o r l d Bank in March 2007 based on the Government Debt Management Performance Management Framework (GDM- PMF). This assessment provides a basis for the refinement and finalization o f the debt management strategy.

I V - WORLD BANIUAfDB STRATEGY FYOS-11

A - LESSONS FROM PAST WORLD BANWAFDB ASSISTANCE”

58. Implementation o f the 2003 Wor ld Bank CAS and the 2002-2004 AfDB CSP offer valuable lessons for the JAS. Some progress was made in achieving the objectives o f the two strategies. Social indicators have improved. Macroeconomic management has improved, as has the fiscal situation. Over the past year, the Government has taken steps to improve the business environment. Progress has been made in sectors where there are clear strategies in place, such as education. Progress was also made where strategies took into account other donor programs to ensure complementarity.

59. With the benefit o f hindsight, the strategic objectives were ambitious given country conditions at the time they were formulated following a period o f economic difficulties and problems with economic management. Early in the period, the dialogue was not effective in rural development and energy. Economic reform could not be launched because the Government was not prepared to go forward, as pol icy frameworks were not in place.

60. The Wor ld Bank and AfDB adopted a more results-oriented approach, but the strategy documents did not offer fully developed indicators. Emphasis was gradually placed on increased focus o n some critical indicators and key results in selected areas.

61. Some generic problems have adversely affected the quality o f the portfolio o f both institutions in the past33: (i) weak co-ordination between the DOSFEA and the implementing agencies; (ii) delays in ratifying and fulfilling the conditions o f financing agreements; (iii) inadequate timely availability o f counterpart funding; (iv) episodes o f non-adherence to procurement and disbursement procedures; (v) delays in submitting regular project audit reports and quarterly progress reports; (vi) ineffectiveness o f project steering committees; and (vii) weak technical and administrative capacities o f executing agencies. An important lesson i s that project design should give more attention to managerial and technical capacity in light o f critical shortage in capacity at a l l levels, including at local levels. On the Wor ld Bank side, the adoption o f country financing parameters in 2005 has helped minimize the fiduciary risks. For both institutions, close supervision and a focus o n simpler project design have mitigated the above risks.

62. Solid analytical and advisory activities (AAA) was prepared by the two institutions to ground pol icy dialogue, notably o n public expenditure reform. An assessment o f seven Wor ld Bank economic and sector work was recently completed34 as part o f the 2003 CAS review process by a panel. The Panel found that the AAA program was strategically relevant given clear linkages with the main CAS themes, the Bank’s poverty alleviation goals, the PRSP, and other donors’ programs.

63. Based o n the above lessons, there are some important implications for the new JAS:

See Annex 13 (World Bank CAS FY03-07 Completion Report) 32

33 Refer to Annex 9 for details o f current IDA-funded portfolio and to Annex 10 for current ADF-funded yytfolio.

following: 2003 CFAA, 2005 CPIP, 2004 PER, 2005 PER, 2006 PER, 2003 PPIAF trust fund on PURA. AAA reports recently evaluated by the internal audit department at the World Bank, include the

- 17 - - Because o f capacity constraints, technical support under projects tends to require especially high staff supervision inputs; - As governance i s central to a successful PRSP implementation, the new JAS should continue to place a strong emphasis o n it. Achievements in investment climate reform and public expenditure management can be used as a proxy for economic management and thus governance. - Given constraints o n IDA and ADF allocations, JAS continues to be leveraged with that o f other donors. The JAS objectives take into account available resources. - The Wor ld Bank and AfDB intend to continue to coordinate closely o n pol icy reform with the TMF and other donors, to strengthen the message and dialogue with Government. - Strong coordination i s needed among donors o n program implementation. - JAS i s results-based: outcome indicators are clearly l inked to interventions, the JAS shows a linkage between indicators and higher level objectives in the PRSP.

B - FRAMEWORK FOR WORLD BANWAFDB ENGAGEMENT IN THE GAMBIA

JAS Framework 64. This JAS i s being prepared at a time when the country has completed i ts MDG- based PRSP-I1 and the Government has just become eligible for debt rel ief under HIPC and MDRI. There are expectations o f increased project a id f rom development partners, with a roundtable planned for February 2008. 65. As noted in the introduction, this JAS was prepared jointly by the World Bank and AfDB and represents the f i rst step o f an effort to harmonize donor assistance in The Gambia in line with the Paris Declaration o n Aid Effectiveness. I t will allow the two institutions to align their development programs, avoid duplication o f efforts, and combine their technical expertise. Under this jo in t strategy, the Wor ld Bank and the AfDB have developed shared objectives and a common plat form for lending and non-lending services. These will include coordinated contributions to budget support, complementary investments in growth and competitiveness, and jo in t analytical work in the areas o f public finance, c iv i l service reform and governance, as detailed in Annex 1.

JAS approach

66. Closer alignment with national priorities. The strategy i s based o n extensive discussions held with the Government, the development partners, and c i v i l society (see Annex 12 on the consultation process). The JAS covers about the same period as the PRSP-I1 (2007-201 1) and supports the achievement o f PRSP-I1 results. This country-based model builds on the core principles o f t h e - A f i x a Act ion Plan35 (AAP). The JAS supports the aspects o f the Government program where the two institutions have a comparative advantage and where the Government feels that such support i s most needed.

67. Strategic selectivity and donor coordination. In order to achieve i t s objectives, the JAS will take into account lessons learned by both institutions in the implementation o f their

Meeting the Challenge o f Africa’s Development: A World Bank Group Action Plan (SecM2005-0445), August 17,2005. The JAS focuses on four o f the AAP’s flagships, namely those aimed to (i) strengthen the private sector, (ii) increase the economic empowerment o f women, (iii) build s k i l l s for competitiveness in a global economy, and (iv) raise agricultural productivity.

35

- 1 8 - previous strategies, the performance and orientation o f current portfolios, the role o f other partners, and the experience in terms o f public-private partnerships. The challenge i s to respond within the constraints o f IDA and ADF allocation^^^, as wel l as the constraints o f the country’s absorptive capacity and debt sustainability. This JAS wil l apply strategic selectivity by not allocating resources to some key aspects o f the PRSP-I1 agenda, such as support to HIV/AIDS, nutrition, telecommunications, generation, transport, which will benefit f rom assistance by other donors during the JAS period. For example, support to infrastructure development and some productive sectors i s provided by the European Union (transport, including feeder roads; electricity). This selectivity has been applied through a process o f prioritization discussed jo int ly by the Government, AfDB and the Wor ld Bank. Given that the social sectors are covered under the current IDA and ADF portfolios during the 2008-20 1 1 period, the Government has asked that the JAS be focused for the most part on the growth agenda. As a result o f this process, only four new lending operations37 are planned during the JAS period where the Wor ld Bank and the Afr ican Development Bank have comparative advantages: (i) a series o f two budget support operations, (ii) a Growth and Competitiveness project, and (iii) a Livestock and Horticulture project (see Table 7). 68. Additional funding options. Given l imi ted IDA and ADF resources, additional funding options will be explored. Collaboration with IFC (Global Trade Finance Program, technical assistance, access to e-markets, etc) o n the Wor ld Bank Group side, and possible funding through the Private Sector Window o n the AfDB side, will strengthen the impact o n private sector development and provide support to MSMEs. Leveraging o f funds for the growth agenda will be sought through the Enhanced Integrated Framework (EIF - see para. 108). The use o f trust funds such as GPOBA (water and sanitation), PPIAF (energy and regulatory framework), Japan PHRD (support to communities and capacity building in education) will be vigorously pursued. The Government has also applied for continued financing under the EFA Catalytic Fund in the education sector for the period 2008-2010. T o the extent possible, the JAS wil l make provisions for ensuring that conditions are put in place for financing regional programs under the next IDA and ADF financing cycle. For example, in infrastructure, plans to construct the Gambia bridge have been revived and efforts are currently underway by AfDB to revise the costing o f the project. AfDB will also support the regional OMVG energy program under i t s private sector window, through the Fund for African Private Sector Assistance (FAPA). The FAPA technical assistance co-financed with N E P A D to prepare the project has been approved and the grant agreement letter has been signed. Different types o f public private partnerships have been proposed and will be examined.

69. Integrated approach. T o deliver nationwide results in areas such as improved efficiency o f public finance, or to achieve results in specific geographical areas or sectors (such as energy or groundnuts), the approach will combine various instruments (budget support for possible policy options, investment operations, community interventions for capacity building through NGOs). In the energy sector, for example, support will be channeled through technical assistance under PPIAF for the development o f a master plan, while possible small-scale investment may be funded under a Wor ld Bank Growth and Competitiveness operation for the build-up o f service platforms, or under the AfDB Rural Electrification Project for provision o f electricity at local levels. In the groundnut sector,

36 The scope o f new IDA and ADF financing during the JAS period i s limited, as the country’s forgone IDA and ADF debt service under the MDRI Initiative w i l l be deducted from the country’s allocations (see

” Additional financing in support o f the Capacity Building for Economic Management project was approved in October 2007 (FY08)

aras 114-1 15).

- 19 - some capacity buildinghechnical assistance will be funded under the IDA and ADF funded operations, while the pol icy dialogue will be conducted under the proposed pol icy lending.

70. A major challenge for The Gambia i s to build public sector capacity in order to ensure efficient government functions, support good governance and promote growth. In l ine with the Capacity Development Management Act ion Plan (CDMAP) prepared by the Wor ld Bank, this JAS wil l help build capacity across sectors, projects and analytical activities. This wil l be done at the level o f ministries and the administration, as we l l as at the level o f local communities and c i v i l society organizations. Activities to be financed by the Wor ld Bank and/or AfDB will include:

- carrying out a c i v i l service reform study and providing support t o implement some o f the study's recommendations, - supporting reforms o f public systems and the capacity o f staff to run them (procurement, statistics, budget cycle), - supporting capacity development o f justice sector institutions, - scaling up support to local governments and service delivery at decentralized levels, - providing assistance in education at the primary, secondary and tertiary levels, as wel l as assistance in sk i l ls development, - strengthening the monitoring o f PRSP results, and - ensuring donor coordination o n capacity building activities.

7 1. Successful implementation o f the ongoing portfolios will be an important tool for achievement o f the JAS outcomes, supported by new operations and analytical work under the new jo in t strategy. Efforts will focus on enhancing implementation quality in order to attain results. Effective portfolio management requires a strong presence in the field. On the Wor ld Bank side, the Liaison Off ice i s playing a key role in this respect. The Country Director will continue to visit The Gambia o n a regular basis and facilitate a quarterly portfolio review (mini-CPPR) process. There are also a number o f Dakar-based project task team leaders. In addition, a Monitor ing and Evaluation (M&E) specialist and an operations officer were decentralized to Dakar as o f October 2007. On the AfDB side, support f rom SNFO and regular missions by Headquarters's staff will allow for close supervision o f JAS implementation.

72. This JAS will focus on results and outcomes, and will help harmonize M&E requirements, including in areas such as budget support. In Annex 1, the Results Matr ix summarizes (i) the PRSP-I1 objectives that the JAS seeks to support, (ii) the results that both institutions hope to contribute to through their interventions, and for which they will be jo in t ly held accountable, and (iii) the instruments that both institutions will use to implement the program. Should changes occur during JAS implementation, whether in terms o f resource availability or performance, IDA and ADF-funded activities would be adjusted accordingly. In addition, a mid-term JAS progress report i s scheduled for early 2010, which will allow the AfDB and the Wor ld Bank to review and discuss necessary adjustments.

Managing the existing portfolio3'.

JAS Instruments

73. Budget Support. The JAS will be a platform for the two institutions, working in a complementary fashion, to re-engage the Government in pol icy lending39. The Gambia i s

38 See Annexes 10 and 11. 39 Development Policy Lending (DPL at the World Bank) i s called Policy Based Lending (PBL) at the AfDB). The last IDA-funded adjustment operation closed in 1992 (2nd Structural Adjustment). On the AfDB side, the second Structural Adjustment loan (SAL 11) was approved in January 1990 and became fully disbursed by July 1992.

- 20 - ready to transition to budget support, given i t s good growth record and demonstrated continued commitment to improving i t s macroeconomic pol icy and fiduciary systems. Given the governance and institutional weaknesses noted earlier, appropriate measures will be incorporated in the design o f the policy lending operations to mitigate these risks, including (a) incorporating recommendations o f the Country Financial Analytical Assessment (CFAA)40, (b) tahng into account the institutional capacity for implementation, (c) incorporating work being carried out under ongoing donor support to improve public expenditure management systems 41.

74. Should the Government’s reform program stall or macroeconomic conditions deteriorate significantly during the JAS period, IDA and ADF resources earmarked for budget support would be reallocated to less risky investments and poverty-targeting operations. On the other hand, if the gradual reform scenario continues, the Wor ld Bank and AfDB will focus o n areas where further traction i s l ikely and in sectors contributing to The Gambia’s path to prosperity. In order to foster demand for good governance and strengthen social accountability, public sector management interventions will be supplemented with active engagement at the level o f the domestic private sector and with support to institutions outside central government, such as c iv i l society, local communities and NGOs.

75. During the JAS period, it i s anticipated that up to a third o f IDA and ADF financing to The Gambia wil l be provided through a series o f two DPLs. Given the fact that the Wor ld Bank and the AfDB have not engaged in budget support in The Gambia for a long period o f time, a programmatic approach i s proposed in the form o f a series o f two operations, the f irst one to be financed by the Wor ld Bank in early FY09 (about US$7 million), and the second one by the AfDB (about US$3 mill ion) with a time lag o f nine to twelve months. Should additional IDA resources become available, notably as a result o f gradual improvement in the country’s performance, a cofinancing by IDA o f the AfDB-funded operation could be envisaged. The JAS will condition these two successive operations, to the greatest extent possible, on achievement o f a set o f indicators that will be agreed with Government and with other donors (budget support will also be provided by the EU, starting in late 2009). The Wor ld Bank, AfDB and the EU will share a common pol icy matrix agreed with the Government. The sharing o f the pol icy matrix will be formalized by a Memorandum o f Understanding (MOU).

76. Analytical work will help lay the foundation for support to the JAS key objectives. B o t h institutions will ensure that, within their l imi ted budget envelopes, sufficient resources are allocated for the preparation o f new lending operations, including for upstream AAA. The AAA program has been developed taking into account the analytical work o f other development partners and knowledge gaps affecting the pol icy dialogue, or project preparation implementation.

77. The core diagnostic tasks that were completed by the Wor ld Bank and AfDB in pr ior years have helped support the values element o f the new JAS, in particular with regard to the governance agenda (CFAA, CPAR, PERs). Lessons have been learned f rom these activities, including the need for supporting continued capacity building, dissemination and knowledge sharing.

40 Prepared in FY08 by a joint World Bank and AfDB team.

Support for Economic Management project. IDA-fbnded Capacity Building for Economic Management Project, and AfDB-funded Institutional 4 1

- 2 1 - C - PROPOSED WOFUD BANWAFDB PROGRAMS AND EXPECTED OUTCOMES

78. The proposed JAS platform for 2008-2011 i s based on two main pillars (see Table 7 below: (i) Strengthening the institutional framework for economic management and public service delivery, and (ii) Enhancing productive capacity and accelerating growth and competitiveness. The JAS results matrix i s presented in Annex 1. The matrix establishes the results chain for the JAS program and focuses o n outputs and outcomes, l inked to longer term country outcomes. Indicators have been identified to measure progress.

JAS Pillar 1 Strengthening the Institutional Framework for Economic Management and Public Service Delivery

79. This Dillar i s l inked to the first. third and fourth pillars o f PRSP I1 and will a im at (i) improving the enabling pol icy environment, (ii) improving coverage o f the basic social services and social protection needs o f the poor and vulnerable, and (iii) enhancing governance. The success and sustainability o f the Government’s efforts in promoting growth and reducing poverty wil l very much depend o n macroeconomic stability and the pace o f structural reforms aimed at increasing the availability o f services and facilitating their access. Specifically, the Wor ld Bank and AfDB will seek to assist the Government in improving budgetary practices to increase the resource allocation and in supporting social programs in order to achieve better access to public services and outcomes in education and health, water and sanitation (see Annex 1 for contribution o f Pillar 1 to PRSP-I1 objectives and for JAS outcomes/milestones and interventions by AfDB and the Wor ld Bank).

80. During the JAS implementation period, the strategy wil l focus on governance. In particular, i t will address issues related to the efficiency o f public resource management and the effectiveness o f public service delivery in sectors such as education, health, water and rural electrification. I t wil l support c iv i l service reform to make c i v i l servants more accountable and address issues o f high turnover rates.

EXPECTED RESULTS - PILLAR ONE (i) Imurovina the transparency and accountabilitv in the use of uublic resources

8 1. Strengthening governance i s crucial in improving economic management and public service delivery in The Gambia. By strengthening budgetary procedures, fiduciary reforms help improve the efficiency o f expenditures. By encouraging the involvement o f local governments and c i v i l society, these reforms help optimize spending allocations.

82. The Government i s committed to sustain ongoing public financial management reforms. The 2003 CFAA action plan prepared jo int ly by donors42, as wel l as the recommendations emanating f rom the Wor ld Bank’s FY04, FY05 and FY06 Public Expenditures Reviews helped to raise the awareness o f the key challenges and necessary actions and to place the reforms o n the agenda o f both the Government and donors over the past few years.

42 Including the World Bank and AfDB

- 22 -

World Bank

Table 7 Ongoing and Proposed JAS Lending and Analytical Program (2008-201 1)

AfDB

Ongoing AAA Multi-country PPIAF Multi Sect. Regul. Framework

Planned AAA PPIAF Development o f Energy Master Plan PPIAF Tarif f Modeling

PILLAR 1 -Strengthening Economic Management and Public Service Delivery

Ongoing AAA

Planned AAA Diagnostic Re-export Trade Study Private Sector Profile

Ongoing Portfolio Capac. Building for Econ. Management (CBEMP) ($15.0 m) Supplemental CBEMP ($3.0 m) 43

Education Phase 2 ($8.0 m) Community Driven Development ($12.0 m) Regional Locust ($1.9 m)

Planned Lending Budget Support (lst in series o f 2) ($7.0 m)

Ongoing AAA

Planned AAA Civ i l Service Study/Governance Profile Country Financial Accountability Assessment Poverty Assessment Public Expenditure Review (PER)

Ongoing Portfolio Institutional Support for Economic Management and Governance (UA1.4 m) Basic Education (UA1O.O m) Health Services Development (UA7.0 m)

5 . Planned Lendin Budget Support (2" in series o f 2) (UA1.5 m)

Ongoing AAA Renewable Energy Study

Planned AAA Civi l Service Study/Governance Profile Country Financial Accountability Assessment Gender Profile Banjul Port Study

PILLAR 2 - Enhancing Productive Capacity and Accelerating Growth and Competitiveness

Ongoing Portfolio Gateway (US16.0 m)

Planned Lending Growth & Competitiveness ($8.0 m) Budget Support (1" in series o f 2)

Ongoing Portfolio Farmer Managed Rice Irrigation (UA5 .5 m) NERICA Dissemination (UA1.5 m) Peri Urban Agricultural Development (UA5 .O m) Artisanal Fisheries Development (UA2.9 m) Participatory Integrated Watershed (UA4.95m) Entrepreneurship Promotion & Microfinance (UA8 .O m) Community Skills Improvement (UA5.9 m)

Planned Lending Livestock and Horticulture Development (UA4.0 m) Budget Support (2nd in series o f 2)

43 was approved in October 2007 (FY08).

- 23 - (a) Outcome: Strengthened public financial management

83. Progress was realized in the implementation o f the Integrated Financial Management Information System (IFMIS), which i s acknowledged by the Government as an integral part o f i t s strategy to strengthen public expenditure management and monitor PRSP-related expenditures. The f i rs t phase o f IFMIS was launched in January 2007.

84. Further integrating PRSP priorities into the Government budget. The PRSP emphasizes the adoption o f a medium-term expenditure framework (MTEF) as a means to further deepen the integration o f PRSP priorities with the budget. This will require improved reliabil i ty o f future projections o f sectoral resource allocations, and the preparation o f costed sector strategies based o n explicit ly defined outcomes and outputs. During the JAS period, efforts in this direction may be initiated in the education sector.

85. In procurement, the Wor ld Bank has been providing extensive support in revising the legal framework and establishing the semi-autonomous Gambia Public Procurement Authority (GPPA). A CPIP was carried out in 2003. An action plan was prepared in 2005 to improve the national procurement system by (i) consolidating a comprehensive legal framework (regulations, bidding documents), (ii) setting up an institutional framework with clearly defined roles and accountabilities (policies, execution, internal and external controls and sanctions), and (iii) building capacities (in particular in decentralized areas). I t i s important that the plan be discussed so that these actions can be validated and prioritized. This would in turn facilitate the move toward the use o f country systems by the donor community and support the dialogue with Government o n ways to separate GPPA regulatory and control functions in line with the OECD/DAC recommendations on procurement.

Lending Instrument:

86. The Wor ld Bank will continue to support the ongoing reforms during the JAS period through the Capacity Building for Economic Management operation. Additional financing for that project was approved in October 2007 in order to (i) implement the second phase o f IFMIS, (ii) complete the establishment o f the Gambia Revenue Authority, and (iii) initiate the upgrading o f A S Y C U D A to version ++. 87. The AfDB will provide support under the Institutional Support for Economic Management and Governance operation. The project will provide assistance in the strengthening o f the internal audit function, with support to the National Audit Office. I t wil l also provide support to SPACO (Strategy for Poverty Alleviation Coordinating Office) and DOSFEA (Department o f State for Finance and Economic Affairs).

88. Bo th institutions will promote the implementation o f public finance management reforms through budget support. As noted above, in designing the policy-based lending; considerations will be given to (i) the available analytical underpinning, (ii) the institutional capacity for implementation, (iii) the need to improve public expenditure management systems, and (iv) activities o f other partners. In the context o f the JAS, the budget support operation would mainly focus o n public finance management and c iv i l service reform.

Analytical work:

89. Coordination between the Government and donors was crucial and will continue to be a key factor with the preparation o f a CFAA, to be carried out jo in t ly by key donors in FY08, as analytical work in preparation o f the f i rst budget support operation. The CFAA will be conducted by applying the Public Expenditure Financial Accountability (PEFA) measurement framework. I t will assess the fiduciary risk management in the country and will assist the Government in strengthening the national financial architecture. A full Public Expenditure Review will be prepared in FY09, as an input in the second budget support operation.

- 24 - (b) Outcome: Strengthened national statistical system

90. The JAS will continue to support the Government in i t s efforts to improve data quality and availability so that monitoring o f economic developments and poverty reduction can be strengthened.

Lending Instrument and analytical work

91. The Wor ld Bank and the AfDB will actively support this agenda through the above- mentioned Economic Management support projects and the budget support operations. In addition, the Wor ld Bank will finance the preparation o f a poverty assessment in FY08 with possible AfDB participation. A detailed implementation plan for the Gambia Bureau o f Statistics (GBOS) i s to be costed (with assistance provided under a Wor ld Bank Trust Fund) and discussed at the next donor roundtable.

(e) Outcome: Strengthened audit function

92. The PRSP emphasizes the need to improve transparency and accountability in planning, designing and implementing the PRSP program by facilitating citizen engagement in the process and public resource management. I t also stresses the need to empower local communities to influence priority setting and resource allocation, and the need to ensure continued dialogue with c iv i l society on the actions required to improve PRSP performance.

Lending Instrument:

93. During the JAS period, the Wor ld Bank and AfDB support will seek to strengthen the role o f Parliament and c i v i l society in overseeing and controlling the use o f public resources. The ADF-financed Institutional Support for Economic Management and Governance Project will provide assistance to the National Assembly, the National Audit Office, the new Directorate o f Central Project Management and Aid Coordination, SPACO, and the Gambia Bureau o f Statistics. The Wor ld Bank-financed Community-Driven Development project will support local governments in delivering a platform o f basic social and infrastructure needs, and hence will increase public sector accountability by allowing beneficiaries to oversee the use o f these funds.

(ii) ImDroving civil service

Outcome: Enhanced Human Resource management policy and tools are available

94. The PRSP acknowledges that the c i v i l service serves as a catalyst for economic development and growth. The effectiveness o f the State to use public funds will largely depend on i t s capacity to manage i t s human resources. Constraints include high attrition, poor remuneration, inabil ity to motivate and retain skilled personnel to al low for career development and security o f tenure, and ineffective utilization o f expatriate staff to ensure s h l l s transfer.

and used in public administration

Analytical work

95. A Governance Profi le has been prepared by the AfDB and a c i v i l service reform study i s being conducted in FY08 jo int ly by the Wor ld Bank and AfDB to complement the above analysis. I t will propose an action plan to be supported by both institutions, notably under the budget support operation. In particular, both institutions will support activities in the education sector to motivate key staffs to work in under-served regions.

- 25 - 96. Initiatives in the medium term include preparation o f (i) a pay reform strategy to be funded under budget support, (ii) a pension reform strategy, (iii) employment and payroll management, and (iv) performance incentives to support results management.

(iii) Public service deliverv in education, health, water and sanitation, and rural electrification

(a) Education. Outcome 1: Gross primary enrollment rate reaches 100% Outcome 2: Gross completion rate reaches 90%

97. The PRSP identifies education as a key determinant o f poverty reduction in The Gambia, which i s part o f the Education for All Initiative. The PRSP notes that the next challenge i s to improve education outcomes and the quality o f schooling. Primary completion i s n o w at 62 percent and i s expected to increase to 80 percent by 2010 and to 100 percent by 2015. During the JAS period, substantial attention i s to be given to expanding access to quality education, especially for girls. The W o r l d Bank (Education Phase 2 APL) and AfDB (Basic Education Project) have had a long-term involvement in the sector. The two institutions will continue their support to the sector in the following areas (i) improving performance o f students, teachers and schools, (ii) strengthening capacity building and performance management, and enhancing monitoring and evaluation, and (iii) continuing expansion o f effective access to under-served communities.

(b) Health.

98. The PRSP notes that the challenge i s to put greater emphasis on primary services and preventive care. The Wor ld Bank will continue to provide support to improving health services by expanding community-based services under the Community-Driven Development operation. The project allows rural communities, in partnership with Local Government Authorities to plan, implement and maintain their priority social and economic investments, including in health. The AfDB Health Services Development Project has been successful in increasing access to health services44.

Outcome 1: Increased number of households with access to basic health services

(c) Water and Sanitation. Outcome: Increased number of water and sanitation Connections in Greater Banjul Area

99. The PRSP’s objective i s to provide access to safe water to 100 percent o f the population in the Greater Banjul area and to 90 percent in peri-urban, growth centers and rural areas o f the country. A Water and Sanitation study i s being financed by AfDB. I t will form the basis for a Water Supply and Sanitation Project to be financed by the AfDB if additional resources beyond the expected country allocation become available.

100. Support t o the sector could be envisaged by the Wor ld Bank Group under a possible output-based aid (OBA) program. OBA i s one method for improving the delivery o f basic services when the inabil ity o f users to pay full cost would justify performance-based subsidies to complement or replace user fees. This financing could be made available in The Gambia for improving the delivery o f water and sanitation. Support to the Government’s program o f small public infrastructure in urban areas 45 was provided by the Wor ld Bank under the Poverty Alleviation and Capacity Building Project (including financing o f pavements, markets, and schools). IDA funding o f a follow-up project to P A C A B could be

44 I s being extended. The PACAB project closed in December 2006 (US19 million) 45

- 26 - envisaged in the next JAS cycle under IDA-16. available under IDA-15, preparation could be moved forward (as a “standby” operation).

Should additional resources become

(d) Rural Electrification. Outcome: Increased number of households with access to electricity in targeted areas

101. The Rural Electrification Project financed by the ADF and BADEA i s to provide continuous power supply to 46 towns and villages outside the Greater Banjul Area. I t represents the init ial stage o f a national grid which wil l eventually be connected to the Greater Banjul System. The major challenge facing the energy sector i s to increase the electricity access rate to 10 percent by 201 1 and to provide sustainable alternative fuels for cooking since biomass based fuels are unsustainable. The other challenge i s to creating additional capacity to generate and transmit electricity and increasing the sector efficiency by reducing the system losses. To meet the energy needs o f The Gambia in the future, the ADF funded a Renewable Energy Master Plan study, which made numerous recommendations in particular to use biogas, solar thermal, methane, and hybrid diesel-wind technologies to generate renewable energy. By investing in renewable energy technologies, The Gambia can gain by selling Carbon credits to the developed countries, thereby drawing benefits f rom Clean Development Mechanism (CDM) o f Kyo to Protocol.

JAS Pillar 2

102. The JAS will provide a framework for strategic investments and pol icy options to (i) support growth poles in The Gambia and (ii) address key barriers to investment. These poles could be centered around key sectors o f the economy such as tourism and agricultural exports. In order to improve the productive capacity o f the poor, the strategy will provide support to agriculture and livestock development, sk i l l s development for women, and microfinance.

103. The Wor ld Bank and the AfDB bring significant comparative advantage in terms o f (i) supporting the multi-dimensionality o f development o f these growth poles, (ii) making an impact through complementarities o f investments, and (iii) leveraging additional financing resources.

Enhancing Productive Capacity and Accelerating Growth and Competitiveness

This JAS pil lar i s in support o f pil lar 2 o f PRSP 11.

EXPECTED RESULTS - PILLAR TWO

(i) Promotinp a competitive investment climate/Growth and Competitiveness

Outcome 1: Increased number of tourists Outcome 2: Increased volume of agribusiness exports Outcome 3: Improved credit to private sector

104. The Gambia’s business environment presents both challenges and opportunities. Foreign direct investment i s high (over 10 percent o f GDP), mostly t o finance hotels for the tourism industry. IFC/FIAS will assist the authorities in addressing existing administrative barriers that f i r m s face when they want to establish themselves and operate in the country. In particular, in the context o f the Wor ld Bank-financed Gateway project, they will review new investment policies, notably the Investment Act, the Free Zone Act, investment incentives, their administration and impact. They will also review the simplification o f customs and business registration procedures. Initiatives to support access to credit are described below. Finally, they will support capacity and sk i l l s building initiatives.

- 27 - 105. As noted in para 16, tourism i s the dominant sector o f the economy. Agricultural exports i s another potential driver o f growth. Current growth in The Gambia is, to a large extent, spurred by the private sector, but constraints remain in terms o f poor infrastructure and the need to strengthen the business climate and pol icy environment. This context creates the justification for the concept o f growth poles to help provide the adequate business environment to stimulate and lead economic growth in selected areas.

106. The support to “growth poles” in The Gambia, as wel l as initiatives aimed at addressing constraints to growth and competitiveness could be financed under a proposed Growth and Competitiveness operation. Tourism and agricultural exports could be envisaged as possible growth pole components o f the project.

107. The project would rely on an infrastructure platform to help accelerate the growth o f these sectors. This platform would be composed o f main infrastructure upgrades in the energy, water and transport sectors to attract private sector investments. This infrastructure platform would be complemented by pol icy reform in the business environment (including in the financial sector), and some activities under the ongoing Wor ld Bank-financed Gateway project.

108. The Wor ld Bank i s a core agency of the Enhanced Integrated Framework (EIF). A DTIS was carried out in 2007. The EIF will have some US$3-4 m i l l i on per country to support the implementation o f the DT IS during the JAS period, with particular emphasis on the growth and competitiveness agenda.

(ii) Facilitating access to financial resources bv micro, small and medium sized enterprises lMSMEs)

Outcome: Improved access to finance

109. The private sector in The Gambia consists mainly o f MSMEs, which are constrained by limited access to finance and poor management and technical capacity. Based o n previous poor performance o f projects in The Gambia, IFC has chosen a selective approach by focusing on enhancing the capacity o f local financial institutions to improve the access to finance o f their existing and potential SME clients. Activities that IFC i s currently loolung to finance include: (i) improving access to finance through investment in local microfinance institutions and provision o f facilities under the IFC Global Trade Finance Program to local commercial banks, (ii) strengthening enterprise sk i l ls (capacity building) and market linkages o f these institutions through advisory services (through the PEP Afr ica and Afr ica M S M E Programs), (iii) improving the business environment (reducing cost o f compliance with business regulations for the formal sector). These activities would complement S M E support to be provided by AfDB within the same strategic framework.

1 10. The ADF-funded Entrepreneurship Promotion and Microfinance Development Project i s supporting the training o f rural women, men, and youth in entrepreneurship and sk i l l s training to become economically empowered. The project also has a microfinance component for wholesaling to experienced and qualified non-banking institutions. In addition, the private sector arm o f the AfDB will support SMEs.

- 28 - (iii) Strengthening the amicultural sector

Outcome 1: Improved productivity of crops, livestock and forestry Outcome 2: Improved prevention and early warning system

111. The sector has been stagnant and lacks a coherent strategy. Agriculture-related activities will contribute to poverty reduction and improved foreign trade by sustaining the conditions for (i) improved efficiency o f the groundnut sector, and (ii) the development o f the potential o f the Gambia’s agricultural sector, beyond groundnuts. Activities which could be financed could include (i) rehabilitation o f river transportation to alleviate current constraints to the evacuation o f groundnut harvests, (ii) capacity building o f the various stakeholdershnformation exchange (quality/food safety issues), (iii) research, and (iv) support to commercial environment.

112. The PRSP notes that most o f the poor are farmers in rural areas, particularly groundnut farmers, and that agricultural productivity has stagnated in recent years. The assessment by Wor ld Bank and IMF staff o f initiatives in the agricultural sector recommends that these initiatives be further focused o n private sector promotion. Development o f the sector will l ikely require a multi-sectoral approach which encompasses agricultural development, employment creation, and access to social basic services and infrastructure.

1 11. The Wor ld Bank i s providing assistance to the rural poor through a Community- Dr iven Development operation, whereby rural communities plan, implement and maintain their priority social and economic investments. The Gateway project i s providing some support to the groundnut sector in terms o f l imi ted rehabilitation o f river barges for the 2007/8 harvest and technical assistance to kickstart the implementation o f the sector roadmap. As noted above, the proposed Growth and Competitiveness operation would help develop the potential o f the Gambia’s agricultural sector beyond groundnuts.

112. The ADB has traditionally given special attention to the agricultural sector in The Gambia because it i s the major occupation o f close to 70 percent o f the active w ~ r k f o r c e ~ ~ . The on-going agricultural portfolio consists o f seven projects including three multinational projects (see Annex 11). The proposed interventions wil l allow diversification o f crop and animal production systems, efficient management o f natural resources, and the development o f rural financial services. The AfDB group, with 22 percent o f i t s cumulative commitments to agriculture in The Gambia, has built up significant experience and expertise in the sector. The proposed Livestock and Horticulture operation, which i s to be implemented nationwide, i s country-driven and will build on the Peri-Urban Smallholder Improvement Project (PSI?). The latter i s one o f the best performing projects in the on-going portfolio. Eighty percent o f PSIP beneficiaries are women and the proposed project wil l target rural women as well.

(iv) Enabling the environment for development of the energy sector

Outcome 1: Secure funding for investments identified

Outcome 2: PURA applies new regulatory tools I n new electricity master plan

1 13. During the JAS period, the Wor ld Bank Group will provide support to The Gambia’s energy sector, including technical assistance for the development o f an Energy Master Plan,

In addition to consistency with the country’s development agenda, t h i s i s consistent with the AfDB Strategic Plan through 2007, wh ich considers agriculture and rural development as an important pr ior i ty area.

46

- 29 - possibly through a Public-Private Infrastructure Advisory Facil ity (PPIAF) funding. The proposed funding could also cover regulatory aspects, energy access and prioritization o f investments to support The Gambia’s growth agenda. The AfDB i s also providing support in the area o f renewable energy through the commissioning o f rural electrification projects. For example, under the Community Slulls Improvement Project, 21 sk i l l s centers in rural areas are being equipped with solar panels.

114. If an understanding i s reached on the sector fiamework, IDA funding o f a small project at the national or regional level could be envisaged in the next JAS cycle under IDA- 16, with preparation to start in 201 1 as a “standby” operation. Preparation could be moved forward if additional resources become available under IDA-15. On the AfDB side, the “private sector window” plans to support an energy program for the Gambia River Basin Development Organization (OMVG) in the form o f a public private partnership that includes The Gambia. Technical Assistance has been approved .and coordination among the two institutions will be pursued.

IDA-14

D - ESTIMATED RESOURCE ENVELOPES Table 8: World Bank and AfDB allocations (FYO8-011)

Additional Financing CBEMP FY08 3.0

Budget Support FY09 7.0 ADF-l Budget Support CY09 1.5 3.0

Growth & Competitiveness FYlO 8.0 ADF-l Livestock and CY08 4.0 7.0 Horticulture

I TBD I TBD I TBD I OBA 1 Water & Sanitation 1 TBD 1 TBD I ;Elli 1 Water and Sanitation

TBD Priv.Sect Line o f Credit to I TBD 1 TBD 1 TBD I 1 TBD 1 I 1 SMEs IFC I SME/Microfinance

World Bank

1 15. Actual allocations during the JAS period will be determined o n an annual basis and will depend on (i) total IDA resources available, (ii) the country’s performance rating4’, (iii) the performance o f other IDA borrowers, (iv) the number o f IDA-eligible countries; and (v) terms o f financial assistance (grants or credits).

116. As presented in Table 8, the jo in t strategy has been prepared o n the basis o f an estimated $18 mi l l ion allocation over the period FY08-11. Additional financing o f US$3 mi l l ion under the Capacity Building for Economic Management Project has been approved in FY08. The period FY09-11 will be covered under IDA-15. The envelope under IDA-15

47 IDA country allocations are based on the country performance ratings (CPR), which i s based on CPIA ratings, country portfolio ratings, and governance indicators.

- 3 0 - takes into account the fact that debt rel ief under MDRI has been netted out o f the IDA allocation4*. The IDA allocation to each project should be seen as indicative.

African Development Bank 117. Actual allocations during the JAS period will be determined under ADF-11 (2008- 2010) and ADF-12 (2011). As for IDA15, MDRI debt rel ief i s netted out o f the ADF envelope4’. Given that ADF-11 resources are yet to be determined, it i s assumed that the level o f ADF resources will correspond to the level under ADF-X, minus MDRI: about US$lO mill ion, including about US$3.0 mi l l ion for budget support, assuming guidelines o f ADF-X apply. Confirmation o f whether they apply will be known after the ADF XI Replenishment Meetings early 2008. The ADF-XI1 allocation for 201 1 i s not yet determined.

V - RESULTS MONITORING AND EVALUATION

118. A National Planning Commission (NPC) i s being set up to coordinate planning and implementation of PRSP-11. A pro-poor advocacy group (Pro-PAG) has also been established by Civil Society Organizations (CSOs) to participate in the monitoring o f the PRSP. In terms o f monitoring capacity, good progress has been made in restructuring the Central Statistics Department (CSD), transforming it into the semiautonomous Gambia Bureau o f Statistics (GBOS), and providing training programs and new recruitment o f i t s staff. A new Statistics A c t was enacted in 2005, a Statistical Master Plan has been prepared, and a Statistics Council constituted. It i s important that adequate resources be channeled to GBOS to ensure i t s semi-independence and hold it accountable for improved data quality and availability. The poverty database has been improved through the 2003 household Expenditure Survey, the 2003 population census and the 2005/06 economic census. The Wor ld Bank i s currently working with GBOS in preparing a Poverty Assessment and will be working with the Government o n disseminating results within a few months o f data collection.

119. A JAS implementation monitoring system i s in place. T o ensure adequate review o f AfDB and Wor ld Bank contributions toward the development o f The Gambia, related activities under the control o f the two institutions are wel l defined in Annex 1. The JAS matrix includes a l i s t o f results and intermediate outcomes to be monitored during the period FY08-11 and for which the two institutions will be jo int ly held accountable. Project activities will be assessed on a regular basis, including during regular portfolio reviews. The overall JAS and portfolio M&E systems wil l contribute to increasing the country’s capacity to monitor i t s PRSP program and strengthening the country’s data capacity and external a id monitoring. The JAS implementation monitoring system wil l be l inked to the Government’s PRSP monitoring in different ways, including through (i) regular reporting o n Wor ld BanWAfDB projects and programs (review o f key performance indicators, portfolio reviews, project completion reports), and (ii) a mid-term evaluation o f the Joint Assistance Strategy.

Debt cancellation under the MDRI f r o m IDA would result in average annual debt service savings (net o f 48

HIPC assistance) for The Gambia o f US$4.6 m i l l i on between 2008 and 201 1 and US$6.1 m i l l i on over the next 30 years.

MDRI re l ie f f r o m the AfDB will yield annual debt service savings (net o f HIPC assistance) averaging US$1.6 m i l l i on over the next f ive years and US$3.9 m i l l i on over the fol lowing 39 years.

49

- 31 - V I - PARTNERSHIPS and PARTICIPATION

120, The Gambia continues to be highly dependent o n external development assistance. Over 80 percent o f the country’s development budget i s contributed by the international donor community. Major donors include the AfDB, the Wor ld Bank, IMF, EU, DFID, OPEC, UNDP, the UN agencies, Taiwan ROC, and Japan (see a summary o f donor interventions in Annex 8).

121. External donor assistance i s expected to increase over the period 2007-2012. The Government i s planning a donor conference in February 2008 to mobilize additional external a id for supporting the implementation o f PRSP-11.

122. The issue of aid harmonization i s important in a small country like The Gambia. More than 15 donors are providing assistance, which i s channeled through a broad variety o f entities, both governmental and non-governmental. An overall framework for external partners’ coordination i s not yet in place, and different government agencies deal with different development assistance agencies. The Gambia has signed the Paris Declaration o n Aid Effectiveness, and most external partners are aligning external assistance with country objectives, but are preparing separate assistance strategies for the period 2007-201 1, including U N D P and the EU. This JAS i s an important step in the process o f harmonization.

123. The preparation o f this JAS was discussed with other partners. Joint analytical work i s envisaged with a number o f donors, including o n fiduciary issues, such as the next Country Financial Accountability Assessment (CFAA). Joint project supervision will be sought, along the lines o f what i s already in place in the education sector5’. This JAS also supports the Government tahng the lead in coordinating donor assistance, in particular through the newly established Central Project Management and Aid Coordination Directorate. Progress in terms o f donor collaboration will be measured at the time o f the JAS Progress Report to see to what extent a further consolidation o f strategic frameworks could be envisaged for the next cycle (2012-2015), notably with the U N D P and the EU.

124. Participation. The JAS i s based on in-depth discussions with the Government and consultations with donors and other stakeholders. First, a one-day workshop o n “The Gambia Path to prosperity” was held in Washington D C in early March 2007 o n “The Gambia with a Government high-level delegation l ed by the Vice President and attended by seven Secretaries o f State, representatives o f the private sector, and donors. The workshop discussed sources o f growth, key development challenges and the country’s priorities. The authorities expressed their views o n the proposed support to be provided by the Wor ld Bank and the AfDB to the Government’s development agenda. Additional insights came f rom follow-up consultations in The Gambia in April 2007 with Government. As progress was made o n triggers to meet the HIPC Completion Point, and as it became clear that the IDA and ADF resource envelopes would be adjusted downward to take into account the MDRI debt relief, in-country consultations were held in October 2007 to revisit the scope o f the strategy and to ho ld discussions with stakeholders and donors (see Annex 12 for more details).

VI1 - MANAGING R I S K S

125. There are two external factors which pose risks to the successful implementation of the proposed joint strategy. First, the country remains vulnerable to drought. Weather-

’’ Government’s Education Program i s now supervised jointly under Government leadership by a l l donors involved.

- 32 - related shocks have a spillover effect on critical sectors such as tourism, agriculture and infrastructure. This JAS strongly supports risk mitigation measures in rural areas and agricultural productivity.

126. Second, given the country’s small domestic market and strong reliance o n external trade and service industries, The Gambia i s susceptible to an increase in o i l prices, possible global recession, and related changes in the tourism sector. The emphasis in the jo in t strategy o n supporting fiscal prudence and economic diversification through improving the business environment i s essential to mitigate these risks.

127. Risks to the reform momentum are moderate. The finalization o f a new PRSP, and indications o f increased project a id f rom development partners provide the necessary space for the Government to generate a consensus o n economic reform measures. However, the Wor ld Bank and AfDB programs are relatively small and may not have the necessary leverage. Donor coordination i s therefore crucial to accompany the Government’s reform program in a more meaningful and sustained way.

128. The potential deterioration of the macro situation i s a risk, which could be potentially triggered in the event o f any number o f exogenous shocks, or in the case o f policy slippages. The JAS program reflects the need for maintaining fiscal balances and reducing domestic borrowing. The high level o f external debt i s also a risk factor. The authorities intend to limit new debt accumulation and to keep borrowing on highly concessional terms. The country has requested assistance for the development and adoption o f a new debt strategy by mid-2008 to ensure debt sustainability beyond the HIPC Completion Point.

129. Inadequate fiduciary controls could result in increased corruption and could undermine investor and donor confidence. The Government i s taking actions to improve governance in key areas. The Wor ld Bank and AfDB will continue to (i) engage in policy and institutional reform, (ii) carry out a systematic analysis o f corruption r i sks in sectors o f potential engagement, (iii) strengthen project and portfolio supervision efforts, (iv) pursue remedies when corruption i s found, and (v) enhance disclosure o f information to facilitate oversight o f project implementation by beneficiaries and c i v i l society. The proposed re-engagement o f the two institutions in budget support operations i s a s ign o f improvement o f the country’s own systems. In case o f significant improvements or slippages in core governance areas, the program o f activities financed under this JAS could be adjusted.

130. Capacities o f public institutions in The Gambia are notably constrained by high staff turnover and unfi l led positions. The two institutions will work closely with the Government to complete a c i v i l service reform study and to provide the necessary support to put in place the proposed recommendations.

13 1. Finally, at the level of project implementation, the development effectiveness o f portfolios financed by the AfDB and the Wor ld Bank are hampered by the weak capacity in project management. T o mitigate this risk, the two institutions will work closely with Government and other development partners to increase support to public sector reform, including c iv i l service reform, and to provide extensive capacity building at national and local levels in the context o f projects and analytical work. The JAS program wil l be monitored o n an annual basis and a formal JAS mid-term review will be conducted to assess progress and determine the need for any revisions to the scale and scope o f the proposed programs.

Governance remains a factor.

Managing capacity shortage.

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- 3 7 -

The Gambia a t a glance 2/26/07

Key Development Indicators

(2005)

Population, mid-year (millions) Surface area (thousand sq. km) Population growth (%) Urban population (% of total population)

GNI (Atlas method, US$ billions) GNI per capita (Atlas method, US$) GNI per capita (PPP, international $)

GDP growth (%) GDP per capita growth (%)

(most recent estimate, 2000-2005)

Poverty headcount ratio at $1 a day (PPP, %) Poverty headcount ratio at $2 a day (PPP, %) Life expectancy at birth (years) infant mortality (per 1,000 live births) Child malnutrition (% of children under 5)

Adult literacy, male (% of ages 15 and older) Adult literacy, female (%of ages 15 and older) Gross primary enrollment, male (% of age group) Gross primary enrollment, female (% of age group)

Access to an improved water source (% of population) Access to improved sanitation facilities (% of population)

The Gambia

1.5 11

2.6 26

0.4 290

1,920

6.5 (2006) 3.7 (2006)

59 a

56 89 17

79 84

82 53

Sub- Saharan

Africa

741 24,265

2.1 37

552 745

1,981

5.3 3.1

44 75 46

100 29

99 87

56 37

~

Low income

2,353 29,265

1.8 31

1,364 560

2,486

7.5 5.6

59 80 39

73 50

110 99

75 38

Net Aid Flows

(US$ millions) Net ODA and official aid Top 3 donors (in 2004):

United States Japan Germany

Aid (% of GNI) Aid per capita (US$)

Long-Term Economic Trends

Consumer prices (annual % change) GDP implicit deflator (annual % change)

Exchange rate (annual average, local per US$) Terms of trade index (2000 100)

Population, mid-year (millions) GDP (US$ millions)

Agriculture Industry

Services

Household final consumption expenditure General gov’t final consumption expenditure Gross capital formation

Exports of goods and services Imports of goods and services Gross savings

Manufacturing

I980

55

4 0 5

23.0 84

6.8 -0.2

1.7

0.7 24 1

30.8 14.9 5.6

54.3

63.0 31.2 26.7

42.7 63.6

I990 2000

99 49

12 3 6 3 4 3

34.0 12.3 106 37

12.2 0.2 12.0 3.7

7.9 12.8 100 100

0.9 1.3 317 421

(% of GDP) 29.0 35.6 13.1 13.1 6.6 5.4

57.9 51.1

75.6 77.8 13.7 13.7 22.3 17.4

59.9 48.0 71.6 56.8

5.3 13.6

2005

63

3 3 2

16.5 43

3.2 4.3

28.6 100

1.5 461

33.0 13.0 5.1

53.9

78.5 11.1 25.0

43.4 60.3 11.9

Age distribution, 2005 I Male Female

150-54

20 10 0 10 20

percent

Under-5 mortality rate (per 1,000)

200,

150

100

50

0 I 1990 1995 2000 2004

OThe Gambia OSub-Saharan Africa

Orowth of GDP and GDP per capita (%)

10 7

90 95 00 (

+GDP -GDP per capita

1980-90 1990-2000 200045 (average annual growth %)

3.6 3.4 2.8 3.6 3.0 3.6

0.9 3.3 2.0 4.7 1 .o 7.2 7.8 0.9 4.2 2.7 3.7 5. Q

-2.4 3.1 4.1 1.7 -2.2 4.2 0.0 1.9 2.9

1.2 -0.2 3.5 -5.5 -0.8 5.3

20.9 -7.2

Note: Figures in italics are for years other than those specified. 2005 data are preliminary estimates. .. indicates data are not available. a. Country poverty estimate is for 1998. b. Aid data are for 2004.

Development Economics, Development Data Group (DECDG)

- 38 -

The Gambia

Balance of Payments and Trade

(US$ millions) Total merchandise exports (fob) Total merchandise imports (ci9 Net trade in goods and services

Workers' remittances and compensation of employees (receipts)

Current account balance as a % of GDP

Reserves, including gold

Central Government Finance

(% of GDP) Revenue

Expense

Cash surpluddeficlt

Highest marginal tax rate (%)

Tax revenue

Individual Corporate

External Debt and Resource Flows

(US$ millions) Total debt outstanding and disbursed Total debt service HIPC and MDRi debt relief (expected; flow)

Total debt (% of GDP) Total debt service (% of exports)

Foreign direct investment (net inflows) Portfolio equity (net inflows)

2000

126 193 -37

14

-16 -3.8

111

18.5 16.2 22.1

-1.8

483 22 90

114.8 9.5

44 0

2005

I18 197 -78

8

-60 -13.0

85

19.8 17.2 30.1

-9.2

35 35

674 34

168.1 16.6

60 0

Composltlon of total external debt, 2004

Shn-term, 27

lateral 255

Private Sector Development 2000 2005

Time required to start a business (days) Cost to start a business (% of GNI per capita) Time required to register property (days)

Ranked as a major constraint to business (% of managers surveyed who agreed)

- - -

n.a. n.a.

Stock market capitalization (% of GDP) Bank branches (per 100,000 people)

Governance Indicators, 2000 and 2004

Voice and accountability

Political stability I Regulatory quality

Rule of law

Control of corruption

0 25 50 75

0 2004 02000

Country's percentile rank (0-100) higher values imply bene, ratms

7

1W

Source: Kaufrnann.Kraay-Ma6truUrri. W o M Bank

Technology and Infrastructure 2000 2004

Paved roads (% of total) Fixed line and mobile phone

High technology exports subscribers (per 1,000 people)

(% of manufactured exports)

35.4 19.3

30 99

3.1 2.6

Environment

Agricultural land (% of land area) 75 78 46.1 47.1 Forest area (% of land area, 2000 and 2005)

Nationally protected areas (% of land area) .. 2.3

Freshwater resources per capita (cu. meters) .. 2,030 Freshwater withdrawal (% of internal resources) .. 1.0

C02 emissions per capita (mt)

GDP per unit of energy use

0.21 0.20

(2000 PPP $ per kg of oil equivalent)

Energy use per capita (kg of oil equivalent)

(US$ millions)

IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments

IDA Total debt outstanding and disbursed Disbursements Total debt service

0 0 0 0 0 0 0 0

171 245 6 19 4 6

iFC (fiscal year) Total disbursed and outstanding portfolio 1 I

of which IFC own account 1 1 Disbursements for iFC own account 0 0 Portfolio sales, prepayments and

repayments for iFC own account 0 0

MlGA Gross exDosure New guaiantees - -

Note: Figures in italics are for years other than those specified. 2005 data are preliminary estimates. .. indicates data are not available. -indicates observation is not applicable.

Development Economics, Development Data Group (DECDG)

8/12/06

- 3 9 -

M iI len niu m Development Goals The Gambia

With selected targets to achieve between I990 and 2015 (estimate closest to date shown, +/- 2 yean)

Goal 1: halve the rates for $1 a day poverty and malnutrition 1990 1995 2000 2005 Poverty headcount ratio at $1 a day (PPP, % of population) 59.3 Poverty headcount ratio at national poverty line (% of population) Share of income or consumption to the poorest qunitile (%) Prevalence of malnutrition (% of children under 5)

64.0 57.8 4.8

26.2 17.2

Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) 48 67 77 Primary completion rate (% of relevant age group) 43 44 54 Secondary school enrollment (gross, %) 18 34 47 Youth literacy rate (% of people ages 15-24)

Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 64 81 97 Women employed in the nonagricultural sector (% of nonagricultural employment) 21 Proportion of seats held by women in national pariiament (%) 0 2 13

Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 151 146 142 137 Infant mortality rate (per 1,000 live births) 103 101 99 97 Measles immunization (proportion of one-year olds immunized, %) 86 91 85 84

Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 540

44 55 Births attended by skilled health staff (% of total)

Goal 6: halt and begln to reverse the spread of HlVlAlDS and other major diseases Prevalence of HiV (% of population ages 15-49) 2.4 Contraceptive prevalence (% of women ages 15-49) incidence of tuberculosis (per 100,000 people) 189 206 223 242 Tuberculosis cases detected under DOTS (%) 76 73 69

18

Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) 82 02 82 Access to improved sanitation facilities (% of population) 53 53 53

Nationally protected areas (% of total land area) C02 emissions (metric tons per capita) 0.2 0.2 0.2 0.2

Forest area (% of total land area) 442 46.1 47.1 3.5

GDP per unit of energy use (constant 2000 PPP $ per kg of oil equivalent)

Goal 8: develop a global partnership for development Fixed line and mobile Dhow subscribers (Der 1.000 DeoDie) 7 19 30 192 .. . . I .

Internet users (per I ,000 people) Personal computers (per 1,000 people) Youth unemployment (% of total labor force ages 15-24)

Education indicators (%)

125 1

,j , , , , , , , 0

20w 2002 2005

+Primary net enrollment ratio

+Ratio of girls lo boys in primary & secondary education

Weasles immuniratlon (% of I-year olds)

100,

1990 1895 2000 2005

OThe Gambia 0 Sub-Saharan Africa

0 0 9 33 1 11 18

CT indicators (per 1,000 people)

250

2w

150

100

50

0 2000 2002 2005

0 Fixed +mobile subscnbers B4 Internet users

Note: Figures in italics are for years other than those specified. . . indicates data are not available. 9/26/07

Development Econom cs. Development Data Group (DECDG)

- 4 0 -

Annex 3: The Gambia Poverty Indicators

Gender

Male Female

Table A Poverty Indicators by Local Government Area

(percentage) Poverty Head Count Poverty Gap

(2003) (2003) YO Y O

Kanifing 37.6 14.1 Brikama 56.7 24.2 Mansakonko 62.6 21.9 Kerewan 69.8 35.1 Kuntaur 94.9 50.9 Janjanbureh 75.7 29.0 Basse 67.9 28.4 Source: 2003 Household Survey

B anj ul 7.6 2.2

Head Count Poverty Gap Poverty Meadcapita Severity Living Standard

YO YO Y O Dalasi 48.2 17.2 8.5 14,312 63.0 27.1 15.1 1 1,303

Table B Poverty by Gender of the Household Head

Poverty Severity (2003)

YO 0.8 6.8 13.7 10.0 21.6 30.5 14.4 15.0

Source: 2003 Household Survey

- 41 -

Annex 4: Selected Economic and F inanc ia l Indicators, 2004-2009

2008 2009 Act. Act. Act. 1st rev. Proj. Proj. Proj.

2nd rev. 2nd rev. 2nd rev.

~- 2004 2005 2006 2007

National income and pnces Nominal GDP (millions of dalasis) Nominal GDP GDP at constant pnces Consumer price index (penod average) Consumer price index (end of penod)

Exports, f.0.b.’

Imports, f.0.b.’ Terms of trade’ Nominal effective exchange rate (period average) Real effective exchange rate (period average)

External sector

Of which: domestic exports

Money and credit

Broad money Net foreign assets Net domestic assets

Credit to the government (net? Credit to the pnvate sector and public enterpnses Claims on foreign exchange bureaus Other items net

Velouty (GDPIaverage broad money) Yield on treasury bills (percent per yearf

Gross investment Gross domestic savings Grass national savings

Central government budget Domestic revenue Grants Total expenditure and net lending Overall baiance, including grants Basic baiance’ Basic primary balance’ Net foreign financing Net domestic financing

Stock of domestic public debt

External sector Current account balance

Exciuding official transfers Including official transfers

Current account balance Excluding official transfers Including official transfers

Overall balance of payments Gross official reserves

In months of Imports. c.i.f.

External public debt Stock’ Stock (percent of GDP) Net present value of debt (percent of exports)’ External debt service (percent of exportsf

Use of Fund resources Purchasesldisbursements Repurchaseslrepayments

12,042 20.1

7.0 I 4 3 8.1

10.5 47.5 46.2

-10.2 -1 1.3 -1.2

18.3 28.8 -10.5 -10.6

-6.5 -1.2 7.7

2.4 28.0

29.0 8.0

22.8

20.9 4.5

31 .I -6.2 2.4 9.6 5.7 0.5

32.9

-14.7 -6.1

-58.9 -24.6 31.3 84.0 4.3

580.7 146.5

17.7

0.0 -7.6

(Annual percentage changes, unless otherwise indicated)

13,182 14.248 15,918 16,007 17,900 9.5 8.1 11.7 12.4 11.8 5.1 6.5 7.0 7.0 6.5 5.0 2.1 5.0 5.0 5.0 4.8 0.4 5.0 5.0 5.0

-16.5 3.9 6.2 4.5 3.9 -72.4 143.7 10.8 17.7 3.5 10.2 -0.6 17.6 21.5 17.8

-13.8 -3.0 -0.6 -0.3 0.7 4.2 3.0 ... 4.5 1.3 ...

(Percent change: in beginning-of-year broad money)

13.1 0.3

12.8 6.3 5.5 0.0 1 .o 2.3

12.5

26.8 4.1

11.7

19.7 1.7

30.0 -9.2 -0.1 8.5 5.5 3.7

35.5

-20.2 -15.1

26.2 8.0 17.8 12.6 8.5 -4.6 3.8 -1.6 8.4 2.6 0.0 0.0

-3.7 -5.6

1.9 2.0 10.4 ...

(Percent of GDP)

27.9 27.7 10.6 4.1 16.4 13.3

21.2 22.0 1.7 8.5

29.2 29.1 -6.8 1.4 1.5 4.3 8.4 9.2 5.2 3.2 1.6 -4.7

32.2 28.9

.14.7 -19.4

.11.5 -12.9

8.6 11.8 -3.6 4.1 12.2 7.7 -3.8 -2.1 2.8 3.7 0.0 0.0

13.2 6.1

2.0 2.0 11.6 ...

23.6 24.9 5.3 5.0

12.8 12.8

22.1 21.1 6.3 3.9

25.4 29.1 2.9 -4.1 4.1 1.4 9.0 4.9 0.8 4.6

-3.3 -0.5

29.6 24.3

-16.1 -17.5 -10.8 -12.2

(Millions of U.S. dollars, unless otherwise indicated)

-93.4 -74.7 -111.1 -104.1 -138.7 -69.6 -58.4 -73.8 -70.1 -96.7 13.0 24.4 10.8 10.4 -3.1 96.6 118.6 120.2 120.0 130.0 4.5 5.5 5.7 4.8 4.9

628.2 676.7 266.9 323.4 377.0 134.7 133.6 46.1 49.9 47.5 215.4 101.9 114.0 106.8 118.5

17.7 16.5 13.1 18.5 7.0

(Millions of SDRs) 0.0 0.0 4.0 4.0 4.0

-1.4 -2.7 -2.8 -2.8 0.0

20,017 11.8 6.5 5.0 5.0

4.5 4.7 0.9 1.6

11.8 3.9 7.9

-0.6 4.0 0.0 4.5

2.0 ...

24.0 5.7

13.2

21.1 4.1

29.6 -4.3 1.6 4.7 5.0

-0.7

20.8

-17.0 -11.8

-146.3 -101.4

-2.1 140.0

4.5

436.7 50.7

130.6 7.0

4.0 0.0

Credit outstanding 15.9 14.6 11.8 ... ... ... ... Sources: Gambian authorities: and IMF staff estimates and projections. ’Computed based on values in U.S. dollars. ‘ExCiUdinQ reexports and imports for reexport ’Including advances to the government in foreign currencies. ‘Weighted average for all maturities based on weekly auction data for the month of December for 2004-06. and for October for 2007. ’Defined as domestic revenue minus expenditure and net lending, excluding externally financed capital expenditure. ‘Defined as domestic revenue minus expenditure and net lending, excluding interest payments and externally financed capital expenditure. ‘Assuming HlPC and MDRl debt relief is delivered at end-2007. ‘Exports of goods and nonfactor services (not including reexports).

- 42 -

2002-03

Annex 5: Trade Indicators

Composition of Merchandise Exports (Millions of U S dollars)

1998 2004 Groundnuts 12.5 9.8

Table A

2004-05

Fruits and Vegetables Fish and fish products Cotton Other Domestic Products Re-exports

3.5 3.1 1.4 2.3

109.3

3.0 0.3 0.2 3.1

101.1

Total 132.1 117.5 Source: IMF (2006b, Table 34); h i t s and vegetables figures corrected using Comtrade data as reported in Chapter 10; 2004 groundnuts figure also corrected by authors.

Table B The Gambia’s Foreign Exchange Earnings by Category

1997-2003 Average (Percentage Share o f Total) Merchandise 17.3

Groundnuts 10.6 Fruits and vegetables 3.0 Fisheries 2.4 Other Merchandise 1.3

Services 62.8 Re-export trade, net 18.8 Transportation 10.8 Tourism 33.2

Remittances 19.8

Total 100 Source: IMF (2004, Table 111.2, p. 39).

Figure A Shares of Imports By Origin

OTHER

EU ASIA

EU ECOWAS

OTHER

EU ASIA

ECOWAS

Source: DOSTIE, Trade Review Table.

- 43 - Annex 6: Governance Indicators

Governance Indicators for The Gambia 1996 to 2006

2006 2005 2004 2002 2000 1998 1996 Voice and 23.6 18.3 31.3 32.2 17.8 17.8 11.5 Accountability Political Stability 53.4 54.3 56.3 67.8 61.1 65.9 46.2 Government 26.1 28.9 37.0 25.6 37.4 29.4 40.3 Effectiveness Regulatory Quality 39.5 35.1 41.0 33.2 39.5 47.3 6.8 Rule o f L a w 47.6 45.7 46.2 46.2 49.0 56.7 63.3 Control o f Corruption 30.6 29.6 32.0 38.3 42.2 36.4 65.0

Source: WBI Governance Indicators

- 44 -

Annex 7: Growth and Competitiveness

Sectoral Structure of the Economy and Investment Climate

Primary Sector

1. The primary sector i s dominated by agriculture. About 91 percent o f the extremely poor and 72 percent o f the poor in The Gambia work in the agricultural sector. However, because o f l o w productivity and value-added, the sector only contributes about a third o f GDP. Given these percentages, agriculture i s a crucial sector for shared growth, improved food security and poverty reduction. Increasing agricultural productivity and diversification, improving access to markets, and linking the agricultural sector to the growing tourist industry could provide good opportunities to achieve these goals.

2. Groundnuts remain the country’s main cash crop engaging directly or indirectly over 80 percent o f the population. As noted earlier in this report, the groundnut sub-sector continues to involve the largest number o f the poor. Exports have declined drastically since the 1980s, hitting an all-time l o w in the 2006-2007 season. The current crisis i s not related to the country’s comparative advantage for groundnuts, the shortcomings o f farmers, or international market conditions, but rather to a combination o f l o w world prices, inconsistent sector management, and excessive government intervention.

3. The underlying problems in the groundnut sub-sector are numerous: The cooperative movement has consistently shown poor financial and operational management to the point where farmers have lost faith in their institutions; subsidized fertilizer application i s value- subtracting; international standards for edible groundnuts and groundnut o i l are not widely known or enforced; transport and storage are poor; the industrial processing facilities and r iver barges suffer f rom chronic lack o f investment and maintenance; and prices do not reflect quality differences. L o w quality, especially manifested by high levels o f aflatoxin and pesticide residues, has excluded Gambian nuts from the lucrative European market in edibles, relegating them to the birdfeed market.

4. There i s an urgent need to (i) reduce dependence on groundnuts by encouraging diversification, and (ii) restore sustained growth in the sector by increasing efficiency and competition at a l l levels o f the value chain through new entries and private sector investments. With improved organization, and the return o f experienced strategic investors, groundnut output could be restored to previous highs. With current prices rising, and the prospect o f s t i l l better prices as quality improves, revenues to farmers could quadruple. The sub-sector needs gradual re-privatization o f industrial assets, f i rst through management contracts. This should be accompanied by complementary measures la id out in the Roadmap (recently approved) and policy statement n o w being finalized to include: a new pricing system, the reorganization o f input supplies, crop finance, quality control, maintenance and investment o f assets, research and marketing, a revitalized producer organization and a regulatory framework.

5. Horticulture seems a promising area o f agricultural diversification that could reduce dependence on groundnuts. In the 20 years o f i t s evolution, the Gambian horticultural export industry has made slow progress. A number o f entrepreneurs have tried horticulture, and al l but two have failed or withdrawn. However, there i s room for growth in this sub-sector given the potential in the European and regional markets. With good management and minimal support f rom Government to provide a conducive business environment, horticultural f i r m s

- 45 -

should be competitive. In addition, there i s good potential for linking the agricultural sector to the hotel and tourist trade, and there i s scope for processing o f f ru i ts and vegetables in connection with the newly created free zones. T h e sub-sector can contribute to poverty reduction through increased employment in rural areas.

6. There i s significant opportunity for cashew in The Gambia given the intrinsic quality o f the nut, the cost structure o f collection and export, and the l ikely growth in the global market. I t i s critical that these advantages be maintained by providing the best environment in which the industry can develop without intervention. Cashew i s an excellent smallholder crop and the impact o f a successful development o f cashew exports can have a positive effect on incomes in a producing area. Rough estimates suggest that feasible growth in cashew exports over the next ten years could offer income to some 30,000 households, generating annual revenues almost twice as high as for groundnut farmers. T h i s would be more than al l those engaged in tourism-related activities - and significantly more o f the poor - even if tourism should double in size52.

Cashew i s another promising area o f d i v e r ~ i f i c a t i o n ~ ~ .

7. Livestock rearing in The Gambia i s carried out for local consumption and i s an important farming activity in The Gambia in fostering food security. However, there i s scope for expanding supplies to the local tourist industry and for creating positive linkages with an impact o n revenues.

8. The fishery sector in The Gambia i s unique in i t s geographical configuration. Marine fisheries’s processing and exports are intertwined with the situation in the Senegalese fishing sector, and the crisis there has contributed to a crisis in The Gambia. Exports have fallen from US$40.0 mi l l ion (1985) to US0.4 million53. The number o f licensed industrial vessels has dropped from 160 (1991) to 3, and current receipts by the Government are minimal. None o f the industrial catch i s being processed locally, which i s where some o f the potential lies for local value-added. Rebuilding a modest industrial fishery sub-sector and expansion o f artisanal fisheries appear feasible. K e y challenges include the situation o f fish resources, international competitiveness, infrastructure, and sector policies.

Secondary Sector

9. The industrial sector, which remains small (at around 13 percent o f GDP in 2005), consists mainly o f construction and agro-processing activities. The manufacturing sector accounts for only f ive percent o f GDP. However, two small factories are showing new initiative by pioneering a radically different form o f export-oriented production, namely the production o f garments for the EU market. Bo th have begun operations in the last two years.

Tertiary Sector

10. sectors and represent a large share o f the economy - about 54 percent o f GDP in 2005.

Services, including trade, transport, communications, and tourism are key sub-

5 1 2007 DTIS 52 2007 DTIS

Zone (EEZ) and landed directly abroad. This does not capture fish caught by industrial vessels in waters o f The Gambia’s Exclusive Economic 53

- 46 -

11. Trade. The Gambia has a highly open economy, with import and export ratios to GDP that are higher than most neighboring countries. The Gambia’s import to GDP ratio averaged nearly 60 percent in the 1980s and 1990s, before dropping somewhat in the early 2000s, but remaining wel l above the regional average54, due to the fact that many imports are re-exported.

12. The main domestically produced exports are groundnuts and tourism. Exports o f goods and services f rom The Gambia are equivalent to about 45 percent o f GDP55 (or 30 percent if re-exports are netted out). This i s better than some West African countries, but less competitive than some o f the best-performing small states in other parts o f the world, such as Barbados and Mauritius. The Gambia needs to raise and diversify domestically-produced exports in order to raise the rate o f economic growth, enlarge the available pie, and stimulate various demands for the goods and services offered by the poor.

13. Re-exports are one o f the most important industries in The Gambia in terms o f GDP and employment and play a dominant role as shown in Table 3 in this report. And yet, re- exports are largely ignored in the official documents on The Gambia. The re-export trade accounted for about 80 percent o f total exports in 2006 and contributes significantly to government revenue as goods are subject to tariffs when imported even i f intended for re- export; consequently 40 percent o f The Gambia’s total government revenues and 50 percent o f tax revenues are f rom taxes on international trade, a very high dependence even by Afr ican standards. Re-exports fe l l about 10 percent in 2006, continuing the long-term decline since the mid 1990s.

14. A number o f factors reduce the country’s competitiveness: narrowing o f the differential in favor o f The Gambia with regard to trade taxes, port handling efficiency, etc. Indeed, the country i s confronted with trade pol icy challenges to i t s role as a regional trading hub:, including the ECOWAS common external tariff, which could have a negative impact o n government revenues. Officials in The Gambia understandably express concerns about the sustainability o f the re-export trade, as other countries reduce trade barriers and improve trade facilitation.

15. Framework for trade. The Gambia fares wel l in terms o f regulations for international trade and for the labor market. In terms o f the ease o f dealing with licenses and permit requirements for ongoing businesses, the Doing Business (DB) indicators rank the country 73 out o f 175 countries, a relatively high ranking. Customs clearance procedures work wel l by Afr ican standards. Like l o w tariffs, a relatively efficient customs service i s a crucial ingredient in The Gambia’s re-export trade (see Table G below). T o maintain i t s comparative advantage, the application o f procedures can be improved, and corruption needs to be carefully monitored. Although precise data are not available, duty waivers have been estimated to be as high as 16 percent o f merchandise imports. The high value o f waivers, lapses in recording procedures and discretionary granting o f concessions potentially indicate problems with corruption. For the first time in history, Customs conducted a survey o f taxpayers at the end o f 2005 in order to identify ways to improve services and reduce corruption. This report should be publicized and measures based o n i t s findings implemented

54 About 52 percent in 2005 ’’ T h i s figure for total exports i s somewhat deceptive as i t includes a lot o f re-exports. To compare with other countries, i t is necessary to correct for the disproportionate role o f re-exports which are a rather uniquely Gambian phenomenon. Using the figure for net foreign exchange earnings (after accounting for imported inputs), the ratio o f exports o f goods and services to GDP would be closer to 30 percent.

- 47 -

in order to improve customs operations. The country operates A S Y C U D A version 2.7 for which the core modules were recently upgraded and stabilized. This was a major achievement as it effectively computerizes customs administration. At present, the authorities are upgrading the system so that manifest information can be transmitted electronically, and import/export declarations can be inputted directly by the traders.

16. Institutional Structure for Trade. The successful formulation and implementation o f trade policy and export development poses a major institutional challenge for the Government. I t requires effective coordination across government agencies as wel l as with the private sector and c i v i l society. Normally, this requires a clear strategy with broad ownership, polit ical leadership at a high level, effective coordinating committees, and a secretariat to keep the process moving. None o f these elements i s in place at present. Some support i s to be provided through the Trade Integrated Framework Initiative.

17. Transport infrastructure i s particularly important in the case o f The Gambia, given i t s ambition to serve as a regional trading hub. Improving access to markets i s a key objective. In this regard, the port i s the key node, and roads and river transport facilities linking the port to the rest o f country and the Region. If Banjul i s to compete with other larger ports, The country would therefore have to make numerous improvements to i t s entire transport network.

18. The Banjul Port i s efficient in terms o f speed and cost o f clearance o f goods, although improvements could s t i l l be made. The River Gambia was the init ial basis o f T h e Gambia’s role as a regional hub, and the main mode o f transporting groundnuts. However, river transport has shown a steady downward trend and i s underutilized at present. The airport benefited f rom a major overhaul in 1997. It i s performing we l l and also provides links to the above hub. Recent developments in air safety and security warrant scrutiny o n the part o f the Government. Roads are the dominant mode o f transport, accounting for more than 90 percent o f the total motorized freight and passenger movement, and therefore being a key to trade and growth.

I t has the capacity to expand flights considerably.

19. Tourism in The Gambia i s relatively small but o f considerable economic significance, and i s a major contributor to employment and therefore poverty reduction. Tourism i s the top net foreign exchange earner, generating as much as al l other exports combined. Tourism constituted 16 percent o f GDP in 2006 and contributed over 10,000 direct or indirect jobs, amounting to about 20 percent o f a l l private sector formal jobs. A careful study o f the sub-sector has estimated that the direct benefits accruing to the poor f rom tourism in 2005 were roughly US$14 mi l l ion which i s more than total gross receipts f rom a l l commodity exports combined56. Total tourism revenues remaining in the country are closer to US$50 mill ion.

20. The Gambia offers a range o f opportunities to broaden i t s appeal through natural, cultural and historical attractions. Although the tourism sector i s thriving, a number o f constraints handicap the long-run prospects for growth. Challenges are present in terms o f the institutional environment, most notably the deficient supply and high cost o f public services; the high cost o f electricity; high taxation; high interest rates and lack o f access to credit; inadequate marketing o f The Gambia in foreign markets, and l o w capacity. The Government has developed a master plan for

The tourism sector has been growing strongly.

56 Jonathan Mitchel l and Jojoh Faal, The Gambian Tourist Value Chain and Prospects for Pro-Poor Tourism, ODI, December 2006.

- 48 -

tourism development with support f rom the African Development Fund. I t recognizes the problems and recommends a strategy o f upgrading tourism facilities, and diversifying i t s products, along with an enhanced marketing effort to raise The Gambia’s profile. However, the Government has been slow to begin implementation.

Investment Climate

21. shows that in addition to electricity, other obstacles include credit, land access and taxation.

The recently completed Wor ld Bank Investment Climate Assessment for The Gambia

22. Land. Most land in the Greater Banjul area i s State land and approval f rom the Department o f State for Local Government and Lands i s needed for the leasing and mortgaging o f land. The approval process for obtaining a lease or transfer o f land for commercial purposes i s seen as one o f the main impediments to investment in The Gambia. Time to register property i s 371 days in The Gambia as opposed to 109 for the Africa Region as a whole. The new business park close to the airport will provide areas for business and wil l help export-oriented f i r m s avoid the land access issue. Also, it i s t o be noted that the land-tenure system in The Gambia i s characterized by a dual ownership structure under the concept o f freehold interest and under customary tenure controlled by headmen (Alkalos). As noted in Chapter I1 o f this report, rural women have n o rights to o w n land despite their high engagement in the agricultural sector. The insecurity o f tenure among women becomes evident in times o f death o f spouses or divorce, as they can lose access to the land.

23. Taxes. A central issue concerns the proliferation o f local and sectoral taxes, which together are oppressive to business5’. The Gambia i s ranked 165* in 175 countries regarding the payment o f taxes in DB indicators. In effect, the overall taxation rate o f f i r m s ’ profits i s almost four times higher than the average for Sub-Saharan Afr ica (see Table G below). For example, the tourism industry faces a variety o f special and uncoordinated taxes from both municipalities and the Tourism Authority. The cumulative level o f these taxes i s too high. Greater coordination o f the various taxes i s urgently needed. The possibility o f substituting a value-added tax for the sales tax should be considered as a way o f improving the equity and efficiency.

24. Indirect taxes, consisting o f customs and sales tax, account for approximately 75 percent o f tax revenue. Revenue collection relies heavily o n indirect taxes, but this i s not atypical for a small, export-oriented country. The newly established Gambia Revenue Authority (GRA) has as one o f its objectives the broadening and diversification the tax base in the country, notably by taxing the informal sector, but this i s not easy to accomplish. It could even discourage the entry o f informal companies into the modem economy.

25. Financial Services. Large domestic borrowing by the Government has contributed towards high interest rates, thus crowding out access to credit by the private sector. In 2006, credit to the private sector and public enterprises was about 13 percent o f GDP, which i s small compared to most countries in Africa. The agricultural sector received 15.0 percent o f loans from commercial banks in 200558. This l o w level i s the result o f the restructuring o f non-performing loans for groundnut marketing in previous years, which has directed funds away from loans to productive activities. Commercial bank lending rates were around 20-25

For more details, see 2004 FIAS report and 2007 DTIS. 51

58 compared with 24 percent for re-exports and 45 percent for others, including fishing and personal loans

- 49 -

percent, despite the relatively l o w T-bill rates (11 percent). There are several reasons for inadequate supply and high cost o f loans to the private sector: bank inefficiency, the mix o f monetary and fiscal policies, the short-term nature o f deposits, the lack o f an organization to disseminate information on credit risk, and deficiencies in the legal environment. The share o f f ixed investments financed with bank funds i s l o w in The Gambia, less than five percent compared to almost 18 percent in Senegal.

- 50 -

ANNEX 7 (tables)

Table A Private investment has grown faster in countries with a better investment climate.

3 4 5 8 7 8 9

sentud are averages for 0'9 index of "inwslmnerrt profile"

is basad on measures of contract enforceability, expmpriafon, pmfit rapatriation, ;end payment dalap. Higher numbers are associated with less risk and saonger irwestment climates. Soume: World Bank and Internaijonal

Country Risk Guide.

Table B

2006 Selected Competitiveness Indicators

Do ing W o r l d Heritage Business Economic Foundation

Forum The Gambia Benin Ghana Guinea Guinea-Bissau Kenya M a l i Nigeria Senegal Tanzania Uganda

113 137 94 157 173 83 155 108 146 142 107

102 105 NA NA NA 94 118 101 NA 104 113

123 117 105 126 131 95 88 146 83 94 66

Number of countries 175 125 157 Source: W o r l d Bank, W o r l d Economic Forum, Heritage Foundation.

- 51 -

Table C

The Gambia - Constraints to Firm Operations and Growth

Percet-rtngs 01 fornial firms perceieiiw obstndes to be 'mnlor"or '%vary avawere"to iirni oimrations anrl ~ o y y l l i

Labor Regulation

Judicia system

Po iticsl uncertainty

Crime

Corruption

T'enspor:

=ill &nd Educatioi of av&ilable w x k f x c e

customs Regulalionr

'ism1 Administration

msiress Licensing m d opersting permit=

MBCrOeCOnJmiC st&iltty

Anticorrpetilive 3r irfornal Eradice%

Tar

Land Access

CTedi:

Eectricity

I 0% 2OYo 40% 6 0 % 80% l O C l %

Source: Report 2007 Investment climate Assessment

Table D 2006 Doing Business Indicators by Issue, Selected Countries (By ranking)

The Gambia Ghana Mali Senegal Ease o f Doing Business Composite 113 94 155 146 Starting a Business 124 145 163 150 Dealing wi th Licenses 73 83 122 66 Employing Workers 25 120 131 152 Registering Property 130 113 93 151 Getting Credit 143 117 143 143 Protecting Investors 162 33 99 135 Paying Taxes 165 77 141 159 Trading Across Borders 24 61 167 94

Closing a Business 76 94 99 74 Enforcing Contracts 53 50 140 138

Source: World Bank Doing Business Indicators, online.

- 52 -

Table E

Comparative Cost Structure - Electricity and Telecommunications

The Gambia Ghana Uganda Mauritius Senegal

Electricity rates US0.18 cents up USS0.06 US$0.03 US$0.07 US$0.08 $ per kwh to 130 kwh

Telephone charges to US$0.70 US0.50 USS3.0 US1.40 US0.50 Europe per minute

Source: Sahel Invest

Table F

Percentage o f Fixed Assets Financed Through Bank Credit.

China 20.4

Senegal

South Africa 16.5

Mal i

Maw it ania 6.0

The Gambia 4.1

0.00 5.00 10.00 15.00 20.00 25.00

Note. Unweighted sample data. Source. World Bank (2007). The Gambia: An Assessment of the Investment Cl imate

- 53 -

Table G Taxation o f firms in selected countries.

350 1 300

250

200

150

100

50

0

71.2

Gambia China SSA Mal i OECD Senegal South Mauritius average average Africa

Note. Th is indicator considers the total amount o f taxes and mandatory contributions payable by a business. Source. D o i n g business 2007.

Table H Average time to clear goods at customs (days).

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

7.6 7.6

China Senegal Mal i South Mauritiu Africa

Exports EJ Imports

1

Gambia 3Morocco Source. E n t e p r i s e surveys.

- 54-

Annex 8: Donor Interventions

Economic Management and Policy Reforms

.Poverty Reduction and PRSP

Governance & Decentralization

Health

Education

Infrastructure

The World Bank through lending and non-lending operations i s providing assistance in the areas o f economic formulation and execution and public financial management. Its main on-going operation i s “Capacity Building for Economic Management” (US$ 18.0

The IMF i s currently providing technical assistance in the areas o f financial management, particularly in the areas o f revenue administration reforms, including customs and the establishment o f a central Revenue Authority. I t has also provided assistance to the Statistics Department in updating the CPI data and improving the national accounts. The AfDB Group through i t s “Znstitutional Support for Economic Management and Governance ” (UA 1.4 m) i s assisting mainly in debt management. The EU (Euro 18 million) for proposed budget support DFID i s providing technical assistance in the areas o f financial management and governance through “Gambia Financial Governance Program P.S. 2 m” and the old “Legal Capacity Building Program (PS 0,807 m”, Gambia debt Project P.S. .3 m”. UNDP i s supporting governance reforms, and providing technical assistance through its “Economic Management & Capacity Building Project’’ and through its “National Governance Program” The AfDB through its “Entrepreneurship Promotion and Microfinance Development Project” (UA 8 m) i s providing microfinance for vulnerable groups and through its “Community Skills Development Project” (Loan UA 4.4 &Grant 1.45 m) provides support to community based organizations through the construction o f multi-purpose ski l ls centers and formalizing relationships between the Bank and micro-finance institutions. The EU i s mainly involved in food security and income generation (US $2 m). Other development partners: UNDP, EU, DFID and The UNDAF. The UNDP (i) Proposed “National Governance Program ”; and (ii) “National Environmental Youth Corps”. EU: (Euro 8 m): to support public sector and civ i l service reforms, support to strengthening o f legislative and judicial processes, support to improvement o f trade reforms Other Development Partners: United Nations agencies. The AfDB Group supports basic health through its “Heath Services Development Project 11” (UA 7.0m) (the project i s being extended). The World Bank: “HZV/AZDS Rapid Response” (US$ 15 m - closed in December 2006) and “Participato y Health/Population/Nutrition ” (US$18.0 m - closed in June 2005). Other Development Partners: IsDB and other UN agencies. The AfDB Group through i t s “Basic Education ZZZ Project” (UA 10.0 m) assists in improving the accessibility and quality o f primary education through the expansion of classrooms, teachers training, and provision o f learning materials. The World Bank “Third Education Project Phase ZZ” (US$ 15 m). UNDP: “Formal and Vocational Training, $2 m ” Other Development Partners: DFID, IsDB, OPEC, UNDP and other UN agencies. The AfDB Group: (i) “Water SuppZy and Sanitation Study” (Grant UA 1.2 m); (ii) “Rural Electrification Project” (UA 2.9 m); (iii) “Renewable Energy Study” (Grant UA 0.75 m) IsDB “Westfield Road” US$6 m. The EU Proposed“Transport Program” (Euro 20 m)., RWSS (Euro 6.8 m): (national roads, bridges linking north and south banks, upgrade o f ferry terminals, capacity building) “Energy Program” (Euro 10 million): upgrade and maintenance o f electricity transmission and distribution, capacity building. Other Development Partners: OPEC, IsDB, Kuwait Fund, the Netherlands.

m)

55

Private Sector

Agriculture and Rural Develop.

The World Bank: Gateway Project (US$ 16.0 m) The EU: Rural private sector development (US $ 3.0 m “ 10” EDF”), Support to non-state actors, Euro 2.5 m.

The AfDB Group: (i) “Peri-Urban Agricultural Development Project” (UA 5.07 m), (ii) “Participatory Integrated Watershed Management” (UA 4.95 m); (iii) ‘ i l r t isanal Fisheries Development Project” (UA 2.9 m); (iv) NERICA Rice Development (UA 1.56 m), (v) ‘[Farmer Managed Rice Irrigation Project” (UA Loan 5.0 &Grant UA 0.5 m). EU: STABEXProject, Euro .65 m, Groundnuts Price Fund Euro .6 m. Other Development Partners: FAO, IFAD, Japan, Taiwan, BADEA, IsDB, GTZ.

x r

K 7

r- 0 0 N

Y

cn z

8 2 Z 0 0 0 N N N

I

c C

C c

P -

- 58 -

Annex 11 - Ongoing AfDB Rural Development Projects

- Farmer Managed Rice Irrigation: The project i s developing tidal irrigation areas for rice production. I t also has a rural credit support to farmers via Vil lage Savings and Credit Associations (VISACAs) and training and capacity building for farmers and D O S A staff. The main objective o f the project i s to increase the rice production and incomes o f smallholder rice farmers.

- NERICA dissemination: the multinational project aims at enhancing rice production and import substitution. The project effects technology transfer through production o f foundation and certified seed and through provision o f f ie ld equipment to selected groups o f seed producers for demonstration purposes. Farmer groups are also provided with training in land management.

- Peri Urban Agricultural Development: the project focuses o n the development o f livestock by promoting small-scale livestock enterprises such as poultry and small ruminant breeding plus support to the horticulture sub-sector. Training for farmer groups has been provided in the thematic areas o f livestock development and horticulture husbandry. According to the mid- tern review report conducted in March 2007, implementation was highly satisfactory in the horticulture development and capacity building components. Except for the construction o f slaughter houses and wells, the implementation was quite satisfactory for the livestock development component.

- Artisanal Fisheries Development Project: This project aims at increasing fish production and the cash income o f fisherfolk. The project contributes to resolving the the problem o f protein deficiency in rural areas through increasing inland fish production and consumption. The project creates employment for the fishing communities at large at for woment who are the main target o f the credit program which i s a component o f the project.

- Participatory Integrated Watershed management: This project aims at increasing land productivity and reducing soil erosion on a sustainable basis. The project i s designed to empower communities at the grass-root level through the transfer o f control o f efficient land use management f rom the Government to local people.

- The proposed Livestock and Horticulture Development Project: This proposed investment operation would build on the Peri Urban Project and aims at raising the productivity and quality standards o f the livestock and horticulture sectors. I t would address issues related to the whole value chain, including productivity, farm-gate disposal, l ive animal marketing, marketing to the local tourism industry, product processing, and export. The strategic objectives o f the operation would therefore be l inked to those o f the Growth and Competitiveness project with regard to enhancing the productive capacity o f the poor. Backward linkages with the tourism industry would be forged. The operation would also include capacity building activities.

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Annex 12 - Consultation Process

The JAS i s based o n in-depth discussions with the Government and consultations with donors and other stakeholders. First, a one-day workshop o n “The Gambia Path to prosperity” was held in Washington D C in early March 2007 on “The Gambia with a Government high-level delegation led by the Vice President and attended by seven Secretaries o f State, representatives o f the private sector, and donors.

The workshop discussed sources o f growth, key development challenges and the country’s priorities. The authorities expressed their views o n the proposed support to be provided by the Wor ld Bank and the AfDB to the Government’s development agenda.

Additional insights came from follow-up consultations in The Gambia in April 2007 with Government. As progress was made o n triggers to meet the HIPC Completion Point, and as i t became clear that the IDA and ADF resource envelopes would be adjusted downward to take into account the MDRI debt relief, in-country consultations were held in October 2007 to revisit the scope o f the jo in t strategy and to ho ld discussions with stakeholders and other donors.

Parlementarians noted the importance for the Wor ld Bank and Afr ican Development Bank to engage with their group o n development issues for a number o f reasons. First, they are strong advocates for development, as they debate and approve budgets, review policies and promote coherence across pol icy areas. Second, they promote the rule o f l aw and exercise oversight. And finally, the projects submitted by the two Banks are subject to their approval, either directly through ratification, or also indirectly through the budget process. They noted their appreciation for the closer consultation with their group, which they viewed as a change in the way development assistance i s carried out.

Consultations were held with c iv i l society, including representatives o f NGOs, trade unions, and the media. The group noted the increased and transformed role o f c i v i l society in general, which has n o w joined governments around the globe as agenda setters, decision makers and providers o f community services. The group stressed that experience has shown that policies to reduce poverty are most effective when priorities are set by the countries receiving aid. In their view, collaboration with c iv i l society and the private sector can enhance efforts to promote growth. They also emphasized the role that c iv i l society can play, including (i) ensuring that the voice o f the poor i s heard, (ii) building common ground through participatory approaches, and (iii) offering solutions to local problems. On the Wor ld Bank side, participation o f c iv i l society i s sought in the implementation o f the community-driven development project and the Gateway project. On the AfDB side, i t i s sought in the implementation o f most rural development projects. The group o f NGOs stressed the need to consolidate their relationship with Government and other stakeholders in order to (i) better link NGOs to development actors and better match donor and NGO programs, and (ii) strengthen c i v i l society participation in PRSP-I1 implementation.

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Annex 13 - The Gambia CAS Completion Report

- - -

Date o f CAS: February 10,2003 Period Covered by CAS Completion Report: March 2003- June 2007 (FY03-FY07) CAS Completion Report originally drafted by Herminia Martinez and revised by Francoise Perrot

I - INTRODUCTION

1. This CAS Completion Report (CASCR) reviews the experience implementing IDA’S Country Assistance Strategy (CAS) for The Gambia, dated February 10, 2003 (Report No. 25436-GM), covering the period FY03-05. Due to the delay in the new CAS, the progress during the period FY06-07 i s included. The report reviews the Bank’s strategic objectives, program o f support and their relevance to The Gambia’s development goals. I t assesses the Bank’s performance and presents a set o f lessons for the new assistance strategy (JAS) for FY08-11, prepared joint ly with the African Development Bank.

2. The report i s based on reference documents59 and discussions with the country team, government counterparts and various stakeholders. IEG consulted the Bank’s team during the preparation o f their assessment.

3. The CASCR assesses CAS implementation from the perspective of the Bank’s new results framework. Because the CAS was prepared before the introduction o f the current approach to monitoring, it did not explicitly identify core measurable results, and indicators were not refined. I t only provided some progress benchmarks (Appendix 1). An effort was made in the CASCR to retrofit the intended objectives f rom a broader perspective.

4. The present evaluation concludes that overall performance during the period FYO4-07 i s rated moderately satisfactory. Progress in most sectors during the CAS period has been uneven. The country maintained an average growth rate o f 5 percent, but growth did not translate into poverty reduction due to poor service delivery. The Bank was moderately successful in assisting the Government to (i) strengthen public finance management, (ii) provide public infrastructure, and (iii) increase primary school enrollment. However, some goals were not achieved, notably in the divestiture program and in preparing a comprehensive rural development strategy.

59 CAS; Project Appraisal Documents; Implementation Status Reports; Supervision Reports (aide memoire); Implementation Completion Reports; ESW reports and QAG Assessment Report; IEG reports.

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11 - THE GAMBIA’S DEVELOPMENT OBJECTIVES

5. The Gambia’s long term objectives were enunciated in the 2002 PRSP (Report 24366-GM o f June 20, 2002). PRSP-I was based on extensive poverty analysis which showed an increase in poverty linked to declining incomes and ineffective public expenditures, The Government thus focused the PRSP-I on poverty reduction. The PRSP acknowledged the need for continued growth. The Government identified five broad pillars for i t s pol icy framework which were to:

(i) Improving the enabling pol icy environment to promote growth and poverty reduction;

(ii) enhancing the productive capacity and social protection o f the poor and vulnerable;

(iii) improving coverage o f the unmet basic needs o f the poor;

(iv) building capacity o f local communities and c iv i l society organizations to play a greater role in development; and

(v) mainstreaming cross-cutting poverty issues (gender, environment, nutrition, HIV/AIDS awareness) into development programs.

The PRSP also presented a macroeconomic framework for 2003-05 which was largely consistent with the policy framework.

6. The Government prepared two Annual Progress Reports (APRs) covering PRSP implementation during 2002-03 and 2004, respectively. The APRs and accompanying Joint Staff Advisory Notes (JSANs) were presented to the Fund and World Bank Executive Boards in April 2005 and June 2006, respectively.

7. During 2006, the Government prepared a new PRSP (PRSP-11), which was presented to the Boards in June 2007, together with the accompanying Staff Assessment (JSAN). PRSP-I1 reviews implementation during the entire span o f the f i rst PRSP (2002- 2005), elaborates a comprehensive pol icy strategy for the medium term (2007-201 1). I t includes a detailed action plan to achieve macroeconomic and structural targets and l i n k s objectives more closely to the achievement o f MDGs, including costed and time bound interventions to achieve each MDG. An addendum to the JSAN was recently produced as part o f the H P C Completion Point. I t focuses on implementation during 2005.

111 - BANK’S STRATEGIC OBJECTIVES

8. The CAS was prepared within the fi-amework o f the PRSP and was also informed by work o n a pol icy review6’, by the performance o f the portfolio, and extensive consultations with the Government, c iv i l society and other partners. The main focus o f the overall Bank’s strategy was to support PRSP targets. The CAS was organized around

Under preparation at the t ime 60

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PRSP Pillar 1 Improving the enabling environment for growth and poverty reduction

three broad areas, which supported PRSP pillars. majority o f these objectives in different sectors.

The Bank’s program supported a

*

Figure 1 - CAS support to PRSP Pillars and K e y Sectors

CAS Area 1

Improve public expenditure management

*

CAS Area 2 Promote private

sector growth c.)

CAS Area 3 Enhance equity and quality of

service delivery

c-)

PRSP Pillar 2 Enhance the productive

* capacity and social protection of the poor

Improve coverage of basic social sewices

!* PRSP Pillar 4 - 1 Building capacity for

local, people-centered development

Key Sectors Supported by CAS

- Macro environment - Public Finance Management - Domestic Debt

Key Sectors Supported by CAS

- Private Sector - Agriculture - Energy - Public infrastructure and

services

Key Sectors Supported by CAS

- Education - Health - Public Infrastructure and

services

Iv - THE GAMBIA’S PROGRESS TOWARDS ITS GOALS

Macroeconomic stability and Growth

9. With the exception of the economic slowdown in 2002-2003, The Gambia’s overall macroeconomic performance in the last few years has been strong. In 2002, the impact o f adverse weather on agriculture and poor macroeconomic management led

- 6 3 -

to a 3 percent decline in real GDP. Since then, The Gambia has enjoyed robust growth, mainly because macroeconomic policy has been strengthened. This macroeconomic stability over the last few years has sustained foreign exchange inf lows and vibrant economic activity. Real GDP growth averaged 6.4 percent for 2003-2006, led by tourism, construction, and telecommunications sectors. Growth is projected to reach 7 percent in 2007. However, while The Gambia’s growth in recent years has been commendable, reducing poverty has continued to be a major challenge for the country.

10. During the period o f CAS implementation (FY03-07), both the Bank and the Fund supported the Government in macroeconomic and structural reforms under the agreement overseeing division o f responsibilities. The IMF took the lead in the pol icy dialogue on macroeconomic policies and monitored macroeconomic performance by way o f quantitative performance criteria and indicators. The Bank focused more on capacity building for economic management, as well as social, institutional and structural reforms. These complementary efforts contributed to growth in The Gambia.

Poverty

11. The Gambia remains a poor country, with a GNI per capita of U S 2 9 0 in 2005. The poverty analysis o f the latest Integrated Household survey indicates that the overall poverty headcount ratio i s 57.9 percent. In addition to prevalence o f poverty, inequality i s significant. The Gini coefficient o f 0.484 for 2003 i s relatively high. Through the CAS, the World Bank aligned i t s operations in support o f poverty reduction targets, as outlined in the country’s PRSP. Under the Bank-funded Capacity Building for Economic Management Project (CBEMP), a poverty analysis o f the Integrated Household Survey was prepared and issued in June 2006. I t allowed for a confirmation o f poverty results for the collection period covering five quarters in 2003-2004.

V - ASSESSMENT OF CAS OUTCOMES

12. The CAS focused on PRSP development objectives, and not on CAS outcomes. The CAS noted that “the Bank would align i t s operations in support o f PRSP targets in order to ensure progress toward the MDG targets”. The CAS therefore focused on PRSP pillars. Under these pillars, i t specified three objectives : (i) improve public expenditure management, (ii) promote private-sector led growth, and (iii) enhance equity and quality o f service delivery. I t only included some progress benchmarks. Thus, this CASCR analyzes the intended objectives from a broader perspective.

13. The CASCR reviews each pillar in terms o f the pillar’s main objectives, the related assistance instruments, and i t s achievements or shortcomings with regard to the CAS area o f focus. As noted above, CAS baseline and targets are missing.

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Revenue Overall Balance

CAS Objective - Improving Public Expenditure Management

2004 2005 2006 2007* 20.9 19.7 21.2 22.1 -5.7 -8.6 -6.3 2.9

14. policy environment for growth and poverty reduction.

The CAS objective i s supporting the first PRSP pillar o f improving the enabling

Basic Balance Basic Primary Balance

15. The Bank supported structural reforms to strengthen the macroeconomic framework and public finance management through a Capacity Building for Economic Management project (CBEMP). In addition, analytical work included a Development Policy Review (DPR - FY03)), which assessed the country's prospects, a Country Financial Accountability Assessment (CFAA - FY03), a Public Expenditure Review focused on fiscal discipline (FY06), and a Country Procurement Issues Paper (CPIP - FY05).

2.4 -0.1 1.5 4.1 9.6 8.5 8.4 9.0

16. The authorities have acknowledged that the original macroeconomic targets for 2004 and 2005 were not met, but this was largely due to exogenous factors and the persisting after-effects o f past policy slippages in 2002-2003. Adjustments were successfully implemented in recent years and public expenditure management reforms have achieved their objectives.

17. Macroeconomic performance. Following the early-2000s slippages, macroeconomic stability has been maintained since 2004. The authorities have pursued prudent fiscal and monetary policies, resulting in a resumption o f growth o f about 6.2 percent on average for the period 2004-2006, outpacing population growth which averaged about 2.8 percent in recent years.

18. Fiscal performance. A tightening o f fiscal policies from late 2003 lowered inflation and contributed to sustained growth. The CAS target o f maintaining overall budget deficit at less than 5 percent o f GDP has been met in 2007. The overall fiscal deficit reached 5.7 percent o f GDP in 2004, 8.6 percent in 2005, and 6.3 percent in 2006. However, fiscal performance in the first half o f 2007 has been strong. The overall balance i s expected to register a surplus o f 2.9 percent in 2007. The basic balance, a measure o f the domestic fiscal adjustment effort61 moved into surplus in 2006. The basic primary balance62 moved from a deficit o f over one percent o f GDP in 2001 to an average surplus o f 8.8 percent o f GDP during 2004-2006, and i s expected to reach 9 percent in 2007.

Table 1 - Summary of Central Government Operations, 2005-2007

'' Defined as domestic revenue minus expenditure, excluding externally-funded capital expenditure

capital expenditure Defined as domestic revenue minus expenditure, excluding interest payments and externally-funded

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19. Domestic debt management. Progress has been slow but the growth o f domestic debt has been contained. The CAS target o f limiting the growth o f domestic debt as a percent o f GDP has been partially met. The stock o f gross domestic debt stood at 31.2 percent o f GDP at end-2006, up 8 percentage points from i t s level in 2000. The increase reflected large extra-budgetary spending in 2001, and the Central Bank’s sale o f Government debt between 2003 and 2005 to sterilize the impact o f rebuilding international reserves. However, the stock o f debt has come down to 29.1 percent o f GDP in 2007, reflecting sustained good fiscal performance. The Government has committed to developing a comprehensive debt management strategy (DMS). Domestic debt i s projected to fal l from 29.1 percent o f GDP at the end o f 2007 to 13.7 percent o f GDP in 2012 and to 8.4 percent o f GDP in 2027. The relatively tight fiscal pol icy programmed for the medium term wil l help bring domestic interest rates close to single digits levels. N o w that the country has become eligible for external debt rel ief under H P C and MDRI, the lower debt service, combined with lower interest rates on domestic debt, provides space to increase poverty reducing expenditures.

20. Progress has been slow towards further integrating PRSP priorities into the Government budget progress. The PRSP emphasizes the adoption o f a MTEF as a means to further deepen the integration o f PRSP priorities with the budget. The CAS target o f introducing a medium-term expenditure framework (MTEF) and program-based budgeting has not been met. The Ministry o f Finance started work on the MTEF during the 2005 budget process when an overall resource envelope was developed, but the 2006 budget was produced on an annual basis. The authorities have initiated efforts to establish sector wide approaches in the education and health sectors. Existing public expenditure reviews (PERs), including sectoral PERs for the education, health, agriculture, and road sectors, could form the basis for the preparation o f a MTEF. However, DOSFEA needs to give this priority well in advance o f the budget preparation process.

21. Good progress has been made in carrying out publ ic financial management reforms. These reforms have improved transparency and accountability in the use o f public resources.

The Budget Management and Accountability Act was introduced in 2004. I t provides for a fuller integration o f recurrent and development budgets, a closer linkage between budget preparation and execution, and consolidation o f public funds. The Central Bank Act was introduced in 2005. It provides increased operational independence o f the Central Bank. The Gambia Revenue Authority (GRA) Act was introduced in 2004. I t created the authority which consolidated administration o f income and sales tax with customs. The CAS target with respect to the introduction o f an integrated financial management information system (IFMIS) has been met. The first phase o f the system was launched in January 2007, and i t represents a comprehensive public expenditure management IT system for a l l stages o f the budgeting and accounting process. I t currently does not cover expenditures from donor projects. Public accounts have been updated to 2006. The IFMIS i s expected to produce the 2007 accounts by end-March 2008.

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- In addition, the authorities have consistently produced annual public reports on budget execution, as well as reports on the use o f interim HIPC debt rel ief .

22. Overall Pillar Assessment. The above pillar has been rated as satisfactory. Public expenditure management in The Gambia has improved during the last five years, and in spite o f the country’s weak institutional capacity, the planned reforms have made good progress.

CAS Objective - Promoting Private Sector-led Growth

23. The CAS objective i s supporting the second PRSP pillar o f enhancing the productive capacity and social protection o f the poor. The Bank’s strategy focused on helping The Gambia: (i) clarify i t s agriculture strategy, (ii) have an energy pol icy in place, and (iii) provide public infrastructure and services.

24. Bank program in support of private sector development. A Diagnostic Trade Integration Study (DTIS) was carried out in FY07, which provides a framework for accelerated growth and makes recommendations on improving the business climate and on strengthening and diversifying domestic production o f goods and services in areas such as groundnuts and other agriculture. A survey was conducted in 2007 to help prepare an Investment Climate Assessment (ICA), which will be finalized in the next CAS period. The CAS work program included a proposed Private Sector Assessment which was not carried out. Instead, informal sector work was carried out in regulatory reform and energy. The Bank approved supplemental financing for the Poverty Alleviation and Capacity Building project (PACAB). The CAS envisaged that the Gateway project would support divestiture activities. Financing for preparatory studies was made available under the project.

25. Agriculture. Most o f the poor are farmers in rural areas, particularly groundnut farmers, and agricultural productivity has stagnated in recent years. The sector i s not diversified, with heavy reliance on groundnut production and traditional subsistence. A new agriculture sector strategy is under preparation, aimed at promoting pro-poor growth and employment in the rural sector through private sector development. Development o f the sector wil l likely require a multi-sector approach which encompasses agricultural development, employment creation, and improvement o f health, education and physical infrastructure. The DTIS has helped identify the constraints to sector growth and possible avenues for diversification and institutional arrangements, notably in the groundnut sector. Although there has been progress in terms o f clarifying the Government’s approach to sector development, the CAS target i s viewed as not having been met, as the strategy was not completed under the CAS period.

26. Groundnuts. Since 2000, mismanagement and pol icy instability have led to a downward trend in exports, hitting an all-time low in 2006-200763. The Government unsuccessfully attempted to privatize the public groundnut processing plants from 2005

63 2007 DTIS

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to 2006. Since then, i t has prepared a comprehensive sector reform strategy to revitalize the groundnut sector. A sector reform “roadmap” has been prepared in consultation with key public and private sector stakeholders, including the Wor ld Bank, IMF and EU. This roadmap outlines the government’s plans to fully liberalize the sector and to privatize the management o f the publicly-owned groundnut plants. Steps already taken include, inter alia, (i) allowing free entry o f operators at a l l levels o f the value chain, (ii) transferring management responsibility for the sector to the Agribusiness Service Plan Association (ASPA), which will determine the producer price, (iii) putting GAMCO, one o f the two processing plants, under a receivership as part o f the liquidation process, and (iv) dissolving the board o f directors o f GGC, the other processing plant, and initiating steps to reconstitute a new Board which wil l no longer intervene in the daily operations o f the company.

27. Energy. Electricity i s identified by the I C A as the most important constraint facing formal sector f i rms. Power outages are frequent and the price o f electricity i s very high. In i t s PRSP-11, the Government has identified energy as a priori ty sector. Some progress has been made. The 2004 Electricity Act liberalizes the sub-sector and opens i t up for private sector investment. N A W E C was slated for divestiture. However, the Government has instead opted for a 5-year management contract with a private firm to begin the process o f improving performance and restructuring NAWEC. In 2007, the Government expressed interest in preparing a master plan to expand the generation, transmission and distribution o f electricity to meet existing and projected energy demand. Financing for the master plan wil l be provided under the next CAS period. In spite o f progress made in the last few years, the CAS target o f having an energy pol icy in place was therefore not met.

28. Provision of public infrastructure and services. Improving poverty alleviation continues to be emphasized in both Bank strategy and Government policy. Through the P A C A B project, the Bank responded to The Gambia’s urban issues. They are characterized by limited access to basic infrastructure, deteriorating infrastructure due to lack o f maintenance, and insufficient municipal financial resources. Progress was made in providing urban services, and the project was successful in providing basic infrastructure services to poor communities and increasing employment, both CAS targets. In al l 79 c iv i l works were implemented and more than 73 percent o f sub-projects are reported to have been implemented in poor areas. The project also helped strengthen local government authorities in prioritizing their investment needs through urban audits, and maintain their infrastructure.

29. The above pillar has been rated as moderately unsatisfactory. Although the constraints to growth in the groundnut sector and the rest o f agriculture have been identified there was slow progress in the preparation o f a rural development strategy. In the same vein, progress was made in the form o f concrete measures taken by Government to revitalize the sector as part o f the implementation o f a sector reform roadmap, based on full liberalization o f the sector. But groundnut export volumes have not yet fully rebounded from their low 2006-2007 figures. In energy, a full-fledged sector pol icy i s not yet in place but the Government has taken measures to improve operations o f the public utility by bringing in private management. More needs

Overall pillar assessment.

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to be done, such as improving the contractual arrangements for private management and strengthening the legal regulatory environment, including by building the capacity and mandate o f the Public Utilities Regulatory Authority (PURA).

CAS Objective - Enhancing equity and quality of service delivery

30. The CAS objective is supporting the third PRSP pillar o f improving coverage o f basic social services and the fourth PRSP pillar o f building capacity for local, people- centered development. The Bank’s strategy focused on helping The Gambia to expand access to and quality o f social service delivery.

31. The Gambia i s on target to meet some MDGs in 2015, such as those related to increasing primary school enrollment or halving the proportion o f underweight children. For the other health indicators, progress i s more limited. The HIV/AIDS prevalence rate has deteriorated in the last year.

32. Health. Health care has expanded significantly. The country has a comprehensive set o f health policies, including the National Health policy, a National Drug policy, ad a National Nutr i t ion policy. Health has the third largest budget among government ministries. The share o f primary and secondary health care within the recurrent budget for health has increased from 42 percent in 1999 to 50 percent in 2003 and has generally maintained this level. The share o f poverty-reducing ex enditures, including health, decreased from 2002 to 200564, but has increased since 2005 . Primary and secondary health care have expanded significantly, particularly the construction o f health centers through donor financing. Moreover, investments in health centers have mostly been made in poorer regions. Physical access to basic health services i s general good, with 85 percent o f the population living within one-hour travel time, o f a health facility. Hospital beds, at 1.2 1 beds per 1,000, compare favorably with other sub-saharan countries. The challenge now i s to ensure that the health centers are properly equipped and staffed.

8

33. The Bank supported The Gambia’s health program through the Participatory Health Population and Nutri t ion project (PHPNP). The project was approved in FY98 and closed in FY05. Total fertility rate declined from 6.4 to 5.1 percent. This decline i s likely attributable in part to higher female education and delays in marriage o f younger cohorts o f women, but also attributable in part to social marketing and availability o f family planning services supported under the project. Infant mortality declined from 92 to 75 percent. Chi ld malnutrition was reduced by 28 percent, reflecting a decrease from 26 percent o f under fives being underweight to 20 percent.

34. The Bank’s HIV /A IDS program’s objective was to help the country organize a preemptive response to the epidemic through a multi-sector approach. K e y performance indicators related to HIV prevention reveal limited impact o f project activities.

From 37 percent in 2002 down to 24 percent in 2005 From 24 percent in 2005 to 26 percent in 2006 and i s expected to increase to 34 percent in 2007.

64

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According to behavorial surveys conducted in 2002 and 2005, knowledge about modes o f HIV transmission and prevention did not improve, r isky sexual behavior increased. [ add email ] .

35. Education. The Gambia’s sector program objectives are well articulated in a new comprehensive Education Policy (2006-20 19, which focuses on expanding and improving the quality o f education. Despite the commitment to education expressed in both sectoral and macroeconomic pol icy documents, the 2001/02 macroeconomic crisis led to severe reductions in the Government budget. This was reflected in the share o f the budget allocated to education, which fel l from 20.7 percent in 2002 to 14.2 percent in 2003. Since then, recurrent budget allocations to education showed increases in 2004 (15.2 percent) and in 2005 (16 percent). However, this i s more an illustration o f the overall macro-economic crisis than o f lack o f commitment to education; in fact, Government provides more money to the education sector than to any other sector in the economy, and budget increases each year have favored education over almost al l other sectoral departments.

36. The education sector has seen some important gains, but challenges remain. Education has benefited from (i) the largest government budget among al l ministries, (ii) support from donors, including IDA’S first phase o f its education APL project (which closed in April 2005) and the ongoing 2nd phase o f the project, and (iii) funding from the EFA FTI Catalytic Fund. Over 1,000 classrooms were built with the support o f the f i rs t phase o f the IDA-hded operation. Between 1998 and 2004, girls’ gross enrollments grew from 67 to 79 percent in lower basic, from 32 to 65 percent in upper basic, and from 11 to 24 percent in senior secondary. Education quality remains the biggest challenge; by al l measures, quality i s l o w and i s showing little improvement across the country, with a particular challenge for girls, who continue to under-perform boys at a l l levels.

37. The above pillar has been rated as moderately satisfactory. Progress was made in access to health services and school enrollment. Capacity constraints and the quality o f education remain a challenge in the coming years.

Overall pillar assessment.

VI- ASSESSING THE BANK’S PERFORMANCE

Quality of Products and Services

38. the planned and actual deliveries o f lending and non-lending support through FY07.

The quality o f Bank work was on the whole satisfactory. Appendix 2 compares

39. Overview. The program (originally to be implemented over the period FY03-05) included three lending operations in the base case and a broad program o f non-lending activities including seven formal or informal reports. The lending program was back loaded, with no lending planned for FY03, possibly because economic and pol icy problems which emerged in 2002 were being resolved. Base case conditions were the satisfactory implementation o f the PRSP, including sufficient budget allocations for

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priori ty sectors; and a satisfactory performance in the macroeconomic front (as demonstrated by performance on the Fund PRGF program) and o f the IDA portfolio. In hindsight, the requirements for the base case may have been strict. The triggers for the high case lending scenario required Government action in the energy sector in addition to continued improvements in the macroeconomic front. The Bank focus on macroeconomic reform was on public expenditure management, which was appropriate given the Bank’s comparative advantage. The Bank’s lending program was relatively narrow in scope, focusing on the social sectors which were viewed as a priority. This may have been justified as the IDA allocation for The Gambia i s small and an infrastructure project and one focusing o n providing services to the private sector and divestiture were being implemented. The program was risky as i t was back-loaded and two o f the three lending operations were follow-ups to ongoing projects, which were to have been delivered late in the program and resulted in overall delays in CAS implementation. Bank lending was affected by the Government’s reluctance to move forward on key sectoral reforms (notably energy), the slow pace o f macroeconomic reforms, and o f project implementation. In hindsight, the non-lending program might have been ambitious given capacity constraints and the limitation on Bank budgetary resources.

(0 Lending

39. planned under the CAS base-case scenario were delivered. In total, new IDA commitments during the FY03-07 period was US$21.9 million, as compared with US$25 million in the CAS base-case lending scenario. This lower level o f new IDA commitments i s due mainly to IDA resource constraints. The programmed Phase I1 o f the Education Sector APL, planned for FY04, was approved in FY06, largely as a result o f delays in the revision o f the new Education Policy. The health and C D D operations were combined into one project (CDD operation) presented to the Board in August 2007. A locust operation, not originally envisaged in the CAS, was approved in December 2004 as part o f a regional effort to combat locust invasion.

Commitments. By the end o f the CAS period (end FY07), the three operations

40. Project Design. The two projects that closed during the CAS implementation period had design problems. IEG rated Bank performance as marginally satisfactory in the Education Sector Program because the review team considered the design over ambitious. The I C R for the Participatory Health, Population and Nutri t ion Project rated the Bank’s performance in lending unsatisfactory because o f the overly complex design, a view shared by the team that carried out the Quality at Entry Review in 1998. I t appears that there may also be design problems with projects under implementation. For instance, the design o f the Gateway Project i s probably over-ambitious given The Gambia’s limited capacity and the government’s ambivalence to reform. The Poverty Alleviation and Municipal Development Project, which had a relatively straightforward design focusing on infrastructure delivery, was successfully implemented. The Quality Assurance Group did not assess any o f The Gambia’s products over the CAS period or in FY06.

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41. Outcomes. Due to the Government’s weak institutional capacity and difficulties in implementing structural reforms, there were delays in implementing reforms in the ongoing and newly approved projects. For example, delays in resolving the external and domestic debt issues made discussions support for priority sectors difficult, although Bank interventions contributed to maintaining the level o f budgetary support for health and education relatively stable during the period. Support to capacity building for economic management contributed greatly to helping the Government deal with cross- sectoral issues, such as public finance management, which were instrumental in the country moving toward HIPC completion point and access to debt relief.

42. Despite problems, the health and education sector operations contributed to shifting sector priorities and focus away from construction and towards results in terms o f services provided. The operations had an impact on the improved service indicators in education and health discussed earlier. Bank involvement through the HIV project contributed to a greater understanding o f issues. Actions through the Poverty Alleviation Project contributed to resolving a serious institutional issue in G A M W O R K S , which has an important role both in ensuring the prompt execution o f projects and in promoting private contracting.

43. The Gambia team prepared two ICRs in FY06, for the two projects which closed in FY05, Phase I o f the Education Sector Program and for the Participatory Health, Population and Nutr i t ion Project. Both ICRs rated the project outcome as marginally satisfactory66 but the results as unsustainable, in part because o f the shortage o f budgetary resources. IEG evaluated the education program, and found the outcome moderately satisfactory, which i s the same rating as that given by the Region. IEG rated the health project as moderately unsatisfactory, which i s lower than the satisfactory rating given by the region because o f shortcomings in the achievement o f some objectives particularly those related to service quality and program management. IEG also judged Bank performance in the health project unsatisfactory even though there was recognition that the Bank team had made a major effort to improve the project desigdimplementation after the mid-term review.

Table 2 - Portfolio Trends (FYO3-07)

Source: IEG ratings

Bo th reports rated the project outcomes as satisfactory as the authors were constrained by the 66

rating system applicable at the time.

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44. Choice of instruments. The Bank has been flexible in i t s assistance to The Gambia to respond to the country’s needs. The Bank included The Gambia in the coverage o f the regional program to fight the locust invasion. I t also provided additional financing to pursue objectives identified under the Poverty Alleviation and Municipal Development project, in particular with regard to small infrastructure services. The choice o f instruments during the CAS period was adequate. However, the Bank’s future lending needs to be more consistent with its new result-based framework.

(ii) Analytical and Advisory Activities (AAA)

45. The economic and sector work included detailed and thorough analytical work, particularly in public finance, and provided the basis for the dialogue with the Government. Whi le no task was dropped, three o f the tasks in the original AAA program in the CAS were slipped as follows: a C iv i l Service Reform study, originally scheduled for FY04 as an informal activity, i s now planned as a full-fledged task. I t has been launched and wil l be completed in the next CAS period (FY08). A Private Sector Assessment, scheduled for FY05, has been turned into an Investment Climate Assessment (ICA). The survey for the I C A has been carried out and the final report wil l be delivered in the next CAS period (FY08). A Poverty Assessment, also originally planned for FY05, has been slipped to FY08.

46. A Country AAA Assessment was carried out in FY07 as part o f the preparation for the next CAS. I t covered the following tasks: the FY04 Public Expenditure Review, the FY05 and FY06 Public Expenditure Updates, the FY05 CPIP, the FY04 CFAA and a PPIAF study on private sector participation in main infrastructure sectors.

47. The Gambia AAA program was rated moderately satisfactory (rating o f 3) overall, as wel l as in the dimensions o f internal quality, participation, consultation and dissemination, and coherence and integration. Strategic relevance was found satisfactory (rating o f 2), as the program was found to have clear objectives, well linked to the main CAS themes, the Bank’s poverty alleviation goals, the country’s development framework and other donors’programs. I ts likely impact was rated moderately unsatisfactory (rating o f 4). Building ownership and coalitions for change has not been as relevant in The Gambia as in other countries because o f the centralization o f decision making and the high turnover in senior government officials, due to decisions from the top. Of particular concern has been the experience with capacity building o n the importance o f which the Bank, the client and the donors agree. The c iv i l service reform study should provide direction in this regard. Bank inputs and processes received a rating o f moderately satisfactory.

Porlfolio Management

48. As o f June 30, 2007, the Bank’s portfolio in the Gambia included five projects for commitments totaling US$55.9 million. The portfolio includes two old projects (Capacity Building for Economic Management and Gateway) and three relatively new ones (Regional Locust, Education Phase I1 and Community-Driven-Development). One

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o f the five projects in the portfolio i s in “problem project” status (Gateway) and is being restructured.

Table 3 - Portfolio Trends ( N O 3 - 0 7 ) *

* includes Regional Locust

49. Disbursements increased over the CAS period reflecting activity in the Poverty AlleviationlMunicipal Development and particularly the H N / A I D S Project which had very high disbursements in 2005 and the Education Project. This trend continued in FY06 when the disbursement ratio was 43 percent. The trend reflects in part the age o f the portfolio, but also improvements in GAMWORKS, a key implementing agency. The disbursement ratio in the CAS period averaged a high 33 percent compared to the regional average o f 23 percent.

50. Fiduciary reporting has improved over the past five years. In FYOO, hal f o f the audit reports due were not submitted on time, a figure had declined to 20 percent in FY02. In FY04 and FY05 al l audit reports were received o n time. This reflects growing understanding o f requirements by the implementing agencies, but also the increased monitoring by the Bank o f financial reporting in general.

5 1. The Government and the Bank have decided to introduce quarterly performance reviews o f the portfolio. The f i rst was carried out in March 2006, and proved effective in resolving pending problems. The new practice i s expected to help improve portfolio performance by identifying bottlenecks and avoiding delays in decision making o n the part o f both the Government and the Bank. The next one i s scheduled for February 2007.

52. Bank internal reports show that most projects were regularly supervised. ISRs show that the team made some progress in setting indicators to measure project outcomes in ongoing projects, although progress i s linked to the paucity o f data discussed above. The number o f risk flags shown in the internal reporting records appears l o w given the perceived implementation problems with the portfolio. The appraisal document o f Phase I1 o f the Education Sector Program provides good indicators and targets which should help in follow-up.

53. During the CAS period, the Bank established a liaison office in Banjul. This office should play an important role in the dissemination o f economic and sector work and in resolving problems in project preparation and implementation.

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Country Dialogue and Donor Harmonization

54. The dialogue with stakeholders and other donors which began at the time o f the CAS preparation continued during implementation. The Bank and the IMF generally coordinated their activities; i t i s important that the two institutions continue to work closely, particularly in ensuring that conditionality i s complementary. The Country Financial Accountability Assessment was prepared jo int ly with the Afr ican Development Bank, the European Union, and the Department for International Development o f the UK (DFID), and the UNDP and DFID collaborated in the preparation o f the Public Expenditure Review. Activities in the education sector, including those o f the recently- approved operation, were closely coordinated with donors involved in the sector, including the DFID, the Afr ican Development Bank, and the EU. The recently approved Community Development Program i s co-financed with the Government o f Japan (PHRD), and program activities coordinated with the International Fund for Agricultural Development, the Afr ican Development Bank and the EU. The Education project i s also co-financed with the Government o f Japan (PHRD). The Bank also proposes to coordinate technical assistance activities with DFID which i s now preparing a capacity building project. The Bank and AfDB are jo int ly preparing the next assistance strategy.

VII - LESSONS FOR SUBSEQUENT CAS DESIGN

55. The fol lowing are lessons for the future CAS:

- The Bank should focus on areas where the Government i s willing to pursue reform rather than focus on areas where no traction i s likely.

- IDA allocations and Bank budget resources may continue to be l imited because o f country size and performance; IDA support should continue to be leveraged with that o f other donors. CAS objectives should take into account available resources. Implementation resources should include costs associated with donor coordination.

- CAS outcome indicators need to be linked clearly to IDA interventions, the CAS should show a linkage between indicators and higher level objectives in the PRSP. Indicators should take into account the CAS timeflame. Base year indicator needs to be included in the CAS.

- The composition o f the lending program needs to take into account the pace o f project implementation in The Gambia: the program should be designed so as to facilitate advancing operations in case o f delays in preparation o f some projects and to the extent feasible the program should be front loaded.

- Project design needs to be simple, given capacity constraints. Senior staff should continue to be involved both at the time o f project design and o f project implementation (resources should be made available).

,

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- Knowledge and capacity issues are a binding constraint to project implementation; the country team wil l need to consider how to best address these issues taking into account the Afr ica Region recommendations on capacity building.

- The Bank should continue to coordinate closely on pol icy reform with the IMF and other donors, to strengthen the message and dialogue with Government. In particular, budget review should be rigorous and look at allocations among Departments.

- Because o f capacity constraints technical support under Bank projects tends to require especially high staff supervision input;

- As governance i s crucial to a successful program implementation, the next CAS may want to place greater emphasis on discussions with Government on this subject; achievements in investment climate reform and public expenditure management can be used as a proxy for economic management and thus governance.

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Planned FY Status FY

CDD PHN

FY04 Yes FY07 FY05 N o (merged with CDD)

MAP SECTION

KartungKartung

KalagiKalagi

SukutaSukuta

DiabuguDiabugu

FarafenniFarafenni

BrikamaBrikama

KerewanKerewan MansaMansaKonkoKonko

Basse Santa SuBasse Santa Su

BANJULBANJULN O R T H B A N K D I V I S I O NN O R T H B A N K D I V I S I O N

W E S T E R NW E S T E R ND I V I S I O ND I V I S I O N

L O W E R R I V E RL O W E R R I V E RD I V I S I O ND I V I S I O N

U P P E R R I V E RU P P E R R I V E RD I V I S I O ND I V I S I O N

C E N T R A L R I V E RC E N T R A L R I V E RD I V I S I O ND I V I S I O N

JanjanburehJanjanbureh

Kartung

Kalagi

Sukuta

Diabugu

Farafenni

Brikama

Kerewan

Janjanbureh

MansaKonko

Kanifing

Basse Santa Su

BANJUL

S E N E G A L

S E N E G A L

G U I N E A - B I S S A U

N O R T H B A N K D I V I S I O N

W E S T E R ND I V I S I O N

C I T Y O FB A N J U L

K A N I F I N GM U N I C I PA L I T Y

L O W E R R I V E RD I V I S I O N

U P P E R R I V E RD I V I S I O N

C E N T R A L R I V E RD I V I S I O N

Gambia

Gambia

ATLANTIC

OCEAN

To Kaolack

To Kaolack

To Kolda

To Kolda

To Bignona

To Bignona

14°N

13°N

14°N

13°N

17°W 16°W 15°W 14°W

17°W 16°W 15°W 14°W

THEGAMBIA

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 10 20 30

0 10 20 30 Miles

40 Kilometers

IBRD 33409R

NO

VEM

BER 2006

THE GAMBIASELECTED CITIES AND TOWNS

LOCAL GOVERNMENT AREA“DIVISION” HEADQUARTERS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

LOCAL GOVERNMENT AREA“DIVISION” BOUNDARIES

INTERNATIONAL BOUNDARIES