```

[Congressional Record Volume 141, Number 70 (Monday, May 1, 1995)]
[Senate]
[Pages S5920-S5924]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

                                 AFRICA

 Mr. SIMON. Mr. President, the World Bank issues an annual 
report on regional perspectives.
  Because I formerly chaired the Subcommittee on Africa for the Senate 
Foreign Relations Committee and have a continuing interest in that 
continent, I read their report on Africa with special interest.
  There are some things that are worth noting.
  One is that, excluding South Africa, the gross domestic product 
[GDP]--national income--grew by just 1.4 percent. That is a low growth 
rate for an area with a high population growth rate. Fundamentally, it 
means there is a continuing decline in the standard of living that 
should concern all of us.
  The high debt burden they mention is also something to be concerned 
about.
  They did note ``the political transition sweeping the continent, 
noting that a few years ago there were only six democracies in Africa 
and the number had reached 29 by the end of June 1994.'' But they also 
note in the story that while in general democracies fare better, some 
of them are having a difficult time, and there are exceptions to 
democracies faring better, including the repressive Government of 
Sudan.
  Mr. President, I ask that the article be printed in the Record. 
  The article follows:

                                 Africa

       The year 1993, on the whole, was a difficult one for the 
     countries of the Africa region, as gross domestic product 
     (GDP), excluding South Africa, grew by just 1.4 percent. 
     Although this represents an improvement over 1992, it is 
     nevertheless disappointing, considering the region's high 
     rate of population growth and the level needed for 
     development. As in previous years, the countries implementing 
     major reforms, and therefore benefiting from the Special 
     Program of Assistance (SPA), saw their aggregate output 
     increase by 2.1 percent, or more than the average for the 
     region.\1\ The sixteen core (or steady) reformers did still 
     better, as their GDP rose by 2.8 percent; the countries 
     comprising the CFA Zone, however, saw their economies 
     contract for a third consecutive year.\2\ A positive 
     development in 1993 was that, on average, the low-income 
     countries performed better than the middle-income 
     Footnotes at end of article.
     ones, although neither group recorded an increase in per 
     capita terms.

TABLE 5-1.--AFRICA: 1992 POPULATION AND PER CAPITA GNP OF COUNTRIES THAT
                  BORROWED DURING FISCAL YEARS 1992-94                  
------------------------------------------------------------------------
                                                              Per capita
                                              Population\1\     GNP\2\  
                   Country                      (millions)      (U.S.   
                                                               dollars) 
------------------------------------------------------------------------
Angola\3\...................................           9.7            NA
Benin.......................................           5.0           410
Burkina Faso................................           9.5           300
Burundi.....................................           5.8           210
Cameroon....................................          12.2           820
Cape Verde..................................           0.4           850
Central African Republic....................           3.2           410
Chad........................................           6.0           220
Comoros.....................................           0.5           510
Congo.......................................           2.4         1,030
Cote d'Ivoire...............................          12.9           670
Equatorial Guinea...........................           0.4           330
Ethiopia....................................          54.8           110
Gabon.......................................           1.2         4,450
Gambia, The.................................           1.0           370
Ghana.......................................          15.8           450
Guinea......................................           6.1           510
Guinea-Bissau...............................           1.0           220
Kenya.......................................          25.7           310
Lesotho.....................................           1.9           590
Madagascar..................................          12.4           230
Malawi......................................           9.1           210
Mali........................................           9.0           310
Mauritania..................................           2.1           530
Mauritius...................................           1.1         2,700
Mozambique..................................          16.5            60
Niger.......................................           8.2           280
Nigeria.....................................         101.9           320
Rwanda......................................           7.3           250
Sao Tome and Principe.......................           0.1           360
Senegal.....................................           7.8           780
Seychelles..................................           0.1         5,460
Sierra Leone................................           4.4           170
Sudan\4\....................................          26.5            NA
Tanzania....................................          25.9           110
Togo........................................           3.9           390
Uganda......................................          17.5           170
Zaire\4\....................................          39.8            NA
Zambia\4\...................................           8.3            NA
Zimbabwe....................................          10.4           570
------------------------------------------------------------------------
\1\Estimates for mid 1992.                                              
\2\``World Bank Atlas'' methodology, 1990-92 base period.               
\3\Estimated as lower-middle-income ($676-$2,695).                      
\4\Estimated as low-income ($675 or less).                              
                                                                        
Note: The 1992 estimates of GNP per capita presented above are from the 
  ``World Development Indicators'' section of World Development Report  
  1994.                                                                 

       Some of the highest growth rates were achieved by those 
     countries, such as Lesotho, Malawi, Mozambique, and Zambia 
     that were recovering from the severe drought of 1991-92. The 
     rather quick recovery of these and other countries from the 
     effects of the drought is testimony to the relative 
     resilience of their economies and to the effectiveness of 
     collaboration among their public administrations, donors, and 
     nongovernmental organizations (NGOs). The improvement in 
     weather conditions was not generalized, however. Drought 
     persisted in some areas, posing a serious threat in parts of 
     Ethiopia and Kenya, and the countries of the western Sahel 
     experienced poor rainfall. In addition, in these and other 
     countries growth was held back by political transition, a 
     high debt burden (despite debt forgiveness and 
     reschedulings), a deterioration in the terms of trade, and 
     weak policy implementation.
       The political transition sweeping the continent has 
     resulted in increasing multiparty democracies; whereas there 
     were just six democracies a few years ago, the number had 
     reached twenty-nine by the end of June 1994. The transition, 
     however, has not been easy, without cost, or uniformly 
     smooth. Where transition governments are in place, power 
     sharing has proven difficult to achieve, and opposing groups 
     still vie for power in many places. On the economic front, 
     the transition has sometimes disrupted production and 
     commerce, affected the mobilization and allocation of 
     resources, and diverted attention away from needed policy 
     reforms. Yet the transition continues nearly everywhere.
       There were sharp contrasts on the African scene in 1993/94. 
     The installation of democratically elected governments in 
     Malawi and South Africa stand in sharp contrast to the mass 
     killings in Rwanda. There were a variety of outcomes in the 
     economic sphere, too, due to the contradictory forces at play 
     not just across countries, but within them and even

                                             TABLE 5-2.--LENDING TO BORROWERS IN AFRICA, BY SECTOR, 1985-94                                             
                                                        [Millions of U.S. dollars; fiscal years]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Annual                                                                   
                                  Sector                                      average,       1990         1991         1992         1993         1994   
                                                                              1985-89                                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture...............................................................        533.9        997.4        504.9        707.4        318.3        152.6
Energy:                                                                                                                                                 
    Oil and gas...........................................................         20.6  ...........        300.0         48.5          2.4        186.2
    Power.................................................................        113.9        230.0        155.0         86.0        356.0         90.0
Environment...............................................................  ...........  ...........  ...........  ...........  ...........          2.6
Human resources:                                                                                                                                        
    Education.............................................................        122.8        350.7        265.9        402.9        417.4        325.5
    Population, health, and nutrition.....................................         75.7        232.7        432.8        100.3        131.2        161.6
    Social sector.........................................................  ...........  ...........  ...........  ...........  ...........  ...........
Industry and finance:                                                                                                                                   
    Industry..............................................................        124.6        180.1         11.0        200.0         83.5         29.6
    Finance...............................................................        241.3        193.6        138.8        619.9        252.3        400.1
Infrastructure and urban development:                                                                                                                   
    Telecommunications....................................................         50.0        225.0         12.8  ...........         89.1  ...........
    Transportation........................................................        339.4        543.6        309.5        242.8        483.0        515.0
    Urban development.....................................................        177.2        360.4         98.3        233.8         61.2        111.4
    Water supply and sewerage.............................................        102.9        257.2        256.0        297.4         67.2         74.1
Mining and other extractive...............................................         31.5  ...........         21.0          6.0  ...........  ...........
Multisector...............................................................        504.0        285.6        861.0        895.0        434.2        711.0
Public sector management..................................................         81.0         76.6         27.2        133.6        121.5         48.2
Tourism...................................................................  ...........  ...........  ...........  ...........  ...........  ...........
                                                                           -----------------------------------------------------------------------------
      Total...............................................................      2,519.0      3,932.9      3,394.2      3,973.6      2,817.3      2,807.9
          Of which:                                                                                                                                     
              IBRD........................................................        909.3      1,147.0        662.9        738.4         47.0        127.7
              IDA.........................................................      1,609.7      2,785.9      2,731.3      3,235.2      2,770.3      2,680.0
                                                                           -----------------------------------------------------------------------------
          Number of operations............................................           80           86           77           77           75           60
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to totals because of rounding.                                                                                                

 within sectors. Some countries (such as The Gambia, Sierra Leone, and Zimbabwe), where the implementation of reform programs is on track, nonetheless 
     experienced low GDP growth rates due the deterioration of 
     their terms of trade, weather conditions, the lingering 
     effects of the 1991-92 drought, or the disruptions caused 
     by rebel activity and political transition. In contrast, 
     other countries (such as Equatorial Guinea and Sudan, for 
     example), where reform programs were lacking or off-track, 
     registered growth of 6 percent to 7 percent, helped by oil 
     exports or favorable agricultural conditions. In yet other 
     countries, results were uneven, with agricultural growth 
     coinciding with a decline in industrial production and 
     services, or a decline in overall exports accompanied 
     nevertheless by an expansion of nontraditional exports. 
     Contrasts also marked the implementation of policies. 
     While the countries of the CFA Zone as a group failed to 
     take the necessary measures to restore their 
     competitiveness in 1993, many of them implemented 
     significant structural reforms in the fiscal, financial, 
     trade, and other areas. In several of the good performers, 
     the improvements that took place were still inadequate, 
     however; savings rates, for example, remained too low to 
     support rapid, sustained growth, and social conditions 
     continued unsatisfactory.
       Despite this panoply of variations, the events of the past 
     twelve months have some common elements that provide 
     encouraging signs for the future. Despite delays and costs in 
     terms of lives and physical assets, the democratization 
     process is moving ahead. Despite economic and political 
     hardships, reform programs have survived in most countries 
     and have even been strengthened in some. Several countries 
     improved their performance in the course of the past year, 
     and the members of the CFA Zone have taken an historic, bold 
     step to improve their competitiveness. While much remains to 
     be done, more countries are embarked on reform programs and 
     face better prospects than compared with a year ago.

                 varying policies, varying performance

       Another common thread of Africa's experience, despite the 
     contrasts noted, is that African countries that have 
     sustained adjustment policies generally have performed better 
     than those countries that have not. This observation, made in 
     a recently released staff study that covered the adjustment 
     experience in sub-Saharan Africa from 1981 through 1991 (see 
     Box 5-1), is complemented by comparing the more recent 
     experience of a country where policy reform has been 
     seriously interrupted (Nigeria) with a country that strayed 
     from, but reembarked on, policy 
     reform (Kenya) and with one that has remained steadily on the 
     reform path (Uganda).
       Nigeria went through a tumultuous period in both 1992 and 
     1993. The planned democratic transition was protracted and, 
     in the end, did not establish civilian rule. The process 
     generated considerable uncertainty, economic disruptions, and 
     social unrest. Budgetary control deteriorated, leading to 
     fiscal deficits, which exceeded 10 percent of GDP. Inflation 
     rose to 40 percent in 1992 and 58 percent in 1993. The 
     official exchange rate was pegged below market rates, with 
     the spread reaching 100 percent by late 1993. The external 
     balance deteriorated significantly, with reserves dwindling 
     and arrears to external creditors rising to more than $6 
     billion, or one fifth of outstanding debt. Meanwhile, the 
     economy grew by only 4.1 percent in 1992 and 1.9 percent in 
     1993, compared with an average 5 percent in the preceding six 
     years. The economic policies announced in the 1994 budget 
     abolished free transactions in the foreign exchange and 
     credit markets, thereby removing the remaining core pillars 
     of the structural adjustment program adopted in 1986.
       In 1990-92, Kenya witnessed a sharp decline in all major 
     macroeconomic performance indicators. However, in early 1993, 
     the Kenya authorities signalled an interest in restarting the 
     reform process, and, as a result, the conditions for strong 
     medium-term growth in Kenya have improved significantly. 
     Implementation of stabilization policies and more effective 
     enforcement of financial sector regulations have sharply 
     reduced runaway inflation (falling to an annual rate of 
     around 15 percent during the last quarter of 1993 after 
     peaking at around 100 percent during the second quarter). 
     Important steps towards structural reform, particularly in 
     the area of external trade, have begun to gradually restore 
     domestic and international confidence in the government's 
     commitment to reform. With the elimination of all but a short
      list of import licenses and the introduction of a unified 
     and stabilized market-determined exchange rate (the Kenya 
     shilling becoming fully convertible in May 1994), the 
     stage has been set for the private, and especially the 
     export, sector to lead the recovery. By the end of 1993, 
     monetary control had been tightened, discipline had been 
     reintroduced in the financial sector, the maize market had 
     been fully liberalized, and foreign-exchange reserves had 
     recovered to comfortable levels. These improvements 
     facilitated the approval by the International Monetary 
     Fund (IMF) of a one-year Enhanced Structural Adjustment 
     Facility arrangement during the fourth quarter of 1993, as 
     well as the successful rescheduling of external arrears 
     with the Paris Club in January 1994.
       Uganda has gone quite far in creating a free enterprise 
     economy. At the same time, the government has stabilized the 
     economy through tight fiscal and monetary programs. Inflation 
     was reduced to around 4 percent in 1993, down from 45 percent 
     in 1992 and 240 percent in 1987, the year in which the 
     present adjustment program was initiated. Uganda has in place 
     a program of comprehensive structural reforms covering the 
     civil service, public enterprises, and major financial 
     institutions, and is undertaking a large reduction in 
     military forces to release resources for priority spending 
     programs. These reforms have had a positive effect on the 
     economy: Real GDP growth is estimated to have reached 6 
     percent in 1993, enabling per capita consumption to rise by 
     about 2.5 percent. The lowered inflation has contributed to a 
     stable exchange rate and renewed confidence in the country's 
     currency. In addition, the downward slide in coffee 
     production, the country's main export, has been halted. There 
     are also signs that nontraditional exports are growing 
     rapidly; that the public's willingness to hold financial 
     assets in the form of savings and time deposits, which have 
     increased fourfold in the past two years, is increasing; that 
     the inflow of private capital has been substantial; and that 
     investment, including rehabilitation and reconstruction work 
     on properties of returning entrepreneurs, is on the rise. All 
     of these gains, together with the increased focus of 
     government spending on basic social services, are expected to 
     have a positive impact on poverty reduction.

                        improved competitiveness

       The countries of the CFA Zone have faced major economic, 
     financial, and social difficulties since 1986. These 
     difficulties were caused by a downward deflationary spiral of 
     production, incomes, and expenditures that cut average real 
     per capita income by 40 percent,
      reduced the capacity of governments to provide basic social 
     services, increased the incidence of poverty, and 
     undermined the Zone's financial institutions. The spiral, 
     in turn, was caused by a massive loss of competitiveness 
     that resulted from a combination of the inflated cost 
     structure existing in the mid 1980's and the major 
     external shocks suffered since then. The prices of the 
     Zone's major exports (coffee, cocoa, cotton, phosphate, 
     uranium, and oil) dropped sharply in the second half of 
     the 1980s, causing its terms of trade to fall by 40 
     percent between 1985 and 1992. The Zone's real effective 
     exchange rate (REER) appreciated by 39 percent over the 
     same period. That movement was the result of the 
     depreciation, since 1985, of the United States dollar and 
     the large depreciation achieved by many competing 
     developing countries of their own REERs through nominal 
     devaluations in the context of economic reforms. The 
     internal adjustment programs and structural reforms 
     pursued by various CFA countries in the period 1986-93 
     were able neither to correct this massive loss of 
     competitiveness nor halt the ongoing downward spiral.
       Recission and financial crisis in the CFA Zone continued 
     throughout 1993. Moreover, as it became increasingly clear 
     that internal adjustment programs were not working, external 
     financing for them dried up. For 1993 as a whole, per capita 
     real income declined by 4.5 percent, exports fell by 3.9 
     percent in volume. and investment further contracted to 13.8 
     percent of GDP.
       Against this backdrop, in early January 1994 the heads of 
     state of the CFA countries met in Dakar to discuss ways to 
     end the economic crisis. The meeting resulted in the historic 
     decision to change the parity of the CFA franc from 50 per 
     French franc, a level at which at had been fixed in 1948, to 
     100 per French franc.\3\ At the Dakar meeting, another 
     important, although less publicized, step was taken: the 
     signing of a treaty transforming the West African Monetary 
     Union into a full economic union. A common approach to the 
     implementation of economic reforms that were needed to 
     accompany the parity change was also discussed.
       The decisions made at the Dakar meeting have provided a 
     unique opportunity to restart the stalled structural 
     adjustment process in the fourteen countries, restore growth, 
     and reduce poverty. Indeed, since January, nearly all 
     countries have adopted reform programs that
      are being supported by the World Bank and the IMF. All 
     postdevaluation programs give priority to restraining 
     inflation to ensure that the nominal parity change 
     actually leads to a substantial depreciation of the real 
     exchange rate. Hence, public sector wage increases have 
     generally been limited to 10 percent to 15 percent to 
     prevent a wage-price spiral. To allow some time for urban 
     wage earners to adjust to the higher cost of imported 
     items, increases in the prices of selected imported goods 
     (petroleum products, rice, sugar, edible oils, medicines, 
     and school books, for instance) are being curtailed 
     through temporary tax reductions and direct subsidies. 
     Fiscal reform--reduction of deficits to sustainable 
     levels, tax reform, and restructuring of expenditures--
     also figures prominently as an objective of the reform 
     programs. Priority, however, has been given to protecting 
     vulnerable groups and relaunching proverty-reduction 
     programs by increasing public expenditures on basic 
     education and health services, developing and implementing 
     social funds targeted at the poorest groups, and expanding 
     labor-intensive public works programs.

                      Regional Cooperation Efforts

       The recent events in the CFA Zone and the new challenges 
     facing South Africa and its neighbors call for strengthened 
     regional cooperation. Various actions have already been taken 
     in this direction, and others are under consideration. In the 
     CFA Zone, the member countries of the new West African 
     Economic and Monetary Union (UEMOA) and the Central African 
     Monetary Union have decided to form economic--as well as 
     monetary--links. In Western Africa, the signing of the treaty 
     for the new union by the six member states was accompanied by 
     further efforts to render budgetary policies coherent, 
     harmonize tariffs and indirect taxes, and develop a regional 
     financial market. In Central Africa, the six member states of 
     the Central African Customs and Economic Union have taken 
     advantage of their increased competitiveness to accelerate 
     the implementation of a new common external tariff. Nontariff 
     barriers have been removed, and rates have been lowered.
       These efforts are being supported by the Bank, together 
     with the IMF, the European Union, and other interested 
     donors.
       At the level of the entire CFA Zone, progress was made 
     during the fiscal year in the areas of social-security 
     provision and collection of statistics. With a view to 
     providing a positive environment for private sector-led 
     growth, a treaty has been signed that will put into place a 
     common framework for business law.
       The World Bank, together with the IMF, the European 
     Commission for the European Union, and the African 
     Development Bank, is cosponsoring an initiative to facilitate 
     private investment, trade, and payments in Eastern and 
     Southern Africa and in the Indian Ocean countries--the cross-
     border initiative (CBI).
       The CBI is based on a new integration concept that promotes 
     mobility of factors, goods, and services across national 
     boundaries among participating countries while minimizing 
     chances for diversion of trade and investment. It involves 
     voluntary participation by countries that are ready to 
     accelerate the reform effort, and is based on the principle 
     of reciprocity among the participating countries. The 
     proposed reform measures are in the areas of trade 
     liberalization, liberalization of the exchange system, 
     deregulation of cross-border investment, strengthening of 
     financial intermediation, and the movement of goods and 
     persons among the participating countries. The reform agenda 
     supported under the CBI has been developed through a two-year 
     process of discussion by public and private sector 
     representatives of the participating countries, as well as 
     consultations with regional institutions.
       The CBI endorsed by thirteen countries at a meeting in 
     Kampala, Uganda, in August 1993. To date, nine countries 
     (Kenya, Malawi, Mauritius, Namibia, Rwanda, Swaziland, 
     Uganda, Zambia, and Zimbabwe) have confirmed their intention 
     to participate and have established mechanisms to prepare 
     country-specific proposals for implementing the CBI-supported 
     reform agenda.
       In addition the heads of state of Kenya, Tanzania, and 
     Uganda (the members of the former East African Community) 
     recently met in Arusha, Tanzania, to reaffirm their 
     commitment to strengthened cooperation. There is a consensus 
     that this cooperation should be based on practical 
     improvements in investment incentives and tax regimes, and 
     streamlined border formalities.

                     The Bank's Assistance Strategy

       The priorities for the Bank in Africa are poverty reduction 
     through environmentally sustainable development; human 
     resources development--not just through lending but also by 
     defining frameworks for effective interventions by 
     governments and donors, as in a recent staff study on health 
     in Africa (see Box 5-2); providing an exceptional response, 
     already in progress, to the situation and events in the CFA 
     Zone; working with major partners to fulfill the objectives 
     and the priorities of the SPA; and ``getting results in the 
     field'' through the improved quality of projects and their
      implementation, especially through strong capacity-building 
     efforts.
       Poverty reduction through environmentally sustainable 
     development. The need and urgency to reduce poverty in the 
     region is evident; however, progress has been limited in 
     Africa as a whole, despite success in some countries. 
     Achieving a high rate of economic growth, combined with a 
     pattern of growth favoring increases in incomes in the 
     poorest sections of society, is central to the Bank's 
     poverty-reduction strategy. The Bank's two-pronged strategy, 
     as elaborated in ``World Development Report 1990,'' acts as a 
     guide to the institution's economic and sector work, as well 
     as to its lending operations.
       Fighting land degradation and desertification have been key 
     objectives of the Bank in its environmental program for the 
     region. This program has been addressed primarily through the 
     elaboration and implementation of national environmental 
     action plans (NEAPs) and through the Bank's lending program. 
     NEAPs--which provide a basis for the Bank's dialogue with 
     borrowers on environmental issues, describe a country's major 
     environmental problems and concerns, and formulate actions to 
     address whatever problems are identified--have systematically 
     paid attention to arresting land degradation through better 
     natural resource management. The Bank's regional portfolio 
     includes more than $500 million in environmental projects, 
     some of which can be directly linked to the NEAP process. The 
     Bank has also been involved in the preparation of a new 
     international convention on desertification that is currently 
     being negotiated and is prepared to be a partner in its 
     implementation when it enters into effect.

                                                     TABLE 5-3.--WORLD BANK COMMITMENTS, DISBURSEMENTS, AND NET TRANSFERS IN AFRICA, 1990-94                                                    
                                                                            [Millions of U.S. dollars; fiscal years]                                                                            
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Nigeria                             Cote d'Ivoire                              Sudan                               Total region            
                Item                 -----------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Start 1994      1994       1990-94     Start 1994      1994       1990-94     Start 1994      1994       1990-94     Start 1994      1994       1990-94  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Undisbursed commitments.............        2,461                                    423                                    181                                 13,118                          
Commitments.........................                        --        1,954                       376        1,365                        --           98                     2,808       16,953
Gross disbursements.................                       353        1,646                       306        1,073                        48          378                     3,195       14,002
Repayments..........................                       348        1,402                       183          769                         3           49                     1,116        4,678
Net disbursements...................                         5          243                       123          304                        45          329                     2,079        9,324
Interest and charges................                       270        1,325                       149          767                         4           36                       868        4,221
Net transfer........................                      -265       -1,082                       -26         -463                        41          293                     1,211        5,103
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Disbursements from the IDA Special Fund are included. The countries shown in the table are those with the largest amounts of public or publicly guaranteed long-term debt. Details may not
  add to totals because of rounding.                                                                                                                                                            

       Assistance to CFA countries. Since the parity change and as 
     of June 30, 1994, IDA has provided approximately $1 billion 
     in quick-disbursing credits and adjustment operations to the 
     CFA countries. For the short term, the Bank-supported 
     postdevaluation programs include, in addition to steps to 
     limit the price increases of essential goods, (a) a draw-down 
     of reserve stocks and additional imports of essential 
     foodstuffs to counter speculative commercial practices, (b) 
     increased budgetary appropriations for education and health, 
     and (c) steps to assure adequate supplies of essential drugs 
     in public health facilities and of low-cost generic drugs in 
     private pharmacies. For the longer term, expenditures on 
     labor-intensive civil works programs, rural infrastructure, 
     education, and health will be increased, as will special 
     programs (nutrition in particular) that target the poorest 
     groups and that will be implemented by NGOs and community 
     associations.
       SPA--phase three. The third phase of the Special Program of 
     Assistance (SPA-3), launched by the program's donors in 
     October 1993, will cover the three calendar years 1994-96. 
     Since the CFA Zone countries instituted a parity change in 
     their currency and launched comprehensive economic reforms, 
     two additional countries, Comoros and Cote de'Ivoire, have 
     met SPA eligibility requirements, bringing the total of 
     eligible countries to twenty-nine. The estimated requirements 
     of donor adjustment assistance for these countries is $12 
     billion over the three-year period. The SPA donors have met 
     twice since the parity change to discuss financing 
     requirements. Total donor pledges have increased, and some 
     disbursements will be accelerated in response to these needs. 
     In addition to mobilizing additional resources, SPA donors 
     have stressed the need to pursue greater selectivity in 
     allocating resources to ensure that countries with strong 
     reform programs are adequately funded and that scarce 
     resources are used efficiently. As of June 30, 1994, the 
     donor community had pledged $6.6 billion in quick-disbursing 
     balance-of-payments assistance, and further efforts are 
     continuing to close the remaining gap.
       The priorities and objectives of SPA-3 are achieving higher 
     growth rates and alleviating poverty; supplementing policy-
     reform programs with more investment in human resources and 
     infrastructure; raising the level of domestic savings and 
     private investment; placing greater emphasis on ensuring that 
     the benefits of growth are directed at reducing poverty; and 
     strengthening local economic management and institutional 
     capacity. The SPA's primary objective continues to be to 
     assist countries to strengthen their policy-reform programs 
     and structural reform efforts. However, to accelerate growth, 
     reduce poverty, and realize the full benefits of policy 
     reforms, the efficiency of public investment financing by 
     donors, which still accounts for about 80 percent of total 
     donor financing, must be improved substantially. Discussion 
     is continuing on sectorwide approaches to donor financing 
     aimed at improving aid coordination and effectiveness. The 
     SPA's role would be to serve as a catalyst to encourage donor 
     support for such integrated sector programs, to monitor 
     outcomes, and promote the harmonization of donor procedures. 
     Mobilization of resources and coordination of specific 
     sector-investment programs will continue at the country level
      through mechanisms such as consultative groups, roundtables, 
     and country-based local aid-coordination groups.
       Project quality and implementation. Despite the 
     difficulties faced by the region, portfolio performance was 
     relatively stable in 1993. Differences among countries were 
     caused, in part, by variation in macroeconomic performance. 
     Overall, adjusting countries had a better record of project 
     performance than the nonadjusting ones, and operations in the 
     particularly difficult areas of agriculture and adjustment 
     lending improved their implementation records. The most 
     serious general constraints to effective implementation are 
     uncertain borrower ownership and limited local capacity. To 
     increase ownership, the Bank is making a concerted effort to 
     involve stakeholders (governments, beneficiaries, the private 
     sector) in project preparation and implementation. The use of 
     participatory approaches--beneficiary assessments, 
     participatory rural assessments, and participatory 
     workshops--is steadily increasing. In many cases, 
     stakeholders participate not just in project design and 
     preparation but also in economic and sector work (ESW). 
     Several actions are under way to improve project quality at 
     entry such as preparation of ``letters of sector policy,'' 
     avoiding unnecessary complexity in project design (through 
     participatory approaches to project preparation and greater 
     involvement to project preparation and greater involvement by 
     resident missions in the process, for example), testing new 
     or complex approaches in small pilot operations, and 
     identifying project-monitoring indicators that reflect both 
     output and impact. In fiscal 1993, the most recent year for 
     which numbers are available, the amount of loan cancellations 
     expected to result from completed or planned restructurings 
     of problem projects totaled about $500 million.
       The need for capacity buildings in Africa cuts across all 
     sectors, and, in all cases the need is urgent and acute. The 
     challenge involves both making greater use of existing local 
     capacity and helping to build such capacity where it does not 
     exist. The Bank's approach recognizes that capacity-building 
     issues need to be addressed at an early stage in the project 
     cycle and that the effort cannot succeed without improving 
     the performance and productivity of the civil service. This 
     concern has led the Bank to appoint a Capacity Building 
     Committee to make recommendations on the most effective ways 
     to advance toward this goal. The committee's recommendations 
     (which highlight ``best practices'' to follow and cover a 
     broad spectrum, from ESW and lending to the role of resident 
     missions) have been approved and are being carried out.
       Capacity building--as well as dialogue with the intended 
     beneficiaries of development-- 
     continued to be the focus of the Bank's work in South Africa 
     during the past year. In that country, the Bank's informal 
     work has dealt with the entire political spectrum, including 
     nongovernmental organizations, the private sector, teachers, 
     and trade unions. Dozens of South Africans have been trained 
     in economics, and relationships have been built up with many 
     of the country's economic and political actors. In April 
     1994, the Bank opened up a resident mission, following a 
     request from the multiparty South African transitional 
     council.

                               footnotes

     \1\The SPA for low-income, debt-distressed sub-Saharan 
     African countries provides quick-disbursing balance-of-
     payments assistance to twenty-nine eligible countries (as of 
     the end of June 1994) in support of reform programs developed 
     in conjunction with the Bank and the International Monetary 
     Fund (IMF).
     \2\The countries are Benin, Burkina Faso, Cameroon, Central 
     African Republic, Chad, Comoros, Congo, Cote d'Ivoire, Gabon, 
     Mali, Mauritania, Niger, Senegal, and Togo.
     \3\The parity of Comoros' currency was changed to 75 per 
     French franc.
                                                                    ____

                box 5-2. Toward Better Health In Africa

       Health issues are assuming an increasingly important place 
     in the Bank's assistance strategy in Africa. Reflecting this 
     trend, a major sector study was completed in 1993 in close 
     cooperation with the World Health Organization, the United 
     Nations Children's Fund, and other partners. The study, 
     ``Better Health In Africa,'' aimed at building consensus on 
     future health strategies in Africa among the many 
     stakeholders.\1\ It found that while dramatic improvements 
     had taken place since independence, most African countries 
     lagged well behind other developing countries in health 
     status. At fifty-one years in 1991, life expectancy at birth 
     in Africa is eleven years less than in the low-income 
     countries as a group, and Africa's infant mortality rate, at 
     over 100 deaths per 1,000 live births, is about one third 
     higher on average than for the universe of low-income 
     countries. New health problems, such as AIDS, and new strains 
     of well-known diseases such as malaria, threaten the 
     important health gains made in Africa over the past 
     generation.
     Footnotes at end of article.
  [[Page S5921]]  
  [[Page S5922]]  
  [[Page S5923]]  
       [[Page S5924]] The report discussed ``best practices'' for 
     health improvement by African governments and their external 
     partners in three areas. First, as did ``World Development 
     Report 1993--Investing in Health,'' the report emphasized the 
     importance of strengthening the capacity of households and 
     communities to recognize and respond to health problems. This 
     requires health and development strategies that increase the 
     access of the poor to income and opportunity, pay special 
     attention to female education and literacy, provide for 
     community monitoring and management of health services, and 
     furnish information to the public and health-care providers 
     on health conditions and services. Second, the report called 
     for reform of African health-care systems, and especially for 
     making a basic package of cost-effective health services 
     available to Africans near where they live and work through 
     health centers and
      first-referral hospitals. Third, the report underscored the 
     need for more efficient allocation and management of 
     public financial and human resources devoted to health 
     improvement, and for their progressive reallocation away 
     from less cost-effective interventions (largely provided 
     through tertiary facilities) to a basic package. It found 
     substantial room for increases in technical efficiency.\2\
       The report concluded that substantial health improvement in 
     Africa is feasible, despite the severe financial constraints 
     facing most African countries. The will to reform and to 
     provide a limited package of quality, low-cost, and highly 
     cost-effective health services to the vast majority of the 
     population is central to success. The study found that 
     higher-income and middle-income African countries, in due 
     course, should be able to finance a basic package of health 
     services for their people from public and nongovernmental 
     resources, without substantial external support. However, the 
     low-income countries are likely to need donor assistance in 
     support of health for an extended period. These countries now 
     spend about $8 per capita annually on health from all 
     sources--public, nongovernmental, and external--compared with 
     the indicative estimate for the basic package in the study of 
     about $13. The transition from the current to the indicative 
     level of spending will have to be implemented flexibly, on a 
     country-by-country basis, with provisions put in place of 
     interim targets to be met along the way.

                               Footnotes

     \1\World Bank. 1994. ``Better Health in Africa.'' Washington, 
     D.C.
     \2\For example, poor drug selection, procurement, 
     distribution, and prescription practices are responsible, 
     together with other factors, for an effective consumption of 
     only about $12 on drugs for every $100 in public spending on 
     pharmaceuticals in many African countries.
     

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