Report No. 29357-SN Senegal Public Expenditure Review December 28, 2004 Prem 4 Africa Region Document of the World Bank TABLEOFCONTENTS PART I ............................................................................................................................. 8 I. MACROECONOMICAND BUDGETPERFORMANCEUNDERTHE PRSP ................................................................................................................... 9 I. MACROECONOMIC PERFORMANCE ........................................................................ 9 I1. PRSP OBJECTIVES AND BUDGET A~PROPRTATIONS ............................................ 11 11.1. Pillars of the PRSP ...................................................................................... 11 11.2. Functional and Economic Classijications of the Budget............................. 13 II.3. The Tie between the Budget and Poverty Reduction.................................... 16 11.3.1. Primary Sector...................................................................................... 16 11.3.2. Secondary sector .................................................................................. 18 11.3.3. TertiarySector ....................................................................................... 21 II.3.4. Quaternary sector ................................................................................. 22 11.3.5. Total Poverty Reduction Investments .................................................. 24 111. FISCALPERFORMANCE ....................................................................................... 26 111.1. Functional Classij-ication of Public Expenditure......................................... 27 111.2. Economic Classification of PublicExpenditure.......................................... 29 111.3. Public FinanceAggregates..................................... III.4. Fiscal Sustainability and Social Sector Spending ....................................... 31 Conclusion ........................................................................................................... 32 I1. EQUITY AND EFFICIENCY OF SOCIAL SECTOR SPENDING ..........39 I. OVERVIEWOF SOCIAL SECTORSPENDING ............................................................ 39 I1. EDUCATION ........................................................................................................ 40 II.1. Inequity ........................................................................................................ 40 11.2. EfJiciency...................................................................................................... 41 111. HEALTH .............................................................................................................. 43 III.1. Inequity........................................................................................................ 43 III.2. EfJiciency ...................................................................................................... 46 CONCLUSION................................................................................................................. 47 PART I1 ........................................................................................................................... 48 I11. SUMMARY ..................................................................................................... -49 I. REFORM PROGRAM ............................................................................................. 49 I1. PRSP IMPLEMENTATION 5 1 ..................................................................................... 111. MACROECONOMIC ............................................................................. STABILITY 5 1 Iv. SERVICE DELIVERY............................................................................................. 52 V. COMMUNICATION WITHTHE PUBLIC ................................................................... 52 IV. WHY REFORMS? WHY NOW? ................................................................. 53 I. IMPLEMENTINGTHE PRSP .................................................................................. 54 I1. MACROECONOMIC ............................................................................. STABILITY 54 I11. SERVICEDELIVERY............................................................................................. 55 Iv. COMMUNICATION WITH THE PUBLIC ................................................................... 55 V. RECENT STUDIESAND REFORMACTIVITIES ......................................................... 56 VI. WHONEEDSTHE REFORM AND WHY? ................................................................. 57 VI1. REFORM-RELATED RISKS .................................................................................... 57 V. BUDGETREFORMSTRATEGY ................................................................. 59 I BACKGROUND . .................................................................................................... 59 I.1. Outcome of the CFAAKPAR exercises ....................................................... 59 11. STRATEGICVISION AND OBJECTIVES INTHE AREA OF BUDGETAND FINANCIAL REFORMS ....................................................................................................................... 60 I.1. Priority axes of intervention ........................................................................ 60 . PRINCIPAL COMPONENTSOF THE BUDGET AND FINANCIALREFORMPROGRAM....61 IV. THEMTEFAPPROACH ....................................................................................... 62 v. EXPERIMENTATION WITH THE MTEF APPROACHINSENEGAL: SECTORAL OBJECTIVE-BASED BUDGETS .......................................................................................... 62 V.1 Medium-term estimation of global resource constraints ............................. 62 V.2. Declaration of budget orientation ............................................................... 64 VI STRENGTHENING OF CAPACITIES TO ABSORB RESOURCES ................................... 64 VI.I. Deconcentration ofpayment order authorization........................................ 64 VI1. STRENGTHENING OFFINANCIAL DECENTRALIZATION .......................................... 65 VI11. STRENGTHENINGCONTROLAND FINANCIALACCOUNTABILITY.......................... 70 VIII.I. Supervision and regulation of government procurement ......................... 70 VIII.2. Internal control ........................................................................................ 70 71 71 X. IX.VIII.3. External control ....................................................................................... CONTROLBY THE NATIONAL ASSEMBLY ............................................................ JURISDICTIONAL CONTROL OF THE AUDIT OFFICE............................................... 71 XI. STRENGTHENINGTHE PUBLIC FINANCEINFORMATION SYSTEM.......................... 72 XI.1. ThePRSP Monitoring System..................................... ............................. 72 XI1. SURVEYS ON THE EXPENDITUFECIRCUIT .......................... ............................. 73 XII.1. Information System on Public Finance Management .............................. 74 XITI. INTRODUCTIONOF A SYSTEM FORMONITORING IMPLEMENTATIONOF THE THE BUDGET ANDFINANCIALREFORMPROGRAM............................................................... 75 XIII.1. Budget Execution .................................................................... XIII.2. Budget Transparency and Reporting....................................................... 76 XIII.3. Financial Decentralization...................................................................... 76 VI. IMPLEMENTINGTHE PRSP ...................................................................... 78 I. MEDIUM-TERMEXPENDITURE FRAMEWORK ...................................................... 79 11. PAYMENTAUTHORIZATION ................................................................................. 79 I11. PRO-POORFINANCIALDECENTRALIZATION ....................................................... 80 IV. TRAINING ........................................................................................................... 82 INVESTMENTS OF LOCALITIES .............................................................................. 82 VI. V. GOVERNMENT TRANSFERS THE LOCALITIES TO .................................................. 84 VI1. AUTOMATION OF FINANCIALAND ACCOUNTING WORK INTHE LOCALITIES..........84 Conclusion ............................................................................................................... 85 VI1. MODALITIESFORFISCALBALANCE ................................................... 86 I. RISKSTO FISCAL BALANCE.................................................................................. 87 I1. PUBLIC EXPENDITURE MANAGEMENT ................................................................ 88 III. BUDGET EXECUTION REPORT~G ......................................................................... 89 Conclusion ............................................................................................................... 90 VI11. SERVICE DELIVERY: QUALITY SERVICES FOR THE POOR .........91 I. PERFORMANCE 92 11. OBSTACLESINTHE HEALTH SYSTEM........................................... ANOMALIES PUBLIC HEALTH SPENDING .......................................................... OF 93 I11. RELATIONS BETWEEN THE MSP's FINANCIAL MANAGEMENT PROBLEMS AND THE OVERALL SOCIOECONOMICCONTEXT ............................................................................ 94 . REFORMS ............................................................................................................ 95 V. USER COMMUNITY PARTICIPA~ON AND .............................................................. 95 VI. HUMAN RESOURCESINHEALTH .......................................................................... 95 VI.1. Availability of Human Resources in Remote Disadvantaged Areas ............95 VI.2. Motivation .................................................................................................... 96 I X . COMMUNICATION WITH THE PUBLIC ON PUBLIC RESOURCES99 EVALUATIONAND CONCLUSION ................................................................................. 101 List of Tables TABLE1:REAL SECTOR(ANNUALPERCENTAGE GROWTH) ................................................ 9 TABLE2: TRENDOFBUDGET APPROPRIATIONS INPERCENT GDP(2000-2004) ..........14 OF TABLE3: SHARESOFVARIOUS EXPENDITURE CATEGORIES INTHE OVERALLBUDGET 15 .... TABLE4: SECTORAL BREAKDOWNTHEINVESTMENTBUDGET. OF 2000-2004 ................. 16 TABLE5: BREAKDOWN THE INVESTMENTBUDGET OF FORTHE PRIMARY SECTOR, 2000- 2004.......................................................................................................................... 16 TABLE6: BREAKDOWNTHE INVESTMENTBUDGET OF FORTHE SECONDARY SECTOR, 2000- 2004.......................................................................................................................... 18 TABLE7:BREAKDOWNTHEINVESTMENTBUDGET THE TERTIARY SECTOR, 2000- OF FOR 2004.......................................................................................................................... 21 TABLE8: BREAKDOWNTHEhVESTMENTBUDGET OF FORTHE QUATERNARY SECTOR, 2000-2004 ................................................................................................................ 22 TABLE9: THEPAPINVESTMENT BUDGETAND THE PTIP.......................................... 25 TABLE10: FUNCTIONAL CLASSIFICATION OFPUBLIC EXPENDITURE, PERCENTOF GDP28 IN TABLE11: BUDGET EXECUTION RATE TREND INTHE MAJOR SECTORS, INPERCENT .........29 TABLE12: ECONOMIC CLASSIFICATION OF BUDGET EXPENDITURE,PERCENT GDP29 IN OF TABLE13: COMPARISON OFAPPROVED BYWITHEXECUTED BUDGET, NATURE BY OF EXPENDITURE PERCENTOFGDP) ........................................................................ 30 (IN TABLE14: BUDGETARY OBJECTIVES (MIDPOINT SCENARIO) OF THE PRSP, OUTCOMES, AND PROGRAM FOR 2002-2005 ................................................................................. 31 TABLE15: SENEGAL SELECTEDECONOMIC AND FINANCIALINDICATORS ....................... 33 TABLE16: PART DESGRANDESNATURESDEDEPENSES LEBUDGET SECTEUR ..34 DANS DU TABLE17: PARTDESSECTEURSDANS LESDIFFERENTESNATURES DE DEPENSES DU BUDGET 2002-2004................................................................................................... 35 TABLE18: PARTDESTYPESDEDEPENSES DANSLEBUDGET EXECUTEDUSECTEUR EN %36 TABLE19: EVOLUTION INVESTISSEMENTSEN% DUP B ETTAUX D'EXECUTION PAR DES SECTEUR .................................................................................................................... 37 TABLE20: SENEGALFISCAL SITUATION 1994-2002AND PROGRAMFOR2003-2005 (CFM BILLIONS) ................................................................................................................... 38 ListofFigures Figure 1: Senegal - Inequalities inunder-fivemortality duringthe past decades....................44 Figure 2: Senegal - Populationper technical health personnel ratio by region and category in 2000 .................................................................................................................................. 46 ListofBoxes Box 1: Basic principle: greater accountabilityof line ministries and localities for their fiscal management andprocurement................................................................................ 99 ListofAnnexes Annex I: Annexes du Gouvemement du Senegal ........................................................Page106 No. Annex 11: L e ((Modele 123 cslp ................................................................................. )) 128 Annex 111: Suivi des depenses jusqu'aux destinations ................................................... 140 Annex IV: L e r81e du Fdddans le budget total ................................... .......................... 158 Annex V: Evolution des principaux agrkgats 1995-2000 (Villes, communes, communes urbaines et communes d'arrondissement - en millions de CFAF160 Annex VI: Senegal - Recruitment Strategy for Civil Service, 2003-2005 ..................... 162 Annex VII: Expenditure Accountability Assessment and Action Plan (AAP)............... 164 ACKNOWLEDGEMENTS This study was prepared after missions in July and November 2003 by a team of economists from the World Bank, the IMF and from Senegal. The document was sent to the Government inJuly 2004 and discussed with them inNovember 2004. The World Bank team was led by Nancy Benjamin (AFTP3) and includes Ousmane Bangoura (AFTHD), Julien Bandiaky (AFTP4), and Robert Cauneau, consultant. LMF contributors include Celine Allard and Alain D'Hoore. Senegal contributors include Aliou Faye and Aboubacry Sow, CEPOD; NCnC Dieng and Khady Ndao, DGF; Abdoulaye Dieng, MEF; Mamadou Abdoulaye Sow and Falou Mbacke Diagne, DGCPT; Sogue Diarisso, DPS; Ahmeth Faye, DCEF; Thiemo Niane and Bassirou Diop, CSPLP; Youssoupha BA, MSN; SadaNdiaye, MEN; and Mamadou L.Deme, consultant. The project has benefited from the overall guidance o f Emmanuel Akpa and from the comments o f peer reviewers, Catherine Laurent (MNSED) and Helene Granvoinnet (AFTPR) and the Senegal country team. The PER team i s especially grateful to Josette Percival and Pierre Lenaud for logistical assistance. PREFACE 1. This Public ExpenditureReview arrives shortly after a CountryEconomic Memorandum that included extensive analyses o fhealth and education spendingand a government-written chapter outlining Senegal's public expenditure management objectives. It was planned inconjunction with the recent CFAA and CPAR studies. The Government and the Bank are now undertaking sectoral PERs o fthe health and agriculture sectors. 2. This study reports on the Government's efforts to use its budgetto implementits PRSP. Part Ireports on basic diagnostics - the macroeconomic situation and the budget performance over the PRSP period. It also summarizes the conclusions o f the CEM and other recent studies on the equity and efficiency o f social sector spending. 3. Part I1takes up the institutional aspects o fmakingthe budget a better instrument for implementing the PRSP. A chapter written by Government presents the Government's public expenditure reform program that has begunreceiving coordinated support from multipledonors, including the Bank through its planned PRSC. Part I1also evaluates these plans by examining the effectiveness o fthe budget system in achieving well-defined government objectives. Inparticular, it examines reforms neededto enable Government to reach its goals in fiscal decentralization. PART I - 8 - I. MACROECONOMICANDBUDGETPERFORMANCE UNDERTHE PRSP I. MACROECONOMIC PERFORMANCE 1. During the period 1994-2001, Senegal enjoyed sustained economic growth of 5.3 percent on average. In 2002, however, as did some other WAEMU countries, it experienced a difficult crop year following a significant rain shortfall. All agricultural production dropped o f f sharply, particularly for groundnuts and cereal grains. However, the outlook for the 2003 crop year improved significantly. 2. This sharp drop in agricultural output resulted in a revision of the GDP growth rate to 1.1 percent in 2002. This said, nonagricultural GDP expanded by 4.7 percent. Moreover, the economy was expected to return to sustained economic growth rates. According to the most recent estimates, growth o f 6.5 percent was registered in 2003. The projected growth rates for 2004 and 2005 are 6 percent and 5.8 percent, respectively. Table 1: Real Sector (Annual PercentageGrowth) ._ 1999 2000 2001 2002 2003 2004 2005 Estimate Program IPrimarysector -2.7 5.7 10.6 7.6 -20.6 19.8 8.6 5.2 Agnculture -7.3 7.3 21.3 13.8 -32.2 36.3 11.6 6 0 Livestock 3.3 4.8 3.1 3.2 -7.2 4.9 5.0 4 0 Forestry -3 4 4.0 -4.5 -6.5 2.3 4.0 4.0 4 0 0.9 1.2 1.3 1.9 -6.4 5.0 5.5 5 0 Fisheries 9.8 7.0 ~ Secondarysector 8.4 6.7 6.1 6.1 6.5 6.9 Mining -2.7 20.7 -0.9 -5.4 11.3 28.0 8.0 4 0 Industry 7.2 4.3 5.2 5.1 11.2 1.3 6.2 6 3 Oil mills 28.3 7.1 49.5 6.1 -9.6 -22.8 -3.0 15 0 1 Energy 5.5 0.5 6.6 10.3 -2.7 18.4 5.0 5 0 Construction and public works 12.7 15.7 4.4 7.8 12.4 10.5 10.0 10 0 Tertiary sector 7.5 4.2 4.0 4.8 4.5 3.7 5.0 I 5.6 Transportationand telecommunications 7.5 6.6 8.0 6.4 5.8 6.9 7.4 7 5 Trade 7.8 4.I 2.1 5.6 5.9 4.2 5.0 75 0 5 I 1 Public administration 2.9 3.9 5.5 0.8 0.4 0.5 7.8 Other 9.4 3.2 2.9 4.5 5.1 3.9 4.1 4 9 IGDP 5.7 5.0 5.6 5.6 1.1 6.5 6.0 5.8 NonagnculturalGDP 7.1 4.8 4.2 4.7 4.7 4.4 5.4 5 8 1 GDP deflator 1.7 1.4 0.8 2.8 2.7 0.9 1.4 1 5 Consumerprice index (annual average) - ___ _~ 1.1 _~0.8 0.7 3.0 2.3 0.0 1 .o 2.0 ~ ~ ~ ~ ~ ~ Sources: IMF and Governmentof Senegal. 3. As regards the use of GDP, unlike the case in 2001 when end consumption was one of the major engines of growth, 2002 was characterized by a slowdown in this aggregate, which represents over 90 percent of GDP. Indeed, end consumption expanded by only 2.6 percent after rising by 9.1 percent following the sharp growth in general government consumption brought about by the subsidies intended to rehabilitate the public enterprises (SENELEC and SONACOS). Gross fixed capital formation expanded by 2.1 percent in 2002, thanks in particular to sustained effort on the part o f - 9 - general government, whose investment grew by 23.8 percent. In total, the investment ratio rose to 18.5 percent o f GDP in 2002 as against 18.1 percent in 2001. According to the most recent estimates, this ratio stands at 19.9 percent in 2003, with increases o f 12 percent inpublic investment and 4 percent inprivate investment. Projections indicate that the investment ratio will be 21.1percent in2005. 4. After experiencing an inflationary surge in 2001, largely attributable to the entry into force of the single VAT rate of 18 percent in September 2001, there was an easing of price hikes in 2002 despite the unsatisfactory results of the crop season. The inflation rate was lowered from 3 percent to 2.3 percent and thus remains within the standards established for multilateral surveillance by the WAEMU (inflation rate o f 3 percent or less). Thus, despite the appreciation o f the euro against the US. dollar and the pound sterling, the economy registered gains in competitiveness for 2002 and 2003 as a whole on the order o f 0.5 percent and 1.2 percent, respectively, thanks to a favorable inflation differential vis-&vis its major trading partners. Estimates for 2003 show prices well under control, with an inflation rate o f -0.037 percent. The projections for 2004 and 2005 indicate that inflation will be equal to or less than 2 percent. 5. In the area of foreign trade, the balance of payments registered a surplus of US$131.8 million in 2002 as against a surplus of US$84.5 million in 2001. This surplus i s largely the outgrowth o f improvement in the capital account and financial operations, given that at the same time the current account deficit (inclusive o f official transfers) worsened (to 5.9 percent o f GDP in 2002 from 4.9 percent o f GDP in 2001). This development is largely attributable to the expansion of the trade deficit to US$536.8 million in2002 from US$425.2 million the year before. According to estimates for 2003, the trade deficit has continued to expand to US$700.5 million. This will have an impact on the current account deficit, which i s estimated to reach 6.3 percent o f GDP in 2003. According to projections, the current deficit will improve in2004 and 2005 as compared to 2003, registering 5.6 percent o f GDP and 5 percent o f GDP, respectively. 6. The external debt stock increased from US$3,442.5 million in 2001 to US$3,580.8 million in 2002. Multilateral creditors accounted for 68 percent o f this stock in 2002 as compared to 63.7 percent in 2001. The external debt stock represents 63.7 percent o f GDP in 2002. This aggregate will improve considerably over the 2003-2005 period owing to reaching the completion point under the HPC Initiative in the first half o f 2004. According to projections, it will represent 42.9 percent o f GDP in2005. 7. Despite the slowdown in economic activity in 2002, the rehabilitation of public finances was consolidated. Thus the overall deficit on a commitments basis (including grants) was 1.3 percent o f GDP in 2002 as against 2 percent in 2001. Excluding grants, this deficit was 3.1 percent o f GDP in 2002, a 0.8-percentage point o f GDP improvement over the 2001 level. However, projections for the 2003-2005 period indicate that the overall deficit excluding grants will average 3.9 percent o f GDP. This is attributable in large measure to the increase in capital expenditure, in particular against domestic financing, during this period and in part to the impact on the wage bill o f the new civil service recruitment policy contained inthe 2003-2005 program. Nevertheless, the ratio o f the wage bill to tax receipts will average 30.6 percent over the period, in - 10- compliance with the critical threshold o f 35 percent set forth in the WAEMU convergence criteria. 8. A comparison o fthe 2003 monetary survey with that of 2002 shows improvement by US$97.4 million in Senegal's external position, a 7 percent increase in domestic credit, and money supply growth o f 11.8 percent. The net position o fthe government was US$110.8 million at end-December 2003 as compared to US$152.8 million at end- December 2002, an improvement o f US$42 million resulting from proper management o f public finances. Overall, Senegal's monetary policy was satisfactory in 2003 and will continue to target the control o f inflation, the consolidation o f foreign exchange reserves, and adequate financing o f the economy so as to safeguard the common currency and achieve sustainable and lasting growth. 11. PRSP OBJECTIVES AND BUDGETAPPROPRIATIONS 9. This section analyzes Senegal's budget appropriations in terms o f the objectives set forth in the Priority Action Plan (PAP) o f the PRSP and compares the PRSP budget forecasts with those for the actual government budget. The priority action plan in the PRSP proposes a combination o f financing by both domestic resources and donor funding. 11.1. Pillars ofthe PRSP 10. An analysis of the poverty profile and of the causes and manifestations of poverty made it possible to develop a strategy based on four fundamental.pillars, namely: wealth creation, capacity building and the promotion o f basic social services, improving the living conditions o f vulnerable groups, and a mechanism for decentralized and participatory implementationand monitoringievaluation. 11. The pillar on wealth creation describes a policy framework for maintaining macroeconomic stability, improving budget management, facilitating international trade, and improving the investment climate. These measures are intended to improve the business environment, especially for small and medium enterprises and for the services sector. While these types o f policy reforms entail adjustments in the economy, they are not inherently expensive to implement. What has larger implications for the budget i s a series o f investments proposed as part o f sectoral programs for keyproductive sectors. 12. The plan for promoting agricultural development aims to improve and diversify market opportunities and reduce the vulnerability o f rural incomes to changes innatural conditions. In addition to projects facilitating the cultivation of new products and markets, the investment plan targets improvements in irrigation, storage, and better targeting o f transport investments. For fisheries, the focus is on natural resource management in addition to improving the sector's capital stock. Much of the other planned investments relate to long-identified shortages inenergy supply and inadequacies intransport infrastructure. These investmentprojects are listedinAnnex IIIo fthe PRSP. 13. The wealth creation strategy to combat poverty accounts for 45.5 percent of the financing necessary for the Priority Action Plan (PAP) of the PRSP. This strategy - 11- is based on the following axes: strong economic growth sufficient to have a substantial quantitative impact on poverty; growth centered in sectors that have a significant and lasting impact on improving incomes in rural and urban areas; and job-creating growth driven by investment and exports. Over the 2003-2005 period, the financing necessary for PAP activities inindustry, mining, energy, and trade has not been completely covered bythe public capitalbudget allocated to these subsectors. 14. The second strategic axis relates to capacity building and the promotion of basic social services, and accounts for 42.2 percent of the financing needed for the PAP of the PRSP. The establishment o fhigh quality basic infrastructures that are better distributed geographically, as well as making essential services available to the people, are prerequisites for strengthening the stock o f human capital and providing viable solutions to social demands through cohesive investments, particularly in the areas o f education, health, water supply, and transportation. The environment, which i s a key subsector for combating poverty, accounts for the largest share o f the PAP, with 15.9 percent o f the financing required. However, the investmentbudget for the environment covers only 39 percent o f the priority actions for the environment over the 2003-2005 period. Much o fthe remaining gap has been filled by a recent donor agreement that i s not yet reflected inthe budget figures. 15. The education component o f the PRSP draws directly from Senegal's ten-year education program, PDEF, developed as a program in common to be supported by the major donors. Under the PDEF, medium-termprogram budgets have been designed for the last three years to organize financing o f activities to meet program objectives. These objectives and their financing have been incorporated into the PRSP. The objectives are: universal primary education by 2010; 49 percent o f the education budget allocated to primary education; improving access for girls and lengthening their formal education; greater access to middle and secondary education; raising the quality o f university education and research. The PRSP also sets a number o f indicators for measuring progress, including primary education enrollment, female enrollment ratios; and improvements inliteracy. 16. Similarly, the PRSP health strategy is built on the Government's ten-year sectoral healthprogram known as PDIS. The main objectives targeted inthe PDIS are: improving access for the poor to medical services; development o f community-basedhealth services; and improvement o f hygiene and sanitation in rural and suburban areas. Notably, the strategy targets improving the quality and supply o f services in the regions where the health and poverty situations are worst; increasing incentives for health personnel to serve the most needy areas; reducing the expenditures o f the poorest households on health care; and improving behaviors that can help prevent disease. The strategy includes indicators on measures o fmalaria, HIV/AIDS, vaccination, and infant and maternal mortality. 17. The water and sanitation sector has not strictly produced a program budget, but it has drafted and costed a detailed action plan for achieving the MDG goals in access to water and sanitation. The plan specifically takes the corresponding PRSP strategy into account. Significantly, the financial plan disaggregates access issues according to the current access status in rural versus urban areas. As shown in Table 9 and in the first - 12- PRSP progress report, investments undertaken or planned for the sector have fully accommodated this strategy. 18. Inthe interest of improving living conditions for vulnerable groups, the PRSP plans a number o f programs, mostly in the categories o f facilitating employment, education, and health services, but specifically targeted to the needs o f vulnerable groups, such as children, the elderly, and the handicapped. While budget system issues are taken up in other pillars o f the strategy, the vulnerable groups pillar, like the one promoting social services, specifically focuses on needed improvements in resource management. What i s noteworthy in the strategy for vulnerable groups is that it targets the capacity o f communities to set priorities andbudgets collectively and to monitor program outcomes. 19. Various social groups (children, women, the handicapped, senior citizens, youth, displaced persons and refugees, etc.) are affected by pauperbation. Their poverty creates conditions o f vulnerability that are inversely proportional to their capacity to defend themselves and to react. The priority actions targeting these groups account for 12.3 percent o fPAP financing over the 2003-2005 period 20. One of the major challenges in combating poverty is the need to reach all of the targeted Senegalese population by addressing their specific needs. To ensure the effectiveness and sustainability of such interventions, a fourth axis of the strategy relates to implementation o f a participatory and decentralized approach to the steering, execution, and monitoring/evaluation o f programs, thereby guaranteeing the transparency required to ensure ownership, but also ensuring consistency with the sectoral programs and local initiatives planned or inprogress. 11.2. Functional and Economic Classifications of the Budget 21. The government budget expanded between 2000 and 2004 from CFAF 880.1 billion in 2000 to CFAF 1,085.6 billion in 2004, an increase o f 23.3 percent. Measured as a percentage o f gross domestic product (GDP), the budget is 28.2 percent o f GDP on average over the 2000-2004 period. Priority is accorded to economic actions (9.6 percent o f GDP on average) and to educational, cultural, and social actions (7.7 percent o f GDP on average) over the 2000-2004 period. - 13 - Table 2: Trend of BudgetAppropriationsin Percentof GDP (2000-2004) 1Averagem ____- 2000 2001 2002-2003 2004 2000-2004 Fublif authorities 0.5 0.6 0.4 0.5 0.4 0.5 1.6 Presidencyof the Republic 0 2 0 3 0 2 0 3 0 81 :: INationalAssembly 0 2 0 2 0 2 0 2 O 2 0 2 I ;; 0 6 SupremeCourtof Appeal 0 0 0 0 0 0 0 0 0 0 0 0 Audit Office 0 0 0 0 0 0 0 0 0 0 0 0 Other 0 1 0 1 0 0 0 0 0 0 ' 0 0 O ll General administrative actions 3.4 3.6 3.4 3.4 3.2 3.4 12.0, Foreign Affairs, Afncan Union, and Senegaleseabroad 0.5 0.6 0.6 0.6 0.6 0.6 Armed forces 1.5 1.6 1.5 1.5 1.4 1.5 5 2 ll Intenor and localities 1.0 1.0 0.9 0.8 0.9 0.9 3 3 Justice 0.2 0.2 0.2 0.2 0.2 0.2 0 81 'Other(Office of the PnmeMinister, Civil Service, Labor, Employment etc ) 0.2 0.2 0.2 0.2 0.1 0.2 0 6 I Economic actions 10.2 9.1 9.2 9.6 9.3 9.6 34.01 Fishenes 0.4 0.3 0.2 0.3 0.2 0.3 1 1 'Infrastructure, Procurement,and Transportation 2.4 2.0 2.9 3.2 3.0 2.7 Agnculture and Livestock 1.9 2.4 1.5 1.4 1.3 1.7 9 61 6 1 Economy, Finance,and Planning 0.4 0.4 0 4 0.4 0.3 0.4 1 31 SMEs, Trade, and Microfinance 0.0 0.0 0.0 0.0 0.0 0.0 0 1 ITownPlanningand Temtonal Development, Housing 0.6 0.7 0.7 0.6 0.7 0.7 Mining, Energy, Industry, Crafts and Water Supply 2.8 2.3 2.0 2.3 1.9 2.3 28 0 31 Tounsm 0.1 0 0 0.0 0.0 0.0 0.0 0 1 Other (including studies andresearch) 1.5 1.5 1.3 1.4 1.7 1.5 5 31 I Educational, cultural, and social actions 6.6 6.8 1.1 8.9 8.3 7.1 27.2 Education and Training 3.8 3.5 4.1 4.6 4.9 4.2 14 91 Health, Hygiene,Prevention,and Nutntion 1.6 2.0 2.2 2.2 2.1 2.0 7 1 Family, Social Development, and NationalSolidanty 0.9 0.8 0.8 0.9 0.9 0.9 3 0 Other (including Environment, Culture, and Communications) 0.3 0.4 0.6 1.2 0.5 0.6 2 11 Public debt 4.2 2.5 4.1 3.1 3.0 3.4 2 1 Other nonclassified 3.4 6.1 2.8 2.9 2.6 3.1 13.1 TOTAL 28.3 29.8 21.6 28.3 26.8 28.2 1oo.ol Source: Ministry of Economy and Finance of Senegal. 22. The budget accords priority to the social sectors such as education and health. These two sectors represent 6.2 percent o f GDP on average for the 2000-2004 period. They account for 45.5 percent o f wages, 28.1 o f operating expenditure, 40.8 percent o f transfers, and 18.2 percent o f investment in 2004. This corresponds to the government's strategy o fpromoting basic social services as set forth inthe PRSP. 23. Defense and security activities are in competition with wealth creating activities. Expenditure for defense o f the national territory averages 1.5 percent o f GDP and 5.2 percent o f the overall budget, while expenditure for activities such as fisheries, industry and crafts, and tourism falls short o f this mark. On average, 76.6 percent o f the budget for the armed forces is intended for wage payments, 23.1 percent for operations, and 0.3 percent for transfers. Defense also accounts for 19.7 percent o fthe wages and 8.6 percent o f the operating expenditure o f the central government in 2004. The security budget is 0.9 percent o f GDP on average. Of this, 44.5 percent is intended for wage payments, 25.2 percent for operations, and 30.3 percent for transfers. - 14- 24. The resources allocated to Justice, the National Assembly, the Supreme Court of Appeals, and the Audit Office are low given the importance o f these sectors to good governance. Indeed, only 0.8 percent o f the budget on average i s devoted to justice, representing 0.2 percent o f GDP. A significant proportion o f this budget is used to pay staff wages (67.5 percent on average) and operating expenditure (31.3 percent on average). The same applies to the National Assembly. Enhancing the accessibility and independence ofjustice to combat corruption, identified inthe PRSP, will not be possible unless the government allocates more resources to it than i s presently the case. The Audit Office, which provides the final checks on the accounts, is allocated a budget that represents a negligible percent of GDP and 0.1 percent o f the overall budget. Additional resources should be allocated to it in order to overcome the delays experienced in the final auditing o f accounts. 25. The share of the "Other non-classified'" item is sizable. It represents on average 3.7 percent of GDP and 13.1 percent of the budget over the 2000-2004 period. The budget for this item exceeds the allocations to the target sector o f the PRSP such as health. 26. Debt service has substantialweight in the budget. It represents 11.1percent o f the overall budget and 3 percent o f GDP in 2004. The former figure is down from 15 percent o f the budget in 2000. Debt service competes for funding with operating expenditure. Inthe 2003-2004 period, debt relief has occurred intandem with a decrease intransfers, while the shares allocated to wages, operating and investment increased. Table 3: Shares of Various Expenditure Categories in the Overall Budget ~ Average ~- .___ 2000 2001 2002 2003 2004 .~ 00-02 03-04 Personnel expenditure 11 I L Average 20.4 18 4 19 8 19 4 20 2 19.54 19.81 Operating expendlture 106 17 7 114 14 1 13 5 13.24 13.77 Transfers 12 5 17 6 I 17 12 2 12 8 13.92 12.46 Investment 4 1 6 37 9 42 2 43 4 42.5 40.55 42.95 ~ Debt service 1 5 0 , 8 3 14 9 11 0 11 1 12.74 11.01 Total , 100 1 100 100 ! 100 100 100 100 Source: Author's calculation. 27. The largest share of the budget is devoted to investment, followed by personnel expenditure, over the 2000-2004 period. Investment on average accounts for 41.5 percent of the budget and 11.7 percent o f GDP, while personnel expenditure accounts for 19.6 percent o fthe budget. 28. Priority is accorded to investment in the quaternary and primary sectors. The quatemary sector accounts on average for 48.9 percent o f the investmentbudget over the 2000-2004 period, while the primary sector accounts for 25.1 percent. This demonstrates Senegal's commitment to the social sectors and the rural areas. 'Other non-classifiedplanned expenditures concerned the undistributed planned expenditures among the sectors - 1 5 - Table 4: Sectoral Breakdown of the Investment Budget, 2000-2004 7- __ ___ - 1 2000 I 2001 1 2002 ' 2003 2004 I Average00-04 I ~ Primary 29.5 25.3 23 8 25.1 1 22.0 25.1 Secondary 14.3 11.5 7.9 6.2 7 6 9.5 ITertiary 17.2 15.4 1 17 9 182 16.5 IQuaternary 39.0 1I 49.6 13'7 52.9 50.7 52.3 ~ , 48.9 Total 1 100.0 1 100.0 100.0 100.0 - 1000 1 ~ 100.0 Source: Author's calculation. 11.3. The Tie between the Budget and Poverty Reduction 29. In accordance with the PRSP pillars, the principal sectors are identified as those contributing to wealth creation, capacity building, and improving the living conditions o f vulnerable groups. Priority objectives for the 2003-2005 periods have been identified for these sectors, and have been budgeted in the PAP o f the PRSP. It i s worth examining how these sectors have been reflected inthe government budget and determining whether the objectives set may deviate from those o f the PRSP. As the PAP represents combined donor and government resources, in instances where the investment budget for a given sector falls below the budget necessary to finance the sector's priority actions under the PRSP, the govemment was unable to assemble all the financing required, including donor financing, or made appropriations not consistent with the PRSP. Since the period 2004- 2005 is ongoing, more donors fundingmay become available for some projects. 113.1. Primary Sector 30. The target sectors for investment in the primary sector are agriculture, institutional support for the primary sector, and the rural water supply. Agriculture represents on average 39.2 percent of the investmentbudget inthe primary sector over the 2000-2004 periods. Institutional support for the primary sector represents 18.7 percent on average, and one o f the strategies pursued is the establishment o f guarantee funds for agncultural projects. Rural water supply accounts for 15.1 percent. The livestock sector (4.9 percent) and fisheries sector (9.4 percent) have been left somewhat by the wayside. Table 5: Breakdown of the Investment Budget for the Primary Sector, 2000-2004 2000 2001 2002 2003 2004 1 Average 00-04 IPrimary sector 100.0 100.0 100.0 100.0 100.0 100.0 ~Agrlculture 44.8 39.5 41.O 33.7 37.2 39.2 ILivestock 2.4 6.4 5.9 4.6 5.3 4.9 Water and Forestry 15.0 12.5 13.5 9.4 10.7 1 12.2 Fishenes 10.7 10.1 7.8 9.4 9.1 9.4 RuralWater Supply 11.3 11.9 10.5 22.2 19.4 11 15.1 Agricultural Studies and Research 0.2 0.7 0.7 0.4 0.0 1 0.4 Institutionalsupport for the pnmarysector 15.5 18.8 20.5 20.3 18.3 18.7 ~. Source: Author's calculation. 31. The budget for agriculture and livestock averages 1.7 percent of GDP over the 2000-2004 period, representing 6.1 percent of the government budget. This is not an insubstantial share. On average, 83.4 percent o f the budget for these sectors i s devoted - 16- to investment, 6.2 percent to wages, 2.4 percent for operations, and 8 percent for transfers. On average, these sectors account for 1lpercent o f the government's investmentbudget. 32. The agricultural activitiescontainedin the PriorityAction Plan (PAP) of the PRSP for the 2003-2005 period represent 16.9 percent of the total financing required for the PAP. The investment budget for the subsector over the same period was able to cover all these efforts, which represent 89.8 percent of the subsector's total investment. The agricultural subsector constitutes a priority for the Senegalese government's economic and social policy, thanks largely to its contribution to improving national food security and to achieving strong economic growth that creates jobs and increases incomes in rural areas sufficient to have a substantial quantitative impact on the national prevalence of poverty. In accordance with the PRSP, the objectives for agriculture are to: reduce the vulnerability o f agricultural activities, intensify and modernize agriculture, increase and diversify agricultural incomes, strengthen the role o f small farmer organizations, and reduce the isolation o f rural areas. The major projects developedinthis subsector, interms o f their amount, are the PSAOP andthe PNIR. 33. The livestock activities contained in the PAP of the PRSP for the 2003-2005 periodrepresent0.4 percentof the totalfinancingrequiredfor the PAP. In terms of budget programming, these activities represent 14.6 percent of the subsector's investment budget over the same period. The livestock subsector contributes to improving food security and combating poverty. In order to increase the subsector's performance in a sustained and lasting manner in accordance with the PRSP, the objectives sought are to: achieve food security, preserve the productive bases and enhance production systems, and boost productivity. The major projects now beingcamed out are the Livestock Support Project, phase II (PAPEL II), the Village Planning and Development Project (PADV), and the Beekeeping Development Support Project (PADA). The new projects added are the project to improve the cattle stock and the project to develop horse raising. 34. The government's policy in the environment sector consists in ensuring the sound and rational management of natural resources with a view to achieving sustainable development. The projects being carried out in this sub-sector involve significant participation by the localities and the people, especially inthe areas o f forestry and biodiversity management. These projects, most o f which contribute to the fight against poverty, are implemented in areas where the natural resources have seriously deteriorated. Their major objectives are to: introduce land management models that promote the incorporation o f production systems and defense; restore and conserve water and soil; and promote rural forestry. The major projects already under way are: the project to rehabilitate the Senegal River valley, the agro-forestry project in Diourbel, the coastal reforestation project, and the National Reforestation Campaign. The environmental activities contained in the PAP o f the PRSP for the 2003-2005 periods represent 15.9 percent o f the total financing required for the PAP. In terms of budget programming, these activities have not been fully funded by the subsector's investment budget over the same period. The investment budget for the environment accounts for - 17- only 39 percent o f PAP activities. As noted above, much o f this gap is filled by recent donor contributions that have not yet been appropriated to the environment sector in the budget figures. 35. The fisheries subsector is one of the most import areas of national economic activity, thanks largely to its contribution to enhancing food security, its provision of raw materials to the fisheries industry, and its contribution to the generation of jobs, incomes, and foreign exchange. Its budget accounts on average for 0.3 percent o f GDP and 1.1 percent o f the overall budget. The objectives assigned to this subsector under the PRSP are: sustainable management and restoration of fisheries resources; satisfaction o f national demand; deriving maximum value from resources; providing professionals in the sector with access to financial instruments that are likely to meet investment and operating requirements under conditions consistent with the financial viability o f fisheries activities. The major projects programmed and already under way are: the fisheries support program; the cold storage program; the program to purchase six motor scooters; and resource monitoring. The fisheries activities contained inthe PAP o f the PRSP for the 2003-2005 periods represent 3 percent o f the total financing required for the PAP. In terms o f budget programming, these activities represent 63.1 percent o f the subsector's investment budget over the same period. 11.3.2. Secondary sector 36. The target subsectors for investment in the secondary sector are energy and institutional support for the sector. The energy subsector accounts on average for 56.6 percent o f the secondary subsector's investment budget. Institutional support accounts for 26.5 percent, and i s intendedprimarily for supporting the private sector. The share o f the mining, industry, and crafts subsectors i s negligible. Table 6: Breakdown of the InvestmentBudgetfor the Secondary Sector, 2000-2004 2000 2001 ~ 2002 ______ - -__ 2003 2004.Average 00-04 `Secondary sector 100 100 100 100 100 100 Mining 1.4 1 2 2 3 3.5 2.6 2.2 Industry 7.5 3 3 4 2 10.7 10.7 7.3 1 Crafts 2.8 3 9 2 7 12.4 0.6 4.5 Energy 66.6 683 71 3 55.2 21.I 56.6 Indusmalstudies andresearch institutional support 4.0 1 0 1 2 3.2 5.3 2.9 for secondary sector 17.7 223 183 15.1 59.2 26.5 _ _ ~ ~ ~ Source: Author's calculation. 37. The budget allocated to the mining, energy, industry, crafts and water sectors represents on average 2.3 percent of GDP and 8 percent of the overall budget. O f the budget for these sectors, 97.4 percent is intendedfor investment, much o f it for the water sector. Finally, 17 percent o f the government investment budget is intendedfor these sectors. 38. The mining subsector activities contained in the PAP of the PRSP for the 2003-2005 period represent 0.9 percent of the total financing requiredfor the PAP. - 18- Interms of budget programming, these activities have not been fully funded by the subsector's investment budget over the same period. The investment budget for mining covers only 53 percent o f PAP activities. However, given the negligible share o f these sectors inthe PAP, the gap is quite small in absolute terms. The main strategies selected in the PRSP to ease the constraints identified in the mining subsector are: producing sufficiently attractive mining legislation and promoting a mining policy that supports sustainable development; the emergence o f non-industrial and semi-industrial mining activities in the less developed regions; seeking new applications for substances with niche markets in order to diversify the income sources for rural populations. The two projects included in this subsector (Study on geological and mining prospecting, and petroleum prospecting) cover activities that are largely oriented toward research, exploitation, maximizing value, and promoting undergroundresources. 39. The industry subsector activities contained in the PAP of the PRSP for the 2003-2005 period represent 1.7 percent of the total financing required for the PAP. Interms of budget programming, these activities have not been fully funded by the subsector's investment budget over the same period. The investment budget for industry covers only 85 percent o f PAP activities. The principal goals set are: the emergence o f industrial activities with high domestic value added; the development o f industrial activities using a branch-by-branch approach; the adoption o f low-cost technologies and engineering, and organizing the transfer o f research results to industry with a view to making the most o f them; and the creation o f a suitable environment for the resurgence o f investment in Senegal. The major projects programmed and already under way are: the Public Services Information Systems Modernization Project (PMSIA); the project to construct pilot ITA workshops; the program to upgrade enterprises and bolster the competitiveness of the Senegalese economy. 40. The crafts subsector activities represent on average 4.5 percent of the investment budget for the secondary sector for the 2000-2004 period. The actions containedin the PAPof the PRSPfor the 2003-2005 periodsrepresent0.1 percentof the total financing required for the PAP. In terms of budget programming, these activities represent 17.3 percent o f the subsector's investment budget over the same period. The objectives set for the subsector cut across the strategic axes identified inthe PRSP, which are presented as follows: the strengthening o f capacities and the self- organization o f the participants in the subsector, and having craftsmen assuming responsibility for their own development; the development and extension o f crafts activities to promote quantitative and qualitative production; training for craftsmen to improve their skill level; the establishment o f attractive and viable crafts centers to combat the anarchistic practice of sales on the public roads, promote craft products, and develop marketing channels; and the introduction o f technically and financially viable mutual associations o f craftsmen to help finance participants in the subsector. The two major projects programmed are: the construction o f 4 crafts villages inMatam, Gibnona, Podor, and Touba Mbacke; and use o f a rotating system to train craftsmen. Nevertheless, it should be stressed that a significant financial effort (a billion CFA francs) has been made by the government under the supplementary budget law (LFR) for 2003 in order to improve infrastructures in the sector by rehabilitating the Rural Craftsmen's' Training - 19- Centers, the Dakar Center for Crafts Training, and the construction o f two new craft villages. 41. Energy accounts on average for 56.6 percent of the investment budget for the secondary sector for the 2000-2004 period. The actions for this subsector contained in the PAP of the PRSP for the 2003-2005 periods represent 6.2 percent of the total financing required for the PAP. Interms o fbudget programming, these activities have not been fully funded by the subsector's investment budget over the same period. The investment budget for energy covers only 86 percent o f the PAP activities. The principal objectives identified in the PRSP are: restoring the efficiency and productivity o f the subsector's infrastructures; improving the institutional framework for the production and transport o f electricity; increasing the electrification rate and the quality o f electricity supplies; intensifying the penetration o f electrical power in the rural areas and in the outlying areas o f the major cities to combat the lack o f security and exclusion. Implementation o f the following major projects in the subsector will contribute to achieving these overall objectives: Energy Program II;the solar Rural Electrification Project; the conventional rural and urban Electrification Project; and the program for the sustainable and participatory management o f traditional and alternative energy sources. Nevertheless, the government i s continuing its efforts using domestic resources by increasing its financial contributions toward improving the rural electrification rate. This explains the government's desire to reduce disparities as regards electrification inthe new department o f Rantrou. 42. Institutional support accounts for 26.5 percent of the investment budget for the secondary sector. The objectives sought concern improving the business environment (especially for SMEs/SMIs), job creation benefiting the target groups deemed to be o f priority (youths, Arabic-speaking university graduates), and the introduction o f a suitable institutional framework for promoting and developing the private sector ingeneral and SMEs/SMIs inparticular. 43. The activities benefiting the private sector contained in the PAP of the PRSP for the 2003-2005 periods represent 0.02 percent of the total financing required for the PAP. In terms o f budget programming, these activities represent 0.3 percent o f the investment budget devoted to the private sector over the same period. The major objectives are the promotion o f investment and exports. The major projects programmed and already under way are: the private sector support program; the Private Investment Promotion project; and support for the recapitalization and reform o f the postal sector. 44. The job creation activities contained in the PAP of the PRSP for the 2003- 2005 period represent 0.2 percent of the total financing required for the PAP. In terms o f budget programming, these activities represent 52.4 percent o f the investment budget devoted to jobs over the same period. The objective sought by the PAP over the 2003-2005 periods is to strengthen the efficiency and transparency o f the labor market. The major projects programmed and already under way are: the National Action Plan for Employment and the Insertiono f Arabic-speaking school graduates. - 20 - 45. Support for SMEs/SMIs covers 1.1 percent of the financing necessaryfor the PAP of the PRSP over the 2003-2005 period. Interms o f budget programming, these activities have not been fully funded by the investment budget for SMEs/SMIs over the same period. The investment budget for SME/SMI support covers only 69 percent o f PAP activities. Hence the need to allocate greater resources in order to remain inphase with the objectives sought inthe sector to reducepoverty. The major objective identified in the PRSP is to support and accommodate SMEs in their development. The major project under way is support to the household fuels subsector. 11.3.3. TertiavySector 46. The target sectors for investment in the tertiary sector are transportation, especially road transport, and institutional support for the tertiary sector. Road transport accounts on average for 84.6 percent o f the investment budget for the tertiary sector, while the shares of trade and communications, important subsectors identified in the PRSP for poverty reduction, are negligible. Table 7: Breakdown of the Investment Budget for the Tertiary Sector, 2000-2004 2001 2002 2003 2004 I ~~ Averageg-04 tertiary sector 100.0 100.0 100.0 100.0 100.0 100.0 Trade I 0 7 0.2 0.2 0.3 0 3 0 3 Tounsm 2 1 2.2 1.6 1.6 0 4 1 6 Road transport 76 0 84.9 90.8 87.9 84 6 Rail transport 8 0 4.1 1.4 1.o "::1 3 1 IMantime transport 2 9 0.2 2.5 1.4 4 0 2 2 Air transport 2 1 0.5 0.3 0.3 1 2 0 9 Communications 0 0 0.0 1.3 1.2 0 0 0 5 ITertiary sector research and studies I 1 3 1.3 0.0 0.0 4 5 I 1 4 IInstitutional support for the tertiary sector 6 9 6.6 1.8 6.3 5 1 _______ 5 3 Source: Author's calculation. 47. Infrastructure, procurement, and transportation account for a significant proportion of the government budget. Their budget represents on average 2.7 percent of GDP and 9.6 percent of the overall budget. Of this budget, 99.2 percent is devoted to investment, on a priority basis inthe roadtransport sector. 48. Support infrastructures such as roads and communications represent 14.5percent of PAP financing. The actions set forth in the PRSP represent 40.6 percent of the investment budget allocated to these subsectors. Road transport plays an important role in Senegal's socioeconomic development through trade traffic and the mobility o f persons and goods. In the PRSP context, it has been assigned the following objectives: safeguarding the existing road stock through periodic maintenance and rehabilitation; cohesive and harmonious development o f the road network; streamlining the provision o f transportation services with a view to eliminating all practices that boost costs; strengthening interurban trade; restructuring and developing urban transportation; and implementing the rural transportation strategy. The objectives set forth in the PAP are to strengthen support infrastructures inthe rural environment and to improve access to rural areas. The major projects programmed and already underway are: Urban Roadways, - 21 - road maintenance, and improving urban mobility. The major objective for communications i s to extend the telephone network. 49. Trade represents 0.6 percent of PAP financing. In terms of budget programming,these activitieshave not been fully funded by the investmentbudget devoted to trade over this period. The investment budget for trade covers only 47 percent o f PAP activities. Hence the needto allocate greater resources in order to remain inphase with the objectives sought inthe sector to reduce poverty. The major objective identified inthe PRSP i s the continued liberalization o f trade, strengthenedcapacities for engaging in international trade negotiations, the promotion of exports and the proper supply o f the domestic market, while respect rules on competition. The major projects programmed and already under way are: the Procurement Regulation Agency, the Export Promotion Office, the outfitting o f the laboratory at the Domestic Trade Directorate, and the National Competition Commission. II.3.4. Quaternary sector 50. The target areas for investment in the quaternary sector are health and nutrition, education and training, and urban water supply and sanitation. Health accounts for 20.1 percent o f the investment budget for the tertiary sector, education and training for 16.3 percent, and urban water supply and sanitation for 17.2 percent on average over the 2000-2004 period. Table 8: Breakdownof the InvestmentBudgetfor the QuaternarySector, 2000-2004 -~ - - - 2000 2001 2002 2003 2004 `Aver&-04 ~~~~ ~ Quaternary sector 100.0 100.0 100.0 100.0 ~100.0 100.0 I Urban water supply and sanitation 22.7 16.2 14.9 148 175 17 2 Culture, youth, sports I.5 2.8 2.3 3 2 2 9 2 5 Housing and town planning 12.5 11.7 11.4 8 6 111 11 0 i Healthand nutntion 17.8 22.4 21.5 190 i 197 20 1 Education and training 16.7 18.7 14.6 i3: 1 6 1 152 163 , Social development 5.3 7.0 7.7 7 8 Administrative procurement 13.1 11.2 19.6 ::6 16 2 Studies and researchon the nonmarket sector 1.1 0.7 0.3 0 6 Institutionalsupport for nonmarket sector 9.2 9.3 7.7 7.5 7 8 8 3 ~ Source: Author's calculation. 51. The education and training budget is gradually increasing. It represents 4.2 percent of GDP on average over the 2000-2004 period and 14.9 percent of the overall budget for 2004. Investments planned under the PAP for the 2003-2005 periods represent 8.1 percent of the financing necessary for that PAP. The actions set forth in the PRSP represent 43.5 percent of the investment budget allocatedto this subsector. The education budget has increased from 13.5 percent o f the overall budget in 2002 to 18.1 percent in 2004. Wages, operating expenditure, transfers, and investment account for 43.5 percent, 13.7 percent, 22.1 percent, and 20.7 percent o f the sector's budget, respectively. On the other hand, 36.1 percent of the wages, 17.4 percent of the current expenditure, 29.8 percent o f transfers, and 7.9 percent o f the government's investment budget are devoted to education in 2004. The government wishes to pursue - 22 - the objectives it set for itself in the PRSP. The priority objective inthis sector remains achieving universal quality education at the primary school level by 2010. At the same time, however, pursuit o f the policy to build capacities at the middle school and general secondary school level will be continued with the construction o f lyckes and neighborhood schools and improvements inthe quality o f higher education. The strategy developed at the primary school level for achieving the universal education objective i s dependent on the construction o f about 2,000 classrooms annual and on the recruitment o f a sufficient number o f teachers. At the same time, the policy o f generalizing the provision o f free textbooks will be continued. The main project developed inthis sector i s the Ten-Year Plan for Education and Training (PDEF). 52. The health budget represents on average 2 percent of GDP and 7.1 percent of the overall budget over the 2000-2004 period. Investments planned under the PAP for the 2003-2005 periods represent 10 percent of the financing necessary for that PAP. The actions set forth in the PRSP represent 50.2 percent of the investment budget allocated to this subsector. The majority o f the health budget i s devoted to investment (55.9 percent), followed by wages (17.7 percent), in 2004. The priority actions targeted are to improve the accessibility o f health services by the poor, the construction and rehabilitation o f health centers and health posts, the outfitting o f health infrastructures, the strengthening o f community-based services, combating malaria, and A I D S prevention and the provision o f treatment to those afflicted by it. The major projects are: the Strategic Plan for Combating AIDS, and the Integrated Health Development Program (PDIS). 53. For drinking water, one of the priority objectives selected was to increase the quality of drinking water and the rate of access to it (in less than 15 minutes), which i s currently 87.9 percent. The aim is to boost this rate to 100 percent by 2010 by, in the short term, providing 60 rural localities with motorized drilling rigs, building 500 bore wells-modern wills for communities that do not yet have access to drinking water, and rehabilitating 100 bore wells that have been in existence for 30 years. In the rural environment, the primary objectives are to meet the drinking water needs o f the rural population and contribute to food security by increasing the mobilization o f runoff water resources for agricultural and pasturing purposes. The major projects programmed and already under way are: the Catchment Basin Construction Program, the Drinking Water for All Project, and the project to support small-scale localized irrigation. In the urban areas, the aim i s to provide satisfactory drinking water services to at least 85 percent o f the urban and surrounding areas by 2006. The main project i s the Long-Term Sectoral Water Project, which will make it possible to provide drinking water in the Dakar area through 2015. The investments planned under the PAP for 2003-2005 represent 6.1 percent o f the financing needed for the PAP. The actions set forth inthe PAP represent 20.9 percent o fthe investment budget allocated to this subsector. 54. For sanitation, the priority objective is to improve sanitary conditions and the living conditions of the urban population, in particular those living in areas not served by access to adequate sanitation services. Investments planned under the PAP for the 2003-2005 periods represent 2.2 percent o f the financing necessary for that PAP. Interms of budget programming, these activities have not been hlly funded by the - 23 - investment budget devoted to sanitation over this period. The investment budget for sanitation covers 82 percent o fthe PAP activities for this subsector. 55. A significant effort is currently being made for the vulnerable groups (children, women, the handicapped, and senior citizens). Indeed, a number o f different projects have been initiated, such as the Social Development Fund, the ADB anti-poverty project, small loans to women's groups, the project for infant development, support for disadvantaged groups, and the project to combat the exploitation o f children. The budget allocated to this pillar o f the PRSP represents on average 0.6 percent o f GDP, or roughly 2.1 percent o f the overall budget over the 2000-2004 periods. Investments planned under the PAP for the 2003-2005 periods represent 12.3 percent o f the financing necessary for that PAP, with particular emphasis on children. In terms of budget programming, these activities have not been fully funded by the investment budget devoted to vulnerable groups over this period. The investment budget for vulnerable groups covers 81 percent o f the PAP activities for this subsector. 56. In the context of streamlining and advancing the decentralization and local development process, the government intends, inthe medium and long terms, to devise a global framework aimed at improving local development and the financial and administrative management o f the localities, while upgrading human resources, the programming and financing o f infrastructures and equipment, and ensuring grassroots participation inadvancingdemocracy. 57. The government will endeavor to continue and move forward with decentralization, in particular by providing support for institutional development with a view to promoting genuine local administration. Steps will be taken regarding the local taxation system so as to enable the localities to free up sufficient resources to finance local public investment. The competencies o f the localities should be strengthened and expended, while devising a more rational temtorial division, making it possible to establish entities that are more viable administratively and financially. II.3.5. TotalPovertyReductionInvestments 58. Table 9 compares the total PAP expenditures and those o f the Triennial Public Investment Plan (PTIP) for the PRSP years 2003-2005, showing total PAP and PTIP spending for the period in the first two columns. An examination o f the detailed investment budgets for education, health, and agriculture shows a close correspondence between the specific projects listed in the PAP and in the PTIP. Nevertheless, the PTIP includes some activities not listed in the PAP. Further, the classification by sector is not always identical as some rural infrastructure projects grouped under agriculture in the PRSP appear to be classified under infrastructure in the PTIP. Similarly for vulnerable groups, an area not organized as a ministry or a sector, most o f the projects listed in the PRSP appear to be health and education projects targeted at vulnerable groups. Thus further data on the successful targeting of these programs will be needed before a fdl assessment o f the adequacy o f investments can be made, while the total listed separately for social investments could underestimate the total investmenteffort. - 24 - m N I 59. Table 9 shows, by year, the estimated gap between spending on PAP activities programmed under the PTIP and that required under the PAP. For the 3-year period, the aggregate gap betweenthe PTIP and the PAP is nearly 100 billion CFA out o f a total PAP spending o f 600 billion CFA. However, fully 60 percent o f this gap i s due to the environment sector where much o f the gap has been filled by donor funds not yet accounted for inthese budget figures. The remainder o f the aggregate gap is reasonably small and could possibly be reduced by other donor funds yet to come in 2004-2005. Across sectors, the deficits in mining, industry and energy do not have a big role in the overall PRSP investment plan. More significant to the poverty reduction strategy are deficits in small and medium enterprises, water and sanitation, and vulnerable groups. The Government has acknowledged these gaps in its PRSP progress report, andpromises there to improve spending in these areas. The Government will also be expected to increase allocations for environment inorder to fulfill programs listed inthe PRSP. 60. Thus accordingto the PTIP, PRSP investment priorities have largelybeen covered in the budget. The detailed audit o f 2003, the first year o f PRSP implementation will show more fully the adequacy o f disbursements on specific PAPprojects. 111. FISCAL PERFORMANCE 61. This section is devoted to the analysis of fiscal performance in terms o f execution o f the approved budget by sector and by nature o f expenditure. It will conclude with an analysis o f the trends for the major public finance aggregates for 2003 and projections for 2004 and 2005 as compared with PRSP projections. Methodology for Data Adjustment 62. This section describes the breakdown o f the budgets executed between 2000 and 2003. Problems with the data prevent us from obtaining a robust series for these years, especially for 2002. Therefore, several assumptions were made to fill the gaps in the data, as described below. 63. The starting point is the Tableau des Opbrations FinanciBres de I'Etat (TOFE) developed by the Treasury. This Tableau i s based on the execution o f credits provided by the Direction du Budget, to which are added statistical adjustments to hlly account for all the expenditure o f the government. These adjustments are for expenditures that follow exceptional procedures, and typically concern spending by embassies, regional administrations, advances by the treasury, PPA and other subsidies. 64. Usingthe data provided by the Treasury and Direction du Budget, and inorder to be able to allocate these expenditures across the principal ministries, the following were the principal adjustments made: 1. The operating expenditures o f the embassies were allocated to the Ministry o f Foreign Affairs. 2. For operating expenditures by regional administrations, the Direction du Budget was not in a position to provide data by ministry for the period under consideration. Therefore, we assume these expenditures were allocated in the - 26 - same manner as the budget voted in 2003. The shares were derived by using the amounts allocated to the differentregions ineach ministry's operating budget. 3. The advances by the treasury were classified as current expenditures or transfers byministry according to the nature o fthe advance, and the intendedbeneficiaries. 65. Fiscal year 2002 was an unusual one, with the introduction o f a new system as well as new software for public expenditure management. As data on the breakdown between operating budget and transfers for that year were not available, we had to estimate the proportions using the average o f the shares for 2000, 2001 and 2003 by sector, and multiplythese by the 2002 budgetary allocations. The difference between the total current expenditures (operating budget and transfers) so derived and that in the TOFE is entered inthe line item, "not elsewhere classified." 66. Regarding the investment budget, the information by ministries i s available for all years except 2003. Therefore, the adjustment was made by using the proportions from the sectoral shares in the budget executed in 2002, and multiplying by the total investmentbudget in2003 from the TOFE. 111.1. FunctionalClassificationof PublicExpenditure 67. Government current and capital expenditure (including debt amortization) amounted to 24.3 percent of GDP in 2003. It expanded by 9.3 percent between 2000 and 2003, in terms o f percentage o f GDP. The budget execution rate was 86 percent in 2003, as compared to 2001 and 2002 when the figure was 80 percent on average. However, this good rate masks disparities between the sectors and the different types o f expenditure. - 27 - Table 10: FunctionalClassificationof PublicExpenditure,in Percentof GDP2 I 000 2001 ZoOz 2003 1AverageIPercent of Public authorities 0.6 0.5 0.3 0.5 0.5 1.9 Presidencvof the Reoubhc 0 3 0 3 0 1 0 3 0 2 1 0 NationalAssemblv 0.2 0.2 0.2 0.2 0.2 0.7 Suoreme Court O f ADDeal 0.0 0.0 0.0 0.0 0.0 0.0 Audit Office 0.0 0.0 0.0 0.0 0.0 0.0 lother 0.1 0.0 0.0 0.0 0.0 0.2 I IGeneral administrative actions 3.3 3.5 3.1 3.6 3.4 14.1 Foreim affairs 0.6 0.6 0.3 0.6 0.5 2.2 Armed forces 1.5 1.5 1.5 1.5 I.5 6.2 Intenorand localities 0 7 1 0 I O 1 0 0.9 3.9 Justice 0 2 0 2 0 2 0 3 0.2 1.o Other 0 2 0 2 0 2 0 2 0.2 0.8 lEconomic actions 1.5 6.4 1.9 1.0 1.2 29.9 `Fisheries 0 3 0 3 0 3 0 3 0.3 1.2 Infrastructure. Procurement.and Transoortation 1 7 1 3 2 8 2 5 2.1 8.7 lAencultureand Livestock 1 0 1 7 1 1 1 0 1.2 5.0 Economv. Finance.and Plannine 0 4 0 4 0 4 0 4 0.4 1.6 ISMEs. Trade. and Microfinance 0 0 0 0 0 0 0 0 0.0 0.2 Town Plannine and Temtonal Develooment.Housing 0 3 0 6 0 5 0 5 0.5 2.0 Mining. Enerw. Industrv. Crafts and Water SUDD~V 3 0 I O 1 3 1 1 1.6 6.6 Tourism 0 0 0 0 0 0 0 0 0.0 0.1 lother (includine studiesand research) 0 8 1 1 1 3 1 1 1.1 4.6 Educational. cultural. and social actions 5.6 5.8 6.8 1.4 6.4 26.6 Educationand Training 3 4 3 0 3 8 4 0 3.5 14.8 Healthand nutntion 1 6 2 0 2 0 2 0 1.9 7.9 IFamiIv. social develooment. 0 5 0 6 0 7 0 7 0.6 2.6 Other 0 1 0 2 0 3 0 6 0.3 1.3 Public debt service 3.5 2.8 3.4 3.1 3.2 13.5 Other nonclassified 1.8 5.1 4.0 2.7 3.4 14.1 TOTAL 22.2 24.1 25.5 24.3 24.0 100.0 Source: Ministrv of Economv and Finance. 68. Public expenditure for education represents on average 3.5 percent of GDP and 14.8 percent of total expenditure. Expenditure for health is 1.9 percent of GDP and 7.9 percent of the budget. The extent to which the total budgets for these priority sectors are executed i s relatively good. However, there are some problems with respect to the execution o f investmentexpenditure for education. Indeed, the average execution rate for the 2000-2003 period for education i s only 59.8 percent. This i s attributable to the low level o f annual execution o f the PDEF in comparison with the approved budget. In 2000, 2001, and 2002, the execution rates for this project were 32 percent, 54 percent, and 73.3 percent, respectively. For health, PDIS execution has proceeded satisfactorily between 2000 and 2003. It bears noting, however, that the current budget for health has an execution rate o f 91.6 percent for 2003. 69. Agriculture and livestock, which have an important role in Senegal's economic development, have an average budget execution rate of 66.6 percent over the 2000-2003 period. However, agriculture made significant quality gains in terms o f investment budget execution. Indeed, the rate rose from 45.2 percent in 2000 to 69.4 percent in2002. The major projects such as the PPEA, the PSAOP, and the PNIR, have rather low execution levels for their programmed budgets, despite a pronounced * Current expenditures (operating and transfers) in2002 executed by sector and investment executedby sector in2003 are estimated - 28 - improvement for the PSAOP in 2002. Execution rates on average for the period 2000- 2002 are 44 percent for the PPEA, 63 percent for the PSAOP, and 32 percent for the PNIR. For livestock the investment budget execution rate for 2002 is low, at 41.6 percent, attributable largely to the major projects in the sector, the PADV (21.6 percent) and PAPEL II(44.2 percent). 70. Budget execution for the resources devoted to the vulnerable groups has fallen short of the mark. The rate was only 52.3 percent in 2003. This low rate is explained in large measure by the low rate o f execution of investment expenditure, which was 39.1 percent in2002. The Social Development Fundproject has a budget execution rate o f 25.9 percent, though it represents 50.4 percent of all budget resources allocated to social development. 71. The national defense, security, and justice sectors have not experienced budget execution problems. For security, the budget execution rate was 120.2 percent in 2003. On average for the 2000-2003 period, expenditure on security (0.9 percent of GDP) rivaled that on agriculture (1.2 percent o f GDP). Table 11: Budget execution rate trend in the major sectors, in percent _. Average 2002 2003 12000-2003 ~~~~ National Assemhlv 908 98 5 95.6 1007 9 6 4 1Armed forces 1053 9 3 4 101.5 1004 100 1 Tntenor and localities 7 3 4 9 8 2 104.5 1202 I 99 1 lustice 112 1 101 1 90.9 1332 1 1093 Fishenes 792 81 7 135.6 90 3 96 7 Infrastructure Procurement and Transnortation I 705 642 96.9 77 7 77 3 Amculture and Livestock ' 5 2 0 723 71.0 71 0 6 6 6 Town Planning and Temtonal Develnnment. Housing 482 83 2 74.8 854 7 2 9 Minine Energv lndustrv Crafts and Water Sunnlv 106 1 422 64.4 497 1 656 'Education and Training 88 1 848 91.9 870 1 879 IHealth Hveiene Prevention and Nutntion 101 5 9 8 0 90.4 91 6 954 IFamily, Social Development, and National Solidanty 3 9 4 517 56.9 52 3 50 1 Source: Author's calculation. 111.2. Economic Classification of Public Expenditure Current expenditure averaged 16.1 percent of GDP over the 2000-2003 period, with transfers and wages in priority positions. Interms o f percent o f GDP, they increased by 4.7 percent from 2000 to 2003 while investment grewby 19.6 percent. Table 12: Economic Classification of Budget Expenditure, in Percent of GDP 2000 2001 2002 2003 4verage 2000-2003 Current expenditure 15.3 17.2 15.9 16.0 16.1 Wages 5.6 5.2 5.7 5.4 5.5 Operating expenditure 3.1 3.9 3.O 3.7 3.4 Transfers 3.0 5.3 3.8 3.7 4.0 Debt service 3.5 2.8 3.4 3.1 3.2 Investment expenditure 6.9 6.9 9.6 8.3 1.9 Government 2.3 2.9 3.O 2.6 2 7 Loans 2.7 1.7 2.8 2.4 2 4 Subsidies 1.4 1.7 2.2 1.9 1 8 0.4 0.6 1.6 1.4 Source: Author's calculation. - 29 - 72. Investment,which represented7.9 percent of GDP on average, was financed 34.2 percent by the government, 30.4 percent by loans, 22.8 percent by subsidies, and 12.6 percent by other sources over the 2000-2003 period. The largest share o f investment expenditure was for the quaternary sector (56.3 percent) and the primary sector (21.3 percent) in 2002. Government financing i s used on a priority basis for road transportation, administrative procurement, education, health and nutrition. Loans principally target agriculture, urban water supply, energy, and health and nutrition. Subsidies are used on a priority basis for road transportation, housing andtown planning, and health and nutrition. 73. The investment budget has the lowest budget execution rate 67 percent on average by comparison with the other categories o f expenditure (personnel, operations, and transfers), which are well executed. The sectors with unsatisfactory investment budget execution results are: agriculture, livestock, water and forestry, rural and urban water supply, and social development, which mainly i s mainly a reflection o f the investment share inthese sectors and the low execution rates o f investment spending. Table 13: Comparisonof Approved bywith ExecutedBudget,by Natureof Expenditure(in percentof GDP) -~ Average 2000 2001 2002 2003 :000-2003 5.6 5.2 5.7 5.4 5.8 5.5 5.5 5.5 98% 95% 104% 98% 99% 3.1 3.9 3.0 3.7 3.O 5.3 3.1 4.0 104% 73% 95% 94% 91% 3.0 5.3 3.8 3.7 3.5 5.3 3.2 3.4 85% 101% 118% 108% 103% 6.9 6.9 9.6 8.3 11.7 11.3 11.6 12.3 Execution percentage 59% 61% 82% 67% 67% Debt service Executed 3.5 2.8 3.4 3.1 4.2 2.5 4.1 3.1 84% 113% 84% 101% 95% 22.2 24.1 25.5 24.3 28.3 29.8 27.6 28.3 79% 81% 92% 86% 84% 111.3. PublicFinanceAggregates 74. Budget years 2002 and 2003 took place in the context o f the rehabilitation of public finances, and budget execution levels were satisfactory. This improvement is - 3 0 - attributable to the combined effect o f an increase in budgetary resources and the contraction o f public expenditure, following the non-renewal o f the CFAF 105 billion subsidyto the public enterprises (SENELEC and SONACOS) in2001. 75. Total expenditure and net lending i s evaluated at CFAF 850 billion in 2003 as compared to CFAF 730.3 billion in2002, an increase o f 16.4 percent. 76. Regarding the wage bill, the "wage bill/tax receipts" ratio was 30.1 percent despite a one-point difference from the objective set forth in the PRSP in 2003. It remained below the limit for the WAEMU convergence criterion, which establishes a ceiling at 35 percent. According to the forecasts for 2004 and 2005, the ratio will continue to meet the criterion. 77. The "domestically financed capital expenditure as a percentage o f tax receipts" ratio was 24.1 percent in2003, thus exceeding the Community standard (20 percent) and the PRSP objective (22.6 percent). 78. Total budgetary receipts amounted to CFAF 720 billion in 2003, as compared to CFAF 664.6 billion in 2002, an increase o f 8.3 percent. This growth resulted from increases o f 7.6 percent in tax receipts and 21.7 percent in nonfiscal revenue. This reflects the positive impact on the tax ratio, which rose from 18.9 percent in2002 to 19.1 percent in 2003. The projections for 2004 and 2005 are more optimistic than the PRSP objectives. 79. The basic budget balance was 0.6 percent o f GDP as compared to 1.9 percent in 2002. The PRSP projections are more optimistic than the outturn for 2003 and the forecasts for 2004 and 2005. 80. The overall fiscal deficit (excluding grants) expanded between 2002 and 2003, from -1.9 percent o f GDP to -3.4 percent o f GDP. Projections indicate that this balance will be - 4.8 percent o f GDP in 2004 and -3.6 percent o f GDP in2005. These figures are less optimistic than those set forth inthe PRSP. Table 14: Budgetary Objectives (Midpoint Scenario) of the PRSP, Outcomes, and Programfor 2002-2005 7 __ - 2 ~ 20 2003 I 201 201 ~ PRSP PRSP PRSP ~ PRSP Real Obj. Real 0bj.- 'rog. 1 Obj. Prog. ~ Tax ratio (%) 18,l 18.9 18,2 19.1 1' 18,2 19 I 18,2 19 3 ~ Wage billitax receipts (%) 29,9 31.7 29.1 30 1 28,l 30 6 I 27,2 31 1 Domestically financed capital expenditurehax receipts (%) 21,7 23.5 22,6 24 1 22,4 25 3 22,2 26 5 Capital expenditure (% of GDP) ExcludingHIPC 794 7.5 8 S 8 2 8,6 8 3 8,6 Including HIPC 7 3 7.9 9,3 8 3 9,4 8 7 9,4 7 7 8 4 ~ lasic budget balance (% of GDP) 1,3 1.9 1,4 0 6 1,6 -0 3 1,8 0 2 `ash basis surplus or deficit (-) ( " 2of GDP) Including grants -0,4 -0.1 -0,5 -1 4 -0,5 -2 6 -0,4 -1 4 Excludinggrants -2,6 -1.9 -3,3 -3 4 , -3,3 -3,l -3 6 ~~ -4 8 ~ ~ _____ ~ ource: IMF and Ministry of Economy and Finance 111.4. Fiscal Sustainability and Social Sector Spending 81. Senegal's fiscal position i s relatively stable, and spending allocations for the social sectors are adequate. Projections based on the baseline and optimistic growth - 3 1 - scenarios from Senegal's PRSP indicate that debt will remain sustainable under the assumption o f continuity o f current fiscal policy. However, according to simulations with a macro consistency model included in the Senegal poverty assessment, debt could become unsustainable under pessimistic assumptions. The same simulations indicate that even under baseline or optimistic conditions, there is little scope for increasing public social sector spending, and thus any increases would need to come from other sectors. The poverty assessment concludes as follows: 82. One of the messages fromthe simulations is that the scope for large increases in social public spending is limited. This can be made clearer by recalling the parameters used inthe base scenario. The scenario assumes that primary public spending (i.e., spendingnet o f debt service) would progressively increase from 19.2 to 22.2 percent o f GDP, while at the same time revenues would increase from 18.0 to 20.0 percent o f GDP. Spending would thus increase faster than revenues (by one percentage point over 15 years), which ifall the other parameters holdwould be sustainable from a debt point o f view. However, faster increases in spending would probably not be sustainable, unless revenue generation is increased proportionately, which may not be easy to achieve, and may jeopardize long-term growth. Iftotal spending can be increased over time, but only inrelatively modest proportions as a share of GDP, achieving targets in (among others) education and health may require massive reallocations within the overall budget. In practice however, it i s difficult to implement such large reallocations. Obviously, higher levels o f grants would enable more spending on the social sectors, but it is unclear how much potential there is in the long run for higher grants from donors in Senegal. Thus while spendingplans inthe PRSP are ambitious, financing may be a challenge. [Simulations o f other scenarios in a macro-consistency framework are included in Annex 2.1 Conclusion 83. Senegal's economic growth and macro-economic balances are in line with its PRSP projections. With a few exceptions, Senegal has allocated sufficient fimds to finance the investment planput forward inits PRSP. Further, recent budget data indicate that Senegal largely spends what it allocates. Budget execution rates are near 100percent for all spending categories besides the common exceptions of the investment budget, where the execution rate i s typical o f developing countries, and debt repayments in some cases. Thus budget execution rates by sector largely reflect the share o f investment inthe sector's total spending. - 32 - Appendices to Chapter I Table 15: Senegal Selected Economic and Financial Indicators 1999 2000 2001 2002 2003 2004 Zoos, hnnual averageinflation (%) 8 0.7 3.0 2.3 0.0 1.0 2.0 National Accounts (growth rates, %I) Agnculture 7 106 7 6 -199 192 8 4 5 1 7 6 1 6 1 9 5 4 6 6 9 7 3 3 4 0 4 8 4 8 4 1 5 0 5 5 DP at market pnces 0 5 6 5 6 1 1 6 5 6 0 5 8 1 2 9 3 0 -13 4 1 3 8 4 0 ' National Accounts (YOof GDP at current market prices) f h s s domestic investment 1 6 185 181 185 199 2 0 8 21 1 Public investment 3 6 2 6 4 7 9 8 8 9 0 8 8 Pnvate investment 24 123 117 1 0 6 111 1 1 8 123 Gross domestic savings 35 8 6 8 6 7 5 8 8 9 9 107 IBalance of Payments (% of GDP at current market prices) kurrent account balance (including budgetary and project grants) -5.8 -6.3 -4.9 -5.9 -6.3 -5.6 -5 8 Current account balance (excluding budgetary and project grants) -7.9 -8.6 -6.6 -7.6 -8.3 -7.4 -6 8 External Indicators Extemal Public Debt Service/Export of Good and Non Factor Services 12.2 12.5 9.3 9.5 8.4 7.5 6 9 Gross Official Reserves in months of imports 2.3 2.2 2.6 2.9 2.8 3.0 2 8 Government finance (YOof GDP at current market prices) Domestic revenue 17.3 18.1 17.8 18.9 19.1 19.1 19 31 Current expenditures 12.0 13.2 15.3 13.6 14.0 13.7 13 6 verall fiscal balance excluding grants (commitment basis) -3.5 -2.0 -3.9 -1.9 -3.4 -4.8 -3 6 verall fiscal balance including grants (commitment basis) -1.4 0.1 -2.0 -0.1 -1.4 -2.6 -1 4 0.8 0.5 1.6 1.9 1.8 3.6 1 8 0.6 -0.7 0.5 -2.0 -0.4 -1.0 -0 7 k Monetary indicators road money (M2) (% annual growth) 13.3 10.7 14.5 7.6 11.8 7.8 7 4 2iGDP (% o f GDP at current mp) 24.4 25.4 26.8 27.8 28.9 29.0 29 0 IHIPC Initiative expenditure (% of GDP at current market prices) 0.1 0.2 0.4 0.8 0.9 1 2 Memo: DP at current market pnces (billions of CFA francs) 925.03114.03379.63510.63768.84049.3 4348.5 614.9 710.1 732.4 694.8 580.1 518.2 517.0 Source :FMI et Ministbre de I'Economie et des Finances - 33 - Table 16: Part des grandes naturesde DCpensesdans le Budgetdu secteur Yo du Source :Calculde I'auteur Part dansle budgettotaldu secteur total 1 Investisseme . -1 Salaires Fonctionnement Transferts nts Total budgc AnnCe 2002 I I Presidence de la Rkpubhque 24 7 62 1 13 2 0 0 100 0 0 6 Assemblee Nationale 48 4 50 0 1 7 0 0 100 0 0 6 Forces ArmCes 76 6 23 1 0 3 0 0 100 0 5 4 'Interieur et collectivites locales 41 8 33 0 25 2 0 0 1000 3 4 ~ Justice 1 66 3 32 5 1 1 0 0 100 0 0 7 PEche 5 3 1 6 0 1 9 2 9 1000 0 8 Infrastructures, Equipement et Transports 0 7 0 2 0 0 99 1 1000 10 7 'Agriculture et Elevage 5 7 2 0 7 1 852 1000 5 5 Urbanisme et Amenagement du Temtoire, Habitat 2 3 0 8 0 0 9 7 0 1000 2 6 Mines, Energie, Industne, Artisanat et Hydraulique 1 0 0 6 0 7 9 7 6 1000 7 2 Education et Formation 45 7 11 2 21 2 21 8 1000 14 9 Santt, Hygiene, Prevention et Nutrition 16 6 114 11 7 603 1000 8 0 ,Famlle, developpement social et Solidarite Nationale - 85 5 5 2 7 833 1000 ~-2 1 I AnnCe 2003 IPrCsidence de la Republique 13.1 74.8 12.1 0.0 100.0 0 9 IAssemblte Nationale 45.1 53.4 1.5 0.0 100.0 0 6 Forces Armtes 75.7 23.3 0.9 0.0 100.0 5 3 Inttrieur et collectivites locales 43.8 22.5 33.7 0.0 100.0 3 0 lJustice 68.9 30.0 1.1 0.0 100.0 0 7 lP&che 4.5 1.6 0.1 93.8 100.0 I 1 Infrastructures, Equipement et Transports 0.6 0.2 0.0 99.2 100.0 I 1 2 Agnculture et Elevage 6.2 2.3 8.1 83.5 100.0 5 0 Urbanisme et Amenagement du Territoire, Habitat 3.4 2.7 0.5 93.5 100.0 2 0 Mines, Energie, Industne, Artisanat et Hydraulique 0.9 0.6 1.2 97.3 100.0 8 1 Education et Formation 41.8 14.5 22.1 21.6 100.0 164 Sante, Hygiene, Prevention et Nutrition 17.2 10.6 17.9 54.3 100.0 7 7 Famlle, developpement social et Solidarite Nationale -~ 4.7 2.5 29.9 63.0 ~~~~~ ~ AnnCe 2004 IPrCsidence de la Republique 25.0 64.9 10.1 0.0 100.0 0 7 Assemblke Nationale 41.8 56.8 1.4 0.0 100.0 0 6 I Forces Armees 76.8 22.3 0.9 0.0 100.0 5 2 Inttrieur et collectivites locales 47.9 20.2 32.0 0.0 100.0 3 4 Justice 67.3 31.5 1.2 0.0 100.0 0 8 P&che 5.9 2.4 0.1 91.6 100.0 0 9 ,Infrastructures, Equipement et Transports 0.6 0.2 0.0 99.2 100.0 11 2 Agriculture et Elevage 6.8 2.8 8.8 81.6 100.0 4 9 Urbanisme et Amenagement du Territoire, Habitat 3.0 3.4 0.0 93.6 100.0 2 6 Mines, Energie, Industrie, Artisanat et Hydraulique 0.6 0.5 1.6 97.3 100.0 7 0 I Education et Formation 43.0 15.4 22.9 18.7 100.0 18 1 Sante, Hygiene, Prevention et Nutrition 17 7 12.8 13.5 55.9 100.0 7 8 Famlle, developpement social et Solidante Nationale __ _ _ 7 1 5.2 8.1 79.6 100.0 1 9 ~ _____ _____-~ - 34 - Table 17: Part des secteurs dans les diffkrentesNaturesde Dkpensesdu Budget 2002-2004 Source :Calcul de I'auteur ~ Salaires FonctionnementTransferts Investissements1 AnnCe 2002 1 0 7 3.1 0.6 0 0 1 5 2.7 0.1 0 0 Forces Armies 20 7 10.9 0.1 0 0 Inteneur et collectivitks locales 7 2 9.8 7.3 0 0 11 Justice 2 5 2.1 0.1 0 0 0 2 0.1 0.0 1 9 0 4 0.2 0.0 25 0 1 6 1.o 3.3 11 1 I 0 3 0.2 0.0 6 0 1 0 4 0.4 0.4 16 8 1 3 4 5 14.7 27.1 7 7 I 6 7 7.9 8.0 11 4 0 9 1.o 0.5 4 1 - ' 0 6 5.0 0.9 0.0 1 4 2.2 0.1 0.0 l 2 0 6 8.8 0.4 0.0 '1 6 7 4.8 8.3 0.0 2 6 1.5 0.1 0.0 0 3 0.1 0.0 2.4 1 0 4 0.2 0.0 25.6 1 6 0.8 3.3 9.6 0 4 0.4 0.1 4.3 0 4 0.3 0.8 18.2 35 2 16.9 29.8 8.2 6 8 5.8 11.4 9.6 1 0 0.7 10.3 6.1 ~ - 0 8 3.2 0.5 0.0 1 3 2.7 0.1 0.0 19 7 8.6 0.4 0.0 8 0 5.1 8.5 0.0 I 2 5 1.8 0.1 0.0 I O 3 0.2 0.0 2.0 1 0 3 0.2 0.0 26.1 1 6 3.4 9.3 ~ 1.o 0 4 0.7 0.0 5.8 ~ 0 2 0.3 0.9 16.1 ~ I 386 20.7 32.5 8.0 I 6 9 7.4 8.3 10.3 Famille, diveloppement social et Solidarite Nationale 0 7 0 7 1.- 2 3 6 - 35 - Table 18: Part des types de dCpenses dans le BudgetexCcutCdu secteur en % i - Source :Calcul de I'auteur -.-. . _ _ _ Part dans le budget total du secteur % du total I Salaires Fonctionnement Transferts Investissements Total 1 budget AnnBe 2001 I I Presidencede la Republique 15 3 84.2 0 5 0 0 100 0 1 1 pAssembleeKationale forces Armees 51 2 47.1 1 7 0 0 10001 0 7 76 9 22.9 0 2 0 0 100 0 6 1 Interieur et collectivitBs locales 43 6 35.0 21 4 00 1000 I 4 2 I Justice 61 3 37.8 0 9 0 0 100 0 0 9 P@che 6 5 2.2 0 2 91 1 1000 1 1 0 1 Infrastructures,Equipementet Transports 1 2 0.7 0 0 98 0 1000 5 4 Agriculture et Elevage 5 7 2.9 51 4 40 0 I 7 2 I Urbanismeet Amenagement duTerntoire, Habitat 4 1 1.4 0 0 94 5 100 0 loo O 2 3 Mines, Energie, Industrie, Artisanat et Hydraulique 2 1 34.3 1 4 62 2 100 0 4 0 Educationet Formation 68 4 7.2 5 4 19 0 100 0 124 Sante, Hygiene, Preventionet Nutrition 14 8 14.4 7 5 63 3 100 0 1 8 2 Famille, developpement socialet Solidaritt Nationale 8 7 9.7 3 8 17 8 1000 0 9 ' ~~ Annee 2002 I Presidence de la Republique 26 0 59.6 144 0 0 100 0 '' 0 6 AssembleeNationale 50 1 48.3 1 6 0 0 100 0 0 6 1 80 3 19.4 0 3 0 0 1000) 5 9 ~ F ~ u ~ Z , ' ~ : e c t i v i t elocales s 51 0 24.9 24 1 0 0 1000 3 8 I Justice 78 4 20.7 1 0 0 0 100 0 1 0 7 P&che 4 3 0.7 0 1 94 9 100 0 1 2 Infrastructures,Equipement et Transports 0 7 0.1 0 0 99 2 I 11 2 Agriculture et Elevage 9 7 1.4 9 8 79 1 100 0 loo O 4 2 Lrbanisme et Amenagementdu Territoire, Habitat 4 6 0.7 0 0 94 8 100 0 2 1 Mines, Energie, Industrie, Artisanat et Hydraulique 1 7 0.7 1 1 965 1 0 0 0 / 5 0 !Educationet Formation 58 0 2.8 21 7 17 5 100 0 14 9 Sante, Hygiene, Preventionet Nutrition 16 7 9.3 12 1 61 9 7 8 I Famille, developpementsocial et Solidarite Nationale __32 3 5.7 ' 1 3 ~ ~ 4 8 57 2 100 0 ~~~ AnnBe 2003 Presidencede la Republique 14 3 70.4 15.2 0.0 100 0 1 1 ~ Assemblee Nationale 45 5 53.0 1.5 0.0 1000 0 7 IForcesArmees 75 2 23.9 1.o 0.0 1000 6 2 Interieur et collectivites locales 46 9 25.0 28.0 0.0 4 2 Justice 55 4 43.9 0.7 0.0 100 O loo 0 I 1 1 P&che 4 7 2.9 0.1 92.3 100 0 1 2 I Infrastructures,Equipementet Transports 0 8 0.6 0.0 98.6 100 0 102 ' Agriculture et Elevage 9 6 6.0 11.3 73.1 4 2 Urbanismeet Amenagement du Territoire, Habitat 5 2 3.4 1.2 90.3 100 0 loo O ~ 2 0 I IMines, Energie, Industrie, Artisanat et Hydraulique 1 9 1.7 2.4 94.0 100 0 4 7 IEducationet Formation 52 0 8.4 25 5 14 1 1000 16 6 Sante,Hygiene, Preventionet Nutrition 15 0 12.9 19 2 52 9 100 0 8 2 Famille, developpementsocial et Solidarite Nationale- _9 _ ~ 3 6 3 58.7 25.6 10001 2.6 1 - 36 - Table 19: Evolution des investissementsen % du PIB et taux d'exkcution par secteur ___. .-~~ 20 -~ --- I 201 -- 2 2 % Prev Real execution Prev Real b exCcutior 'rCv - @J 6 execution PRIMAIRE 3.5 1.7 49.5 2.9 1.8 61.8 2.8 2.0 73.6 Agriculture 1.6 0.7 45.2 1.1 0.6 56.6 1.1 3.8 694 Elevage 0.1 0.0 41.1 0.2 0.1 27.9 0.2 0.1 41 6 1 lEauxet forets 0.5 0.2 35.0 0.4 0.3 75.5 0.4 0.3 69 3 P&che 0.4 0.3 78.1 0.3 0.2 79.0 0.2 0.3 I38 4 Hydrauhquerurale et agncole 0.4 0.2 48.4 0.3 0.1 33.7 0.3 0.1 44 0 etudes etrecherchesPRIMAIRE 0.0 0.0 21.9 0.0 0.0 4.7 0.0 0.0 100 0 iAppuirenforcementet AT pnmaire 0.5 0 3 590 0 5 0.5 85.8 0.6 0.5 83 8 SECONDAIRE 1.7 1.3 74.8 1.3 0.3 24.4 0.9 0.8 89.0 'Mines 0.0 0.0 93 9 0.0 0.0 100.0 0.0 0.0 93 9 Industnes 0.1 0.0 29 7 0.0 0.0 40.1 0.0 0.0 72 9 Artisanat 0.0 0.0 29 9 0.1 0.0 11.8 0.0 0.0 87 8 Energieclassiqueet renouvelable 1 1 1.o 92 7 0.9 0.1 7.5 0.7 0.6 85 8 1 Etudes et recherches SECONDAIRE 0 1 0.0 20 8 0.0 0.0 104.9 0.0 0.0 97 5 ,Appuirenforcementet AT secondam 0.3 0.1 43.9 0.3 0.2 68.2 0.2 0.2 104 1 TERTIAIRE 2.0 1.4 68.8 1.5 0.8 54.6 1.8 1.3 73.8 Commerce 0.0 0.0 70.1 0.0 0.0 100.0 0.0 0.0 100.0 Tounsme 0.0 0.0 0.0 0.0 0.0 37.9 0.0 0.0 86 5 Transportsroutiers I.5 1.3 82 2 1.3 0.8 60.4 1.6 1.2 71 8 Transportsferroviaires 0.2 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0 0 ,Transportsmantimes 0.I 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 I ITransportsaenens 0.0 0.0 85 0 0.0 0.0 0.0 0.0 0.0 1000 I IPosteset TClecommunications 0.0 0.0 0.0 0.0 0.0 0.0 Etudeset recherches TERTIAIRE 0.0 0.0 0.0 0.0 0.0 4.3 0.0 0.0 Appui renforcementet AT tertiaire 0.1 0.1 58.9 0.1 0.0 33.4 0.0 0.1 297.8 QUATERNAIRE 4.6 2.5 55.5 5.6 3.9 70.3 6.2 5.4 87.7 i Hydraulique urbaineet assainissement 1.O 0.3 29.0 0.9 0.4 41.9 0.9 0.5 52 4 Culture Jeunesseet sports 0.1 0.0 36.8 0.2 0.1 66.9 0.1 0.1 91 8 Habitatet urbanisme 0.6 0.3 44.6 0.7 0.5 81.4 0.7 0.5 73 1 SantC et nutntion 0.8 0.9 109.0 1.3 1.3 99.6 1.3 1.2 92 8 Educationet formation 0.8 0.4 54.3 1.o 0.6 54.4 0.9 0.7 developpement social 0.2 0.I 28.8 0.4 0.2 44.7 0.5 0.2 39 1 7 3 6 ~ Equipementadministratif 0 6 0.4 632 0 6 0.5 78.6 1.2 1.6 1366 Etudes et recherchesQUATERNAIRE 0 1 0.0 824 0 0 0.0 28.4 0.0 0.0 124 6 Appui renforcementet AT quatemaire 0 4 0 2 390 0 5 0.4 81.0 0.5 0.5 112.0 - TOTAL 11.7.6.9 58.8 11.3 6.9 60.7 11.6--~ 9.6 82.3 Source :Ministhe de I'Economie et des Finances - 37 - Table 20: SenegalFiscalSituation1994-2002 and Programfor 2003-2005 (CFAF billions) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Program TOTAL REVENUEAND GRANTS 385.6 439.7 496.1 497.8 541.9 568.4 626.3 664.4 726.7 797.7 857.0 938.7 Tax revenue 267.8 330.3 369.3 401.1 438.9 491.2 537.3 576.8 629.2 676.9 737.2 802.2 Direct taxes 63.5 80.1 85.0 94.3 107.2 107.5 128.7 130.6 142.5 153.3 166.9 181.6 Indirect taxes 204.3 250.2 284.3 306.8 331.7 383.7 408.6 446.2 486.7 523.7 570.3 620.6 Non-tax revenue 33.7 35.9 25.0 31.1 21.2 15.6 25.0 25.9 35.4 43.1 34.4 38.9 Foreign grants 84.1 73.5 101.8 65.6 81.8 61.6 64.0 61.7 62.1 77.7 85.4 97.6 Current grant 69.1 43.5 17.7 11.9 18.7 4.1 14.1 0.0 1.9 17.6 12.8 22.6 Capital grant 15.0 30.0 84.1 53.7 63.1 57.5 49.9 61.7 60.2 60.1 72.6 75.0 TOTAL EXPENDITURE AKD NET LENDING 424.8 438.7 497.9 484.3 550.6 609.9 623.1 733.0 730.3 850.0 964.2 999.3 Current expenditure 318.7 316.6 312.6 317.6 310.1 351.1 411.0 516.6 478.2 529.5 556.5 592.4 Capital expenditure 100.2 117.7 183.0 163.8 196.9 242.3 193.2 217.2 275.9 311.4 352.0 363.5 Treasury special accounts an( correspondents (net) 5.9 10.4 7.9 7.3 8.3 11.2 14.0 3.8 -18.2 -11.1 0.8 -5.0 Net lending 0.0 -6.0 -5.6 -4.4 35.3 5.3 4.9 -4.6 -5.6 -6.8 6.3 8.0 Additional HLPC Initiative expenditures (to be identified 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 27.0 18.8 25.4 Temporary costs of structural reforms 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 29.8 15.0 Overall fiscal balance including grants (commitment basis) -39.2 1.0 -1.8 13.5 -8.7 -41.5 3.2 -68.6 -3.6 -52.3 -107.1 -60.6 Ocerall fiscal balance excluding grants (commitment basis) ,123.3 -72.5 -103.6 -52.1 -90.5 -103.1 -60.8 -130.3 -65.7 -130.0 -192.5 -158.2 Adjustments to cashbasis ,160.8 -60.4 0.0 2.7 -2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Overall fiscal balance (cash basis) ,200.0 -59.4 -1.8 16.2 -11.4 -41.5 3.2 -68.6 -3.6 -52.3 -107.1 -60.6 Source :FMIet Ministhre I 1'Economie et des Finances - 38 - 11. EQUITY AND EFFICIENCY OF SOCIAL SECTOR SPENDING 1. Senegal's PRSP beginswith an analysis o fpovertywhere the most striking feature of the poverty profile i s its rural dimension. Poverty inthe rural zones can range from 70 to 90 percent. The second strongest characteristic associated with poverty i s the lack o f education. In poor households, those in the lowest quintile, 89 percent of heads of households have no formal education and 8 percent have only primary-level education. These factors prompted the PRSP's focus on the rural economy and the need for improving decentralized delivery o f social services. 2. Overall social sector spending seems adequate with about 45 percent o f Senegal's current budget; 35 percent for education and 9 percent for health. About 20 percent o f the investment budget i s allocated to the same sectors, about 10 percent for each. The previous chapter shows similar shares for the last few years. Despite the overall adequacy, these allocations can only be evaluated in light o f the efficiency o f these resources in producing social services. Further, the administrative presentation o f the budget does not readily indicate the shares allocated to services inrural and poor areas, whereas this allocation i s an important measure o f the poverty focus o f Senegal's budget. 3. This chapter summarizes recent work analyzing the equity o f social sector spendingand the efficiency o f that spending inproducingservices needed to reach PRSP goals. I. OVERVIEWOFSOCIALSECTORSPENDING 4. Table 21 gives the share o f spending for major categories o f public education. Primary education receives nearly halfthe total as was targeted inthe PRSP. However, as has often been noted, university education receives an unusually generous 24 percent o f the total, much o f it paying for student scholarships. Nevertheless, with PRSP and PDEF spending targets met, total education spendingamounts to 3.5 percent of GDP, comparing favorably to the average for LDCs. Table 21: Distributionof Public Expenditureof Operationper Under-Sector, from 1992 to 2003 (in YO) Sources UPEIMEFP,DAGEIMEN, CREA Reviewof Public Expenditurein the EducationSector, (2001), DAGEIME Annual Budget of the Ministryof Education, 1997-2003 - 39 - Table 22: ComparedLevelof the Expenditureby Pupilin YOof The GDPPer Capitaof Operationby Under-Sector Primairemrim Secondaire/Second SupCrieurlHigher ary ary Senegal (2003) 0,13 0,30 2,73 Senegal (2000)a 0,14 0,33 2,45 Anglophone Africa (years 90's)b 0,lO 0,66 6 3 Asia years 90's)b 0,08 0,19 099 Countries with Intermediate Revenue (2000) 0,12 (Superior tranche)a 5. Similarly, PDIS spending targets for health have also been met or nearly met. One difficulty in evaluating public spending allocations for health is that the national budget supplies less than halfthe total resources spent on the PDIS. As designed inthe program budget, the remaining resources come from local committees or governments through user fees paid by households, or from donor programs not included in the national budget. Nevertheless, national budget allocations have risen over the last few years from 1.6 to 2.1 percent o f GDP, and total health spending reached 9,167 FCFA or $14per person in2002. 6. Given the nature of the national budget nomenclature, the biggest public expenditure problems in Senegal are not strongly apparent in the budget allocations across broad categories of spending. Rather, Senegal's public spendingproblems become most apparent when these normal budget allocations are matched up with the disappointing outcomes in the social sectors. This issue was examined inthe health and education chapters o f the Senegal CEM, the health and education chapters o f the Senegal poverty study and in the Government's review o f the education sector. The main elements are summarized below. The two most salient conclusions are these: The greatest inequities o f services access and outcomes are between urban and rural areas; and technical efficiency problems are substantially limiting the ability o f public spending to achieve PRSP goals. 11. EDUCATION 7. [This section was adapted from a report Analyse du secteur de I'bdueation prepared by Centre de Recherches Economiques Appliqukes (CREA) and issued by the Ministry o f Education, and from chapter 5 on Educationinthe Senegal CEM.] 11.1. Inequity 8. As noted above, Senegal's budget is not organized in a way that readily shows what i s beingspent on services inthe poorest and rural regions. Nevertheless, the lack o f access to social services was registered inthe QUIDhousehold survey and reported inthe PRSP. Further, various indicators document the poorer results registered in the rural areas, as shown inTables 24,25 and 26 below. - 40 - Table 23: Specific Enrollment Rates of Primary School Students by Age, grouped by residential area (2003) Classe Student Rates by Age _________- jllrbain pura1 -~ ,SCntgal I Ici (7 years) 1109,9 180,8 l 9 0 , 8 --- cp (8 years) 108,6 65,7 _ _ ~ 80,5 ce1(9 years) 1124,2 169,4 ~89,9 ce2 (10 years) 193,o 152,9 67,7 I - cml(11years) 97,O 57,O 74,2 em2 w e a r s ) 73,8 132,l - _. 47,6 1 Source . Student Stausucs Data, ME/DPRE/BSS (2003) Table 24: Profile of Students grouped by residential area (2003) ___ ~- --- Class Clty Rural Areas __ __ Senegal 1 __ c1 ~100,OO ~100,OO ,100,oo , I ~~ 92,92 7535 82,74 ~~~ __ '70,53 I 66,70 1 cml __--7431 p1,16 -'54,97 --. C m 2 66,93 l34,85 48,13 _ _ _ ~ Source Student Stausdcs Data, 2003, MEIDPREIBSS Table 25: Unit cost by region and education level (CFA), 2000 Education Indicator Primary Secondary' - ~ -..- ~~~ Subsidy per capita inurban areas 5045 693 Subsidy per capita inrural areas 4202 368 Source: Ministry of Education and Household Survey data'hcludes lower and upper secondary and technical/vocational 9. One source o f inequity i s that secondary education teachers are paid more than primary teachers and that, in comparison to primary education, access to secondary education i s relatively lower in poor areas. In addition to the urban-rural gap in public education subsidies, the same measurement has been analysed according to income quintiles. The per capita subsidy inprimary education for the richest was found to be 1.7 times larger than for the poorest. But the disparity increases at the secondary level where the per capita subsidyfor the richest quartile is 4.0 times that o f the poorest. 11.2. Efficiency 10. Several studies have noted that despite the favourable spending allocations for education in Senegal, the outcomes in educational attainment have been disappointing. One example i s given in Table 27 showing comparative results on standardized tests across African countries. The coexistence o f adequate spending and low outcomes presents an apparent case o f inefficiency. - 4 1 - Table 26: Scores for FourthYear Exams (CE2) Pays iSize of SampleCompetencyin the RealWorld Reading Math Average 11. One o f the hallmarks o f inefficiency in Senegal's education spending i s the high repetitioddropout rate. Analysis based on cohort survival rates indicates that out o f every 100 boys and 100girls ingrade 1,34 boys and 30 girls reach grade 6 (the end o fprimary cycle); only 6 boys and 5 girls reach grade 10; andjust 1 boy and 1 girl are able to reach the final year o f secondary cycle. 12. Using estimated unit costs it is possible to estimate losses due to inefficiencies caused by dropout and repetition rates in each sub-sector. As noted above, the efficiency was 0.35 in the primary cycle and 0.27 inthe secondary cycle. These inefficiencies result in a waste of resources amounting to CFA 24.6 billion (US$ 35 million) inprimary and CFA 14.9 billion (US$ 21 million) insecondary education, for a total o f CFA 39.5 billion (US$ 55 million) in the two cycles. This total loss i s equivalent to 40 percent of the entire recurrent education budget for 2000. 13. The disturbing trends in completion rates are probably related to the quality o f schooling. One strong factor affecting the quality o f schooling i s the number o f hours that schools are in session. This factor i s reported in Table 27, estimated by a survey o f the number o f designated school days when school was not in session. 14. Another dimension o f inefficiency was examined in the education expenditure tracking survey. For a sample o f teachers that the survey undertook to monitor, only 64 percent could be identified. O f those that could be identified, many were found to be retired, deceased, or on rotation elsewhere. Finally, 58 percent were found to be on active duty, while this group was composed o f 47 percent in the classroom and 11 percent in administrative service. Giventhat personnel expenses comprise more than 95 percent o f total primary spending, these results indicate that o f public resources allocated to primary education, only 47 percent reaches the classroom ifthe teacher comes every day, and less given the highabsentee rate shown inthe table below. - 42 - Table 27: Number of SchoolHoursby Course inPrimarySchool in Dakar (2002) (class flow only) + Requested 0 + Given[?(5)/5] *(7) 307 10 Actual Number of School Hours (8) (9)) - 690 I I I Source: Decree No2001-687 Fixing school quarters and how many holidays and vacation length in Primary School for years 2001 2002; survey of schools in the Dakar region, 2002. 111. HEALTH This section is adapted from chapter 4 o f the Senegal CEM on Health, Nutrition and Population. 111.1. Inequity 15. Health outcomes in Senegal's PRSP are measured in terms o f progress towards the MDGs. By sub-Saharan Africa standards, Senegal i s a good performer in terms o f most o f these health outcomes. However, when compared to other, equally poor developing countries ($300 to $600 per capita GDP), Senegal's outcomes are well below the median. Further, a number of these indicators register a strong degree o f inequality across the differentregions o fthe country. 16. Inequalities in under-five mortality in Senegal are among the worst in the West African region. The poorest 20% o f the population continue to experience under-five mortality rates, which are twice higher, compared to the richest 20% o f the population (see figure 1). Countries with under-five mortality rates inthe neighborhood o f Senegal's levels such as Ghana, Cote d'Ivoire and Togo experience lower child health inequalities; in addition, Senegal's child health inequalities are much higher than its Sahelian neighbors with much higher levels o f under-five mortality such as Mali, Niger and Burkina Faso. - 43 - Figure 1: Senegal- Inequalities in under-five mortality duringthe past decades USMRper 300 1000 250 200 150 100 50 0 Poorest Second Middle Fourth Richest 17. Malnutrition i s also concentrated among the poorest segments of the population. Although Senegal experiences among the lowest levels o f child malnutrition in West Africa, socioeconomic inequalities in child malnutrition are among the worst observed in the sub-region. Underweight prevalence among the poorest 20% stands at twice the level o f the richest 20%, stunting prevalence among the poorest 20% has deteriorated to three times the level o f the richest 20%. 18. Total fertility rates have fallen from 6.6 in the middle o f the 80s to 6.0 at the beginning o f the 90s and 5.2 at the end o f the 90s. Most o f the change in fertility, however, has occurred in the urban areas and among educated women. The segments o f the population that could have benefited the most from a decline in fertility are still experiencing relatively high levels o f fertility: rural and illiterate women who live inthe poorest regions o f the country. While total fertility rates have declined to 3.9 among urbanwomen, they still stand at a relatively highlevel o f 6.1 inrural areas. 19. The country's health delivery system has failed to maintain a network of qualified midwives in the rural areas and the poorest regions. It is in these same segments o f the population where reproductive factors o f matemal mortality, such as early maternal age and high parity, continue to be sustained by female illiteracy, low status o f women and other socioeconomic and cultural factors. Without sustained efforts for extending quality matemal health services inthe rural areas andthe poorest regions o f the country, it would bevery difficult for Senegal to reach the specific MDGrelative to maternalmortality. 20. The poorer the community, the lower the access to potable sources o f water. It is only in the richest region o f Dakar where the proportion o f households with piped water i s above 70 percent; in the next region o f Thies, this proportion falls to 27 percent, it levels off at less than 3 percent inthe poorest region o f Kolda. - 44 - 21. Female education continues to be one o f the main contributors to health improvements in Senegal. Disparities in female education between the poor and the better off, and between poor and relatively rich regions, will continue to challenge efforts to reduce health inequalities inthe country. 22. Geographical accessibility o f health services i s still very limited inthe rural areas. While 80 percent o fthe urbanpopulation livewithin30mn o f ahealth facility, inthe rural areas, only 42 percent o f the population live within 30mn from health facilities and 43 percent live beyond 1 hour from health facilities. Large disparities between regions continue to prevail. In the two poorest regions o f Kaolack and Kolda, the geographical accessibility o f health services i s twice as low as the richer region o f Dakar. 23. Furthermore, even when accessible, the facilities are not being used. The QUID 2001 data suggest that nearly 40 percent o f the sick who sought care reported not being satisfied with care received. For all sources o f care, costs were cited by 61 percent o f the sick as being the main raison o f their discontent with care received; 35 percent reported long waiting time among the reasons o f their dissatisfaction, compared to 18 percent and 12percent who mentioned lack o f drugs and quality o fthe treatment respectively. 24. Another reason for the underutilization o f facilities i s the absence o f qualified medical or health personnel in them. Disparities between regions in the availability and quality o f health personnel are even wider than disparities observed relative to the geographical accessibility o f health services: Senegal has not been able so far to sustain networks o f physicians and qualified midwives in the poorest regions o f the country and rural areas. The richest region o fDakar, with 24 percent o fthe population, has 65 percent o f the country's physicians, and 5000 inhabitants per physician. In contrast, in the intermediate regions o f Thies, St Louis, Diourbel and Tambacounda, the population to physician ratios range from 17,000 to 30,000 inhabitants per physician. In the extreme region o f Kolda, the population- physician ratio reaches 85,000. The distribution o f midwives between regions is very similar to the distribution o f physicians, as figure 2 shows. - 45 - Figure 2: Senegal Population per technical health personnelratio by region and - category in 2000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 k l d a b l a c k Zlguinchor Tamba Dimhe1 StLouL Fatick Louga TGs Dakar 25. Hence, while additional efforts from local communities have supported the growth of basic health infrastructures throughout the country under the implementation of the primary health care strategy, and continue to support recurrent costs o f local health services since the health financing reforms o f the 90s, the public health sector has failed to support these local efforts by the substitution o f community health workers with better qualified health personnel in general, the substitution o f matrons with qualified midwives in particular. Indeed, the implementation o f the primary health care strategy and the decentralization o f the health delivery system during the past two decades have been based on a human resource base composed mainly o f nurses and community health workers. 26. Finally, Senegal has been unable so far to extend a network o f physicians and qualified midwives inthe rural areas and the poorest regions o f the country. Such failures in the management of human resources will continue to hamper efforts to improve the quality o f local health services in general, reproductive health services in particular, outside the region o fDakar. 111.2. Efficiency 27. A symptom of this variability o f qualified medical personnel is the gross inefficiency in health services. Much can be achieved through better use o f available resources. For instance, there i s sizeable inefficiency inthe production o f services inthe Dakar region. The number o f children immunized by DTC3 per nurse is 57 in Dakar, while it levels up to 260 in Louga, 176 in Thies and 121 in Fatick. As for maternal health, the same phenomena is observed. While a midwife ensures 111 prenatal visits in the public sector in Dakar, a midwife in the region o f Kolda produces 2086 visits. The same i s observed for deliveries with the personnel in the poor regions having overall a higher level of productivity than the personnel in richer regions. The same can be observed for inpatient care. InDakar, the inpatient public sector activity i s also very slow - 46 - when examined in relation to the large quantity o f personnel available. In Dakar, 60 inpatient days are registered per medical doctor, while in Kolda, this number climbs to 1692. Finally, the data suggest that there is room for large efficiency gains inthe delivery o f health services if supported by effective measures o f relocation o f health personnel from the region o f Dakar towards the poorest regions o fthe country. Table 28: Senegal - Technical Efficiency of Health Services _ _ _ ~ _Kolda~- Kaolack Ziguinchor Tamba Diourbel St Louis Fatick Louga Thih Dakar ~--.--..- # of DTP3 per nurse 116.5 214.2 166.0 103.7 121.5 93.6 121.7 260.6 176.1 57.3 # of antenatalcare visit per 2085.5 817.7 441.8 969.6 613.8 355.8 591.4 801.4 424.0 111.2 midwife # of assisteddeliveryper 666.6 473.6 1377.0 353.0 289.7 132.0 277.9 362.7 260.05 84.9 midwife Occupancyrateof 43.9 38.0 42.8 42.2 83.1 72.0 27.9 56.5 85.5 60.0 hospitals'beds #of inpatientdays per physician 1622.8 198.1 742.1 559.0 741 461.1 1587.4 982.5 486.7 61.0 # of inpatientdays per nurse 80.3 29.5 103.8 83.9 61.0 112.6 129.6 204.7 166.5 38.2 Source: Senegal HNP CSR on Povertyand Health (forthcoming). 28. The distribution o f health facilities and health personnel confirm that the largest share o f public spending continue to be concentrated in the richest region, Dakar. As local government fiscal capacities are increased, as a consequence o f fiscal reforms and increased transfers from the central level, and elected local officials' sense o f ownership and responsibility o f local health services is institutionalized, basic health services may benefit from increased internal public funding. For these additional resources to be translated into positive changes in the performance o f basic health services, however, synergies between central and local public funding and other sources o f funding have to be harnessed within performance-based, transparent and accountable organizational structures. CONCLUSION 29. Inequities insocial sector spending show the inadequacies o f decentralized service delivery and thus o f deconcentration arrangements in the relevant ministries. The technical inefficiencies show the weaknesses in personnel management and expenditure monitoring as well as the lack o f community involvement, absence o f monitoring and evaluation o f program outcomes, or any feedback from evaluation to changes inprogram management. Thus the key public expenditure management challenges facing Senegal are the institutional reforms neededto remedythese shortcomings. 30. Part I1 takes up the Government's approach to these institutional reforms. It includes a chapter written by the Government that presents the Government's budget system reform plan. The main plank o f the reform dealing with equity issues includes greater financial decentralization. The approach to efficiency issues includes more decentralized monitoring and personnel management but also relies on improved financial management and more consistent information systems, to improve execution and accounting, but also to introduce feedback on program performance to budget planning. - 47 - PART I1 - 48 - 111. SUMMARY 1. The main shortcomings o f the Senegalese budgetary system have been known for some time. Since the previous Public Expenditure Review (PER) was prepared in 1997, several studies have contributed to an extensive dialogue that led to the government's budget reform program. The govemment has conducted several of its own analyses of the budgetary system, participated actively innumerous studies of fiduciary standards conducted by donors, and to the chapters on health and education in its Country Economic Memorandum and poverty assessment, with in-depth analysis o f the data on expenditure inthe social sector. To address the identified shortcomings, the govemment proposed a reform program, the main elements o f which were incorporated in the Poverty Reduction Strategy Paper (PRSP) in early 2002, discussed extensively with donors following Country Financial Accountability Assessment (CFAA) and Country Procurement Assessment Review (CPAR) studies, and adopted by the Council of Ministers in mid-2003. Given the broad participation in and approval o f this program, it stands to receive further support from Senegal's development partners. 2. This report considers the main components o f the ongoing reform o f Senegal's budgetary system, proposes certain elements that need to be strengthened, and explores several issues pertaining to program implementation. The review was undertaken in a participatory manner with the govemment, which was asked to present the reform program. In the interest of treating implementation issues, the report examines the dynamics of four initiatives that reinforce the budgetary reforms by providingincentives to implementthem and by shaping the reforms to suit the needs of other public sector objectives. These four initiatives are: (i)implementing the PRSP; (ii)improving the tools for maintaining macroeconomic equilibrium; (iii)decentralizing service delivery; and (iv) improving communication with citizens regarding the use of public resources. By examining these four complementary initiatives, the report highlights the elements o f the ongoing reforms that need to be improved and points to ways that the implementation o f this complex budgetary reform can be strengthened and accelerated. 3. Part I1i s divided into five parts. The first covers the reform program while the others each focus on a different dynamic aimed at fleshing out the reforms and strengthening the incentives to implement them. The final part o f this overview sets forth the main conclusions andrecommendations that have emerged. I. REFORMPROGRAM 4. The major elements o f the government's proposal are as follows: => Basic principle: greater accountability o f line ministries and localities for their fiscal management and procurement. z Introductionofthe Medium-Term ExpenditureFramework (MTEF)andbudgetingby objectives at the sector level, as has been done for education and health (beginningwith the 2005 budget) 3 Delegationofpaymentauthorizationtothelineministries(beginninginJanuary2005) Strengthening o f financial decentralization through measures for: (i) interconnecting the PRSP and local planning; (ii)speeding the mobilization o f Fonds de Dotation h la De`centralisation (FDD) and Fonds d 'Equipement des CollectivitLs Locales (FECL); and (iii)decentralizingthe capital budget, whether domestically or extemally financed - 49 - z Strengtheningexpostcontrols(administrative, judicial, political), offsettingtheeasing o f ex ante controls z Modernization of the financial information and archival system, with use of information and communication technologies (ICT) =, Raising thresholds for procurement, limiting the ex ante controls by the Cuisse Nutionale du Crkdit Agricole (CNCA), and introducing annual audits and improved dissemination o f procurement information to the private sector. 5. Briefly, the government wants to make the budget operate more efficiently by expanding program budgeting in the context of an MTEF, use a modernized information system to delegate public expenditure and procurement authority to the line ministries and localities, and make greater use o f ex post financial control and reporting. 6. Important first steps have been taken inall of these areas. However, three main areas require further development. 7. First, financial decentralizationi s critical to reachingprogram targets, and many o f the details relating to decentralizationhave yet to be worked out. 8. Second, the financial information system i s now regarded as a linchpin in the functioning o f the other reforms far more explicitly than in the past or than originally planned for, and relies on more complex institutional cooperationthan previously. 9. Third, the mechanisms for preparing program budgets, delegating payment authorization, financially decentralizing current and capital expenditure, and working with ex post budget controls all require the cooperation of the treasury, which has been among the slowest reformers. For this reason, the incentives prompting the treasury to take on this role inthe newapproach needto bemore clearly defined. - 50 - 11. PRSP IMPLEMENTATION 10. Budget reforms are at the heart o f all other reforms in the PRSP. The government's plans for implementing program budgets and an MTEF will do much to help implement the PRSP and are essential for accommodating the government's financial decentralization plans. However, program monitoring and evaluation are essential for the success o f the MTEF and o f budget decentralization. New mechanisms instituted for PRSP monitoring should be mobilizedto improve budgetmonitoring. 11. The government has developed and launched a detailed program for improving public finances in the localities. Under this plan, a number o f pilot projects have been carried out successfully in the area o f fiscal decentralization, but it would be beneficial to strengthen the cross-cutting aspects and the role that decentralization must play in achieving the objectives relating to health, water supply, and other sectors. 12. Senegal should rely more on financial decentralization to the localities than on deconcentrationthrough the line ministries. Inthe health sector, the deconcentrated structures have not emerged as successful models of accountability to local communities, and interventions are required in other sectors if the health objectives are to be achieved. In education, there i s confusion in the budgeting of local operating expenses between the localities and the ministry. Given the fungibility o f the resources transferred to the local level, fiscal decentralization cannot be approached in only one sector at a time. Rather, the expansion o f contractual budgeting with local authorities can best accommodate a local priority setting. The contractual provisions should include obligations for financial reporting and community involvement inmonitoring and evaluation. 13. Financial management training for local officials should proceed in tandem with greater transfers to the localities. 14. Greater information transfers between the center and the localities are essential to achieving PRSP objectives and making efficient use o f local financial resources. The planned software upgrades should be completed and hardware requirements should be surveyed and updated. Alternative information systems need to be established in the absence o f electronic connections. 15. Local service providers in the social sectors are best financed by the respedive central ministry, but local communities should have more authority over managing the service personnel slots allocated to them. 16. The role o f the Conseil Nutionul de Ddveloppement des Collectivitks Locules (CNDCL) in deciding allocations to localities could be efficiently replacedby specific criteria that could be applied as soon as the budget i s enacted by the National Assembly. The relevant legal texts to implement this change should be finalized and adopted. 111. MACROECONOMIC STABILITY 17. The treasury should increase its use o f short-term cash management instruments in order to allow the line ministries to execute their program budgets smoothly, inparticular as regards capital expenditure, inline with the MTEF. 18. Measures taken previously to streamline spending procedures have resulted in less transparent control o f expenditure. New measures to simplify budget execution must rely on a - 5 1 - comprehensive and rapid information system that interconnects decentralized spending with accountingcontrols. 19. To increase its capacity to track spending, the government should adopt consistent accounting procedures among the various administrations and across the different levels of government involved inthe spending process. 20. The government should complete the implementation of the integrated IT system in order to be able to monitor the spending process and link the accounting modules to it. The plans to operate this system under a relational database shouldbe implementedpromptly. 21. The treasury should make full use o f the available IT systems in order to produce financial statements for audit, and should adapt institutional practices to accommodate an accelerated pace o f producing treasury balances andbudget results. IV. SERVICE DELIVERY 22. The performance o f health services from 1998 to 2002 fell short o f what might have been predicted on the basis of the resources available. Moreover, the gains made interms o f improving health standards were not distributed equally. There are considerable disparities between urban andrural areas, betweenregions, and between socioeconomic groups. 23. To address these problems, the government needs to modernize the human resource management system inthe health area o f the public sector, while enhancing staff performance and the health sector's contribution to combating poverty. 24. Inaddition, the government should address two importantpoints: the weakness of the budget information system and the lack o f a culture o f evaluating government policies. v. COMMUNICATION WITH THE PUBLIC 25. Until recently, Senegal's budget was largely inaccessible. In 2003 the Government began posting the budget (loi de finance) and the TOFE on the Finance Ministry website, and information on economic policy reforms is now publishedin a new government journal. The Government should make full use o f program budgets and evaluation o f their implementation inorder to meetits own objective ofmakingthe purpose ofpublic spendingclear to all. 26. Inorder to collect the data needed to improve communications with donors and with the Senegalese citizenry, government officials must communicate regularly with one other. 27. The incentives for implementing the budget systemreforms-implementing the PRSP, donor coordination, improving the tools for macroeconomic management, service delivery, proximityhinancial decentralization-need to be translated into incentives to share information across the length of the expenditure chain. 28. The agents managing the different stages o f the expenditure chain are, by design, independent from each other. Therefore, the information flow must be enforced at the appropriate political level in order to reap the collective gains sought from the reform. Further, the public, including the National Assembly, should considerably raise the standards applied to the kindo f information demanded of government. - 52 - IV. WHY REFORMS?WHY NOW? 1. The main shortcomings leading to Senegal's budget system reforms have been known for some time. The government performed a number o f important analyses for the previous PER in 1997. These studies pointed out the lack o f ex ante project evaluation, cumbersome disbursement procedures, and nearly complete absence of ex post evaluation o f project implementation and impact. 2. The budget system, largely unchanged since the 1960s, was serviceable but imposed a number o f constraints on the efficient use o f public resources. Budget allocations seemed largely compatible with government priorities, though many outside observers argued for higher allocations for health, especially primary health services, and a higher share o f education expenditures on primary education. In the late 1990s, sector-wide strategies and program budgets were developed for both health and education while allocations for primary education and health were increased. Nevertheless, outcomes inboth sectors continued to be poor, indicating serious inefficiency in management o f both financial and human resources. The poor outcomes also reflectedthe difficult disbursement procedures, difficult procurement procedures (especially for decentralized activities), and poor tracking of money allocated. Further,the unequal distribution of outcomes improvementbetweenwealthier regions such as Dakar and the poorer remote regions signaled the inadequacy o f financial decentralization in general and o f deconcentration inthe social sectors inparticular. 3. The introduction o f program budgeting in health and education, supported by a number o f donors, did ensure a type o f regular budget reporting in these sectors, although, given the inadequacy o f the overall budget reporting system, this was accomplished through time-consuming manual processes. Further, the government has not produced reports o f audited budget outcomes for 15 years. Accordingly, actual results on spending have not recently been certified for any sector. 4. Toward the end o f 2001, the government turned its attention to the low execution rate o f investment projects and the low absorptive capacity of donor funds. This investigation ' revealed several o f the fundamental budget system shortcomings that had previously been identified, along with several new concems. The study, completed in early 2002, made specific recommendations for reforms in four main areas. Regarding budget preparation, it recommended extending the program budgeting approach to other sectors in the context o f a Medium-TermExpenditure Framework. It recommendedsimplifications inbudget execution procedures and implementation o f a system o f qualitative monitoring and evaluation. In pursuit of these reforms and to improve budget reporting, the study recommendeda program o f improvements in the computerization of budget execution and accounting. The bulk of these reforms were included in Senegal's Poverty Reduction Strategy Paper and were further refined inthe context o f studies included as part o f the PRSP implementationplan. A number o f these reforms have been launched, a coordinating committee has been established, and a more detailed description o f the reforms was prepared for the first annual PRSP progress report. 5. Nevertheless, progress in implementing these reforms has been slow. Consequently, we consider other initiatives that include incentives for their execution and adapting the reforms to the requirements o f other public objectives. - 53 - I. IMPLEMENTING THE PRSP 6. The new approaches to public expenditure management, emphasizing the essential fungibility o f aid even if inthe form o f investment project financing, had a strong impact on the Heavily Indebted Poor Countries (HIPC) Initiative on debt relief for International Development Association (IDA) countries. The understanding that HIPC debt relief would become fungible budgetary support for poverty reduction programs in each country contributed to the donors' requirement that HIPCs describe their overall poverty reduction strategies inorder to provide the best possible indication of how the HIPC resources would be used. Hence, while new approaches to public expenditure management helped give birth to the PRSP, the PRSP has in tum provided an anchor for public expenditure reforms in countries like Senegal. 7. First, in developing program budgets, the PRSP provides a common reference point for establishing key objectives and measurement indicators. Second, the budget system, as a key instrument for implementing the PRSP, needs to become more efficient in allocating resources to priority activities. Third, the PRSP and the program budgets designed to implement it canjoin forces to make poverty reduction a more country-driven, and thus more effective, process. Finally, public expenditure management reforms can help establish the fiduciary standards needed to coordinate donors around a single plan for implementing the PRSP that harmonizes aid processing by emphasizing national rather than donor financial procedures. 8. Senegal's plans, already inprogress, involve integrating PRSP projects into the budget and merging PRSP implementation plans and monitoring indicators with sectoral program budgets. 11. MACROECONOMIC STABILITY 9. Maintaining macroeconomic stability or, more specifically, maintaining fiscal balance, has traditionally been a motivationfor improving expenditure management. For countries that face fiscal deficits that complicate this task, this may provide a strong incentive to improve expenditure management. In Senegal, the basic fiscal balance has remained in line with macroeconomic stability, as defined inprograms agreed upon with the International Monetary Fund(IMF) since the mid-1990s. This represents a significant accomplishment, especially in contrast with the years preceding the devaluation o f the CFA franc in 1994. Nevertheless, the means by which control over the fiscal balance i s maintained couldbe improved. 10. The govemment's proposed agenda for budget formulation includes expanding the use o f sectoral program budgets. This implies imparting some degree o f autonomy to the line ministriesas regards preparing and monitoring budgets, without losing sight or control o ftotal spending. Such an approach requires a strong system o f communication between spending ministries and the treasury, and a treasury system that can handle variability in revenue and spending flows. However, the rigidities in Senegal's approach to maintaining fiscal balance can interfere with the smooth execution o f sectoral program budgets, in particular through sudden `stop spending' orders to line ministries to accommodate short term revenue shortfalls or isolated spending surges. 11. Moreover, the information system used for budget procedures does not yet provide the kind of timely data on expenditure needed to match more decentralized spending comfortably with adequate fiscal controls. The shortcomings o f the information structure also slow down budget execution and the efficient financing o f budgeted activities. This in turn contributes to - 54 - slow execution o f investment projects, which hinders use o f donor resources and makes transactions under the capital budget less predictable. 12. The government's plans include finalizing the computerization o f expenditures and strengthening treasury and audit functions that will improve macroeconomic management and budget reporting. 111. SERVICE DELIVERY 13. In conjunction with implementing the PRSP, and even beyond that process, the government wants to improve the overall performance and outcomes o f its major spending ministries, notably health and education. Senegal's targets relative to the Millennium Development Goals (MDGs) are set forth inthe PRSP, but the success of the overall program budgets and the improvement o f service delivery and outcomes will require reforms that extend beyond the sectoral strategies. In particular, both the health and education programs have found that implementation and outcomes at the decentralized levels have lagged, slowing progress in those parts o f the country with the poorest indicators and holding down national performance. 14. Thus, successful implementation of national program budgets in the social sectors relies on more effective budget transfers to the decentralized level, and this financial decentralization relies in turn on a number o f reforms in central-level budget processes. Given the fungibility o f resources transferred to decentralized levels, the government could not plan to decentralize one sector at a time, but rather has planned a broader financial decentralizationstrategy. 15. Another reform critical to progress in the social sectors i s personnel management. Household surveys have reported strong complaints about the quality o f health and education services, and expenditure tracking surveys have pointed out problems with absenteeism among front line health and education workers. Government plans include providing more control over public service providers at the local level and providing a better incentives system for social sector workers. Iv. COMMUNICATION WITH THE PUBLIC 16. Senegal's PRSP makes a strong bid for good governance and transparency. Early in the dialogue on budget system reforms, the government articulated an important principle for public expenditure management: the public sees that the government spends money, and it should understand the purpose o f the spending. This implies not only that at least one format of the budget, ifnot the only one, should be comprehensible to a substantial proportion o f the public, but also that information on execution and evaluation should be provided regularly. This latter goal will require public involvement at the local level inhelpingto ensure service delivery and providing information for purposes o f evaluating performance indicators. Such local participation has been tested in some localities, and the government's plans for financial decentralization call for expanding the practice more generally. 17. Thus, Senegal's budget system reform policies deeply involve the government's interactions with its citizens. The PRSP contains very public promises, and its implementation as well as that o f other budgeted objectives will inevitably become more transparent. - 55 - 18. One o f the objectives o f Senegal's public expenditure management plan is to increase and perpetuate the domestic demand for information on budget outcomes. While improvements in treasury and audit services are needed to produce budget reports, the intendedrecipients for these reports, inparticular the National Assembly, also need assistance in interpreting the reports, which assistance has been planned with a particular focus on the Finance Committee. v. RECENTSTUDIESAND REFORMACTIVITIES 19. A renewed effort to activate reforms in the budget system was engendered when the PRSP was being put together in 2001. At the time the PRSP was being finalized in early 2002, Senegal had already planned and begun installing a computerized system for handling budget execution, although technical difficulties were to persist for some time. An extensive working group, representing many o f the administrations within the Finance Ministry, instigated and collaborated on a preliminary study o f weaknesses in the public expenditure system, especially those affecting Senegal's absorptive capacity. At the same time, the Deputy Minister for Budget sponsored a conference on the experience of program budgeting in health and education to date, and launched the discussion of how sectoral program budgetingcould be extended to other sectors and developed into a MTEF. The discussion focused at length on the role o f the localities in contributing to the development and implementation o fprogram budgets. 20. After the PRSP was finalized in May 2002, the PRSP task force produced a series o f documents on the modalities for implementing the program, including a proposal for implementing an MTEF. In October 2002, these documents were discussed in a broadly participatory conference and the main recommendations were later adopted by the Council o f Ministers. In the autumn o f 2002, Senegal also worked to ensure that the first-year PRSP program was reflected inthe 2003 budget. InDecember 2002, the govemment contributed the chapter on budget systems reform inthe Country Economic Memorandum (CEM) that pulled together many of the recommendations agreed on inthese various studies and discussions. 21. The Govemment, in addition to work undertaken at its own initiative, cooperated extensively with diagnostic studies undertaken by donors. The vast majority o f the major donors have programs designed to help improve public expenditure management, and have shared these agendas with one another. InApril 2003, Senegal undertook an IMF-supported program o f expenditure management reforms that emphasized greater transparency and prompt and more comprehensive reporting o f budget transactions. Country Financial Accountability Assessment and Country Procurement Assessment Review studies were concluded in early 2003 and discussed among the budget constituency o f officials and donors alike. The CFAA study identified a number o f weaknesses in budget execution, the lack o f reporting o f budget outcomes, and failures o f ex post audit and control. The procurement discussion, among many other issues, identified poor decentralization systems as hindering procurement and therefore the progress of programs with decentralized activities. 22. The CFANCPAR conference inJune 2003 agreed on an action plan with a matrix o f measures aimed at addressing the shortcomings noted, while taking on board the conclusions o f a conference the day before on economic and financial decentralization. This action plan was sent to the Prime Minister with emphasis on five main themes: the MTEF, transfer o f payment authorization powers to the line ministries, strengthening o f ex post controls, modernization of the financial information system, and greater efficiency in public procurement. The agenda was adopted by the Council o f Ministers in July 2003 and was - 56 - reviewed with approval by donors convened at a meeting on donor harmonization sponsored by Strategic Partnership with Africa (SPA). 23. The government has since set up a committee overseeing a series o f working groups to prepare the activities set forth in the action plan. The work of three of these groups provides an indicative sample. The working group on the MTEF has met several times, most recently inOctober 2003, to work out the legal and accountingtexts that would need to be changed in order to adopt a sectorally detailed MTEF within the framework of the budget system. The Director-General o f the treasury posed a number o f practical and penetratingquestions on this point and called for granting the administration all legal means necessary for making all the adaptations needed to implement the MTEF. 24. A second group met in November to examine the modalities for extending payment authorization powers to line ministries that have produced program budgets. Again, the interface with the treasury and the need to integrate financial information systems between authorizing agents and the treasury emerged as a key factor. A third group brings together a large number o f disparate parties involved in one aspect or another of financial decentralization, meeting weekly to work out the practical details of decentralizing capital expenditure, which i s not yet provided for innational procedures, although some pilot projects exist using donor funding. Usefully, this group is piloted by a staff member from the treasury. VI. WHO NEEDSTHE REFORMAND WHY? 25. While the Ministry o f Finance, and specifically the Directorate-General o f Finance (DGF), manages budget preparation and plays a strong role in budget execution, the staff assigned to Budget within the Finance Ministryare effectively spearheading the reform; this is also part o f the multiple structural changes in the ministry. The DGF was the first to implement computer software to track budget execution, and it coordinates the multisectoral working group managing the MTEF. The Ministry o f Finance wants to improve and accelerate the information generated on expenditure, increase the absorptive capacity o f investment projects, and improve the instruments of macroeconomic management. The Finance Ministry is also charged with coordinating implementation o f the PRSP, including reports on progress. The line ministries are interested in having more autonomy over spending, more streamlined spending procedures, and more effective decentralization. The localities want larger and faster disbursements from the center, and greater influence over the management o f locally posted government personnel. And all parties want to harmonize donor actions around a general plan on budget support for PRSP implementation and to reduce the time spent on disparate donor procedures. 26. The desire to harmonize donor assistance to the PRSP, expand budget support, and emphasize national procedures was expressed in documents issued at the Consultative Group meeting inJune 2003. Meetingthe requisite fiduciary standards, along with most o f the other reforms listed above, entails important interconnections at the treasury, where they often slow down. As noted above, the treasury needs some capacity building, but this capacity building should be undertaken with a firm view o f incentives affecting the treasury, and o f the value o f the reforms inenhancing the treasury's sphere o f activity. VII. REFORM-RELATEDRISKS 27. The government has performed the hardest task, taking the various studies with their dozens o f recommendations and distilling a cohesive plan o f a few main initiatives that serve the country's most important objectives. The tasking o f groups to investigate the detailed - 57 - practical requirements o f implementing such reforms i s a good sign. Nonetheless, the complexity of the reform and the fact that it cuts to the heart of a central public function like public spending could make it difficult to implement, even though all parties concerned expect to benefit. Complex reforms place their greatest stress on cooperation across agencies and across ministries. Such cooperation is not Senegal's strong point, not because o f the lack o f a common vision or mutual interests, but rather because of the lack of common information and sufficient qualified staff within the ministries and agencies. Past experience characterized by the strong presence o f donors has turned the information channels outward, benefiting the donors, rather than across agencies within the government. N o w that the Prime Minister has chaired the ministerial meeting to approve the budget reform program, all the energies o f the relevant authorities will needto be brought to bear to ensure its implementation. 28. Symbolic of the risks posed by complexity are the proposed information system reforms. Neither the plans for improving fiduciary standards nor those for extending financial decentralization can function properly unless innovations are made to the information system. There are many interesting initiatives in this regard, but despite the recent investments in ICT and the institutional structures developed for coordinating them, the systems in the various agencies still do not communicate with one another the way they should. Cooperation and implementation lag behind software installation, and manual processes continue in parallel with electronic ones. T o implement the decentralization strategies, interim plans for exchanging information with the localities need to be set up to cover the period until new communications investments are made at the local level. 29. Inview of these challenges, perhaps the greatest ally of the budget system reform is the highvalue placed on the objectives it has been designed to achieve. Public spending i s an inherently political process that necessarily reflects and expresses the politics o f the country, inthat it isthe majorvehicle for implementing governmentpolicy. The motives for reforming a system with a given political equation for balancing the distribution o f responsibilities and the control over public expenditure must be borne inmindat all times. The main components o f the government's program and the steps it has taken so far to implement the program are described below. - 5 8 - V. BUDGETREFORMSTRATEGY I. BACKGROUND 1. The PRSP takes a comprehensive approach to refocusing economic and social policy on improving the living conditions of the people. Insuch a context, the government i s twice called upon to improve the quality o fpublic spending: 2. With respect to resource allocation, the aim is to contribute, in a dynamic perspective, to strengthening the long-term bases for development by establishing the infrastructures required to promote private initiative, enhance the value o f human resources, and improve living conditions. With respect to execution o f the devolved budgets, this is a matter o f ensuring that spending is carried out as projected, evaluating its impact in the field, and assessing its efficiency, in the context o f a participatory approach. The objectives to be achieved through the budget reforms and the strategy to be implemented thus relate to the vision underlyingthe development strategy adopted for the years ahead. Throughout the years since the devaluation o f the CFA franc, an effort has been made to maintain or increase the previously achieved share o f social expenditure in the total government budget. However, Senegal has not yet achieved the objective o f universal primary education, and the health indicators are below World Health Organization (WHO) standards. To address these various shortcomings comprehensively, it i s important to establish closer links between the government budget and the PRSP by means o f a MTEF. A second objective i s to ensure the ability to track the resources made available for poverty reduction. 1.1. Outcome of the CFMCPAR exercises 3. In the last quarter of 2002 and with donor support, two evaluation exercises were carried out, one on the system for managing public finances (CFAA) and the other on the government procurement system (CPAR). 4. The assessment o f public finances first revealed that the preparation o f expenditure and the formulation o f the draft budget law are still based on a logic focusing on resources rather than outcomes, and as a result the budget forecasts for current expenditure fail to integrate a medium-termvision. Such a budgetary process i s not conducive to implementing the Poverty Reduction Strategy, which sets out specific objectives and targets to be achieved inaccordancewith athree-year or longertimetable. 5. As regards government budget execution, the current regulatory framework places particular emphasis on ex ante controls that remain centralized within the Ministry o f Economy and Finance for all expenditures effected by staff inthe Dakar region. Incontrast to the other regions, the central procedures for executing public spending are long and complex, with administrative controls deemed redundant and ineffective, which explains the frequent recourse to procedures circumventing ordinary law. 6. As regards external control over government activity in the public finance area, two series of players are involved: Parliament and the Audit Office. Parliament's control is political, exercised for the most part through the passage o f draft budget laws and budget execution laws. The belated presentation o f the draft budget execution law for passage by Parliament limits its potential control over the use o f public resources by the government. Moreover, the effectiveness o f the administrative structures for internal audit by the executive branch i s limited due to the lack o f adequate resources and capacities. The Audit Office, - 59 - which hasjurisdiction in this regard, has only recently been created and does not have access to the public accounts early enough in order to examine them. 7. The information system currently inplace has also been analyzed in the CFAA which found It not capable o f providing all the information required in a timely and exhaustive manner. Public expenditure management software introduced in 2002 constitutes a step forward inthis area, but it does not cover all the structures involved and does not have all the functionalities required. An integrated information system using the available technological resources would improve the coordination o f the offices responsible for collecting revenue and would make it possible to cross-check data on taxpayers and those liable for customs duties. It would also make it possible to shorten and deconcentrate some stages o f the expenditure circuit, reduce the risks of data input errors, and at the same time make it possible to produce financial data in sufficient time to guarantee the proper audit of financial operations and the proper steering o f public programs andprojects. 8. The filing of records is performed in an archaic manner by the financial agencies, which have neither a system tailored to perform this function nor adequate human and material resources. 11. STRATEGIC VISION AND OBJECTIVESINTHE AREA OF BUDGETAND FINANCIAL REFORMS 1.1. Priorityaxes of intervention 9. The Program of Budgetary andFinancial Reforms will have to contribute to imparting to every citizen the conviction that access to resources i s occumng equitably and transparently. It must also contribute to establishing peace and stability and promote an environment conducive to production and to transparent management practices in the public and private sectors. The establishment o f efficient and transparent institutions i s essential to the regulation and stabilization o f the development process, to decisionmaking, and to safeguarding political and economic stability. This entails further promoting a culture of citizen responsibility, information, transparency, the rule o f law, and social justice serving the general interest. 1.2. Addressinginefficiency 10. Thus, the program is aimed at improving the quality o f service, in particular in the sectors where there i s heavy social demand (education, health, promotion o fjob creation), by respecting the principles o f good governance. 11. In the area of public expenditure management, the government is committed to maintaining the thrust o f the reforms already initiated and to: (i) gradually extending budgeting by objectives to the other ministries; (ii) reviewing the institutional framework for public expenditure; and (iii) renewingand streamlininginstruments andprocedures. 12. The govemment will continue modernizing the instruments for mobilizing budget revenue, in particular by continuing to computerize services, streamlining the budget expenditure chain, renovating the account management system, and disseminating the new public procurement code. Improvements in the level of public expenditure execution will also be sought by reviewing the constraints preventing a significant increase in the rate of consumption o f allocations (project preparation, negotiation and signature o f contracts, starting activities, disbursement, procurement, and the capacities o f contracting enterprises). - 60 - 1.3 Povertyorientationand equity 13. Beyond these aspects, it bears noting that the programmingof public expenditure plays a strategic role in the implementation and evaluation o f poverty reduction initiatives. Fulfilling the objectives o f poverty relief will necessitate, among other things, taking the Poverty Reduction Strategies into account in the system for programming and budgeting public expenditure. 14. As regards strengtheningthe technical capacities of the ministries,it is important at the outset to recall that the PRSP places greater emphasis on the principle o f national initiative and ownership o f the reforms by the people. The central administration and decentralized entities, the personnel inthe localities, civil society, and the private sector should be supported by activities to strengthen capacities for program preparation and absorbing mobilizable resources. The institutions responsible for management of external assistance as well as legislativeandjudicial controlshould also benefit from this support. 15. Regarding the spatial dimension, this cross-cutting approach will form part o f the proximity approach driving the dynamic o f decentralization and local development. The decentralization process has already completed several stages, after which some powers have been transferred, although exercising these powers is meeting with a number of problems, including a notable lack o f capacities. In fact, the various evaluations have revealed: (i) a significant shortage of resources in the localities as regards coping with the demands and powers transferred to them; (ii)the lack o f functionality o f the support bodies; and (iii) the poor understanding of the aims o f decentralization. In the medium and long terms, the government will have to devise a global framework aimed at improving local development and the financial and administrative management o f the localities, while upgrading human resources (the programming and financing o f infrastructures and equipment), and ensuring grassroots participation in advancing democracy. The government will endeavor to continue tomove forward with decentralization, in particular by providing follow-up support for institutional development and the promotion o f genuine local administration. Steps need to be taken regarding the local taxation system so as to enable the localities to free up sufficient resources to finance local public investment. The competencies o f the localities should be strengthened and expanded, while devising a more rational territorial division, making it possible to establish entities that are.more viable administratively and financial. 16. Finally, as regards the informationsystem, adoption o f the new ICT offers possibilities that are important to tap. 111. PRINCIPAL COMPONENTS OF THE BUDGET AND FINANCIAL REFORM PROGRAM 17. Beginning in the second half o f the 1990s, once fiscal stability was regarded as attained, greater and greater emphasis came to be placed on the effectiveness and efficiency o f public spending. The concerns with good governance and combating poverty also prompted the countries eligible for the HIPC Initiative to focus more intensively on public finance management that gives greater visibility to the circuit and impact o f the funding mobilized. The participatory approach, recommended for achieving the objectives in improving living conditions o f the people, must remain in force, from identification through implementation, monitoring and evaluating. In so doing, it mandates a reporting obligation that can be respected only ifthere i s a high-performance information and control system. -61 - 18. The range o f competencies and procedures required to ensure the appropriate management o fpublic finances includes: 19. Budget programming, the determination o f priorities at the level o f detail required for monitoring and evaluating the measures implemented. The introduction o f a financial information system that allows for clear monitoring o f identified expenditure categories. The establishment o f intemal procurement procedures that make it possible to obtain products o f acceptable quality at the lowest price, on time. The introduction o f an accounting system based on the correct recording of financial data that produces financial statements that allow for satisfactory oversight o f general govemment operations The strengthening o f intemal control mechanisms. The initiatives taken over the last half-dozen years laid the groundwork inthis regardfor the controlledintroductionofanMTEFapproach. IV. THEMTEFAPPROACH 20. The MTEF i s defined as a transparent process for financial planning and budget preparation aimed at allocating public resources to the strategic priorities for development and promoting overall fiscal discipline. It i s a process within which the annual budget decisions are reached in light o f multiyear forecasts and benchmarks with respect to the strategic priorities and expenditures. 21. Finally, the MTEF approach emphasizes the identification o f indicators and measurements o f the performance o f the ministries and other entities in terms o f achieving their objectives. These performance indicators will enable the Ministry o f Economy and Finance, the Parliament, donors, and others to evaluate the sectoral ministries on the basis o f improvements in the quality of the services rendered, instead o f basing efforts solely on the level o f expenditure. V. EXPERIMENTATION WITH THE MTEFAPPROACH IN SENEGAL: SECTORAL OBJECTIVE-BASED BUDGETS 22. In Senegal, the MTEF approach was first introduced in the health and education sectors as part o f a public expenditure review and a medium tem sectoral program that make up part of a long-term plan. Analysis of the experience o fpreparing objective-based budgets inthe two ministries shows that there is a sound understandingof the objectives and general principles underlying the objective-based budgeting approach. However, preparation o f the objective-based budgets has heretofore been carried out in tandem with the traditional approach to preparing the draft budget law that organizes the preparation and execution o f the govemment budget. V.1 Medium-termestimation of globalresource constraints 23. Projections o f the resources available inthe medium term are already carried out inthe context o f the three-year programs o f economic and financial reforms worked out with the IMF. Since 1998, Senegal has regularly adopted a three-year program that indicates the overall ceiling for budgetary expenditure (current and capital budgets) inlight o f the resources available and the acceptable levels o f the public deficit. 24. The current expenditure forecasts are prepared by the Budget Directorate (DB). The capital expenditure forecasts are prepared by the Directorate o f Economic and Financial Cooperation (DEFC) inthe context o f the three-year Public Investment Program (PTIP). The - 62 - procedures for preparing the PTIP set forth inthe national planning system are comparable to the MTEF approach. 25. An inter ministerial technical committee chaired by the Director-General o f Finance was established in August 2003 to coordinate activities relating to the introduction of an MTEF on a national scale. The committee is made up of the major offices of the Ministry of Economy and Finance involved in the management o f public finances and the DAGEs of the Ministries o f Education, Health, the Environment, and Justice. In October 2003, an action plan was adoptedfor establishingthe MTEF for 2005-2007.3The ultimate objective is to have a medium-term framework for decision-making and resource allocation for the entire public sector, complemented by an analogous mechanism for allocating resources within the sectors inaccordance withthe informationproducedbythe sectoral ministries. 26. The process will be tried out beginningwith the budget law for 2005, in the Ministry of Economy and Finance (for the overall MTEF) as well as the Ministries o f Education, Health, Environment, and Justice (for the sectoral MTEFs). The experiment will be gradually extended to the other ministries inkeeping with existing capacities and priorities. 27. A global study aimed at revisiting the legal and regulatoryprovisions governing public finances is provided for in the MTEF action plan in order to provide guidance on the impact of the budget system reform on the existing legal framework. 28. During the experimental phase, the MTEF preparation process will be set forth in detail in an annexed document that will be conveyed to the Parliament for information purposes. Inthis context, budget preparation needs to be improved for the priority sectors in order to: 29. Make greater use o f a strategic approach for preparation o f the budget and defining in particular the missions, aims, objectives, and outcomes o f the sectoral ministries and public agencies. z Definetheactivitiesnecessarytoachievetheobjectives. =, Preparethebudgetonthebasis ofthe costsofsuchactivities, gradually abandoning the incremental method used for preparationo f the current budget. 3 Identify and simultaneously evaluate the capital costs and recurrent costs, introducing an institutional mechanism integratingthe preparation of the current and capital budgets. a Improve the classification and presentation of the budget in order to make the objectives, activities, and outcomes by ministryor other entity more visible. 3 Monitor and evaluate the outcomes o f the programs and o f managers on the basis of performance indicators that have been identified and selected with respect to the objectives set. 30. Pending that time, the draft budget law for 2004 took into account the guidance representedbythe PRSP along the lines described below. The Action Planfor implementationofthe MTEFis annexed. - 63 - V.2. Declaration of budget orientation 31. Senegalese law calls for annually conducting a debate on the budget orientation between the legislative and executive branches prior to the forwarding o f the draft budget law for examination and passage. 32. The principle o f financial accountability derived from the national good governance program, and the spirit o f the facilities sought with development partners as regards the mode o f financing the PRSP action plan and the MTEF approach, make the budget orientation debate the ideal occasion for the Ministry of Economy and Finance to indicate annually, preferablyby June at the latest: 3 The intentions ofthe government inbudgetmatters for the three following years, and its long-term budgetary objectives in terms o f total current revenue, total operating expenditure, budget balances compatible with preserving the stability of the macroeconomic framework, and total level o f the public debt 2 Compatibility ofits budgetary objectives and development strategy priorities with the principles o f responsible fiscal management 3 The reasons for any waiver that may be sought from Parliament as regards the application o f the general principles o f responsible fiscal management, and the conditions and time lags for returningto observance o f these principles. 33. Presentation o f the draft declaration to the budget orientation debate will allow for fruitfulexchanges betweenthe legislative and executivebranches onthe draft budget's overall impact on the economy and to explain the choices and priority expenditures envisaged. These exchanges will relate to budget aggregates and not to the revenue and expenditure components espoused by pressure groups. The draft declaration should be examined first in the Finance Committee and then inplenary session, but is not formally enacted by Parliament. However, the political parties are at liberty to disclose the various arbitrages that they would have made between debt, taxes, and expenditure, in keeping with the principles o f responsible fiscal management and the development strategy priorities. VI STRENGTHENING OF CAPACITIES TO ABSORB RESOURCES 34. While the preparatory phase for the draft budget law i s an important time for examining concerns with respect to the efficient allocation o f resources, budget execution must in turn look toward the objective of absorbing and efficiently utilizing the allocations made available. To this end, two major focuses for decision-making have been identified: the deconcentration o f payment authorization, and financial decentralization, within a general policy o f strengthening capacities to absorb resources. VI.l. Deconcentrationof paymentorder authorization 35. The deconcentration o f payment order authorization i s among the budgetary reforms undertakenby the Government o f Senegal following the CFAA, which identified weaknesses in the areas of budget programming, the capacity to absorb resources, and expenditure execution circuits, among others. Ithas three principal objectives: 3 To simplifythe public expenditure executionprocedures and circuits so as to reduce delays - 64 - z To increase the capacity ofthe spendingsectoral ministries to absorb the resources mobilized by the implementation of the PRSP by making them accountable for budget execution z Tostrengthenthedecentralizationofbudgetmanagement. 36. The Technical Committee established to coordinate activities relating to the introduction o f the MTEF is also charged with examining and making proposals to the Minister o f Economy and Finance on the modalities for introducing the deconcentration o f public expenditurepayment authorization beginningin2004. 37. The deconcentration of payment order authorization (the administrative act whereby, inaccordance with the validation ofa debt ofthe govemment or public agency, the accounting officer i s ordered to pay it) may be carried out following the delegation o f signature authority or delegation o f power. The difference between the two modalities i s intheir nature and their consequences. 38. The delegation o f power stabilizes the function of payment order authorization, which i s vested ina person designated not as an individual but as a function o f his or her position. It also makes it possible to make the spending ministry fully accountable, as it will thus be answerable before the financial discipline authorities for all acts relating to payment order authorization. Finally, delegation of power enables the spending ministry to subdelegate payment order authorization to one o f its personnel. 39. For these reasons, the delegation o f power could be introduced on an experimental basis, beginning in 2004, in the Education, Health, Environment, and Justice Ministries, for the following expenditure categories: current expenditure (procurement, operations, and transfers). Other expenditure categories (shared expenditure, public debt, personnel expenditure, standing expenditure, expenditure for evaluation purposes, and unforeseen expenditure)will not be included for the time being. Ifthe experiment is successful, it could be generalized inthe other ministries beginningin2005. 40. Implementation o f the delegation of power for the deconcentration o f payment order authorization calls for the following initiatives: 3 SelectinganoptionattheMinistryofEconomyandFinance z Notifyingthespendingministriesselectedinthetestphaseoftheoptiontaken z Creating payment authorization units within the DAGEs or SAGESof the sectoral ministries concerned; z Creating subsidiary Financial Operations Control (COF) units within these same ministries Extending the expenditure management software to the line ministries, or purchasing a SIGFIP-type software and adapting it to the Senegaleseenvironment =r> Creating or strengthening the legal basis for the deconcentration o f payment order authorization. VII. STRENGTHENING OF FINANCIAL DECENTRALIZATION 41. Since the transfer o f powers in 1996, and in light o f the changes required for implementation o f the Poverty Reduction Strategy, the State's resolve to make more resources available to local-govemment authorities has been strengthened even further by the - 65 - decentralization o f the implementation o f internal resources o f the Consolidated Investment Budget (CIB). 42. Accordingly, under the aegis o f the Ministry of Economy and Finance (MEF), an ad hoc task force was formed to study decentralization o f the CIB's domestic resources, after validation o f the terms o f reference drawn up by the Directorate o f Forecastingand Statistics. 43. Following the work done with the effective participation o f representatives o f MEF and o f the Ministry with responsibility for local-government authorities (McCL), plus representatives o f the local elected officials, o f certain technical ministries (Energy and Mines, Education, Health and Agriculture) and of the Monitoring Unit for the Poverty Reduction Program, the provisional report o f the study was submitted first to the Minister o f Economy and Finance and then subsequently to Senegal's development partners at a working session held on August 4, 2004, under the chairmanship o f the Minister with responsibility for the Budget. 44. After gathering and compiling the views and comments of the development partners with representatives inDakar, together with those of certain administrations and members of civil society, the committee then set about producing the final version o f the report and preparing an inter ministerial advice on the subject betweennow and the end o f 2004 for the definitive validation o f the decentralizationstrategy it hadproposed. 45. Inshort, this strategy, subject to validation bythe authorities, shouldbe put into effect as of fiscal 2005. The strategy advocated i s as follows: 1) Determinationandtransfer of resources 46. Development project formulation will remain under the responsibility o f the ministries having oversight over the sectors to which the CIB domestic financial resources are to be transferred. 47. This formulation will consequently be effected annually on the basis o f the needs expressed by the population at the local-government level. This i s the "bottom-up'' strategy that enables the State to hear the people and act to meet their needs. 48. The existence o f projects entered in the investment budget i s accordingly a prerequisite. Once this condition is met, the projects adopted by mutual agreement between the ministries concerned, the McCL and the MEF, will be made the subject o f an inter ministerial decree allocating the funds to be transferred per local-government authority, per project and per expenditure item (construction andor infrastructure). 49. This decree authorizing provision o f the funds to the local-government authorities will be prepared by the Minister o f Economy and Finance and signed by the sector ministries concerned and by the ministerresponsible for Finance. 50. Next, at the central level, each administrator o f appropriations (the sector ministries concerned) will proceed to commit the expenditure on the strength o f the inter ministerial decree, following the Request for immediate Availability (DFWI) procedure. 51. After the sector ministry, the following players will have a part in the transfer o f the funds: - 66 - a) The Office o f the Financial Comptroller (COF), which i s charged with preliminary administrative verification o f the proper and lawful nature o f the expenditure. b) The Directorate o f Debt and Investment (DDI), the role of which consists in authorizing the expenditure by issuing a payment order in the name o f local-government authorities concerned under cover o f the Accountant General. c) The Directorate General o f Government Accounts and the Treasury (DGCPT), which i s responsible for the accounting transfers o f receipts and o f funds that will be effected by the system o f accountants inaccordance with the established procedures. d) The McCL tasked with apprising the State representative to the local-government authority o f the decree allocating the projects and also the appropriations assigned to each o f them to enable them, at the appropriate time, to ascertain that the local-government authorities' budgetary programming i s consistent with the resources allotted to them. o The deliberative organs of each local-government authority will be responsible for including in the authorities' budgets the amounts notified by the State, either in the form o f regularly budgeted allocations or by means o f a resolution following special deliberation. 52. Subsequent utilization o f the funds must be scrupulously consistent with the initial purpose declared inthe CIB, without there beingany possibility o f modifying or amending the initial allocation, except with the prior consent o f the sector ministry. o The collector o f the local-government authority will receive the funds and enter them in a provisional account, after which he will notify the executive organ of the receipt o f the funds and their allocation. To this end, he must send a copy o f the project description(s). As in the past, and in accordance with the accounting procedures in effect, he will manage the accounting phase o f the bookkeeping implementation o f the expenditures by applying the controls requiredby the pertinent laws andregulations. The Representative of the State will verify the legality o f the operation and ensure that the funds are not diverted from their initial purpose. Once it has been verified that everything i s indue and proper order, the budget i s approved. 53. Inorder to pavethe way for the reformprocess to beginin2005, the following two key steps will have to be taken before the end of 2004; - Adoption o f a law authorizing the local-government authorities to implement the investments included inthe budget; - Signing of an agreement between the State or its local-government-level representatives and the local-government authorities setting forth the commitments and obligations of the parties. 54. Moreover, in application o f the authorizing law, it will be necessary to amend Article 252 o f the Code of Local-Government Authorities in order to broaden the range o f the local- government authorities' receipts for investment purpose's so as to accommodate the CIB funds (cf. Law No. 96-06 o f March 22, 1996 creating the Code o f Local-Government Authorities). - 67 - 55. Similarly, Decree No. 91-1230 ofNovember 14, 1991 reforming the charts o f accounts of the State and the Local-Government Authorities, and Inter ministerial Decree No. 010830 o f December 1, 1993 as amended, setting out the budgetary nomenclature o f the local- government authorities, will have to be updated. 2) Decentralizationimplementationschedule 56. Decentralization o f the management o f the domestic financial resources of the CIB mustbe carriedout inaprudent and cautious manner. 57. As o f fiscal 2005, a test involvingthe Ministries of Education and Healthwill have to be run. For the projects coming under these two ministries, a representative sample of actions to be undertaken will be selected at the region, commune, and rural community levels. Preference should be given to administrative regions having a dynamic Regional Development Agency (ARD). 58. For fiscal 2006, the experiment could be extended to other ministries if the results o f the first year are sufficiently encouraging. Inpoint o f fact, this experiment could be extended to the Ministries responsible for Justice and the Environment, which for that matter have already been selected to try out the Medium-Term ExpenditureFramework (CDMT) and the deconcentration o f authorization. 59. The objective is, as o f 2007, to extend decentralization o f the management o f the internal resources o f the CIB to all spending ministerial departments with projects that have been entrusted byThe State to the local-government authorities for management. 60. Once this reform has been extended to all ministries, the number o f local-government authorities to be involved will depend on: (i) the projects included in the CIB; (ii) their location; and (iii) the institutional capacity of said authorities to implement the investments in question. It is therefore conceivable that this decentralization might not affect a particular local-government authority because: (i)there are no projects included in the CIB that are located within its boundaries, and (ii) its institutional capacities are not o f the caliber required to ensure competent implementation o f an investment. 3) Accompanying measures 61. The implementation o f the reform will therefore take place at two levels, namely the central level and the local-government level. The first o f these levels i s made up o f all the State players, that i s to say the sector ministries with responsibility for the investments for which the management o f financial resources is to be decentralized. 62. The human and material resources available to these keyplayers inthe initiation o f the reform will be deployedto strengthen the process o f decentralizing the CIB's resources. 63. As regards the second level for whose benefit this decentralization will be carried out (regions, communes and rural communities), it will be necessary to strengthen their human and material resources inorder to take into account the new workload that will be induced for thembythe reform. 64. The State's support for the Regional Development Agencies also plays a role in this strengthening of the local-government authorities. The objective sought thereby i s to provide - 68 - these authorities with close-by technical services which will also enable them to run the various local development programs o f which they are the beneficiaries. 65. The recentering o f the deconcentrated state services around the representative o f the State (governor, prefect, subprefect) is also designed to improve the control o f legality and budgetary control by pursuing the effort underway since 1998 to benefit local-government authorities interms o f infrastructure facilities and strengtheningo f their capacities. 66. The State will also have to create the conditions that will enable every facet o f the local economy to benefit fully from the favorable impacts of the decentralization implemented. 67. Inorder to better cope with their increased responsibilities and to meet the demands of society, the elected local-govemment representatives, have set up an organization called the "Union o f Associations o f Local-Govemment Elected Representatives" (Union des Associations d'Elus Locaux - UAEL), which groups together on the basis o f their common objectives the three associations o f elected local-government representatives, namely the AMS4, APR5 and ANCR6. With the assistance o f the Canadian cooperation agency, a Support Project for Local-Government Elected Representatives (PAEL) has been set up for the purpose o f strengthening the associations' institutional capacities. 68. In this way the UAEL has become involved in several areas and particularly in the training of the local players with respect to the different projects and programs designed to support the local-government authorities. 69. The main training programs underway are the following: 70. Regarding the Development partners, special mention should be made o f a large number of support programs and projects for decentralization and local development in the interests of the Senegalese local-government authorities. Most o f the parties involved in the rural areas (National Rural Infrastructure Project - PNIR, Program in Support o f Decentralization in Rural Areas - PADMIR, ProCR, Local development Support Project - PADDEL, DGL-FClo, etc.) have experimented with different ways o f supporting local investments in accordance with the urgings o f the latter o f decentralized rural development policy of 1999. 71. Many rural communities have already incorporated budgetary support by including the budgetary assistance from their partners intheir budgets. 72. This practice has necessitated a variety o f training programs for local-government elected representatives and key staff. These courses have covered administrative and budgetary management and acting as contracting authority. 73. Inthe same context, the UrbanDevelopment andDecentralizationProgram-PAC, the Urban Local Development Support Program - PADELU, the Regional Support Program - PAR and the Support Program for Local Development Initiatives - PSIDEL have invested much time and effort in strengthening the capacities o f municipal and regional council members and of the staff ofthe decentralized administrative and technical services. AMs: Mayors' Association of Senegal APR: Association of RegionalPresidents ANCR: NationalAssociation of RuralCouncils - 69 - VIII. STRENGTHENING CONTROL AND FINANCIAL ACCOUNTABILITY VIII.1. Supervisionand regulationof government procurement 74. The government procurement system i s an important component o f the system for managing public expenditure. Its regulatory framework i s defined by the government procurement code. The recent reform o f this code made it possible to move closer to international standards for open competitive bidding, the establishment o f neutral and objective selection criteria, and predictable rules the enforcement which i s subject to public control. 75. For procurement entailing sizable expenditures, the central supervisory and regulatory structure should be empowered to audit the process o f awarding such contracts in order to ensure that they are consistent with prevailing regulatory provisions before the related contract documents are signed. 76. The central supervisory and regulatory structure for government procurementwill need to: 3 Standardizecontractawardprocedures 3 Trainstaffingovernmentprocurement 3 Approveinadvanceanyrequestsforwaiversofstandardprocedures 3 Gatherinformationongovernmentcontracts, includingdisputes,gapsinexecution, and payment incidents. VIII.2. Internalcontrol 77. In the area of public finance management, the internal control system targets three major objectives: 3 Ensuringcompliancewiththelawsandregulations 3 Ensuringthe reliability ofthe financial dataandreports onthemanagement ofpublic finances 3 Facilitatingtheefficiencyandeffectivenessofoperationsfinancedbythegovernment. 78. Preventing errors and fraud and promoting the preparation o f accurate accounts enables general government to produce credible financial and management reports ina timely manner. Inthis regard, internal control stands as one pillar o f good governance. It i s carried out by structures in the position o f management control among the senior authorities (Inspectorate General o f the State, for example) or inadministrations (General Inspectorate o f Finance, inspectorates o f other offices). 79. Control may be exercised both before (ex ante control) and after (ex post control) the expenditure takes place. It generally relates to: (i) the quality o f the payment authorization officer; (ii)the regularity and legality o f the expenditure; (iii) the precise posting o f the expenditure to the accounts; (iv) the availability o f appropriations; (iv) the precision with which the amount o f the expenditure i s determined; and (v) observance o f the proper pace for making full use o f appropriations. - 70 - VIII.3. External control I.1 Inthe budget area, external control (outside the executive branch) is carried out bythe National Assembly and the Audit Office. Ix. CONTROL BY THE NATIONAL ASSEMBLY 80. Under the Constitution o f January 22, 2001, Senegal retumed to the system o f a unicameral legislature, represented by the National Assembly. Through its basic legislative power exercised by the enactment o f laws, the National Assembly i s also constitutionally granted financial powers with respect to public finances, diplomacy, and the control o f governmental actions. 81. Inthe course ofthe review ofaproject or proposal, a deputy maypropose one or more amendments inaccordance with the provisions currently in force inthis regard. Deputies may also summon the various government ministers to respond to oral questions. In the final analysis, the National Assembly uses a committee structure to organize the powers it exercises more efficiently. 82. The nature o f the various questions that may be submitted to it requires strengthening the capacities and resources available to Parliament and its members for investigations, analysis, proposals, and counterproposals. Inparticular, strategies should be developed that can contribute to providing Parliament with the material, strategic, and human resources that permit a more efficient control o f government actions. If made available to parliamentary committees and to deputies, the support o f experts and specialists capable o f conducting research and performing the analyses requiredwould contribute to enhancing the autonomy o f the legislative branch. 83. Moreover, it would be advisable to create spaces and social dialogue among parliamentarians, the people, and civil society. The National Assembly should have the resources to arrange to hear specialists on the important issues o f the day and to enable the people concemed to benefit from them. 84. The strengthening o f the technical capacities o f parliamentarians thus entails exchanges o f experiences with the parliaments o f other countries. Initiatives should be taken to facilitate study travel and exchanges to benefit parliamentarians. x. JURISDICTIONAL CONTROL OF THE AUDIT OFFICE 85. The Audit Office was created in 1999. The scope o f its jurisdiction is vast, covering the following aspects: s Jurisdictionalcontroloftheaccountsofpublicaccountingofficers 3 Controlofbudgetlawexecution 3 Controlofthemanagementofpublicutilityservices 3 Controloftheparapublicsector 3 Penalizingmanagerialoffenses. 86. Nearly 470 management accounts maintained by public accounting officers are subject to auditing by the Audit Office. They are composed o f 94 entities in the parapublic sector, -71 - not counting the administrative services and all the localities (11 regions, 67 communes under ordinary law, 43 urbanizedcommunes, and 320 rural communities). 87. To handle this workload, the office has 43 technical personnel Cjudges, contractual auditors, examination assistants, and individual rapporteurs). The administrative personnel is made up o f 33 bailiffs, administrative clerks, secretaries, and drivers. / 88. Owing to the imbalance between an extended control perimeter and an insufficient number o f staff, the Audit Office i s constantly confronted by a number of problems, including material constraints, in terms o f office space, computer equipment, and information and documentation systems, which make for less than the best working conditions. 89. In January 2000, nine draft budget execution laws relating to the fiscal years ending from 1987/1988 to 1996 were approved by the National Assembly during a special session. These draft budget execution laws were accompanied by nine reports on budget law execution and nine general statements o f conformity prepared by the Audit Court. It was possible to absorb this backlog thanks to the accelerated settlement procedure (a simplifiedprocedure for verifymg figures). 90. Ongoing consultations with the Ministry of Economy and Finance have indicated that the management accounts for 1999 have been submitted, while the necessary corrections are now beingmade to the management accounts for 2001 and 2002. 91. The situation is similar for the public entities subject to private accounting systems. These entities are several years behind inthe auditing of their accounts. To overcome this lag, the Audit Office has a pressing need to recruit and build the capacities o f personnel with the necessary profile, or for recourse to the services o f private accounting firms. It also needs support along these lines. 92. In order to address the work overload and to meet deadlines, the office is contemplating receiving assistance from experts inFrance's Audit Office, and hopes to obtain support for covering its costs. 93. The level o f training o f Audit Office staff i s quite appreciable, however, as 90 percent o f the personnel assigned to audit activities have at least a master's degree, and the professional experience o f such staff ranges from 4 to 30 years. Only a third o f these staff have already gained experience with auditing. The need to strengthen capacities as regards jurisdictional control and management audits has also been coveredby an action plan covering the period 2004-2007. XI. STRENGTHENINGTHE PUBLIC FINANCE INFORMATION SYSTEM XI.l. The PRSPMonitoringSystem 94. The Government o f Senegal has established a flexible and participatory framework for monitoring implementation o f the PRSP through the Poverty Reduction Program Monitoring Unit. The unit is currently completing the introduction of a monitoring-evaluation system aimed at meetingthree challenges: 3 Creatingcrediblelinksbetweenthe PRSP,the sectoralpolicies andprograms, andthe other complementary national initiatives - 72 - s Tracking andmonitoringthecontributionsofthevariousparties involvedinfinancing the PRSP (national budget, donors, localities, nongovernmental organizations [NGOs], grassroots organizations, the people, and so forth) s Guaranteeing the effective andregularparticipationoftheprivatesector, civil society, and decentralized localities in order to strengthen national ownership of the PRSP. 95. This monitoring-evaluation system will: Combine the PRSP focal points responsible for monitoringthe execution of the sectoral operating plans and the payment authorization units to be created within the sectoral ministries. The technical committee working on the MTEF and the deconcentration o f payment order authorization has recommended that the PRSP focal points be associated with the DAGEsor SAGES. s Put inplace an observatory for monitoring and evaluatingpoverty trends inSenegal, taking into account the various efforts underway with respect to competitiveness and employment, among others. Discussions are currently in process with a view to streamlining the above and defining the internal organization of the observatory, as well as its tasks and its relations with the other structures established or in the process o f being established by the government, inparticular the observatory on competitiveness as well as the one envisaged on employment. Make use of the results o f the surveys on monitoring public expenditure recently conducted in the education and health sectors, and institutionalize this mechanism while gradually broadening it to include the other ministries in light o f the availability o f information and capacities. s Organizeperiodicpublic expenditure reviewsintheprioritysectors(education, health, justice, environment) in order to regularly monitor changes in the unit cost structure in these sectors and to make appropriate readjustments in light o f the PRSP objectives and performance indicators. To this end, a PER inthe Ministryof Health i s in progress as part o f the preparations for the secondphase o f the PDIS. s Identifya minimumlist of indicators that will beregularly monitored inaccordance with a schedule agreed to by all partners. To this end, the PRSP Unitrecently organized a workshop that enabled the parties involved in implementation to identify by consensus a minimumlist ofindicators that will be submitted to the government for validation. XII. SURVEYS ONTHE EXPENDITURE CIRCUIT 96. Surveys on the expenditure circuit7 have revealed that the successive increases in resource allocations to the priority social sectors o f education and health appear not to have been reflected in any improvement in education and health indicators. They made it possible to assess expenditure processing lags at each level in order to identifythe resulting delays and their causes. They ultimately concluded that there was some inefficiency inthe management of public resources in these two sectors. The principal constraints identified are as described below. 'The Study by the Ministry of Healthand Preventionwas conductedinMarch2003, and is entitled"Etude pour lamise en placed'un Systemede Suivi des Dtpensesjusqu'a Destinationau Senegal" [" Study on the Introductionof a System for TrackingExpenditurethroughto itsDestinationin Senegal." ] The report by the Ministry of Education,conductedinFebruary2003, is entitled"Suivi pas a pas des depensesd'education" [Step- by-StepTrackingof EducationExpenditure]. - 73 - 3 In addition to the procedures for mobilizing the government budget and the requirements of decentralization, procedures for mobilizing the other resources o f the sectoral programs (PDIS and PDEF), particularly o f external resources, are subject to special, unwieldy, and constraining mobilization procedures. z The budgetnomenclatures usedbytreasury staff are oftenpoorlyunderstoodat the sector level, the rules of government accounting are not properly mastered, and the new rules o f budget management associated with the decentralization are not properly understood. z The expenditures of one category of personnel (contractual staff in education) are budgeted under the heading on material expenditure, making it difficult to determine precisely the importance o f the wage billinthe Ministryo f Education budget. z The operating budget of elementary schools is still managed by the Ministry of Education through the DAGE and the DENS, which i s contrary to the government's decentralization policy and makes achieving the objectives o f the grassroots sector questionable. 97. A number of reasons have been identified for transforming these resources into tangible outcomes: (i)inefficient transfers of funds through the various levels o f the administrative system, from the central level to the base infrastructure unit, namely the school or health post; (ii)considerable waste inthe budgets mobilized; (iii) intrasectoral allocations that are not inkeepingwith the sectors' declared objectives; (iv) extremely highunit costs that are unrelated to the quality o f services provided; (v) lengthy delays in routing the resources; (vi) misallocation of resources for other uses; and finally (vi;) the inadequate capacities o f the system, particularly the final recipients o f funds. 3 Inthe shortterm, itisimportanttopinpointbottlenecksmoreaccurately, identify their scope and their location, and make the appropriate corrections with a view to achieving the objectives o f the l0n-year plans for education and health. The aim i s to identify and isolate the constraints associated with delay and distinguishthem from those relating to resource embezzlement and waste. 3 Inthemediumterm, itwillentailestablishingacomprehensiveinstitutionalmechanism that will make it possible in the future to make the transfer o f resources more effective, transparent, and efficient. The grassroots operational unitswill then receive on time and in their entirety all the resources intended for them so as to guarantee achievement of the sectoral objectives. To this end, the perimeter o f the surveys on the expenditure circuit shouldbe expanded so that they contribute to: b Identifying and analyzing the constraints and anomalies in the routing of resources to their destination b Developing an action plan for improving the arrival of government expenditures at their destination b Making recommendations for systematizingfollow-up. XII.l. InformationSystemon PublicFinanceManagement 98. This area involves introducing an integratedsystem that permits: z The Public Treasury to be able to record on the accounts and pay all the public expenditures of the government - 74 - => Exhaustive monitoring (both physical and financial) o f all the public current and capital expenditure, regardless o f financing source s Regular, real-timemonitoringofthevolumeandstructureofthecountry's debt,aswell as o f debt service z Auditing and evaluation of the degree of exhaustiveness and integrity of the informationmade available on public finance management. 99. To this end, the Ministry of Finance has implemented an integrated public expenditure management software (SIGFIP). This tool has already been put into operation for the 2004 budget. It is also beingusedfor testing the deconcentration o f payment order authorization in the four pilot ministries chosen for the MTEF. 100. The current information system allows the production o f accounts balances, management accounts, and the general Finance Administration accounts, with results that should improve after the implementation of the public accounting software ASTER. The MinistryofFinancehas an agreementwith the FrenchCooperationto make ASTER available to the Treasury, and a team has been put together to coordinate its successful operation. XIII. INTRODUCTIONOFA SYSTEMFORMONITORING THEIMPLEMENTATIONOFTHE BUDGET ANDFINANCIAL REFORMPROGRAM 101. The Govemment of Senegal has introduced a Monitoring Unit for the budget and financial reforms to be carried out in implementation o f the PRSP and the CFAA/CPAR action plan. It was created by decree and reports directly to the Office o f the Minister of Economy and Finance. 102. The main objective of the unit is to coordinate and monitor implementation of the reforms to be introduced to modernize the public finance management system and to strengthen the institutional capacities o f government and local government unitsby promoting effectiveness, efficiency, and transparency inplanning; the allocation o f public resources; the management o f expenditure; and the auditing o fpublic finances. 103. To this end, the uniti s responsible for: 3 Coordinatingtheinternalandexternalinitiativesrelatingtobudgetary, accounting, and financial reforms 3 Promotingthepreparationofactionplansandtheirvalidationbythegovernment 3 Supervisingandmonitoringtheexecutionoftheactionplans =, Facilitating the mobilization of the resources and means necessary for implementing the action plans => Regularly reporting to the Minister o f Economy and Finance on progress with reforms and informinghim o f the future outlook. Steps Taken MTEF 104. Govemment financial operations tables (TOFEs) covering three years forward have been produced, initially for the PRSP, and continuing as part o f the government's drafting of - 75 - its own IMF Memoranda of Economic and Financial Policies, and are published on the website o f the Ministryo f Finance. 105. Sectoralprogram budgets have been inuse for three years inthe Health and Education Ministries and continue to be produced, even in the health sector where the multidonor sectonvide program PDIS has come to an end. 106. The Environment and Justice Ministries have produced sectoral strategies and are committed to producing program budgets by June 2004. 107. The PRSP implementation task force has produced a series o f sectoral operation strategies which it has offered as contributions to sectoral program budgets. 108. The PRSP implementation task force has also defined a series o f performance indicators and established a nationwide network o f PRSP focal points charged with monitoring and evaluating PRSP programs, and has proposed to make this network available for purposes o f monitoring and evaluatingprogrambudgets. XIII.l.Budget Execution 109. The DGF has installed and fully implemented a new software system for executing and recording budgetary expenditure. 110. The continuation o f the budget execution software has been installed and tested for the payment phase that takes place inthe treasury. 111. The govemment has conferred on a technical plan to transfer payment order authorization powers to those line ministries that have program budgets and has committed to convey this authority by end 2004. XIII.2.Budget Transparency and Reporting 112. Electronic copies o f the budget for 2001-2004 have been posted on the Ministry of Finance website. 113. Documents for producing the budget execution laws for 1997-2002 have been prepared by the spending authority, and the draft execution laws for 1997 to 2000 have been sent to the Audit Office. . The execution law for 2001 has been drafted and i s beingsent 114. In2003, the govemment instituteda system oftracking poverty reductionexpenditures and has introduced a report on the results o f this tracking exercise inits PRSP progress report. XIII.3. Financial Decentralization 115. In2003, the govemment accelerated the transfer offunds for current expenditureto the localities, so that the funding could arrive earlier inthe year. 116. Legal texts have been drafted to relax certain procedures in the transfer o f funds to localities. 117. The govemment participated inexpenditure tracking surveys inhealth and education. - 76 - 118. Consistency between the sectoral operation plans o f the PRSP and regional and local plans has been established. 119. Systems of contractual budgets combining greater financial transfers with qualitative and financial reports on spending and results have been implemented in 60 pilot localities. These pilot projects have included training on budgeting and financial reporting at the local level. 120. Central-level transfers to these pilot localities have increased over the past two years. 121. A government modernization project is building an IT network that should enable most administrations to communicate electronically with each other and to access databases remotely. The initial backbone network covers mainly Dakar, but the intention i s gradually to connect the regions. In addition, the Interior Ministry, which holds a sizable share o f the decentralizationportfolio, has started to implementits own network. - 77 - VI. IMPLEMENTING THE PRSP 1. Senegal's PRSP begins with an analysis o f poverty and then outlines the govemment's goals for reducing poverty and the strategy for achieving them. The strategy i s based on four pillars, the first three o f which focus directly on poverty reduction: wealth creation, capacity building and the promotion of basic services, and improving the living conditions o f vulnerable groups. The fourth pillar i s devoted to the principles, resources, and institutions putinplaceto execute strategiesunder the other pillars. 2. The first pillar contains a number o f sectoral strategies and a section on accompanying measures. Among the latter, under the objective o f fiscal equilibrium, are the following actions: "prudent and increasingly rigorous management of public expenditure by means of transparent procedures and the optimization of budget allocations," and "systematic adherence to budgeting by objectives." The second pillar on social services includes a section on good govemance. Actions under this section include improvements in procurement procedures; reduction o f ex ante and enhancement o f ex post expenditure controls; improvement in financial information systems; dissemination o f information on the government's financial operations, on the budget, and on the TOFE; and enhanced efficiency o f public expenditure. The action matrix also targets an expansion o fdecentralization. 3. The final pillar o f the PRSP targets information systems, the clarity o f budget choices, and better budget processes. It notes upcoming reports on the mechanism for simplifying spending procedures, on raising the absorptive capacity o f investment projects, and on plans for monitoring and evaluating PRSP implementation. These reports were subsequently produced; some were endorsed at the October 2002 conference, and others presented at the June 2003 CG meeting. 4. The inclusion of public expenditure management reforms in several sections of the PRSP is an indication o f how transversal the subject is. Aside, though, from the content o f PEM reforms written into the strategy, the PRSP i s interesting in and o f itself. The PRSP i s the first publication from Senegal presentingthree-year macroeconomic forecasts, including expenditure and tax receipts. It also presents three alternative growth scenarios and the associated macro tables, consistent with given macroeconomic assumptions. Finally, it includes three-year investmentbudgets organized by objectives under the strategy. 5. Thus, the PRSP not only puts forward an agenda of poverty reduction objectives and measures that it explicitly plans to implementthrough program budgets, but also provides an example o f the first stages of that process. The three-year macroeconomic forecasting has been continued and forms the basis o f discussions with the IMF. Senegal's challenge at this point i s to expand program budgetingto other ministries beyond health and education, and to adopt the institutional and informational changes needed to adapt spending procedures to program budgets. 6. In the Health and Education Ministries, program budgets and traditional line-item budgets have co-existed for some time. One of the key obstacles to institutionalizing the program budgets more fully i s that the current budget information system i s not yet set up to record the relation between program spending and spending by type (wages, materials, and so forth). Thus, the reports on program spending are put together through time-consuming manualprocesses. - 78 - 7. The experience o f these two pilot ministries stands incontrast to the tradition practiced elsewhere in the government. The DGF view o f this process is that it i s devoid of any medium-term vision and o f any monitoring and evaluation component. Thus, the budget staff inthe ministries have noinformation onthe impactofpublicspendingonthe quality ofpublic services. I. MEDIUM-TERM EXPENDITURE FRAMEWORK 8. What the MTEF, implemented as a budget framework, can bring is a system of evaluating spending according to agreed-upon indicators, whereas ex post evaluation of either current or project spending has been almost completely lacking, aside from specific requests from donors. In this respect, the monitoring and evaluation work undertaken for the PRSP, with performance indicators and annual evaluation processes, will provide valuable experience. 9. Incontrast to the recent program budgets inhealth and education, which were overly detailed, the framework for sectoral budgets should be more generic, but still allow for the specifics o f objectives and indicators particular to each sector. 11. PAYMENT AUTHORIZATION 10. One o f the actions listed on the plans for the MTEF involves the transfer o f payment order authority to ministries with program budgets. The objective i s to reduce procedural obstacles to spending in ministries, which can be evaluated ex post on the basis o f program objectives, as well as by ex post audit. The practical details o f such an arrangement were the subject of a two-day seminar inNovember 2003. 11. In the system governing foreign-financed investment projects, spending is executed under extra-budgetary procedures by project managers under the supervision o f the Debt and Investment Directorate ,to which authorization power i s delegated. Incases where the project accounts have balances advanced by the treasury, it i s again the DDIthat authorizes payment. This payment circuit, then, does not pass through the treasury or its accounting system. Accounting i s maintained by project managers and the DDI, but the communication between them i s not always comprehensive. 12. Thus, the government's proposal to delegate payment order authorization to the line ministries would go a long way toward enabling the latter to set objectives-oriented budgets and execute them. However, there are risks in the technical and human dimensions o f the information system. The DGF and the COF need to receive direct informationabout spending they do not directly authorize. . 13. The line ministries face a similar situation vis-a-vis geographically decentralized spending. The localities have an important role to play inimplementing sectoral programs as well as inreaching PRSP targets, but urban and rural communities also rely on local spending autonomy. Among the principles given in the PRSP for guiding its implementation i s proximity: that the locus of decision-making concerning the implementation o f interventions under the PRSP should be as close as possible to the beneficiaries and their place o f residence, while guaranteeing efficiency and transparency. - 79 - 111. PRO-POORFINANCIALDECENTRALIZATION 14. Senegal's policy on decentralization was laid out in a 1996 law transferring specific responsibilities to the localities. The 1996 law is described inseveral studies, most recently in the CFAA Annex o f June 2003 and the Poverty Assessment Report. Most observers have noted shortcomings in the implementation of the law, most notably that the transfer of resources to the localities has not been matched by a specific delegation o f accountability. With the lack o f resource transfers serving as the main indicator o f inadequate implementation, various initiatives have been launched with a view to improving local finances and center-local transfers. The government i s now inthe process o f synthesizing the lessons from these pilot projects and from PRSP implementation in order to forge a strategy that will more successfully achieve the objectives o f the decentralization policy adopted in 1996. 15. Senegal's PRSP clearly identifies the strong rural dimension o f poverty. Most o f the poor are in the rural areas, and most o f the rural population i s poor. Lack o f education and lack of access to basic services are defining characteristics o f the poor. The poverty profile for Senegal documents the inequities in income distribution and the large gap in incomes, education, health, and access to services that afflict the poor communities. 16. What becomes clear from these analyses is that Senegal cannot reach its PRSP targets in poverty reduction, health, and education without improving the productive infrastructure and basic services in the decentralized communities. Yet Senegal's fiscal decentralization system i s inadequate for providing decentralized services at the level needed to reach PRSP objectives. Expenditure tracking surveys in health and education demonstrate that absenteeism i s a problem in both sectors, and that budget transfers to local communities arrive only in part and late, and may be spent on objectives other than those budgeted at the center. 17. The recent World Development Report on "Making Services Work for Poor People" illustrates why decentralization alone i s not a panacea for solving inadequate service delivery to poor areas. The report makes clear that decentralized administration o f services needs to be accompanied by increased accountability o f local service providers, greater information at local levels about the amount and use o f available funds, and greater voice for poor clients in the evaluation o f service quality. Thus, while decentralization is a powerful tool for improving performance in many sectors, fiscal decentralization needs to be coordinated with the overall budget system reforms, including sectoral program budgets, ex post audit, and reporting and evaluation. 18. The government has developeda detailedprogram' and launched several initiatives for improving government finance in the localities. Thus a number o f pilot projects have been carried out successfully in the area o f fiscal decentralization, but it would be beneficial to strengthen the transversal aspects, namely, the role that decentralization must play in achieving national objectives relating to health, water supply, and so forth. Some of these projects work with local communities to develop consensus over priority community investments and arrange for their financing. Others promote contractual arrangements with localities targeting performance objectives in particular sectors. However, it i s necessary to clarify the role o f local contractualbudgets insectoral programs and the PRSP agenda. * Including, "Plan d'action decentralisation" [Decentralization action plan], produced bythe Ministry o f Interior. - 80 - 19. This transfer o f information between the center and decentralized communities on national program objectives and related local activities i s all the more critical given the fungibility of fiscal transfers to the local level. Research in Organization for Economic Co- operation and Development (OECD) countries (and India) has demonstrated that transfers to regional or local governments are treated as fungible by those governments. Evidence from the expenditure tracking surveys in Senegal also indicates that funds transferred to localities for health may be spent on other things. Line ministry staff have also commented that reaching decentralized social sector objectives has been affected by localities choosing to spend social sector funds on other things. Indeed, given the fungibility o f financial resources at the local level, decentralized service delivery cannot be solved inonly one sector at a time. 20. InSenegal, anumber of localgovernments produce line-itembudgets that are attached as part o f the general budget law and controlled at the line-item level from the center. However, any locality that has any alternative source of revenue, including user fees, local taxes, or direct transfers from donors and NGOs, can use disbursements controlled from the center to displace other funds and reallocate those to other priorities. While Senegal may not be able to contravene the fundamental fungibility o f local transfers, it can hardly implement a plan like the PRSP with no information on what the localities are doing. 21. Fortunately, the work undertaken inpilot decentralizationprojects has made it possible to develop much local capacity for establishing and budgeting local priorities and for tallying results against the stated objectives. The data derived from this dialogue demonstrate a strong concordance between revealed local priorities and those o f the PRSP. Nevertheless, the center needs to make the following adjustments: (i) extend the system o f program budgets to cover the key PRSP sectors so that local contractual budgets can be reflected accurately innational program budgets and their performance indicators; (ii) provide information to the local level on comparative funding levels across localities and across programs; (iii) collect information on local contractual budgets, spending, and evaluation of service quality; and (iv) connect the decentralized PRSP monitoring system to the budget system so as to use the data for tracking progress on program budgetperformance indicators. 22. This kind o f information sharing will clearly benefit from a reliable, user-friendly information system between different levels o f government. Various donors have contributed to the development o f Senegal's intergovernmental information network. A Bank project, PMSIA, i s building a network that should enable most administrations to communicate electronically with each other and have remote access to databases. The initial backbone network covers mainly Dakar, but the intention i s gradually to connect the regions. In addition, the Interior Ministry, which holds a sizable share o f the decentralization portfolio, has started to implement its own network. The basic ICT infrastructure requiredto allow, say, the weekly transfer of a single spreadsheet file i s not extensive. Nevertheless, it could be a few years before the essential localities are equipped with even this basic level o f infrastructure. Twelve regional centers are well equipped with ICT, but by and large the localities are not. The government needs to arrange an interiminformation sharing agreement so as not to delay any further the targeted improvements indecentralizedfinancial transfers. 23. Electronic communication hardware notwithstanding, the essence o f any information system i s the willingness to share data and agreement among the various participants on what data are shared with what frequency and what monitoring system. The record so far has not been encouraging. The incentives for maintaining the information sharing should be incorporated into the basic package; thus, decentralized transfers come with the obligation to - 81 - provide quantitative and qualitative reports, and they must not continue to come without the reports. IV. TRAINING 24. A related issue concerns training of local officials. Untilrecently, the lack of capacity of local officials to handle money or report on its use was often cited as reason to slow down financial decentralization, and training o f these officials was often cited as a prerequisite for speeding up intergovernmental transfers. Lately a consensus has emerged that financial transfers and training need to proceedin tandem. Local officials are not interested intraining, and local populations are not interested in participatory budget processes, if no money is forthcoming. If money comes ina contractual form, the incentives for training are strong, the butalso stronglyneeded. 25. Local officials who must produce or contract to produce audits are not the only ones in need of training. Iflocal citizens are to be enlisted to help formulate budget priorities and to monitor and evaluate the quality o f local services, they need basic information about their rights and responsibilities (whom they can complain to), about service delivery expectations (the teacher should show up five days a week and stay for six hours, eight months o f the year) and about resource transfers to their own and to comparable communities. V. INVESTMENTS OF LOCALITIES 26. The strengthening o f the decentralization movement, and hence the increase in the number and amount o f investment operations by the localities, i s closely linked to the decentralization o f the Consolidated Investment Budget, which may be regarded as a prerequisite. 27. The government's plan is as follows: 3 Ensure consistency between the PRSP and the local development plans, and betweenthe localplans themselves. 3 DecentralizetheConsolidatedInvestmentBudget. z Promotethemanagementoflocalinvestmentsfinancedexternallyinthecontextof budgetary assistance. 28. An important accompanyingmeasurewould beto: z Controltherealityoftheexpenditure inthecontextofmonitoringandevaluation actions involving the Audit Office, supported by private audit firms as well as the beneficiary populations. 29. It bears noting that, heretofore, the Regional Development Plans have been prepared without any consultation with the localities and are thus rarely compatible with the local plans. Similarly, the consistency o f these plans with the strategies defined at the national level has not been established. This situation is reinforced by the existence o f both a Ministry o f Planning responsible for preparing and implementing the national plan, as well as a regional planning ministry. 30. The National Committee for Locality Development (CNDCL), which i s responsible for advancing and monitoring decentralization, i s also empowered to verify the rationalization - 82 - o f the localities' choice o f investments. However, this entity hardly ever meets and does not appear to be operational. To improve this situation, the authorities are now puttinginplace a technical secretariat for the committee, which will be a light structure with five staff members that should become the secular arm o f the Localities Directorate (DCL). This structure, whose establishment and operations would be financedjointly by the government and donors, should impart new dynamism to the CNDCL and, among other functions, ensure consistency between the national development strategy and the strategies set forth in the local plans. This task would be accomplished by ties to the Regional Development Agencies (ARDs), which have recently be established and are currently being strengthened in the Saint-Louis and Tambacounda regions. These ARDs should intervene at the three levels o f local government. The process should also be supported by the CERPs, which are structures made up o f government officials, whose intervention would constitute confirmation o f the government's desire to accompany the decentralization process by strengthened deconcentration, an essential condition for this change. 31. As regards the execution o f externally financed investments, it would appear to be desirable to envisage carrying it out not within the framework of traditional mechanisms, but rather within that o f budget assistance, and hence to have the financing o f these investments pass through the circuit o f the treasury's government accounting officers and ensure that execution i s subject to the rules o f government accounting. There has already beenexperience with this type o f management under the PNIR (World Bank) and the PROCER (German cooperation), and the results would appear to be highly satisfactory. Competitive bidding procedures are carried out locally, and the local economic fabric benefits considerably. Local expertise and local craftsmen are now ingreat demand. 32. Finally, in order to be able to aggregate local outcomes with outcomes at the central level, it would ultimately be advisable to harmonize the budget and accounting nomenclature o f the localities with that o f the central government. In this regard, the DGCPT will initiate this effort once the West African Economic and Monetary Union (WAEMU) has finalized the directive on a regional nomenclature for the localities. 33. Concerning the monitoring and evaluation of investments to be carried out by the localities in this new framework, major improvements are needed. Indeed, a recent report prepared by the ADM determined that the localities are particularly negligent as regards forwarding the information necessary to document the proper use o f the amounts transferred to them under the FECL. There are hence serious questions as to the precise usage o f the funds and, therefore, as to the effectiveness of the expenditure. Moreover, only a small proportion o f the localities' management accounts, which in theory are produced by government accounting officers, are ever sent forward. Sustained efforts in the monitoring and evaluation area are therefore necessary. These could be carried out by the Audit Office. That office effectively i s able to conduct management reviews, a power it has already exercised in the localities o f the Dakar region. However, owing to its lack o f staff (35 magistrates instead o f the targeted level o f 60) as well as its lack o f experience, the Audit Office should receive ample support from private auditing firms, whose involvement would not only provide technical support but would also afford an opportunity for training the office's magistrates. 34. The monitoring and evaluation efforts should also involve the beneficiary populations themselves. Experience shows that, when expenditure control does not require special technical knowledge, checking that the expenditure has been made properly, a task befalling a specialized commission made up o f civil servants, can usefully be supplemented by a control - 83 - conducted by the beneficiaries themselves, who are informed in advance of the programming o f the expenditures concerned. This control would, as necessary, take the form o f an informative report forwarded to the authorities officially in charge o f this sector, namely the Audit Office and private auditing firms. 35. The treasury regards decentralization as an important issue. Its concerns currently focus largely on central government operations, but it has now identified a lengthy list o f tasks at the locallevel: 2 Reviewthefinancialarrangementsofthelocalities,withtheprimaryaimofclearly definingprocedures. 3 Drawupalistofcorroboratingdocuments forexpenditures. 3 Organize a seminar bringing together payment authorization officers and accounting officers. Begin a management training effort aimed at the localities. 3 Prepareafinancialanalysisguide. 36. It should also be noted that the DGPT, in cooperation with the Audit Office and the Ministry of the Interior and Localities, is currently preparing a draft decree that would make the DGCPT responsible for the administrative discharge o f the management accounts o f municipalities with fewer than 15,000 inhabitants. There are 155 such municipalities. This reform should thus go far toward easing the workload o f the Audit Office. However, it will not become truly operational unless the treasury has sufficient personnel to handle this new responsibility. VI. GOVERNMENTTRANSFERSTHE LOCALITIES TO 37. The two main tools for financial transfers from the government to the localities, the FECL and the FDD, use allocation criteria that are not up to date. Infact, the criteria used for the current fiscal year date back to 1996. A study i s inprogress, underjoint CIDA and United Nations Development Program financing, with a view to defining and proposing updated criteria for such allocation. 38. The procedure for the allocation and effective transfer of the amounts concerned i s extremely cumbersome and therefore very slow. More than eight months pass between the initial meetings in December and the transfer of funds. This hampers the visibility o f managers in the localities. As documented in the CEM, the CNDCL's decision making regarding the distribution o f the allocations to the localities, which often contributes three months to the total processing lag, could be replaced by an allocation rule. Inall likelihood, it will be necessary to amend the law on the allocation o f these funds in order to (i) define allocation criteria that match the localities' needs and (ii)establish a simple and rapid allocation procedure. The ideal situation would be for the allocation committee to meet in December and for the funds to be effectively transferred inFebruary. VII. AUTOMATIONOFFINANCIAL AND ACCOUNTING WORK INTHELOCALITIES 39. The ADM has tasked a consulting firm with rewriting the accounting software for localities (COLLOC) used by the government accounting officers o f the localities. The ADM has also been made responsible for developing a database to record the contents o f the localities' budgets as well as their budget execution, to be used also by the DGCPT, the DCL, - 84 - and the ADM. The company must also add a module for the archiving and management o f documentary and legal data. 40. As regards COLLOC, the company was required to survey any improvements to the first version that users consider desirable. Some of these improvements were incorporated into additional specifications. Rewriting o f the financial management and accounting software used by payment order authorizers (COMMAIR) i s includedinthese specifications. All these additions will require the signingofa codicil to the initialcontract. 41. A steering committee and a technical committee have been put inplace. The company i s o f the opinion that the validation stages have been made extremely lengthy because o f the slowness with which some parties have provided their input. Despite this situation, the contract performance deadlines have been observed and the product i s expected to be delivered within six months. 42. All o f these IT tools are o f the utmost importance because they will enable: (i) payment authorization officers to manage their local finances; (ii) government accounting officers to monitor and control budget execution; and (iii) the central government to have information on the execution of local budgets and thus have a more accurate view o f how decentralization i s proceeding nationally. Progress will be made in this regard only to the extent that the software products in question are properly used and that financial and accounting operations are input daily, which will require major training efforts. Conclusion 43. Senegal cannot reach its PRSP goals, including targets inpoverty reduction, education, and health, without improving decentralized service delivery. Several important interventions at the decentralized level have built essential capacity in local financial management and participatory processes for setting local budgets. The key challenge at this point i s to ensure that central level budget systems are adjusted to fully accommodate the joint requirements o f proximity and fiduciary transparency, and that this decentralization be marshaled to the service of implementing the PRSP. Since funds transferred to the decentralized levels are fungible, this alignment with the PRSP should be achieved through greater inter-governmental communication - on budget plans, spending, and outcomes. Senegal has started in this direction with efforts to harmonize regional and local development plans with the PRSP. 44. In addition, however, the proposed expansion of fiscal decentralization cannot be accomplished in one sector at a time for several reasons, the chief one beingthe need o f local governments to balance competing priorities in an environment where inter-governmental transfers are fungible, but also because important PRSP objectives, especially those inhealth, require multi-sectoral interventions. Further, successful deconcentration will require decentralization o f the investment budget as well as o f the current budget. - 85 - VII. MODALITIES FORFISCAL BALANCE 1. The 1994 devaluation o f the currency provided the appropriate framework for renewed growth, but activity decelerated sharply in2002. Average real GDP growth was above 5 percent during 1995-2001. Since 1995, inflation remained subdued, below 3 percent, and the current account deficit (including officialtransfers) narrowed to some 5-6 percent o f GDP from almost twice as much prior to the devaluation. However, real activity was sharply reduced in2002, owing to a very bad harvest. Agricultural output i s estimated to have contracted by some 20 percent, and overall growth reached only 2.4 percent in2002. However, with the return o f better rains and a revival in agriculture, growth resumed in2003, and is projected to reachmore than 6.5 percent. 2. Thanks to strong control on public finances over the last decade, the fiscal stance has remained satisfactory, except in2001, when unexpected transfers had to be made to parastatals. The overall fiscal balance (including grants) shifted into a surplus o f 1.3 percent of GDP in 2002. It has generally been close to zero for the last few years, with the notable exception o f 2001,when the authorities had to provide ailing groundnut and electricity state- owned companies with some 3 percent o f GDP in transfers, leading to a fiscal deficit o f 2 percent o f GDP at the central government level. The tax ratio has been stable throughout the period at some 17percent o f GDP, a record in the region. On the expenditure side, the wage bill remains under control, far below the ceiling o f 35 percent o f tax revenues agreed upon in the WAEMU. However, repeated low execution rates on capital spending and unexpected accumulation on some o f the deposit accounts in the treasury system signal difficulties in public expenditure management. With the implementation of the PRSP supported by additional HIPC resources, the fiscal stance will slightly deteriorate in 2003. The overall fiscal deficit (including grants) i s projected to be 1.4 percent o f GDP. Out o f the 0.1 percentage points o f loosening compared to 2002, additional HIPC spending and the temporary costs o f structural reforms account for 0.6 percent and 0.4 percent o f GDP, respectively, and most o f the remainder stems from a higher capital budget. 3. Thus, Senegal can be credited with maintaining fiscal balance, as defined in the context o f its IMF-supported programs. The IMF tracks the basic balance, which does not include externally financed capital expenditure and lending. As indicated above, donor- funded investment projects are routinely under executed, and thus this capital budget is allowed to carry balances over from one year to the next. Similarly, HIPC resources can accumulate and be carried over into the next year. 4. Another feature that lessens the clarity o f the budget i s the special treasury accounts that hold the transfers to certain specific agencies and are authorized and registered in the finance law. Most have been closed at the recommendation o f the IMF and transferred to the regular budget, and the sums in those that remain are small. Nevertheless, the monitoring o f these accounts i s poor and their management i s handled manually, leaving reports on the treasury balances the main source o f informationon these accounts. 5. Between the basic budget, the capital budget, the special accounts, the public enterprises, and the other entities whose deficit balances must be made up by the budget (namely, the postal system and pensions), the means for controlling the overall fiscal balance are somewhat disparate. 6. Even so, the means for maintaining this balance can hinder the orderly execution of the budget. As indicated in the CEM, the large public enterprise deficits in 2001 were accommodated on the budget side by a substantial under execution o f planned spending. In - 86 - the course of the year, if revenue or expenditure flows lead to worrisome balances at certain junctures, the spending ministries may suddenly and without advance notice be ordered to hold up expenditures. This indicates both the tight financing constraints the government i s facing and its limited capacity for basic cash flow management. I. RISKSTOFISCALBALANCE 7. To make it possible to direct public resources toward social expenditure, it is crucial to improve the financial position o f the parastatals. Despite several unsuccessful attempts to privatize them, the public enterprises inthe electricity and groundnut sectors (SENELEC and SONACOS, respectively) have yet to be conveyed to the private sector. Pending their sale, their poor financial management required substantial public intervention in2001, but the structural problems were not addressed in the process. Inaddition, to reduce the risks to the tax base, there i s a need to reform the postal system, which has repeatedly been in deficit. Finally, the reforms o f public pension systems could beneficially be furthered. . 8. While it has been instrumental in achieving financial stability, strong central control over expenditure has resulted ina lack o f transparency and posed an obstacle to improvements needed to make expenditure more efficient. The authorities need to enhance their ability to track budget expenditure up to the end users and to increase their absorptive capacity. This requires the adoption o f consistent accounting procedures among the various administrations involved in the spending process. Others elements include: (i) clarifying the relationships between certain public agencies and the treasury, given the recent accumulation of these agencies' deposits with the treasury system that have blurred the budget execution picture; and (ii) increasing the resources available to the Audit Office to allow for the passage o f the budget execution laws pending since FY1997. 9. The medium-term fiscal stance i s geared to expanding spending on social services and infrastructure in the context of PRSP implementation. While current expenditure would grow in terms of GDP, the authorities expect to increase capital expenditure substantially. However, absorptive capacity will need to be increased significantly, since historically, the budget execution rate on capital expenditure rarely reaches 60-70 percent, especially for externally financed projects. 10. As discussed above, the government is planning to expand fiscal transfers to the local levels under the PRSP implementation principle o f proximity. Some have raised concern that this could cause some risk to the overall fiscal balance. Most o f the studies on the fiscal risk imposed by decentralization have contemplated the possibility o f states and localities to transfer liabilities to the central government. While this approach may be problematic in the case o f large economies where subnational governments can contract substantial liabilities, it i s less o f a concern for smaller towns and rural communities. This said, there are 48 municipalities eligible to borrow from a central administration created for this purpose. Total municipal-level lending amounts to CFAF 37 billion, while repayments on schedule have so far represented 1 percent of local current revenue. A potential future liability arises from the fact that local governments are often unable to cover their electricity bills. Given the fact that SENELEC will continue as a parastatal, its deficits will be covered by the central government budget. 11. A possible future concern lies in the proposed expansion o f decentralized procurement. Slow procurement processing has been found to hinder the progress o f several investment projects. Contracts have been designed to bundle projects in a number o f - 87 - locations, such as buildingclassrooms ina number o f differenttowns, while the calls for bids are advertised in Dakar, While firms in Dakar may prefer to avoid the costs associated with operating in several distant towns, the firms closer to the project locations lack the resources to qualify for bidding on the entire package. The Senegalese government has had some success with breaking contracts up into smaller pieces and advertising them locally. Evenso, the standard government practice is to reimburse contractors for work already done against their own resources, and small local contractors lack the funds to prefinance their work, and do not have the relationship with banks needed to obtain financing. The government has found it necessary to finance a program that advances payment for the work to be done by small local contractors, which has helped speed the execution o f projects with local components. However, expanding such a program would risk increasinglocal liabilities to the government. 12. Two additional areas o f concern could arise: a civil service hiring plan and large presidential infrastructure projects (grands travaux). Neither of these has yet been included in the macroeconomic framework or inthe PRSP. 0 Regarding the hiringplans, the medium-term macroeconomic program allows for an annual increase o f 1percentage point of GDP inthe wage bill. The need to expand employment and boost wages was evident after several years o f a hiring freeze that set the ratio of the wage bill to tax revenue well below the WAEMU threshold. While the allocation of new staff across ministries has been determined (see Annex 6), the pattern o f actual recruitment may not precisely match these plans. As a result, sectoral allocations may still undergo some small adjustments for intersectoralshifts inthe staffing increases. 0 As regards the presidential infrastructure projects, the timing, selection, and scope o f the projects are still under study, and consequently the costs are not known. The government has undertaken to reach these decisions on the basis o f well-vetted principles, including independent cost-benefit analysis to guide project selection, and open competitive biddinginconjunction with transparent procedures for selecting contractors. 11. PUBLIC EXPENDITURE MANAGEMENT 13. As a first step toward establishing consistent accounting procedures between the Budget Directorate and the treasury, the three WAEMU directives on public finances adopted in 2003 will be implemented. These relate to the government financial operations table (TOFE), the chart o f public accounts (Plan Comptable), and the government accounts system (Comptabilite'Publigue). 14. The authorities have also agreed to gradually expand over the next year an integrated IT system for monitoring the expenditure process at every stage (budgeting, commitment, clearance, payment order, and payment), a system currently developed at the Budget Directorate. In a subsequent stage, spending ministries' upstream activities will also be incorporated into the database. The system has been tested for the payment phase in the treasury, but is not yet operational there. Moreover, the treasury has yet to connect the ASTER accounting module to the settlements system. The IT systemis also scheduled to, but as yet does not, include payrollvouchers and cash advances to the localities. The government also plans to operate the system under a relational database that would better accommodate program spending and allow for alternative presentations o f budget data. - 8 8 - 15. The recourse to exceptional budgetary procedures increased dramatically in2002. Staff evidently experienced some difficulties, at the start o f the fiscal year, in applying the new WAEMU budgetary nomenclature when recording budget operations. However, at the end o f the year, the stock o f unregularizedprocedures was still well above historical levels. The authorities therefore agreed to limit recourse to exceptional budgetary procedures such as advance payments (paiements par anticipation) and cash advances (avances de trLsorerie). 16. The control process remains cumbersome and slow, but efforts to better centralize it have recently been made. InJanuary 2002, to comply with WAEMU standards, a new control body known as Financial Operations Control [Contr6le des Opkrations Financieres-COF] was established and now supervises the entire expenditure commitment process within the Ministry of Finance. This change has yet to speed up the control process. However, as the delays between the clearance and payment order stages are particularly lengthy, the authorities are targeting reducing the period between those two stages to two or three days once the process i s fully operational in2003. 17. Finally, the relations between the treasury and the public agencies holding correspondent accounts require permanent supervision. 3 Inthepast,severalagencieshadongoingdeficitsvis-a-visthetreasury,adisguisedway o f subsidizing them. The authorities set about tackling this issue in2000 and closed some o f the special accounts. The authorities have committed to reform the postal system with a view to eliminating its special account deficit. The financial services unitwill be separated from the postal company and placed underbank supervision. 3 DuringFY2002, some large deposits were accumulated in correspondent accounts opened for newly created autonomous agencies. It would appear that the amounts concerned were transferred to these accounts in order to finance capital expenditures. In consequence, this expenditure was recordedinthe budget as executed, despite the fact that payment had not been made. Such procedures were also blurring the budget execution picture, and could later threaten the fiscal balance when these large deposits were used. The authorities agreedto limitthe amounts paidinto some o f these deposit accounts. 111. BUDGET EXECUTIONREPORTING 18. In 2000, Senegal began clearing a 15-year backlog in producing budget execution reports by accepting an omnibus report covering the 10 years ending in 1996. In this process, all parties implicitly agreed to an amnesty on controlling expenditure during the period covered, subject to the condition that this amnesty will not be extended to them again. 19. However, the backlog on unreviewed budget execution reports since 1997 has continued to grow. The data behindthese reports are produced by the treasury, checked bythe Audit Office, and provided to the National Assembly. The Audit Office is now engaged in preparing the budget execution reports from 1997 to 2001, based on data supplied by the treasury. Inturn, the treasury submitted the accounts from 1997 to 2001 and is compiling the data covering fiscal year 2002. The treasury is slow to produce accounts to audit, the Audit Office i s understaffed and the staff that it has are inexperienced, and the National Assembly i s not equipped to understand or make use o f the audit report it receives. - 89 - 20. It would appear that the backlog inproducing the draft budget execution laws stems both from the DGCPT, whichproduces its findings belatedly, and from the Audit Office itself, which still i s inadequately staffed inquantitative or qualitative terms. 21. The DGCPT Director placed great emphasis on the legacy o f the past, indicating that he had inherited a difficult situation indeed. From his point o f view, accountingmanagement may be expected to improve substantially by introducing the future government accounting software, the ASTER package developed by the French Directorate-General of Government Accounting. This software would interface with the software that tracks the expenditure chain as a whole, which i s already in place and operational at the treasury. A French mission tasked with evaluating the prerequisites for installing the ASTER package i s expected . 22. The installation o f modem, high-performance software will be an important component inimproving account maintenance. This said, such an improvement will not have a successful outcome unless operations are posted every day and the accounts are monitored on a regular basis. Those operations that must be unwound rapidly, in particular those charged against third-party accounts, merit special attention. It bears noting that this i s not only a technical issue, but also represents a profound change in behavior that should ultimately leadto the establishment o f a genuine accounting culture. Conclusion 23. Inthe recent past, risks to the fiscal balance have come from transferring block sums, along with the spending authority, to special accounts or special entities where expenditures did not pass through standard treasury accounting procedures. Thus past attempts to decentralize spending and lighten execution processes led to reduced transparency. Special accounts have now largely been closed, and coverage o f standard accounting approaches has increased, but only at the cost o f recentralizing spending. 24. Senegal needs to develop the kindo f informationsystem that will allow the treasury to account for spending at deconcentrated and decentralized levels that it does not directly control. The current electronic expenditure system needs to be developed into a full-service executing and reporting system, and it needs to be extended to the line ministries and to decentralized spending authorities. Further,the treasury should tailor its cash management to seasonal variations inrevenues so that line ministries canplan and even out their spending. - 90 - VIII.SERVICEDELIVERY:QUALITY SERVICES FORTHE POOR 1. The chapters on health and education in Senegal's Country Economic Memorandum and the recent poverty assessment provide an extensive analysis o f the data on expenditure in the social sectors, including spending allocation, benefit incidence, and correlation with outcomes. This section explores some o f the follow-on issues identified inthese analyses and their relation to other reforms described above usinghealth as a case study. Before taking up those subjects, it is worth noting that substantial time and effort are required to generate the relevant spending and outcome data. It i s also important to note the value o f the analysis of expenditure impact on outcomes, and the useful guidance it provides to pinpointing where the greatest problems are. It clearly demonstrates the highreturns on improvingbudget databases inwhich to record expenditures systematically and the critical need for program evaluation to raise the efficiency o f program spending. 2. Inthe case of education, the bias of spending in favor of the non-poor is apparent in the shares o f spending on secondary and universityeducation. The CEM concludes that these allocations reflect political choices rather than misunderstanding o f the relevant social retums and that they are secondary compared to the inefficiency ineducation spending. 3. The attention o f the consortium of donors supporting the 10-year education program (PDEF) has brought the education share of current spending to 33 percent. An HIPC Completion Point condition requires that 40 percent o f the sectoral allocation be devoted to primary education. The most striking finding o f the CEM analysis i s the inefficiency of this spending in producing quality primary education, a situation reflected in the low test scores and high grade-repetition rate. The question o f whether 40 percent o f the education spending total i s enough fades before the question o f why the 40 percent does not produce more primary-educated children. The results o f the education tracking survey also indicate that the question o f whether 4+ times per capita GDP is enough or too much to pay teachers i s less important than whether they show up for class and stay all day, or whether the Ministry o f Educationcan even find them. 4. A no less important component o f the PDEF, and also a HIPC Completion Point condition, i s that most new teacher hires should be contractual employees, as they have been shown to provide a similar level o f service at lower cost than civil servants. The contractuals are paid through the disbursement procedures that apply to materials, as opposed to civil service personnel who receive direct monthly payments. As the education tracking survey (Annex 3) points out, the disbursement process governing contractual pay i s often lengthy, and the delays in paying these teachers often lead to absences while the teachers leave their classrooms to seek redress inregional centers. 5. The conclusions o f the health expenditure analysis show clear problems in delivering decentralized services, inmanaging personnel, and inproviding them with incentives to work indecentralized locations. The study also shows that improvinghealth outcomes depends not only on health interventions, but also on interventions in other sectors such as water, sanitation, education, and nutrition. The study concluded that more public resources are needed for health (and indeed, health allocations have been rising), but also that strong community involvement i s needed to ensure quality services and preventive care and to increase the impact on behavior that strongly affects health. - 91 - 6. To support execution of the poverty reduction strategy, the government o f Senegal i s planning to switch from a management system based solely on regulating expenditure to a system that associates the promotion o f the effectiveness and efficiency o f expenditure with more rigorous monitoring of outcomes. The government also hopes that its external partners will replace project aidbybudgetaryassistance. Reforms are also inprogress inthe context of the WAEMU with a view to preparing objective-based budgets that tie public expenditure more closely to program objectives to enhance the ability to monitor and control the effectiveness of public resources. Within the health sector, measures are being implemented to buildadministrative and financial management capacities inthe regions and districts, and to ensure a more regular flow o f funds from the center toward the periphery. Achieving all these objectives requires a fundamental reorientation o f the approach heretofore followed inthe area o f planning and budgeting, as well as a strengtheningo f the capacities to translate sectoral health objectives into financial terms and a better link between development objectives and the public spending program. I. PERFORMANCEOBSTACLESINTHEHEALTHSYSTEM 7. Although the health situation i s determinedby a number o f environmental, economic, social, and cultural factors, the performance o f health services plays a crucial role. In other words, the objectives laid down in the PRSP and in the MDGs, interms o f reducing the rates o f child and maternal mortality and lowering the prevalence and severity o f the main endemics, could not be met without overcoming the existing problems associated with the supplyofand demand for health services. 8. The strengths o f the existing health program lie in the government's political commitment and in the moral and financial support, by both domestic and external partners, for the directions taken. The main problems encountered during program execution are represented by: z Inadequateaccesstoservicesandthelackofregulationstobetterunitethesector z Scantuseofhealthservices, inparticularpreventiveservices,bythepoor z Poorlydevelopedhumanresources,inadequatemanagementthereof, and lackof monitoring o f staff training and performance 3 The limited impact of the deconcentrationldecentralization on the provision of health services 3 The weakness of administrative, financial, and accounting management, and of procurement s Inadequateandinequitablefinancingofhealthcare 3 Ineffectiveness ofthemonitoring andevaluationsystem, whichdoesnotallow for retracingperformance or for monitoringand evaluating health outcome 3 Lackofharmonizationoftheproceduresofexternalpartners. 9. Numerous organizational and structural constraints remain which hamper the functionality of the Ministry o f Health and prevent it from properly playing the roles assigned to it. The shortcomings o f the information systems are glaring inthe absence o f a monitoring and evaluation unit at the central and regional level and the nonfunctionality o f the information system for management purposes. The institutional constraints, such as those associated with procurement, financial management, and the management o f human and material resources, are powerful. - 92 - 10. These problems stem from the irregularity and precariousness o f intergovernmental transfers, the unwieldiness o f procedures owing to the complexity o f the management systems in place, the weakness o f the budget information systems, and the lack o f a culture o f evaluating public policies. 11. Finally, the principle o f cash unity i s an obstacle to greater financial and accounting autonomy o n the part o f the deconcentrated services. All these factors are drags on the spirit of decentralization inthe line ministries such as the Ministryo f Health. 11. ANOMALIESOFPUBLIC HEALTHSPENDING 12. Problems routing funds: The flow o f resources from the central administrative level toward the Ministry o f Health's grassroots operational services units follows different circuits depending on the nature o f the resources to be transferred and the institutional structures involved. Inthe case o f the localities, the delays in mobilizing FDD funding are quite lengthy (almost 10 months pass before the resources reach the local authorities). These lags severely undermine the effectiveness o f the programs that depend on such funds, and make it practically impossible for the Ministry o f Health service to use all of the funds allocated inthe course of the budget year. As regards the FECL, the main problems encountered relate to delays in executing the Enterprise Contract and the lack o f any genuine involvement on the part o f the localities. 13. Inthe case o fthe financial resources that havenot beendeconcentrated, the systemput inplace on the basis o f the operational programs validated at various stages runs up against efficiency problems as regards disbursements, and hence the satisfymg o f requests for financing within the desired deadlines. The disbursement system based on advanced funds rapidly showed its limits owing to its inadequate funding, which could not cover the requirements for spending by the health structures. Furthermore, the renewal procedure i s often time-consuming because o f the availability o f treasury staff to carry out the necessary verifications. 14. To resolve these problems, it would be necessary to adapt the amount o f FDDfunding to the real needs arising from the shift o f responsibilities transferred to the localities (hence the need to prepare a health map in order to evaluate the real financing needs for covering expenses arising from the responsibilities transferred to each locality), to redefine the rules and allocation and distribution criteria for FDDamong the localities, and to limit the time lags for effective transfer o f resources from the current FDD to a maximum lag of three months following passage o f the Budget Law. 15. Steps toward solutions have been implemented since FY 2002 in order to improve the transfer o f non-deconcentrated financial resources from the DAGE toward the regions and localities. The MEF has agreed to raise the ceiling on Advanced Funds to CFAF 20 million each. Regional accounting officers have been recruited and trained. The basic problem remains, however. The Advanced Funds are not the ideal instrument for carrying out health programs. Consequently, it would be necessary either to revert to the customary procedure (payment authorization, commitment, validation, payment) or to use the services o f private executing agencies hired on a contractual basis, as i s the case for the project to prevent and combat HIV/AIDS. 16. Unequal distribution between regions and the center: The initial PDIS approach called for allocating 20 percent of the funds to the center (Ministry o f Health, national directorates and services) and 80 percent to the regional level. This pattern has not been observed in the - 93 - current allocation o f spending, as 60 percent goes to the center and 40 percent to the regional level. It bears noting, however, that the accounting o f certain expenditures executed by the central level onbehalfo f the regional level i s flawed. 17. It bears noting that the financing of the districts stems largely from the people, who provide 55 percent o f the total resources o f the health districts as against 34 percent from the central government, 8 percent from external assistance, and 3 percent from the localities. Between 1998 and 2002, the amount o f overall resources earmarked for the districts doubled, increasing from CFAF 4.37 billion to CFAF 11.38 billion. 18. Institutional problems: Institutional problems at several levels hamper the efficiency o f health spending. For example, the health services at the regional level do not participate in the preparation o f the budget for the localities. Consequently, the localities do not include in their budget forecasts the transfers received for funding the Ministry o f Health's deconcentrated services. There i s a genuine dearth o f information about the government's administrative and financial management rules in the hands o f those involved in the Ministry o f Health: the medical regions and districts. Finally, in terms o f procedures, the budget nomenclatures for the Ministry of Health are different from those usedby the treasury, which i s the source o f misunderstandings and delays in the release o f funds. The lack o f ownership o f the government accounting rules on the part o f the Ministry o f Health services makes them unable to monitor the resources intended for them. The local procurement process that excludes the health structures lacks transparency. It may be the source o f losses in the economic value o f the financing allocated. 19. The sector's management information system i s not comprehensive and does not incorporate data on monitoring decentralized financing, FDD inparticular. The DAGEo f the Ministry of Public Health should be involved in tracking FDD so that it can report on it reliably in its annual budget execution statements. The TOMPRO IT system i s not harmonized with the Info PDIS automated planning system, giving rise to delays in inputting operatingplans and inexecuting expenditure from the nondeconcentrated budget. 20. The solutions to these problems involve the participation o f senior Ministryo f Health staff in drawing up the budget for the localities, so that all the funding anticipated from the FDD is taken into account in the localities budget; existing concertation frameworks are recreated or a formal coordination body i s created to bring together the Financial Administration (regional payment authorizer), the localities in the region, the Regional Council, the municipalities, and the rural communities with the health services represented by the medical region; and the financial management system i s strengthened. 111. RELATIONS BETWEEN THE MSP'S FINANCIAL MANAGEMENTPROBLEMSAND THE OVERALL SOCIOECONOMIC CONTEXT 21. The problems facing the Ministry of Health are not specific to it. There i s little capacity at the various levels o f the ministry in the areas o f financial management or procurement, and the inadequacy o f procedures and regulations contributes to poor management o f resources (financial, human, and material) and to poor health outcomes. These are the same problems facing the public sector as a whole. There is a great need for reform inthe management o fpublic resources. 22. This situation i s the source o f concern once the budgetary approach i s put in place. The reforms planned in the budgetary management o f the government, in particular the deconcentration o f payment order authorization, could have profoundimplications because o f - 94 - the existing problems found with financial management, tracking resources, and the efficiency o f expenditure. It is therefore necessaryto conduct an evaluation o f the financial management structures at the Ministry o f Health at the central and decentralized levels, to strengthen the sector's capacities, and to provide it with the resources essential to successfully making the requisite changes. Iv. REFORMS 23. In order to improve the provision of health services through a more "accountable" deconcentration, the following actions are proposed: (i) continue the redeployment o f existing personnel and budgets; (ii)develop a health map to evaluate requirements in terms o f infrastructure and equipment and in terms o f recurrent costs; (iii)improve coordination between ministries with a view to strengthening deconcentration and helping the localities manage health resources better; (iv) speed up replenishment of the FDD and ensure that disbursement procedures are transparent; (v) make the staff o f the deconcentrated services more accountable to local authorities than to the centralministry,for example by making these officials' promotions and wages depend upon the users of the services they provide; (vi) strengthen the role played by the medical regions and districts in providing technical support to the localities; and (vii) enable the localities to assumeresponsibility for the areas of activity transferred to them, by improving their capacities for fundraising and increasing the amounts o f FDD. v. USERAND COMMUNITY PARTICIPATION 24. Community participation i s one o f the major focuses o f Senegal's health policy. Community contributions to financing health care largely exceeded the amounts called for under the PNDS. However, certain unexpected setbacks to this participation-such as the high cost of services-are beginning to impede financial accessibility to health facilities by the poorest population groups. 25. Over the 1998-2002 period, the costs o f care in public health facilities increased considerably, from CFAF 906 per case in 1998 to CFAF 2,059 per case in2002, and averaged CFAF 1,724 per case over the five years in question. This highcost and its steady increase i s one source o f the financial inaccessibility o f care that could explain the low rate o f usage o f the basic health facilities. The resources mobilized by the people through the cost recovery system came to CFAF 49.1 billion, or twice the projected amount o f CFAF 24.9 billion. N o analysis has beenperformed to identify the causes for this increase. It i s certain, however, that such amounts may constitute serious barriers to access to and use o f the services by the poor. The question now is to determine how to use these funds most efficiently to improve the quality o f health care service delivery to the benefit o f all, including those unable to pay. VI. HUMAN RESOURCESINHEALTH VI.l. Availability of HumanResources in RemoteDisadvantagedAreas 26. One of the major constraints to the proper functioning o f the health care service system i s represented by the lack o f high-performance human resources. Consequently, the availability, skill level, deployment, and motivation o f the human resources inthe public and private health sector are among the major determining factors in achieving the national goals for health and poverty reduction. - 95 - 27. The unequal distribution of available personnel in the various regions o f Senegal aggravates the relative shortage o f personnel and contributes to making health coverage inequitable. There is a concentration o f healthpersonnel inthe health structures and facilities at the secondary and tertiary levels, in locations close to decision centers, and in localities where there are better working conditions and greater possibilities for engaging in other activities to supplement incomes. This limits access to the priority interventions that are delivered principally through the primary health care services in rural and disadvantaged areas, where less competent staff tend to take the place of more qualified ones. 28. To overcome this unequal distribution, and especially to make it possible to open health centers that have been closed in some areas, since 2001 the government has been implementing a contract-based approach for health personnel working in these zones. The corresponding costs have been financed out o f HIPC Initiative resources. However, in order to ensure sustained coverage in the rural, remote, and poor zones, it is important to move forward with a reform o f health sector human resources, including discontinuing the hiring of technical personnel for administrative positions, the introduction o f by-laws for contractual staff o f the decentralized administrations, and the implication o f special motivational measures in order to ensure that personnel are placed in the health facilities in Senegal's interior. The recruitment o f contractual personnel (doctors, nurses, and so forth), which would be carried out by competitive biddingby opening health facilities and opening them to competition, should be delegated to the decentralized entities and to autonomous agencies subsidized by the govemment. It is also important to develop an employment and redeployment plan which makes it possible to evaluate requirements, justify the hiringthat the government i s planning, and ensure a harmonious and equitable distribution o f health personnel throughout the territory by targeting the satisfaction o f requirements in the remote and poor zones on a priority basis. VI.2. Motivation 29. The insufficient motivation o f health personnel affects the technical quality and the perceived quality o f the services delivered to the people, and consequently the high rates o f maternal and child mortality. Demotivation affects all public health services personnel. It i s most pronouncedamong the medical and paramedicalpersonnel. A recent survey o f a sample o f health personnel revealed that the majority o f those surveyed considered themselves only moderately (25 percent) or not at all (62 percent) motivated. This i s manifested principallyby perpetual conflicts between superiors and subordinates, absenteeism, the fleecing o f or poor welcome extended to users, the lack o f care, sloppy work, and sideline activities carried out within the facility. Among the causes most frequently adduced are insufficient income, the absence of links between wage levels and performance; the lack o f a system o f positive or negative sanctions; the lack o f formalized career paths; inadequate working conditions (crumblinginfrastructure and equipment, poor housing conditions); and inadequate personnel supervision. The repercussions o f these factors on performance (as a result o f low staff productivity, reduced access to services, and lower-quality services, especially in disadvantaged and isolated areas, the failure to satisfy users) affect the demand for public services and their use, and thus constitute constraints on passage up the scale for priority interventions. 30. The means applied to address this concern have not as yet worked. As in the rest o f the administration, wages are low and relatively lower for staff in the higher categories, making it difficult to attract and retain skills in some areas and activities. The wage increases granted to all civil service personnel have been eroded by the currency devaluation. They - 96 - were lower for health personnel than for those in education. The special allowances introduced(service allowance, risk allowance, special education allowance, lump-summoving allowance, and allowance for overtime) have come to be regarded as wage supplements inthat they apply across the board. One typical example i s represented by the so-called motivation bonus paid for by CFAF 1.5 billion in HIPC resources, which was awarded to health personnel in a lump sum and the amount o f which was not tied to the performance o f the recipients inany way. The by-laws governing civil service personnel have been amended only slightly since Senegal gained its independence. The promotion and classification systems and their associated financial impacts have not evolved over time. In the context o f the Bamako Initiative, some health posts and health centers pay rebates to personnel against their cost recovery proceeds. The amounts for all the staff o f a unit come to 20-30 percent o f the receipts o f the health committees. The law on hospital reform calls for allocating 25 percent o f the revenue generated to personnel incentive bonuses. The administration o f these bonuses i s not transparent. There are other extrafinancial motivating measures, most o f which affect those working inDakar. 31. The magnitude o f health personnel demotivation indicates just how urgent it i s to take corrective measures, including revision o f the by-laws and the introduction o f a new system for providing staff incentives that i s aimed at the two-fold objective o f improvingperformance and maintaining staff inthe rural areas, inparticular those most distant from urban centers and most disadvantaged. Accordingly, financial and nonfinancial incentive strategies should be introduced for these workers, as well as systems for performance bonuses based on performance contracts, and the assignment of housing for nurses and doctors in the disadvantaged rural areas. In designing these measures, the enormous existing personnel shortage to be overcome mustbe kept inmind. It will be necessary for there to be trade-offs between two priorities that will unavoidably be competing for the use o f the limitedresources: new hiring and improving the motivations o f the existing personnel. Among the accompanyingmeasuresto ensure success, it would be advisable, following the approach used for budgetary management, to deconcentrate the human resource administration and management function o f the Ministry o f Civil Service to the Ministry of Health, and from the latter to the decentralized localities and autonomous entities, and to involve the localities and health committees inassessing employee attendance and performance. 32. The establishment o f the Human Resources Directorate i s intended to address the existing shortcomings in the area o f human resource management capacities. At the same time, it would be advisable to: (i)introduce streamlined management o f budget lines and restructure the medical services regions and health districts to enable them to assume better the new human resource management missions devolved to them; (ii)prepare a new administrative, financial, and accounting procedures manual that gathers together all texts relating to overall management, the description o f operations, the roles and responsibilities o f individual staff and units; (iii)recruit human resource management specialists; and (iv) introduce a computerized system for the real-time management o f staff and personnel files. The success of the reform aimed at improving health personnel motivation will require effective partnership between the various parties concerned: central government, localities, and health committees. 33. A study has been initiated on all these questions with a view to developing a human resource policy for the health sector, provide the govemment with a basis for modernizing the human resource management system in the public sector side o f health, and in so doing increase the performance o f staff and improve the sector's contribution to poverty reduction. - 97 - Conclusion 34. Using the health sector as a case study, a number o f financial management problems are found to hinder the improvement o f service delivery in poor and disadvantaged areas. Unequal distribution o f funds and personnel between the center and the regions is the chief inequity, and poor management o f decentralized funds and staff are among the most urgent reform issues. The health sector is especially inneed o f personnel management reforms, and the direction o f proposed reforms indicates a need for institutional and financial changes as well as greater accountability, including more community involvement. However, inorder to exercise the kind o f financial autonomy it needs to motivate decentralized staff, the health sector will need to invest heavily in improving financial management capacity and in information systems that will support performance management as well as budget management. - 98 - IX. COMMUNICATIONWITH THE PUBLIC ONPUBLIC RESOURCES 1. The adoption o f Senegal's PRSP has changed Senegal's relations with the rest o f the world. While the government has published multiyear development plans before, the PRSP has brought a set o f targets and strategies to the public to a degree, and across a scope o f issues, not previously undertaken. In addition, the PRSP puts a detailed three-year budget next to the broad-based strategy along with a series o f measurable performance indicators. Further, with the first PRSP progress report, Senegal has introduced a kind o f public monitoring and evaluation of its own comprehensive programs that it has never before undertaken. For its part, the donor community has consolidated its diverse interests to direct its focus on poverty reduction and the means for implementingmedium-termstrategies. 2. The PRSP has also altered the relations between the government and its citizens. For example, the PRSP monitoring and evaluation informs the citizens targeted by the strategy o f the successes, shortcomings, and adjustments to be made in national programs. The govemment has started publishingthe budget on the Ministry o f Finance website. Further, a govemment that has not published a budget execution report in 15 years now regards the task as one o f its priorities. Publishing the budget and budget results may not directly communicate to most people, since the current format makes the budget hard to assess, and the audit formats are no clearer. Still, the basic fiduciary standard of publishingbudget results has brought the government to think about presenting the budget in a program format that would be easier to follow, and to engage in a project that will expand the capacity o f the Finance Committee inthe National Assembly to understand and respond to the audit reports. 3. In addition, the PRSP has placed particular emphasis on the government's decentralization policy as well as on the communication flows between the capital and the localities. Localities have represented a small part o f total public spending, but are now a large part o f the program to reach PRSP targets. Transfers to localities have increased over the last few years, and the experience with contractual budgets in 60 o f them, and with participatory infrastructure planning in hundreds more, will prepare them to participate in formulating and executing budgets that are consistent with PRSP implementation plans. The government's next big step i s to decentralize the national investment budget. As the implementation principle o f proximity takes shape, the communities should become more directly involved in the monitoring and evaluation o f PRSP programs and o f the quality o f service delivery ingeneral. Informationon intergovernmental financial transfers and their use will needto flow inboth directions betweenthe central administration and the localities. Box 1: Basic principle: greater accountabilityof line ministriesand localitiesfor their fiscalmanagement and procurement 3 Higherthresholds CA and the intro and imnroveddissemin - 99 - 4. When considering the main summary components o f the government's budget reform program, it becomes noticeable how improvements in the information system serve as a catalyst for most o f the other reforms. Thus, in order to compile the information government wants to communicate to the public, the various budget agents need to communicate regularly with one another. Unfortunately, these communication channels are not well developed. 5. The key aspects o f improving this intemal communication have been identified as follows: 6. The new expenditure chain software should be set up under a relational database that will allow the government to cross-reference traditional budget line items with program spending. This will facilitate the publication o f one budget format that i s more easily understood, and allow the analysis o f the relation between outcomes and spending that can provide feedback to budget formulation. 7. The computerized expenditure chain is essential for the kind o f autonomy the line ministries need to administer program budgets. Once payment order authority has been delegated to them, those expenditures need to generate rapid information to the controllers in the treasury, in part so that treasury balances can be managed more expertly and so that suddenorders to stop spending canbereducedto a minimum. 8. The same principle applies to the relations between the line ministries and the localities. The information on local expenditures must be communicatedto the line ministries as rapidly as possible. 9. So, while better communication with the public is an objective o f public expenditure reform-the people see that the government spends money and should know the reason why-the sum total of the proposed reforms should lead to many changes in communication with the international and domestic public, and among the agents charged with implementing the system for spendingpublic resources. Conclusion 10. The kind o f communication the Government needs to undertake in order to reach its PRSP goals will require a great deal o f institutional cooperation across a number o f public entities, which in turn will require consistent encouragement from the managing political authorities. Physical investments in communication systems and data exchange protocols should be govemed by the institutional needs o f fulfilling the poverty reduction strategy. For example, budget data exchanges should be designed to promote efficiency, proximity and decentralization, timely feedback to those implementing the strategy, and accessible public information for the community which plays a vital role in monitoring the strategy's implementation - 100 - EVALUATION CONCLUSION AND 11. This public expenditure review evaluates the Government's budget system by examining the system's ability to serve four well-defined public objectives: implementing the PRSP, maintaining fiscal balance, quality service delivery for the poor, and communication with the public. This evaluation shows that the system is best suited to maintaining fiscal stability, but somewhat at the cost of maintaining a highly centralized budget system. The costs o f macroeconomic instability during the pre-devaluation period may have motivated a more concerted effort around this objective. Evenso, the means for achieving fiscal balance, including sudden `stop spending' orders to the line ministries, could be disruptive to other objectives such as the smooth execution o f planned programs. In addition, while the rather centralized budget operations generated the internal spending information that Government needed to meet fiscal targets, this information was never organized or distributed in a way that communicatedwith the public on the use or effectiveness o f public spending. 12. Analysis o f social sector spending has pointed out the strong urban-rural inequities in services as well as the inefficiencies o f deconcentrated service delivery. Poor management o f funds and personnel afflictboththe educationand health sectors. 13. Implementing the PRSP i s a fairly recent task o f the budget system. While budget allocations closely match targets set out in the PRSP, the institutional weaknesses and inefficiencies noted above would undoubtedly hinder the effectiveness o f these allocations in reducing poverty according to PRSP plans. Senegal's ambition is to incorporate needed budget system reforms as part o f its PRSP implementationplans. 14. The first plank o f this reform, the Medium Term Expenditure Framework, i s clearly a productive choice at it serves several purposes: clarifying the orientation o f the budget toward the PRSP, making the budget more decentralized, and introducing a monitoring and evaluation system for both the PRSP and the budget. The main challenge is engendering the cooperation o f the key ministries and ensuring that all accounting systems are prepared to adapt to the new budget system. Several ministries have plans to develop the needed sectoral program budgets; the Ministry o f Finance i s planning to offer these ministries payment order authority, and a working groups meets regularly to implementthe fiduciary steps identified by treasury as essential to the MTEF. 15. Fiscal decentralization i s also a major part o f the reform plan, but here the details are less well-specified. The Government intends to streamline transfers to localities, but it also needs to increase these transfers and accord more local control over service delivery personnel. In addition to decentralizing the current budget, the Government has also convened a broad-based committee to develop a strategy for decentralizing the investment budget. However, the details o f the draft strategy are still awaiting validation and the current decentralization plan clearly lacks this important component. All of these decentralization plans need to be accompanied by appropriate accounting systems, as i s done in the current contractual local budgeting projects. Inaddition, they need local monitoring and evaluation systems and an information system that connects local activities to the monitoring system for the PRSP. 16. Indeed, the final planks o f the reform program cover the information and monitoring and evaluation systems. Examination the budget systems' capacity to address the different public objectives shows up repeatedly the complex demands being placed on the information system. Senegal has faced and solved numerous difficulties in planning and building its - 101- electronic information systems. Yet progress has been slow, and many extensions o f the system are needed to fulfill the public goals discussed here. Further, the electronic information transfer is only a part o f the institutional cooperation required to reach the fiduciary standards targeted by the Government. A more intensive inter-agency cooperation can produce the information needed to improve communication with the public. A better- informed public can more efficiently demand social services in underserved areas and more effectively provide feedback on the PRSP. - 102 - ANNEX I ANNEXESDUGOUVERNEMENTDUSENEGAL - 103 - + I r------ IO 8 In 0 0 N - c - N .-6 .-e > Bw m m .BN 8 0 N U C N '2 .e 5+ +m u e . L 5- 0 L n j sw3, I l I IS I : I Y z c 5 c ;$ wg Es g in 8-c\10 -j m c I SflBII J I x2 9 3 N -Ewg E 2 6- r 4 0 ,2 ke, > " E8 0 B J N 1N 0 N m e, U 32 jd ; E? 9 I Mf p w 0 z m 0 - N 0 L a M 0 N m .-ca I -J -J -J 00 i i I c'! m B m v v d 3 - 3 3 -$ N N i r Y e, .3 d .3 c, 1 0 0 I 2 3 5e,e,E ? m x = o '"2 e I . b I 0 $1 I a e, I *f Y sia qsB m 0 0 - N * .- W 4 a '7 a a m 0 3 n 3 22 3 e, I / , E a * e, m - N I + s=i5 . 14 13 G e, 5e, 5e, 8$ 8 8g $ 0 0 * N :3" a a a LI v1 1 c 0 5 i f 2 3Nhl 00 0 e, in I vr 2 I h i- e, ' w i n El a 2e, g i3.3 8s o a a I I 2 I .- 20 + . e, 0 Lr, 3cr .5 a m e, Y 9 I e, m E w 2 i 3 e, e, m b 8s m g Esg 3 0 $ 0 3 N 0 0 I r- 2 I 2E33a w E d w I LE(( MODELE123cslp)) : Uncadre pourl'analyse des politiques macrokconomiques Pour la croissance et la rkduction de la pauvretk INTRODUCTION 1. Les etudes recentes sur la croissance agregee et son incidence sur la pauvrete semblent converger sur la thkse selon laquelle ce qui est bonpour la croissance est aussi (( en general bon pour la reduction de la pauvretk 'D. Plus concretement, les analyses empiriques ont montre que le taux de pauvrete est elastique au revenupar tCte, avec une elasticite de l'ordre de 2 (entre 1.67 a environ 2.5). I1suit donc qu'un point de croissance du revenu par tCte se traduit par environ deux points de changement relatif du taux de pauvrete". Au Senegal, l'klasticitk de l'incidence de la pauvrete par rapport au taux de croissance du revenu reel par t6te a CtC estime a-0.9% a partir des donnees de la premiere enquCte senegalaise aupres des menages (ESAM-I) et de 1'enquCte sur les priorites (ESP). Ces resultats suggerent que dans les conditions actuelles du Senegal, ilfaudrait untaux de croissance soutenu d'environ 7 a 8 pour cent dans les 15 prochaines annkes afin de doubler les revenus par tCte d'ici 2015. 2. L'analyse en terme de taux moyen de croissance et incidence globale de la pauvrete est toutefois trop agrkgte et ne foumit qu'une indication tres partielle de l'impact des politiques macroeconomiques sur lapauvrete. I1importe de l'enrichir afin de tenir compte de la distribution sectorielle de la croissance sur la pauvretk. En effet, un point de croissance du PTB resultant d'un accroissement de la production dans le secteur industriel n'a pas le mCme impact en terme de reduction de la pauvrete qu'un point de croissance resultant d'une augmentation de la production de produits agricoles, de l'elevage ou de la pCche artisanale. 3. L'impact des politiques macroeconomiques sur la distribution de la croissance et donc des revenus peut Ctre capture a travers les prix relatlfs, par exemple des echangeables par rapport aux non-kchangeables, c'est a dire le taux de change reel". Selon cette approche, l'impact d'une variation du taux de change reel sur le bien Etre des menages dependra du profil du menage, notamment les sources de revenus (echanges, non-kchangis) et de l'affectation des dkpenses (consommation locale ou importation). L'evolution du taux de change reel est donc un important determinant de l'impact des politiques macroeconomiques sur le bien-Ctre des menages, et in fine, sur la pauvrete. On Dollar and Kray (2000) Growth i s good for the poor, World Bank. lo Ravallion - Growth, Inequality and Poverty : Looking beyond averages 11 A titre d'exemple, considtrons que le prix des biens tchanges augmentent par rapport au prix des biens non tchanges, c'est a dire une dtprtciation du taux de change rtel. Unproducteur d'arachides dont la production est essentiellement exportte, et qui consacre l'essentiel de son budget de consommation aux produits locaux gagne sur deux plans. Ducot6 des revenus, la dtpreciation du taux de change rtel conduit a la hausse de son revenu d'exportation. Ducot6 de la consommation, ilbeneficie CgaIement d'une augmentation relative de son pouvoir d'achat a cause de la baisse relative duprix des produits locaux qui absorbent la majeure partie de son budget de consommation. A l'inverse, unentrepreneur qui tire ses revenus principalement de la vente de biens non tchangts et consacre une grande partie de son budget de consommation sur les biens importes serait ptnalist par la mEme dkprtciation du taux de change rtel. - 129 - comprend donc l'importance de saisir l'impact des chocs et des politiques economiques sur les prix relatifs pour apprkcier leurs effets sur la pauvretk. Dans ce chapitre, nous avons cherchk a apprkcier l'impact des chocs externes ou internes de court terme et/ou long tenne (tels que la cadence de mise en oeuvre des politiques structurelles liees aux infrastructures physiques, financibres et sociales) sur la croissance et la distribution du revenu des diffkrentes classes de menages. 1. PRESENTATIONDUMODELE 123csLP 4. L'equipe de modelisation de laDirection de laPrevision et de la Statistiques amis en place le modkle 123CSLP. Cet instrument permet de mesurer l'impact de chocs extemes (tels que les termes de l'echange), des changements dans la politique budgktaire (tels qu'une variation des dkpenses publiques) ou dans les reformes structurelles sur la croissance a moyen et long terme, les prix relatifs et la distribution de revenu des menages. Les diffkrents modules du modele 123DSRP sont dCcrits trks brievement dans les paragraphes ci dessousI2. 1.1. Architecturedu mod6le 5. L e modele 123CSLP est un cadre simple qui pennet de mesurer l'impact des politiques economiques sur la pauvrete A travers deux principaux canaux de transmission :l'intensitC de la croissance (le taux moyen de croissance du PIB) et la distribution sectorielle de la croissance (entre les biens echangks et non kchangks). 6. L e modkle est compose de plusieurs modules emboitks les uns dans les autres :un cadre macrokconomique, deux modules de croissance l'un a court et l'autre a moyen tenne, un module sectoriel le modele simple d'kquilibre general 123 et un module menage attache a l'enqubte sur les conditions de vie des menages. Tableau 1: Architecturedu mod6le 123CSLP l2Pour une presentationplus dktaillte dumodble, se reporter au papier de Devarajan et Go :A macroeconomic framework for poverty reduction strategy papers with an application to Zambia, October 2002 ,Africa RegionWorking Paper Series, Number 38. - 130 - 1.2. Les modules de croissance 7. Les dkviations du taux de croissance du PIB sont derivees a partir de deux modules croissance. 8. L e module de croissance endoghe a long terme13 ou le taux de croissance du PIB potentiel depend de quatre variables clts (i) politiques macrokconomiques : I1 les s'agit principalement des politiques commerciales dkterminant le niveau de libkralisation des echanges et les politiques fiscales et monktaires, (ii) le capital humain, (iii) capital le physique, notamment les infrastructures et (iv) les chocs extkrieurs. Tableau 2: Mod6le de croissance endoghe Coefficient du modkle de croissance a longterme Coefficient T stat Politiques structurelles et macro Primesur le marchenoir -0.0153 (-4.02) Profondeurfinancike (%) 0.0004 (3.31) Inflation -0.0014 (-0.21) Taux de change rCel -0.0087 (-2.36) Taux de scolarisationdans le secondaire 0.0003 (2.40) ("/.I Nombre lignes te1/1000 hbt 0.0054 (2.13) Chocs Gains sur les terme de l'echange en %PIB 0.2125 (2.45) Interet sur la dette exthieure en % PIB -0.0029 (-3.28) Croissance Pays OCDE (%) 0.0210 (3.56) Conditions initiales Revenuinitial -0.0105 (-2.33) Intercepte 0.0236 (0.71) Variable muette, 80s -0.0021 (-0.41) Variable muette, 90s 0.0046 (0.60) 9. Sur la pkriode 1990-98, le modkle prtvoit untaux de croissance du PIB par tzte au Sknkgal de 0.7% soit une surkvaluation de 0.5 points par rapport au taux de croissance rkel de 0.2. 10. L e modele de croissance a court terme est estimk kconomktriquement selon un vecteur auto rkgressif(VAR) qui indique la variation dynamique (lors des cinq prochaines annkes) du taux de croissance duPIB en rtponse a une augmentation ponctuelle (a la date d'aujourd'hui) de 1% des termes de l'echange ou des dkpenses publiques. Nous notons qu'une hausse des termes de l'kchange induit une hausse du PIB lors des deux annkes suivant le choc, puis cet effet est contrebalanck dbs la 4ieme annke. L'augmentation des dkpenses publiques induit une hausse immkdiate du PIB qui est contrecarree d6s l'annke 1:Etant donne que la plupart de ces determinants varient relativement peu dans le temps, nous avons eu recours a une analyse de panel (modele de croissance en e cross-country D)afin d'obtenir des coefficients plus robustes. L'Cquation retenue a Ctk estimee sur lapkriode de 1960 a 1998 avec untchantillon de 59 pays. Cf. Easterly, - 131- suivante. Dans les deux cas, les chocs s'estompent rapidement et le PIB retrouve son niveau tendanciel. Tableau 3: Modele de croissance a court terme Annee1 Annee2 AnnCe3 Annee4 Annee5 Choc sur les termes de -0.07 0.06 0.13 -0.05 -0.01 1'Cchange (+1%) Variation des dCpenses de 0.02 -0.07 0.04 0.00 0.00 consommation publique (+1%) 1.3. Prix relatif et coQt des facteurs: 11. Les donntes sur la variation du PIE3 ainsi que les informations contenues dans le cadre macro-economktrique sont instr6es dans le module 123, un modele simple de calcul d'kquilibre gkneral qui permet de determiner l'kvolution des prix relatifs et des salaires. Une fois l e niveau de la croissance du PIB determine a l'aide des modules de croissance dkcrit dans le paragraphe precedent, le modele d'equilibre general ((123 )) permet de dkterminer le niveau des prix relatifs ainsi que l'allocation sectorielle de la production (entre locale et exportke) et la composition de l'absorption (locale et imp~rtee)'~. Les prix intkrieurs atteignent leurs niveaux d'equilibre lorsque les taux de change r6el A l'exportation et a l'importation permettent d'kquilibrer l'offre et la demande des biens 6changes et non CchangCs. A cet equilibre sur l e march6 des biens et services correspond un equilibre sur le march6 du travail, le facteur mobile. En effet, a un niveau donne d'allocation des ressources entre les exportations et la production de bien local, correspond une repartition de la main d'oeuvre entre ces deux secteurs, l'kchangk et le n~n-echange'~.L'kvolution du taux de salaire et des profits dans le secteur des biens exportts et domestiques depend donc de la croissance des prix A l'exportation et des prix domestiquesI6. l4 Notons que le nouvel Cquilibre et l'kvolution du taux de change rtel correspondante dCpendent des tlasticitks de substitution (cote demande) et de transformation (cote offre) de l'tconomie. L'allocation entre la consommation de biens domestiques (production locale) et import& (ou production exportke) sera d'autant plus sensible aux mouvements du taux de change rtel que 1'ClasticitC de substitution (transfonnation) entre ces biens sera ClevCe. l5 Ld,Pd,Le,P, reprtsententrespectivement lamaind'ceuvre et lesprixdans le secteur des biens domestiques et des biens Cchangts. h represente la part des exportations dans la production totale. a et p reprtsentent respectivement la part du travail dans le secteur des biens CchangCs et domestiques. La notation reprksente le taux de croissance de la variable. A A h A R(PD- Ph E ) (a-I)(P~-P,) LO= n(i -p) (1-n)(i -a) + LE= a(i-p)+(1-n)(i-a) - 132 - 1.4. Module mCnage: Impact sur la pauvretCet la distributionde revenudes mCnages: 12. L'kvolution des prix et de la croissance du PIE3 sont appliquees au module mknage, klabork a partir de 1'enquEte ECAMII, afin de mesurer l'impact des chocs et politiques sur les depenses et les revenus des diffkrents deciles. L e tableau ci-dessous indique dans quelles proportions les mknages tirent leur revenu de salaires et de profits sur biens domestiques ou exportes et consomment les biens importes et domestiques. Nous observons qu'en ce qui conceme les depenses, la part allouke aux biens importes par rapport aux biens domestiques ne vane pas que1que soit le decile. En revanche, au niveau des revenus, nous observons des diffkrences notoires pour les diffkrentes couches de la population. Les mknages les plus pauvres tirent environ untiers de leurs revenus de la vente de biens export& et deux tiers de la vente de biens domestiques. Enrevanche, les mknages les plus aises tirent plus du quart de leur revenu des salaires tandis que la vente de biens export& et de biens domestiques reprksentent respectivement le quart et la moitik de leurs revenus. Tableau4: ModuleMCnage Dtciles DCpenses Dtpenses Dtpenses Salaires Revenu Salaires Revenu biens biens totales Revenu biens total importes domestiques biens exportes domestiques 1 42.8 57.2 100 67.7 31.4 1.o 100 2 42.8 57.2 100 66.7 30.9 2.4 100 3 42.8 57.2 100 65.2 30.2 4.6 100 4 42.8 57.2 100 64.0 29.7 6.3 100 5 42.8 57.2 100 62.0 28.7 9.3 100 6 42.8 57.2 100 60.1 27.9 12.0 100 7 42.8 57.2 100 58.4 27.1 14.5 100 8 42.8 57.2 100 53.5 24.8 21.7 100 9 42.8 57.2 100 46.0 21.3 32.7 100 10 42.8 57.2 100 47.4 22.0 30.7 100 Ensemble 42.8 57.2 100 51.0 23.7 25.3 100 2. ANALYSE LA VULNERABILITE DEL'ECONOMIE DE SENEGALAISE: CROISSANCE, PAUVRETE, CHOCS ET POLITIQUESSTRUCTURELLES 13. Les kvolutions du taux de croissance et de l'incidence de la pauvretk dkcrites dans l e scknario central du DSRP reposent sur un certain nombre d'hypotheses cles sur l'environnement, les efforts de politiques kconomiques et sociales ainsi que leur efficacitk. Dans ce qui suit, nous analysons la sensibilitk du taux de croissance, de la distribution des revenus et du taux de pauvretk a ces hypothkses. Les deux premiers ((sctnarios )) illustrent les risques de dkviation a court terme de la croissance du taux programmk dans le cadre macrokconomique de base, comme conskquence de chocs sur - 133 - les termes de l'kchange ou de la politique budgktaire. Les deux demieres simulations mesurent la sensibilitk de la croissance a long terme17 aux politiques structurelles. 2.1. Risques lies aux chocs conjoncturels 14. L'economie Sknkgalaise reste encore trks dkpendante d'un petit nombre de produits primaires. Trois produits reprksentent 60% des produits exportes. Table 5: Poids des principaux produits d'exportation Tabac A Fumer memeContenantDesSuccedanes DeTabac EnTouteProportion 1'67 Chars & Automobiles BlindCesDe Combat armes OuNon;Leurs Parties 1'51 Cigarettes Contenant Du Tabac 1'5 Filets Chair D e PoissonsCongeles 1'39 PrCparationsPour SoupepotagesOu Bouil1on;Soupes potagesPreparesconditi 1,34 Autres ProduitsDeBeauteOuDeMaquillage Prepares & Preparations 1,23 15. Ces produits sont volatiles et soumis aux fluctuations des cours sur les marchks mondiaux. 3. SCENARIO 1:UNE DEGRADATION DESTERMES DE L'ECHANGE COUPLE A UN RALENTISSEMENT DE LA CROISSANCEMONDIALE 16. Nous avons simulk l'effet sur la croissance et la distribution des revenus d'une dkgradation ponctuelle des termes de 1'Cchange de -15% en 2003, combinke a un ralentissement de la croissance mondiale (d'environ 0.5 points par an de 2003 a 2005 par l7 Toutes les simulations reposent sur l'hypothese d'une capacite maximale d'endettement exterieur (ratio au PIB). Enconstquence, l'tconomie s'ajuste aux chocs en ajustant le niveau de l'investissement a l'kpargne totale disponible. - 134 - rapport au scenario de base). Cette depreciation des termes de l'echange peut resulter d'une chute des cours de l'arachide ou ducoton. 17. Une dkpdciation de 15% des termes de l'kchange en 2003 conduit a une baisse annuelle moyenne du taux de croissance du PIB de -0.6% durant les 3 prochaines annees tandis que la contraction de l'economie mondiale induitune diminution d'environ 1point duPIB. Au total, la chute du PIB est estimke 21 environ 1.6, la dkgradation du PIB induite par ladeprkciationdestermes de l'echange tenda se resorber des la 3ieme annee. 18. L a depreciation des termes de l'echange induit un effet dtflationniste qui se traduit par une depreciation du taux de change rkel A l'importation (soit +13.5% en moyenne sur la pkriode 2002/05) ce qui encourage la consommation de biens locaux au detriment des biens importes (dont la production chute de 6% sur la periode de projection). A l'inverse, l'augmentation relative du prix des biens a l'exportation par rapport au prix domestique suscite une hausse de 1.5% des exportations en moyenne sur les deux premieres annees qui tend a se rtsorber des 2003. 19. De fagon gknerale, par rapport au scenario de base, le revenu reel des menages chute de 3.8% pour tous les deciles a l'horizon 2005 (Cf. table 7). Cette evolution resulte de la conjugaison d'un effet revenu et d'un effet de substitution. L'effet de revenu induit une baisse du revenu de tous les agents tandis que l'effet de substitution penalise davantage les classes de revenus les plus pauvres. En effet, les deux principales sources de revenus pour les menages les plus pauvres sont les profits realis& sur la vente de biens domestiques (deux tiers) puis sur la vente de produits de rente (untiers). Les agents rkpondent a la chute relative des prix des biens interieurs en diminuant leur production (- 3% en moyenne de 2002 a 2005) tandis qu'ils tirent moins de revenus de la vente d'un volume legerement superieur de biens export&. A l'inverse, les classes de menages les plus aiskes tirent une grande part de leur revenus des salaires (environ le quart). 11s btntficient donc de la variation des termes de l'echange qui conduit a une apprkciation du salaire reel. Ceci explique le differentiel de croissance de pres de 1 point entre la chute des revenus des classes les plus pauvres (-4.9%) et celle des classes les plus riches (- 3.7%). Par ailleurs, l'evolution de l'indice de GIN1 (+0.3%) indique une augmentation progressive duniveau des inkgalites. Table 7: Impact d'une chute du prix des exportations (-15% en 2003) sur 1'Cvolution des revenusdes mCnagesDCviation en YOpar rapport au scCnario de base Variation du revenu des mhages par 2005 rapport au schario de base Les plus pauvres -4.89% Les plus riches -3.45% Total -3.77% Variation du Coefficient de Gini 0.33% - 135 - 2.2. Impactd'un changement dans la cadence de mise en Oeuvredu programmede rCformes structurelles. 20. L a poursuite des reformes macrokconomiques et structurelles actuellement engagees pourrait porter dans un premier temps le taux de croissance de l'economie Sknegalaise aux environs de 6 pour cent. L e module de croissance endogene a permis de cemer les efforts a consentir notamment en terme de politiques macroeconomiques, d'amdlioration des infrastructures sociales, physiques et financieres (cf. encadre ci dessous) pour atteindre ce taux de croissance. A. Encadrel:L e modklede croissance endogheA longterme L e modkle de long terme a permis d'kvaluer le niveau de croisikre de croissance du PIB qui serait atteint si le gouvemement poursuit les rkformes engagkes. En particulier, nous avons chiffrk l'impact des politiques de change (suppression de la prime sur le march6 noir et de l a surkvaluation du taux de change rkel), des politiques monktaires (rkduction du t a m d'inflation) et financihes (augmentation de la profondeur financiire), des politiques sociales (amklioration du taux de scolarisation dans le secondaire) et des infrastructures (tklkcommunication). Grke au modkle, on peut estimer lcs perspectives de croissance a moyen et long terme de l'economie sknkgalaise, compte tenu des rkformes en cours. Pour cela, nous supposons que la poursuite des reformes aura pemiis a terme (i)de supprimer les dksbquilibres sur le march6 des changes et donc dc reduire la prime a zero, (ii) de rtduire le taux d'inflation a 2%, (iii) d'ameliorer la profondeur financiere de l'economie en portant le ratio de la masse monktaire au PLB a 27%, (iv) de rkduire de moitib le poids du service de la dette, en portant le ratio des int6rEts en pourcentage du PIB de 1.27% en 2000 a 0.67% en 2005, (v) d'ameliorer le stock des infrastructures et le stock de capital humain (en particulier en doublant l'acces a l'enseignement moyen et secondaire conformement A ce qui est prevu dans le Programme Dkcennal de 1'Education et de la formation PDEF). Nos calculs indiquent que les mesurcs ci-dessus, conibinkes a un environnement extkrieur mEmc modkrkment favorable permettraient de porter l e taux de croissance de l'kconomie senkgalaise a moyen temie aux alentours de 6.1%. I - 136 - L a poursuite de cet objectif de 6% peut toutefois Ctre compromise si le gouvemement ne met pas vigoureusement les politiques structurelles telles que definies dans son Document de StratCgie de Reduction de la Pauvrete. En effet, la realisation des objectifs de croissance du scCnario du DSRP repose sur un taux d'exkcution a 100% du plan d'Actions priontaires. Si tel n'est pas le cas, la croissance pourrait flechir comme indiquks dans les scenarios suivants. SCENARIO3: RISQUESLIESA LA PERSISTANCEDE RIGIDITESSTRUCTURELLES 21. Si le gouvemement ne met pas en ceuvre de faqon vigoureuse les rkformes structurelles envisagees, en particulier les politiques visant a promouvoir le capital humain, physique et financier, la croissance du PIB chutera et de ce fait l e gouvemement n'atteindra pas les objectifs de reduction de la pauvrett de moitiC a l'horizon2015. 22. Dans ce scenario, nous faisons l'hypothese que les politiques monetaires et financieres ne remplissent pas les objectifs qui leur Ctaient assignees, en particulier, l'inflation stagne autour de 5%, et la profondeur financiere ne s'ameliore pas par rapport aux annees 90. Les reformes structurelles dans les domaines sociaux, en particulier l'education, accusent du retardet le taux d'acces dans le secteur secondaire ne s'ameliore pas suffisamment (un gain de 3 points au lieu de 16 points). D e mCme, les investissements dans les infrastructures physiques se font un rythme plus lent que prevu. Table 8: Hypotheses likes iiun ralentissement de la mise en Oeuvredu programmede rkformesstructurelles Scenario de Reference Ralentissement DSRP reformes 1. Prime sur le rnarche noir, %-points 0.00 0.01 2. Profondeur financiere 28.16 27.06 3. Inflation 0.02 0.05 4. TCR, 1995=100* 0.00 0.07 5.Taux de scolarisation dans le secondaire 32 19 6. Log # lignes teVl000 hbt 4.79 3.25 7. Gains sur les termes de I'echange % PIB 1.OO% 1.OO% 8. lnteret sur la dette ext, % PIB 0.66% 0.66% 9. Croissance partenaires OCDE 1.51 1.51 Croissancedu PIB/tete 3.47 * 2.13 Croissance du PIB 6.10 4.76 23. Dans un tel contexte, les rksultats de simulation indiquent que le croissance chuterait de 6.1% a 4.7%, soit un flechissement annuel de 1.4 points par rapport au scenario de reference. L e revenu des menages flechit en moyenne de 4% toute classe confondue, cette deterioration des revenus monetaires toucherait davantage les menages les pluspauvres (-5.2%) que les menages plus aids (-4%). - 137 - Table 9: Impact d'un ralentissement dans la mise en aeuvredu programme de rCformesstructurelles sur la distributiondu revenu des mCnages. DCviationen YOpar rapportau scCnariode base Variationdu revenudes mCnagespar 2005 rapport au scenariode base Les plus pauvres -5.18% Les plus riches -3.71% Total -4.04% Variation du Coefficient de Gini 0.34% SCENARIO 3BIS: RISQUES LIES A LA PERSISTANCE DERIGIDITES STRUCTURELLES COUPLEA UNELEGEREDEGRADATIONDE L'ENVIRONNEMENT EXTERIEUR 24. Une mise en place timide des reformes structurelles ne permettrait pas de renforcer la compktitivitk et la diversification de 1'Cconomie Sknkgalaise. D e ce fait, l'kconomie demeure tributaire d'un petit nombre de produits ce qui la rend vulnerable aux choc extkrieurs. Comme par le passe, la croissance realisee ne serait pas de qualitel'. 25. Dans ce scknario, nous montrons que s i le gouvernement ne met pas vigoureusement en Oeuvre les r6formes tel qu'il s'est engagk dans son DSRP, ilaccroit d'autant la vulnkrabilitk de l'kconomie sknkgalaise en cas de chocs extkrieurs. Dans ce scknario, nous mesurons l'impact d'un essoufflement dans le rythme des rkformes kconomiques (tel que simulk dans le scenario 3) lorsque l'environnement kconomique se detkriore lkgerement. Enparticulier, nous faisons l'hypothese que les tennes de l'kchange diminuent ltgerement (-0.2% en pourcentage du PIB soit la moyenne observee sur la decennie des annCes 1990) et la croissance des pays de 1'OCDE stagne autour de 1%(soit unechute de 0.5 points par rapport au scenario debase). 26. L e taux de croissance du PIl3 chuterait annuellement de 2.6 points par rapport au scenario de base. Cela se traduirait par une chute de prks de 10points du revenu des plus pauvres tandis que les revenus de la classe des plus riches baisseraient d'un peuplus de 7 points. Les inegalitks s'accroitraient d'autant (le coefficient de GINIaugmenterait de 0.7). l8 L e DSRPnote une variabilite de la croissance de pres de 1.6 pour une croissance moyenne de 2.7% sur la periode 1960-1993. - 138 - Table 10: Impact d'un ralentissementdu programmede rCformeset d'une dCtCriorationde l'environnement extCrieur sur la distribution du revenudes mCnagespar dCcile. DCviationen YOpar rapportau scCnariodebase Variation du revenu des menages par 2005 rapport au scknario de base 20% les pluspauvres -9.93% 20% les plus riches -7.15% Total -7.78% Variation du Coefficient de Gini 0.67% SCENARIO4: ACCELERATION DE LA MISE EN CEUVREDUPROGRAMMEDE REFORME 27. Les scknarios ci-dessus ont soulignk l'importance pour le gouvemement de poursuivre activement les politiques macroeconomiques et les rkformes structurelles definies dans son document de Stratkgie pour la rkduction de la pauvretk. Dans les deux scknarios suivants, nous montrons comment une accelkration de la cadence d'exkcution du programme de rkformes 6conomiques permettrait au Senegal d'asseoir de faqon plus durable son taux de croissance de croisiere de l'kconomie et de rkduire la sensibilitk de l'kconomie senkgalaise aux chocs extkrieurs. Dans ce scknario, nous envisageons qu'A moyen terme, les autoritks accelereront la mise en oeuvre de politiques permettant d'amkliorer la qualitk : du capital humain en portant le taux de scolarisation dans le secondaire A 40%' du capital financier en portant le taux d'approfondissement financier a 30% et des infrastructures physiques. 28. Dans un environnement exterieur favorable, l'accklkration de la mise en euvre du programme de rkformes structurelles permettrait au taux de croissance du PIB d'atteindre 8%, ce qui conduirait A une augmentation moyenne durevenu des mknages de 6% et une rkduction des inkgalitks (indice de Gini baisse de 0.5 points). Notons que la croissance est pro-poor en ce sens qu'elle benkficie davantage aux plus pauvres. (le diffkrentiel de croissance entre les pauvres et les riches est de deux points). Table 11: Impact d'une accClCration dans la mise en Oeuvre du programme de rCformes structurelles dans un environnement extCrieur favorable sur la distribution du revenu des mCnages par dCcile. Deviation en % par rapport au scCnario de base Variation du revenu des mCnages par 2005 rapport au scCnario de base Les plus pauvres 7.74% Les plus riches 5.47% Total 5.98% Variation du Coefficient de Gini -0.48% - 139 - 0 Dans un environnement extCrieur dkfavorable, une mise en ceuvre accklkrke des rkformes stmcturelles face a une degradation des termes de 1'Cchange et un ralentissement de la conjoncture intemationale (tel qu'observe dans le scenario 1) permet de minorer l'impact des chocs extemes. L'ensemble des rkformes structurelles permet de compenser partiellement la baisse de la demande par un regain de compktitivitk. La croissance A moyen terme se maintient autour de 5.5 pourcent soit pres d'un point de plus que dans le cas du scenario 1. Ce ralentissement moindre de la croissance a long terme permet de limiter de moitik la chute du revenu des mknages (soit unebaisse de 2 points au lieu de 4 points) par rapport au scknario de rkfkrence. 0 Notons que si l'on compare les effets d'un impact d'une accelkration versus un ralentissement (scknario 3bis) dans la mise en ceuvre des rkformes face a un choc exteme, le contraste en terme d'impact sur la pauvrete est encore plus fi-appant. Dans le cas du choc exteme dkcrit au scknario 1 (soit un ralentissement de 0.5 points de la croissance mondiale et une dkgradation des prix A l'exportation de 15% en 2003), un ralentissement des rkformes frappe de plein fouet les plus pauvres dont le revenu baisse de pres de 10 points tandis que si le gouvemement met en place de faqon accklkree le programme de rkformes, la baisse de leur revenus est limitke A -2.5%. Table 12: Impact d'une accClCration dans la mise en czuvre du programme de rCformes structurelles dans un environnement extkrieur dCfavorable sur la distribution du revenu des mbnages par dCcile. Dkviation en % par rapport au scCnario de base Variation du revenu des mhnagespar 2005 rapport au schario de base Les plus pauvres -2.56% Les plus riches -1.83% Total -1.99% Variation duCoefficient de Gini 0.17% - 140- ANNEX111 SUlVIDESDEPENSESJUSQU'AUX DESTINATIONS - 141- H. INTRODUCTION 1. Le Sknegal est l'un des pays qui utilise le plus de volume de ressources pour le secteur de I'education en y consacrant environ 113 de son budget. L'examen de la revue des depenses publiques a men6 la conclusion d'une tres grande ineffcacite dans la gestion des ressources d'kducation. Cette inefficacitk se prksente par un gaspillage important des budgets mobilisks, des allocations intra sectorielles inconskquentes par rapport aux objectifs dCclarCs et une composition economique des coilts unitaires sans rapport avec une kducation de qualitk. En effet, 97% des depenses d'kducation au niveau de l'elementaire sont consacrks aux dkpenses salariales. Par ailleurs, des dysfonctionnements notoires dans le pilotage et la gestion du secteur ont ktk relevks. 2. Pourtant, le secteur de l'kducation a continue a bkneficier d'un arbitrage tres favorable dans l'allocation budgktaire sectorielle (35% des depenses de 1'Etat sont consacrkes en 2001 a ce sous secteur), l'allocation intra sectorielle s'est nettement ameliorke avec plus de 42 pour cent des dkpenses d'kducation qui sont consacrkes au niveau klkmentaire. Mieux les appuis des bailleurs de fonds exterieurs se sont massifiks en terme de volume. 3. L a question centrale qui se pose alors est de savoir pourquoi toutes ces ressources mobilisees n'ont pas permis d'atteindre un minimum d'objectifs apprkciables en terme d'amklioration de l'acces a l'ecole et de la qualit6 des apprentissages. Est-ce qu'augmenter le volume de ressources va pennettre d'amkliorer les performances? Ces questionnements garde toute sont actualitk si nous considerons que le secteur de l'kducation pretenda plus de ressources provenant soit des ressources de I'Initiative Pays Pauvres Tres Endettks (( )) (PPTE) et de 1'Initiative (<'Education pour Tous AcctlQke )) (EFA-Fast Track) qui vont emprunter les circuits traditionnels de mobilisation des ressources internes. Des partenaires au dkveloppement comme I'ACDI ou I'IDA envisagent aussi de financer le secteur de l'kducation sous forme d'appui budgktaire. Ces ressources ne seront plus mobilisees a partir des banques commerciales mais suivent les memesprockdures que les ressourcespropres de 1'Etat. 11. LESPROCEDURESDEMOBILISATIONDES RESSOURCES 4. L e Ministere de I'Education, msme s'il constitue un dkpartement prioritaire dans les politiques et stratkgies de dkveloppement kconomique et social du SknCgal, msme s'il bkntficie d'un ambitieux programme de dkveloppement sectoriel appuyk par toute la communautk des bailleurs de fonds, continue de preparer et d'exkcuter son budget de maniere traditionnelle et ne bhkficie d'aucune mesure dkrogatoire tendant a mettre en place des outils de gestion financiere conformes aux objectifs de rkforme et d'efficacitk poursuivis par le Programme de Dkveloppement de 1'Education et de la Formation. Donc, analyser le processus de mobilisation du budget de l'kducation revient a analyser le processus pour 1'Etat d'une maniere gknkrale. 5. S i les performances ne sont pas satisfaisantes en matiere de mobilisation des ressources, ilest vrai que la chaine de dCpense doit Ztre interrogke mais aussi et surtout, - 142 - ilconvientd'examiner laplaceduprocessusm&medepreparation dubudgetdans les contre-performances relevkes. 2.1 UnProcessusDeProgrammationBudgetisationDepasse 6. Aussi bien au niveau de 1'Etat qu'au niveau des Collectivitks Locales, la preparation des budgets s'effectue de manikre incrementielle avec des notions comme "services votes", "mesures nouvelles" malgrk l'existence d'un programme et des indicateurs qui n'entrent pas du tout en compte dans les debats budgetaires. Des efforts sont certes faits pour amver a unbudget programme mais ils se heurtent trop souvent aux poids des traditions. 7. Aussi, la ligne de dkmarcation entre la responsabilite de 1'Etat et celle des collectivites dans la gestion des kcoles (prkparation et execution des budgets) meme si elle est clairement dkfinie dans les textes n'est pas respectee surtout par 1'Etat qui a des lignes de depenses au niveau central et dCconcentrCe qui sont des repliques des postes budgetaires financks par les Collectivitks Locales a travers le Fonds de dotation de la decentralisation. Et cette confusion est prejudiciable a une execution correcte des dkpenses et une possibilitk de double compte (voir aussi paragraphe sur le procehsus de mobilisation). Dans ce chapitre, nous analyserons l'impact du processus de prkparation des budgets dans les performances en matiere de mobilisation des ressources pour l'kcole. 2.1.1. Unepreparation dubudget de 1'Etatnoncentree sur les besoins des Ccoles 8. L a procedure d'klaboration dubudget de 1'Etat comporte une phase administrative et une phase legislative. En ce qui concerne la phase administrative, aussi bien pour ce qui concerne les dipenses salariales que les dkpenses de fonctionnement hors personnel du secteur de l'education, la prkparation des budgets est exclusivement monopolisee par les services centraux du Ministere de 1'Economie et des Finances (Direction du Budget, Direction de la Coopkration Economique et Financiere) et du Ministere de 1'Education (DAGE). 3.1.1.1 Les dtpenses de personnel fonctionnaire. 9. Sur la base des ktats mecanographiques editts par la Direction du Traitement Automatique de l'hformation (DTAI) la liste des personnels en service durant l'annke prkcedente est dresske. Sur cette base, les recrutements nouveaux sont nkgociks par le Ministere de 1'Education au niveau du Ministere de 1'Economie et des Finances. Aucune autre structure au niveau central comme au niveau dCconcentrCnejoue rkellement unr61e fondamental dans la determination du nombre d'agents a recruter. Les emoluments de salaires sont calcules automatiquement et c'est ainsi que le pourcentage de prevision pour avancement est applique sur le traitement de base de tous les agents meme si ceux-ci ne vont pas connaitre une majoration de leur traitement durant l'annke A venir. Ainsi, le budget de personnel du Ministere de 1'Education est gonfle artificiellement rendant impossible une exkcution intkgrale. 3.1.1.2 Les depenses de personnel contractuel - 143 - 10. Les personnels contractuels (volontaire et vacataire) sont budgetists sur le chapitre de depense de materiel. Ce qui posera des problemes de mobilisation considkrables qui seront analysks dans la partie 3.2 portant execution des dtpenses. L e probleme majeur qui se pose a ce niveau est que, meme si ce type de personnel est gtre par les IA (pour les vacataires et professeurs contractuels du moyen et du secondaire), recrute et gere par les IDEN (pour le volontaires et maitres contractuels), ces structures dkconcentrees ne connaissent meme pas le montant du budget dont ils disposent pour assurer la remuneration du personnel contractuel. Le budget de cette categorie pour tout le pays est globalise au niveau de la DAGE sans une lisibilite regionale encore moins departementale. 3.1.1.3 Les depenses de fonctionnement hors personnel 11. Selon les textes de la dtcentralisation, des domaines de competences bien precis sont transfires a la gestion des collectivites locales. C'est ainsi que pour ce qui conceme le niveau Clementaire, M a t a en charge le recrutement et la gestion du personnel pendant que toutes les autres activitks de l'ecole sont prises en charge par les Communes ou les Communautes Rurales. Au niveau du moyen et du Secondaire, ce sont les Conseils de region qui ont en charge le fonctionnement des colleges et lycees. Cependant, force est de constater que 1'Etat (le Ministere de 1'Education) se trouve en contradiction avec la politique de decentralisation puisque disposant aussi bien au niveau central qu'au niveau des IDEN de budget pour le fonctionnement des Ctablissements de l'klementaire. Cette situation se reproduit au niveau des colleges et lycees ou les principaux et proviseurs (des representants de 1'Etat central) administrent les ressources de ces structures. Les lignes budgetaires inscrit dans ces structures (IDEN, colleges et Lycee) pour le fonctionnement des Ccoles sont reconduites chaque annee de manikre mkcanique sans consideration ni de l'augmentation ou de la diminution des effectifs. 12. L e budget 2002 a kt6 klabore en tenant compte de la Directive de 1'UEMOA relative a la nomenclature budgetaire. Les structures qui d'habitude avaient la latitude de repartir leur budget de fonctionnement (hors dkpenses permanentes) selon leurs besoins, se sont vues imposes une repartition qui n'a pas toujours pris en compte leurs specificites. En effet des rubriques de dkpenses ont ete soit inutilement dotees soit sur-dotees alors que d'autres indispensablesn'ont pas ete dotees ou sous-dotees. 13. Les demandes de reamenagement formulees n'ont pas connues de suite. - 144 - 3.1.2 L e Fonds de dotation de la decentralisation 14. Dans le cadre de la decentralisation, 1'Etat du Senegal a transfer6 aux collectivitks locales la responsabilite de gkrer les ecoles. C'est ainsi que les Communes et les communautes rurales ont en charge la gestion des &coles elementaires pendant que les Conseils de Regionaux assurent la gestion des lyckes et colleges. 15. En transferant cette responsabilitk, il a ete opere aussi un transfert aux collectivites des ressources qui servaient jadis a faire fonctionner 1'Ecole. 16. Enprincipe le r81e de 1'Etatdevrait se limiter a laprise en charge des depenses de personnel, ce qui n'est pas le cas puisque comme nous l'avons constate dans le paragraphe precedent la DAGE, les IA et les IDEN administrent des credits pour des depenses de fonctionnement courant au profit des Ctablissements. 17. Les ressources de la decentralisation ont ete consolidees dans l e Fonds de Dotation de la Decentralisation. Chaque annee, un arrkte repartit et affecte ces moyens aux collectivites locales pour financer les depenses likes au fonctionnement des ecoles. Le tableau suivant donne pour chaque cattgorie de collectivites locales le niveau d'intervention dans l e systeme scolaire et les depenses lies aux competences transferees en matikre d'kducation. Tableau B1: niveau d'intervention des collectivitks locales dans les dkpenses d'kducation COLLECTIVITES NIVEAU TYPES DEDEPENSES D'INTERVENTION Constructions Bourses et aides Equipements ZONSEIL DE REGION Lycke et college Entretien et maintenance Personnel d'appoint Manuels et foumitures Constructions 0 Bourses et aides COMMUNE Ecole Cltmentaire et Equipements prtscolaire Entretienet maintenance 0 Personnel d'appoint 0 Manuels et foumitures Constructions Ecole ClCmentaire et Equipements COMMUNAUTE RURALE prkscolaire Entretien et maintenance Manuels et fournitures Source : loi 96-07 portant transfert d:ompttences aux rbgions, aux comm nes et aux communautes rurales - 145 - 3.1.2.1 Mise en place du Fonds de dotation Le tableau suivant dkcrit le cheminement du processus (dates des diffkrentes etapes) jusqu'a la prise de 1'arrStk interministkriel (MEF et MDCCL) ainsi que le montant global duFonds de dotation allouk par 1'Etat au cours des quatre annees 1999 a 2002. TableauB2: processusde prisede 1'arrCtk interministkrielde rkpartitiondu Fonds de dotationet montantdu Fonds RUBRIQUES UNITES ANNEES 1999 2000 2001 2002 VOTE LO1DE FINANCES jour-mois-an 19/11/98 19/11/99 4/12/00 14/12/01 PROMULGATION LO1DE FINANCES jour-mois-an 31/12/98 13/12/99 20/12/00 27/12/01 RAPPORT CNDCL jour -mois -an rapport Pasde 26/1/00 30/1/01 2913/02 ARRETE INTERMINISTERIEL DE REPARTITION jour - mois -an 21/4/99 19/5/00 8/6/01 10/5/02 Montant global du Fonds de dotation (*) Kfrancs CFA 5 889 537 6 589 537 7 289 537 8 089 537 Sources :journal officiel et arrete interministeriel Des lenteurs administratives considkrables : comme l e montre l e tableau B1 ci-dessus, l'administration met au moins 4 mois apres le debut de la gestion pour prendre l'arrStk rkpartissant les ressources du fonds de dotation de la dkcentralisation. Si nous considkrons que c'est seulement apres la signature de cet arrStC que le prockdure de mobilisation des ressources au profit des collectivitks locales est engagee, iln'est pas rare de constater que ces ressources arrivent au niveau des kcoles a la fermeture des classes. 3.1.2.2 Rbpartition du Fonds de dotation L e tableau suivant donne (en milliers de FCFA) la rkpartition du Fonds de dotation entre les differents niveaux de collectivitks ainsi que les pourcentages correspondants. - 146- Tableau B3: rkpartition du Fonds de dotation entre rkgions, communes et communautks rurales ANNEES TOTAUX RUBRIQUES 1999 2000 2001 2002 Montant % Montant % Montant % Montant % Montant % COMMUNES 2020264 35% 2 121 831 36% 2508330 37% 2528330 35% 9 178755 36% COMMUNAUTESRURALES 222693 4% 242495 4% 338963 5% 652979 9% 1451130 6% 18. Avec plus de la moitie du montant alloue par 1'Etat (58 percent), les conseils de regions sont mieux lotis que les autres collectivitks. L a principale explication reside dans l e fait qu'ils ne disposent pas de ressources propres contrairement aux communes et communautes rurales. Cependant, cette situation porte prejudice a 1'Education car avec la mise en place tardive des credits, les conseils de region anticipent rarement sur les dtpenses d'Education, preferant reserver cette possibilite au dkpenses liees a leur propre fonctionnement . 3.1.2.3 Part de I'Education dans le Fons de dotation de la dkcentralisation 19. Pour les Communautes rurales l'ari-et6 de repartition du Fonds de dotation fixe la part des credits destines a I'Education. Cela n'est pas l e cas pour les autres collectivitks, meme si la Division financikre de la D C L adresse des suggestions aux Communes et Conseils de region. 20. Des enquetes auprks de la Division financiere de la DCL, il ressort que les donnkes de la carte scolaire (nombre d'etablissements, population scolaire, etc.) qui sont en principes les bases objectives de l'allocation des ressources pour l'education, ne sont mises ajour. 21. Les 3 tableaux B4, B5 et B6 qui suivent donnent (en milliers de FCFA) la part du FDD budgetiseepar les Collectivitks locales pour 1'Education (les Communautes rurales ont budgetiseles montants prescrit par l'arrZt6 de repartition). - 147- TableauB4 :part du Fonds de dotation budgCtisCpour 1'Cducation par les Conseils de region 1999 2000 2001 2002 TOTAUX Fatick 162011 36422 22% 172902 32562 19% 201 255 41 332 21% 204417 42068 21% 740585 152384 21% Saint Louis 588 836 315 415 54% 586 668 335 796 57% 662 578 171 692 26% 361 133 154 826 43% 2 199 215 977 729 44% Thies 441 054 I50 000 34% 413 766 156 000 38% 466 962 125 000 27% 475 475 148 000 31% 1 797 257 579 000 32% Ziguinchor 327 540 59 300 18% 310 824 54 600 18% 352 748 56 200 16% 358 993 74 500 21% 1 350 105 244 600 18% TOTAL 1 519 441 561 137 37% 1 484 160 578 958 39% 1 683 543 394 224 23% 1 400 018 419 394 30% 6 087 162 1953 713 32% ~~ 22. L e faible taux de 23% de dotation totale a l'kducation pour l'annee 2001, s'explique par l'erection d'une onzieme region (Matam) qui n'a pas entrain6 l'allocation de ressources additionnelles. A partir de 2001 la dotation de Saint Louis n'integre plus Matam. 23. C'est au total un peu plus de 30% des ressources transferees par 1'Etat qui sont budgetisees pour 1'Cducationpar les conseils de region. Tableau B5 :part du Fonds de dotationbudgCtisCpour 1'Cducation par les Communes 1999 2000 2001 2002 TOTAUX COmmunes Dotahon Part education Dotation Part education Dotation Part educatlon Dotation Part educahon Dotation Part education totale 11 Montant ' % totale Montant1% totale 1 Montant1 % totale Montant1 % totale Montant 1 % ~ I I Fahck 55097' 1800, 3% 579261 1900 3% 68477 2000 3%; 68 794 10500 15% 250294 16200 6% I SarntLoms 43556l 7 112 16% 458321 7482 16% 54 180 8848 16%~ 54430 8 897~16% 197998 32339~16% I i I Tivaouane 49455 1551 3% 51 985 2310 4 % 61 454 1843, 3% ! 61 738 9430 15% 224632 15 134 7% Zigunchor 1 54963 18000 33% 57714 20000 35% 68227 35000I 51% 68 542 10800 16% 249446 83 800 34% TOTAL 203 071 28 463 14% 213 457 31 692 15% 252 338 47 691 19% 253 504 39 627 16% 922 370 147 473 16% - 148 - 24. Sur la periode considCree (1999 a 2002)' les communes suivi (mis a part Dakar dont les donnees collectCes n'ont pu &tre exploitees), ont budgetise 16% du total de leur quote-part de fonds de dotationpour des depenses d'education. Tableau B6: part du Fonds de dotationbudgCtisCpour I'Cducation par les CommunautCs rurales 1999 , 2000 2001 2002 TOTAUX c.rude8 Dotation Part education Dotation Part education Dotation Part educatlon Dotanon Part educat~on Dotation Part education @tale Montant[ % I Montant; 1 1 ~ % totale Montant % totale ,Montant/ % totale IMontant % i Sangalkam , 1434 1184 83% 1551 1301 84% 2 169I 1869 86% 2 169 1869 86% 7323 62231 85% I I Yene , I 1049 799 76% 1 140 890 78% 15931 1293 81% 1593 1293 81% 5 375 4275 80% I I l l I I I 1 I Niakhar 975 725 74% 1067 817 77% 1491' 1191 80% 1491 1191 80% 5024 3924'78% I I I ! Tattagrune 1090 840 77% 970 7201 74% 1356 1056 78% 13561 1056 78%' 4772 3 672 77% I I I 605 355, 59% 655' 405 62% 915 615 6 4 915 615'67%1 3090' 1990 64% I I I I RossBethio 6 672; 6 422 96%/ 7 275 7 025 97% 10 168 9 868 97% 10 168/ 9 868 97% 34 283 33 183' 97% I I Meouane , 1207 957 79% 1309, 1059/ 81% 1830 1530 84% 1830 1530 84% 6 176 5076 82% I I i I ! ' Taiba Ndiaye 794 544 69% 8731 623 71% 1220 920 75% 1220 920 75% 4 107 3 007 73% I I I ! Adeane 1538 1288, 84% 1673 1423 85% 2 339' I 1 I 2 039 S i % / 2 339' 2039 87% 7 8891 6 7891 86% \'lagus 1 1493 1243 83%I I625 1375/1 85% 2271 1971 87% 2271 1971 87% 7660 6560 86% /lTOT*L 117041 10454/899"u/ 127551 11505'90%1 178281 16328191%1 17828' 16328192'k~ 60115 I Y615/91%/j ~ 1 1 Sources collectivites locales et tresoreries-paieries 25. Les communautes rurales qui ne regoivent que pres de 6% du Fonds de dotation consacre en proportion la plus grande part des credits alloues a l'kducation, environ plus de 90%. - 149 - 3.1 L'EXECUTIONDESDEPENSES a) le circuit dans les localitks 26. Dans chaque chef lieux de region autre que Dakar, les fonctions d'ordonnateur sont dkltgutes au Contrbleur rkgional des finances et damles autres localitks, au Prefet. Graphique2 :circuit d'exe'cution au niveau dkconcentrk des dkpenses sur budget du ME t ContrB leu r reg io n a l d e s financeslPr6fet ~- C o ntr6le B o n d e c o m m a n d e V i s a C o n trBie A r c h ivag e ~ 4- 7 V i s a b o n d e ~ E o n vert A r c h i v a g e b o n j a u n e Fiche d ' e n g a g e m e n t II c o m m a n d e Execution R e c e p t i o n Certification C o n tr6le C o n trBle +U- Proposition d e +~ n liquidation E74 P a i e m e n t - 150- 3.2.1.3 Les dklais 27. L e tableau qui suit rkcapitule le temps moyen d'extcution d'une dkpense en fonction selon les deux circuits identifies prkckdemment. I1est obtenu apres un entretien avec les difftrents acteurs de la chaine de dkpense et un recueil des delais moyens de traitement des dossiers au niveau de chaque acteur. Tableau C2:dClais des Ctapes d'exCcution des dCpenses Etapes niveau central niveau local de a minimum I maximum minimum I maximum L a proposition Lavalidation de la d'engagement proposition 15 jours 60jours 1jour 7jours 1 Laproposition de liquidation L'ordonnancement 5 jours 30jours 1jour 3 jours L`ordonnancement Rkglement 7 jours 60jours 1jour 7 jours 28. L a durte totale de traitement d'une dkpense au niveau local est comprise entre 3 et 17jours contre 27 a 150jours pour les dkpenses exkcutkes au niveau central. 29. Ainsi, nous constatons de maniere gknkrale que si les delais sont acceptables dans les autres localitts, ils posent probleme pour Dakar ou s'exkcutent la plus grande proportion dubudget. 30. Un des corollaires de ces dklais allonges est que les foumisseurs/prestatairesde l'administration en prennent compte et les traduisent gknkralement par des surco6ts : un meme article achete au comptant (caisse d'avance par exemple) voit son prix multiplik par 1'5 voire 2 lorsqu'il fait l'objet d'une prockdure d'engagement. 31. Deux principaux facteurs d'allongement des dklais sont kvoquks a Dakar, par ordre d'importance : > L a centralisation des contrGles au niveau du ContrGle des opkrations financieres (COF): P CrtC en janvier 2002, le COF n'a pas encore atteint sa vitesse de croisiere principalement a cause du manque de moyens materiels et humains > Les rejets. 32. Les motifs de rejet CvoquCs par le COF, les ordonnateurs et les comptables sont: - 151- 0 la mauvaise qualit6 des dossiers. 0 L'essentiel des agents s'occupant de gestion financiere n'ont pas r e p une rkelle formation dans le domaine des finances publiques et soumettent des dossiers incomplets par absence de pieces essentielles dans la prockdure &engagement ou de liquidation. Cela entraine des rejets qui retardent l'exkcution des dkpenses. Ce etat de fait est valable aussi bien pour le niveau dkconcentrk que pour le niveau central et pose la question cruciale de la formation des administrateurs de crkdits dans les differentsniveau. 0 le dCfautde reception. 0 Les administrateurs de credits ne font souvent pas rkceptionner par les services du Ministere de 1'Economie et des Finances les travaux ou fournitures faits. Cette situation est causke par la difficulte a mobiliser ces agents des finances qui sont en nombre insuffisant mais aussi parce que la plupart du temps, au moment ou la liquidation s'effectue, le foumisseur avait deja livrk ou effectuk les travaux avant m2me l'obtention du titre de creance qui devait dkclencher la prockdure de rkalisation des travaux ou la livraison. Ainsi, une administration peut consommer un service 3 mois avant pkriode reglementaire et aura du malpar la suite a faire prockder a une rkception. 0 Les dklais moyens ci dessus presentes ne rendent pas compte du cas spkcifiques des dkpenses de carburant. En effet, pour cette catkgorie, les fournisseurs rkclament le paiement avant la livraison (comme kvoquk a Dakar et Ziguinchor) alors que pour les autres catkgories, le foumisseur/prestataire subi les longs dklais puisqu'il s'exkcute avant le paiement de sa crkance. Les certifications delivrkes par les administrateurs pour cette catkgorie de dkpenses sont illkgales. le cas spkcifiquedu paiementdes enseignants non fonctionnaires: 0 les agents fonctionnaires de 1'Etat ne connaissent souvent pas de problemes de paiement des salaires. Cependant, comme annonck au niveau du chapitre sur les prockdures d'allocation des ressources, un reel probleme se pose pour assurer un reglement regulierdu salaire des enseignants non fonctionnaires. 0 Les volontaires de l'kducation sont recrutks et pay& sur un chapitre de dkpense de matkriel qui est gkrk par les differents Lnspecteurs dkpartementaux de l'kducation nationale. Cependant, la ligne de dkpense pour chaque IDENn'est pas specifiee et iln'existequ'uneligneglobaleauniveaudelaDAGEquinepermetpasd'avoir une lisibilite par le niveau locale des ressources qui sont iisa disposition pour ces dkpenses. 0 Tous les semestres, la DAGE du ME demande a la Direction du Budget du MEF de faire une dklkgation de crkdit pour les diffkrents dkpartements sans laquelle les services ordonnateurs et comptables dkpartementaux ne pourront pas exkcuter les dkpenses. Compte tenu des lenteurs administratives, les dklkgations amvent trks rarement a temps au dkbut de chaque semestre d'ou dkja unpremier retard certain. - 152 - 0Aprbs la reception de la delegation de crkdits, l'administrateur fait emarger sur un &at chaque Volontaire de 1'Education et prockde A un engagement en respectant les procedures d'acquisition des biens et services. 0A la finde laprocedure, le comptable departemental liberele montant global pour le compte du "billeteur" de 1'IDEN qui procede au paiement du salaire mensuel. 0L e grandprobleme qui se pose a ce niveau est que toute la procedure est rarement Cpuisee avant la fin de la premiere semaine qui suit le mois commenpnt. Ainsi, les Volontaires pour attendre leur salaire ferment leur classe (pour aussi protester) et se rendent A la capitale departementale pour une dur6e d'environ 4 A 5 jours diminuant d'autant le temps d'apprentissage des eleves et aussi leur propre motivation. Nous constatons de ce fait que cette procedure administrative non conforme a un impact reel sur la qualitk de l'kducation au Senegal et en milieu rural en particulier. 3.2.2 Le bud.get des Collectivitks locales 33. L e budget de la collectivitk locale est prkpark par l'ordonnateur avant le vote du conseil. L a phase prkparatoire intervient generalement le demier trimestre de l'annee (entre octobre et decembre), les commissions techniques (education, finances, etc.) et les services administratifs y sont associks. 34. L e budget est vote par chapitre et par article. 35. Apres le vote, le budget fait l'objet d'une approbation prealable A son execution. L'approbation est un acte reglementaire pris par le reprksentant de 1'Etat auprbs de la collectivitk locale (Gouvemeur pour le conseil de rkgion, Prefet pour la commune et Sous prkfet pour la communaute rurale). 36. L'exkcution du budget de la collectivitk locale sera etudite selon trois rubriques : i)lesintervenants,ii)lecircuitdedkpenseetiii)lescontraintes. 3.2.2.1 Les intewenants 37. L e President du Conseil de rkgion, le Prksident du conseil municipal (maire) et le President de Conseil rural sont administrateurs et ordonnateurs respectivement des budgetsdes regions, communes et communautes rurales qu'ils administrent. 11sproposent des engagements et Cmettent des mandats, le Trksorier Payeur Regional, le Percepteur Municipal ou le Percepteur, selon la localitk, joue le r81e de comptable. - 153 - 3.2.2.3 Les contraintes Dans l'execution des depenses des Collectivites Locales, deux principales contraintes sont evoquees: P Le retard dans la mise en place du Fonds de Dotation de la Decentralisation, sans parler du Fonds de Concours qui, quand ilest alloue, arrive en general avec une annee de retard. P L'insuffisance des fonds propres pour les Communes et les Communautes 38. Rurales (les Regions n'en disposant pas) qui fait que meme, meme si les collectivitks dans leur budget prkvisionnels programment des dtpenses pour le compte de l'kducation sur les ressources propres generees, ces montants ne sont pas executes puisque l e taux de recouvrement des taxes et imp8ts locaux est tres faible et dans l'exkcution des depenses, l'arbitrage est favorable aux dkpenses de fonctionnement des structures (les salaires des employes ou les dkpenses de tklkphone). - 154 - 5. CONCLUSIONSET RECOMMANDATIONS 39. MalgrC le volume appreciable des ressources financikres mis en ceuvre, le secteur de l'tducation est demandeur de moyens de plus en plus importants. L a rarett des ressources et les arbitrages pas toujours favorables au secteur commandent une utilisation optimale des moyens disponibles. L e personnel fonctionnaire: 40. MalgrC, ou a cause de trois fichiers au niveau central (Fonction publique, Solde et Division des personnels du ME), le suivi du personnel enseignants n'est pas ais6 pour diverses raisons: 3 Absencedemiseajour systkmatique. 3 Affectationsfrkquentes de personnelen dehors des commissions crkkes a cet effet. 3 Non fonctionnement des canaux de communication entre les diffkrentes structuresimpliqukes. 3 Manque de moyens surtout matkriels (informatique) au niveau des administrationsdkconcentrkes. Face a cette situation, l'ttude recommande de: Proceder iiun audit du personnel Mettre en place unfichier unique L e personnel non fonctionnaire: 41. L'efficacitt des agents non fonctionnaires est fortement amoindrie par les retards dans le paiement de leurs emoluments. En effet, outre la hstration, les absences et dtbrayages frequents consecutifs au non paiement dans les mCmes dClais que les fonctionnaires ont une repercussion negative dans les enseignements et apprentissages. - 155 - L'ktude recommande de: * Prockder A l'inscription dans les budgets des dkpartements des credits destinks au paiement des volontaires de l'kducation. CF Rendre executoire ce budget sans dklkgation de credits. D'engager annuellement la totalit6 des credits en permettant au comptable de proceder mensuellement, e n meme temps que les fonctionnaires, au paiement des salaires sur l a base d'un ktat certifies dkposks e n debut de gestion. Les ressources de la dkcentralisation : 42. Les fonds de la decentralisation (Fonds de dotation et Fonds de concours) sont mis en place trks tardivement. Leurs rkpartitions entre les diffkrentes collectivitks et les diffkrentes rubriques relatives aux compktences transfkrkes sont systkmatiquement reconduites sans mises Ajour des critkres. 43. En outre, les autoritks des administrations deconcentrees (inspecteur d'acadkmie et inspecteur dkpartemental) ne sont pas toujours impliquees dans la gestion des ressources (information sur les moyens mis disposition- expression des besoins - contr6le de la destination finale de la dkpense). L'ktude recommande de: ciY Procbdera la rkductiondes dblais de mise en place des ressourcesde la dbcentralisation. ciY Impliquerles autoritbsacadbmiquesdans la gestiondes ressources de la dkcentralisationdestinbesa l'bducation. Les dkpenses de fonctionnement des kcoles: Le fonctionnement des kcoles Clkmentaires et matemelles est pris en charge iquatre niveaux : L a commune ou la communautk rurale (entretien et maintenance, foumitures scolaires) ; L'IDEN(autres foumitures, tklkphone, poste et affranchissement, etc.) L'IA (dkpenses permanentes) 0 L a DAGE/ME (dkpenses permanentes) 0 Les moyens sont ainsi kparpillks entre ces structures et constituent un frein dans l'efficacitk. - 156 - L'etude recommande de: GF Globaliser le budget de fonctionnement des kcoles et de transferer les ressourees correspondantes aux collectivitks locales . L e circuit des dkpenses A Dakar: 44. L e contrble a priori des dtpenses budgetaires de l'Etat, conformement a la Directive de l'UEMOA est confit au Contrbleur des Operations Financieres (COF). I1 intervient a deux niveaux: 0 Validations des engagements, 0 ContrGle de la conformit6 entre I'exCcution et I'engagement en amont de l'ordonnateur. 45. L a centralisation des optrations de contrble au niveau d'une structure unique dans la region de Dakar OG s'execute plus de la moitie du budget est un facteur important dans l'allongement des dklais d'execution de la dkpense. L'ttude recommande de: Dkentraliser les opkrations de contr6le A priori au niveau de la rkgion de Dakar. - 157 - ANNEX IV - 158 - L e R81e Du FddDans L e Budget Total Source :L eJournalOfficiel-Loide Finances et CFAA annex; - 159 - ANNEX V - 160- Evolutiondes principauxagrCgats 1995-2000 (Villes, communes, communes urbaineset communes d'arrondissemnent)- en millionsde Fcfa Rubriques 1995 1996 1997 1998 1999 2000 Recettes totales 25 502 24 409 21 066 24 047 25 998 25 969 Evolution -4% -14% 14% 8% 0% Recettes de fonctionnement 23 769 21 890 19500 22 579 23 527 24033 Evolution -8% -11% 16% 4% 2% dont Impbts locaux 11648 10776 11334 14822 13688 13370 Evolution -7% 5% 31% -8% -2% dont produit des Cquipements 2763 2788 2468 3 366 3474 3 534 marchands Evolution 1% -11% 36% 3% 2% Recettes d'investissement 3526 5 127 2862 3516 2590 3627 Evolution 45% -44% 23% -26% 40% dont excCdent de fonctionnement 1794 2608 1296 2040 146 1715 capitalist Evolution 45% -50% 57% -93% 1075% Depenses totales 20401 26278 26 876 25 645 27 611 25 533 Evolution 29% 2% -5% 8% -8% DCpenses de fonctionnement 17477 20687 23438 23524 24413 22224 Evolution 18% 13% 0% 4% -9% DCpenses d'investissement 2923 5591 3438 2 120 3 199 3309 Evolution 91% -39% -38% 51% 3% - 161- ANNEX VI - 162- e, Lo .- g 0 .-a,> L w i 0 L0 s .- ANNEX VI1 - 164- Q e, 3 5r .C e L=: c cE m Y QJ & c 0 m m QJ L M 54 2 6 n Z - m .-