• Référence: P-MU-K00-004
• Date d’approbation: 25/11/2009
• Date de début: 01/07/2010
• Date d'évaluation: 13/07/2009
• Statut: En coursOnGo
• Agence d'implémentation: GOVERNMENT OF MAURITIUS MINISTRY OF FINANCE
• Emplacement: National

The goal of the programme is to sustain economic growth and employment against the backdrop of the ongoing global recession, while not losing momentum on long-term reforms needed to make Mauritius more competitive. By deepening reforms initiated in 2006 under the Bank's first Development Budget Support Loan, the proposed operation will consolidate fiscal performance and strengthen public social service delivery, enhance trade competitiveness, and improve the investment climate. The long-term reform agenda of the Government and its medium-term measures to face the economic downturn are strongly supported by development partners including the International Monetary Fund (IMF).

The overarching goal of the programme is to sustain economic growth and employment against the backdrop of the ongoing global recession, while deepening of the reforms initiated in 2006 under DBSL-I. Its operational policy objectives are to: consolidate fiscal performance and strengthen public social service delivery, enhance trade competitiveness, and improve the investment climate. The Bank recognizes the pressing need of the GoM to enact measures that will help the country face the ongoing global economic crisis: a well-targeted fiscal stimulus package to protect jobs and provide a boost to the economy, and a partial re-profiling of short-term public domestic debt to mitigate roll-over risks and complement domestic financing. Expected programme outcomes include a more efficient and sustainable use of public fiscal resources, better social service delivery, an improved ability to compete in international markets and a more propitious climate for entrepreneurs to operate job-creating, value-added enterprises

3.1 Link with the CSP, Analytical Underpinnings and Country Readiness Assessment

Table 2. Links Between CSP and CPSE Operation Country Strategy Paper PillarsCPSE Operation Component Pillar I: Enhanced Competitiveness and Trade IntegrationEnhance Trade Competitiveness Improve the Business Climate Pillar II: Enhanced Public Sector Efficiency and Basic Service Delivery Consolidate Fiscal Performance and Strengthen Public Social Service Delivery 3.1.1 Link with the CSP: The proposed budget support operation is in line the Bank's strategic goals, including those in the CSP. The Bank's CSP for Mauritius (2009-2013) proposes a combination of instruments, including direct budget support and project investment lending, to support the strategic objectives of the GoM reform programme: building an economic foundation resilient to the challenges of the 21st century and ensuring an efficient public sector able to deliver needed social services to promote a more equitable society. The CSP is articulated around two pillars: (I) enhanced competitiveness and trade integration; and (II) enhanced public sector efficiency and basic service delivery. The mix of lending and non-lending interventions envisaged by the CSP was developed after broad consultations not only with the GoM, but also with a range of civil society organizations and representatives of the private sector. These consultations underpin the design of this proposed operation, which is organized into three components falling squarely under the two pillars of the CSP (Table 2).

3.1.2 Country readiness for budget support: Mauritius has broadly fulfilled the general and technical prerequisite conditions for general budget support. Mauritius' political scene is stable and predictable. Parliamentary elections are scheduled for 2010, and independent of their outcome, a broad consensus exists among Mauritians on the overall development vision underpinning reforms and policy actions in the medium term to 2011. The GoM strongly owns its reform program and has vigorously led harmonization of the work of DPs, which has enabled a solid partnership between the authorities and DPs as well as among DPs. The GoM has prioritized maintenance of macroeconomic stability. The IMF observes that the authorities have made good progress carrying out structural reforms over the last few years, and that these reforms have helped Mauritius's macroeconomic fundamentals to remain solid. The 2007 Public Expenditure and Financial Accountability (PEFA) review, financed by the EC, found that Mauritius PFM systems have good fiduciary safeguards.

3.1.3 Analytical work and underpinnings: A number of analytical works and consultations underpin the proposed budget support operation (see Annex VI). Dialogue during the Bank's 2009-2013 CSP preparation with the GoM, country-level stakeholders and other DPs identified policy priorities to address the current challenges, and highlighted budget support as the GoM's preferred modality for development assistance. The May 2009 budget speech is the GoM's policy action plan for the coming 18 months, and identifies key priorities around which this operation is structured, including saving jobs, protecting people and preparing for recovery from the ongoing global economic crisis. The 2009 Africa Competitiveness Report by the AfDB, the World Bank and the World Economic Forum, the World Bank's 2007 Country Economic Memorandum, and recent Doing Business surveys all point to constraints to private sector development and trade competitiveness as areas that require urgent policy reforms. Preliminary findings from the joint World Bank-AfDB 2009 Investment Climate Assessment, currently being finalized, also informed the design of this operation. On financial governance, the 2007 PEFA and ongoing consultations within the African Peer Review Mechanism will play a major role in strengthening the management of public finances during programme implementation. In addition, the IMF is engaged in extensive dialogue on economic and fiscal issues, including a recent mission that reviewed options for consolidating and extending programme-based budgeting to link it to the performance management system (PMS). Finally, the UNDP's analytical work on budgeting and social safety net programs has informed the GoM's reforms. The Bank will continue supporting analytic works in strategic areas, including an update on the 2007 PEFA by June 2011.

3.2 Collaboration and Coordination with Other Development Partners

3.2.1 The GoM's wide-ranging reform agenda is strongly supported by other DPs. There is strong collaboration by the Bank with AFD, EU and the World Bank, which jointly financed DBSL-I and are jointly financing the proposed CPSE. Further, several economic and sector works underpinning the proposed operation were undertaken by the Bank jointly with other DPs, notably the recent Africa Competitiveness Report (with the World Bank and World Economic Forum) and the ongoing 2009 Investment Climate Assessment (with the World Bank). The Bank, the World Bank, the EU and the AFD participate in joint appraisal and reviews of budget support operations, subscribe to a common policy reform matrix (see Annex II), and use harmonized triggers/prior actions for disbursement of budget support financing. The World Bank's development policy loan series is ending with the current end-2009 disbursement, while the AFD and EU have smaller budget support grant operations envisaged through 2011. The IMF and UNDP have also coordinated with the Bank in policy reform areas related to this operation, with ongoing technical assistance on programme-based budgeting and social safety nets.

3.2.2 The activities of Mauritius' DPs provide clear views on DPs' comparative advantages and demonstrate how DPs achieve complementarity at both country and sector levels. The involvement of DPs in different areas of the development agenda is formally discussed each year during the GoM-led Annual Business Planning event, ensuring clear realms of activities, complementarity, and division of labour (see Annex IX for more details on the activities of DPs across sectors).

3.3 Outcomes and Lessons from Similar Past Operations

3.3.1 The Bank's DBSL-I supported Mauritius in facing the challenges posed by a "triple trade shock" of rising food and energy prices, reduced European Union sugar preferences and the end of textile preferences. The operation supported reforms to:

(i) consolidate fiscal performance;

(ii) improve public sector efficiency, trade competitiveness and the investment climate; and

(iii) widen the circle of opportunity and empower Mauritians through greater participation and social inclusion (see Technical Annex 1 for more details on the reforms supported by DBSL-I). With the support of the Bank and other DPs, Mauritius has made progress in implementing structural reforms, and its economy is increasingly based on innovation, knowledge and skill-based services. The country is on course to meet most of the MDG targets, and governance indicators, including the Country Policy and Institutional Assessment (CPIA) ratings, continue to strengthen. However, continuing the reforms initiated under DBSL-I has become more challenging as a result of the worsening global environment.

3.3.2 Key lessons learned from DBSL-I are as follows:

"Strong GoM leadership/ownership of the design and implementation of the reform programme initiated during the 2005/06 budget led to the positive outcomes, including full engagement with the private sector to support the reform agenda. Response: The Bank has continued following good practices of conditionality in the design of this operation, closely following the GoM's reform agenda to ensure strong ownership. "Technical support across sectors for capacity building and analytical work by DPs contributed to achievement of the objectives of the programme. Response: DPs, including the Bank, are providing capacity building in key areas of the GoM's reform programme. The CPSE will be complemented by Bank grant facilities to support capacity to plan, design, implement, and monitor infrastructure projects, undertake a comprehensive mid-term review of the National IT Strategic Plan, and develop a strategy for mainstreaming gender issues in programme-based budgeting throughout the public sector. "Mutual understanding and strong collaboration between the Bank and the GoM led to positive outcomes in the reform programme. Response: The Bank team has engaged intensively with GoM counterparts during the preparation of the CSP and the design of this programme to better understand appropriate areas of support. "Use of smart indicators as a trigger for disbursement. Outcome indicators such as primary spending as a percentage of GDP proved not to be the best indicators during economic crisis, because the impact on growth was outside the GoM's control. Response: This proposed operation employs disbursement triggers that are clearly under the control of the GoM and are indicative of its commitment to the overall reform agenda. "Collaboration and coordination among DPs supporting the reform programme (World Bank, AFD, EU and UNDP) through formal mechanism such as business plan meetings, joint analytical work, joint appraisal and assessment, implementation and sharing of information contributed to achieving programme objectives. Response: This operation was prepared in close collaboration with all DPs, including a joint appraisal mission, formal joint meetings and numerous informal contacts to harmonize interventions. "Lack of Bank presence undermined institutional competitiveness compared to the DPs represented at country level, and limited synergy of the budget support operation and other Bank Group activities. Response: The Bank has decided to locate the country economist to Mauritius. This is expected to occur by the time this operation becomes effective, and will strengthen partnerships at country level and foster closer follow up of emerging issues concerning the Bank's portfolio. 3.4 Relationship to Other Bank Operations

3.4.1 The proposed operation has important linkages with Bank activities in Mauritius, both currently and moving forward. Improving the efficiency in the public sector will enhance project management capacity for other Bank-financed projects. Such reforms will be beneficial for upcoming Bank Group lending projects as defined in the recent CSP, in particular infrastructure investments in the transportation and water sectors. As well, direct linkages exist between the proposed operation and non-lending initiatives through the ongoing Middle Income Country (MIC) grant facility for developing the health sector strategy as well as proposed MIC grants engendering the programme-based budgeting (PBB) in ministries, strengthening capabi lities to plan, design, implement, and monitor infrastructure projects, and enhancing capacity in the ICT sector. More broadly, the CPSE would provide the Bank with a platform for strengthened dialogue with the GoM, and thus provide a strategic orientation of the Bank's lending and non-lending activities in Mauritius. The Bank's involvement with Mauritius has been limited in part by the absence of a mechanism to engage the GoM in a comprehensive manner across its priority reform program. By energizing the Bank's dialogue with the GoM across several sectors through the CPSE, more opportunities for lending and non-lending engagement will arise to strengthen the Bank's portfolio of activities moving forward.

3.5 Bank's Comparative Advantage

3.5.1 The cumulative experience and achievements from DBSL-I has provided the Bank with invaluable experience in supporting public sector reforms, an area that is a key pillar of the Bank's Governance Strategic Directions and Action Plan 2008-2012. This has led to a strong partnership of mutual trust between the Bank, authorities and other DPs in several sectors. The Bank has also built knowledge and gained the trust of authorities on competitiveness reforms both in the previous operation and through analytical work such as the 2009 Africa Competitiveness Report (with the World Bank and World Economic Forum) and the ongoing 2009 Investment Climate Assessment (with the World Bank). With the CPSE, the Bank will continue engaging in policy dialogue in these areas. Regarding financing, the Bank was ready to provide budget support at a critical time to the GoM, with the modality of assistance authorities need at the right time to address the challenges created by the global economic downturn.

3.6 Application of Good Practices Principles on Conditionality

3.6.1 Reinforce ownership. Strong ownership by the GoM of the reform agenda has underpinned the success of the past budget support operation. The strong link of DBSL-I to the core reforms kept the operation relevant and aligned to the GoM's reform priorities. The proposed CPSE has taken these lessons into consideration and is aligned to the Bank's Mauritius CSP (2009-2013) that was developed in close consultation with the GoM, private sector actors and other DPs. It also closely aligned to recent budget speeches outlining reform priorities.

3.6.2 Coordinate the accountability framework. DBSL-I fostered mutual understanding and respect on both sides regarding the needs and objectives of the reforms. These lessons have informed the design of CPSE. The proposed operation reflects the coordinated approach by DPs to disbursement conditions, amounts of support and timing of the delivery of assistance in line with the funding needs of the budget cycle. The policy matrix of the CPSE (see Annex II) was developed collaboratively among the GoM and DPs, including the Bank.

3.6.3 Select only actions that are critical for achieving results as conditions for disbursement. DBSL-I provided flexibility by enabling the Bank to consider a slippage of the third trigger on cuts in primary spending as a percentage of GDP, as a temporary measure to address the global economic recession. The triggers for CPSE disbursement are few and comprise actions that are achievable and essential to drive outcomes from the GoM's reform programme. Six prior actions have been selected for the disbursement of the first tranche in 2009, and two conditions to satisfy the disbursement of the each of the second and third tranches in 2010 and 2011, respectively.

3.6.4 Conduct transparent progress reviews conducive to performance-based financial support. The Bank, the World Bank, the EU and the AFD are required by the GoM to undertake joint reviews and use common measures and indicators to monitor performance. The Bank will participate in twice-yearly joint reviews as a key requirement for programme supervision. Since the budget speeches have traditionally been the vehicle for announcing major economic policy reforms in Mauritius, one such review will be aligned with the annual budget speech. Further, CPSE financing will be fully aligned with the budget cycle and indeed, the operation supports policy reforms announced in the May 2009 budget.

Expected programme outcomes include a more efficient and sustainable use of public fiscal resources, better delivery of social services, an improved ability to compete in international markets and a more propitious climate for entrepreneurs to operate job-creating, value-added enterprises. Programme beneficiaries will include the entire population of Mauritius, due to the broadness of the reform agenda. Specific beneficiaries will include:

(i) users of publicly-provided social services (through more efficient budgeting and service delivery strategies);

(ii) domestic and foreign entrepreneurs (through overall macroeconomic stability, improved investment climate and ease of foreign trade);

(iii) the Mauritian workforce, including women facing layoffs in the textile industry (through greater employment opportunities in higher value-added sectors); and

(iv) the most disadvantaged members of the population, including the island of Rodrigues (through increased fiscal space for social services and more effective service delivery).

SUGDEN Carina - OSGE2

Source	Montant
BAD	UAC 270.913.559
Co-financier	UAC 238.016.913
Delta	UAC 1.802
Total	UAC 508.928.670