Program Document



Document ofThe World BankReport No. 47224 - RWPROGRAM DOCUMENTON APROPOSED GRANTIN THE AMOUNT OF US$ 35 MILLION FROM THEEDUCATION FOR ALL - FAST TRACK INITATIVE CATALYTIC FUND TO THEREPUBLIC OF RWANDAFOR A EDUCATION FOR ALL - FAST TRACK INITATIVE CATALYTIC FUND BASIC EDUCATION DEVELOPMENT POLICY GRANTSeptember 4, 2009Human Development IIIEastern Africa Country Cluster IIAfrica RegionRwanda - Government Fiscal YearJanuary 1 – June 30 in 2009, and changing to July 1 – June 30 from July 1, 2009Currency Equivalents(Exchange Rate Effective as of January 14, 2009)Currency Unit=Rwandan FrancUS$1.00=RWF 564.6Weights and MeasuresMetric SystemABBREVIATION AND ACRONYMSAfDBAfrican Development BankBSHGBudget Support Harmonization GroupCASCountry Assistance StrategyCIDACanadian International Development AgencyCPAFCommon Performance Assessment FrameworkCSOCivil Society OrganizationsCSRDFIDCountry Status Report for the Education SectorUK Department for International Development DPAFDonor Performance Assessment FrameworkDPLDevelopment Policy LendingDPODevelopment Policy OperationEACEDPRSEast African CommunityEconomic Development and Poverty Reduction StrategyEFA-FTI CFEducation For All-Fast Track Initiative Catalytic Fund EMISEducational Management Information SystemsEPRSEnvironmental Performance Review ProgramESSPEducation Sector Strategic PlanEUFTIEuropean UnionFast Track InitiativeGDPGrowth Domestic ProductGEPGoRGirls’ Education PolicyGovernment of RwandaHIPCHeavily Indebted Poor CountriesHRDPHuman Resources and Development ProjectIASInternational Accounting StandardsIFRSInternational Financial Reporting StandardsIMFInternational Monetary FundJGAJoint Governance AssessmentJRESJoint Review of Education SectorLTSFFLong Term Strategic and Financing FrameworkMDGsMillennium Development GoalsMDRIMultilateral Debt Relief InitiativeMIFOTRAMinistry of Public Services and LaborMINECOFINMinistry of Finance and Economic PlanningMINEDUCMinistry of EducationMoUMemorandum of UnderstandingMTEFMedium Term Expenditure FrameworkNBRNational Bank of RwandaNCDCNational Curriculum Development CentreNECNational Examination CommissionNGONTBNon-Governmental OrganizationNational Tender BoardOPOperational PolicyPADProject Appraisal DocumentPDProject DocumentPEFAPublic Expenditure and Financial Accountability AssessmentPERPublic Expenditure ReviewPFMPublic Financial ManagementPRGFPoverty Reduction and Growth FacilityPRSPPoverty Reduction Strategy PaperREMARPPARwanda Environmental Management AuthorityRwanda Public Procurement AuthorityRwFrRwandan FrancSBSSDRSector Budget SupportSpecial Drawing RightsSILSWApSector Investment LoanSector Wide ApproachTDMPTTCsTeacher Development and Management PolicyTeacher Training CollegesTVETUNDPUNICEFTechnical and Vocational Education and TrainingUnited Nations Development ProgramUnited Nations Children’s FundVice PresidentCountry DirectorSector DirectorSector ManagerTask Team Leader:::::Obiageli K. EzekwesiliJohannes ZuttYaw AnsuChristopher ThomasMargo A. HoftijzerRwandaEDUCATION FOR ALL – FAST TRACK INITIATIVE DEVELOPMENT POLICY GRANTTABLE OF CONTENT TOC \h \z \t "Adjustment Lending Heading 1,1,Adjustment Lending Heading 2,2" GRANT AND PROGRAM SUMMARY PAGEREF _Toc231206968 \h 1I.INTRODUCTION PAGEREF _Toc231206969 \h 3II.COUNTRY CONTEXT PAGEREF _Toc231206970 \h 4RECENT ECONOMIC DEVELOPMENTS IN RWANDA PAGEREF _Toc231206971 \h 4ADEQUACY OF THE MACROECONOMIC FRAMEWORK PAGEREF _Toc231206972 \h 9III.THE GOVERNMENT’S PROGRAM PAGEREF _Toc231206973 \h 10ECONOMIC DEVELOPMENT & POVERTY REDUCTION STRATEGY PAGEREF _Toc231206974 \h 10EDUCATION SECTOR STRATEGY AND PROGRAM 11 IV.BANK SUPPORT TO THE GOVERNMENT’S STRATEGY PAGEREF _Toc231206975 \h 15CHOICE OF INSTRUMENT PAGEREF _Toc231206976 \h 15LINK TO CAS PAGEREF _Toc231206977 \h 16COLLABORATION WITH THE IMF AND OTHER DONORS PAGEREF _Toc231206978 \h 16RELATIONSHIP TO OTHER BANK OPERATIONS PAGEREF _Toc231206979 \h 17LESSONS LEARNED17ANALYTICAL UNDERPINNINGS PAGEREF _Toc231206980 \h 18V.THE PROPOSED EDUCATION FOR ALL – FAST TRACK INITIATIVE CATALYTIC FUND DEVELOPMENT POLICY GRANT PAGEREF _Toc231206981 \h 22OPERATION DESCRIPTION PAGEREF _Toc231206982 \h 22POLICY AREAS COVERED BY THE OPERATION PAGEREF _Toc231206983 \h 24VI.OPERATION IMPLEMENTATION PAGEREF _Toc231206984 \h 26POVERTY AND SOCIAL IMPACT PAGEREF _Toc231206985 \h 26IMPLEMENTATION, MONITORING AND EVALUATION PAGEREF _Toc231206986 \h 27ENVIRONMENTAL ASPECTS PAGEREF _Toc231206987 \h 29FIDUCIARY ASPECTS PAGEREF _Toc231206988 \h 30DISBURSEMENT AND AUDITING PAGEREF _Toc231206989 \h 31RISKS AND RISK MITIGATION PAGEREF _Toc231206990 \h 32ANNEXESANNEX 1: LETTER OF DEVELOPMENT POLICY………………………………………………..……….35ANNEX 2: OPERATION POLICY MATRIX…………………………………………………………………40ANNEX 3: FUND RELATIONS NOTE……………………………….…………………………………..……42ANNEX 4: COUNTRY AT A GLANCE…………………………………………………………………..…....46ANNEX 5: MAP OF RWANDA……………………………………………………………………………...…48The Education For All – Fast Track Initiative Development Policy Bridge Grant was prepared by a World Bank team consisting of Margo Hoftijzer (AFTH3, TTL), Kene Ezemenari (AFTP3, Senior Economist), Keiko Inoue (AFTH3, Education Specialist), Annika Kjellgren (AFTH3, Consultant), Peter Osei, (AFTP3, Research Analyst), Nadege Nouviale (AFTH3, Program Assistant), Michel Welmond (AFTH3, Lead Education Specialist), Johannes Widmann (AFCKE, Country Officer), Sameena Dost (LEFAF, Senior Counsel), and Aissatou Diallo (LOAFC, Finance Officer). The Bank team worked in close collaboration with the DFID team in Kigali, in particular Richard Arden (Senior Human Development Adviser) and Iris Uyttersprot (Education Adviser). GRANT AND PROGRAM SUMMARYREPUBLIC OF RWANDAEDUCATION FOR ALL – FAS TRACK INITIATIVE CATALYTIC FUNDBASIC EDUCATION DEVELOPMENT POLICY GRANTBorrowerRepublic of Rwanda Implementing AgencyMinistry of Finance, Ministry of EducationFinancing DataType: Recipient Executed Trust Fund grant. Terms: Single tranche to be released on effectiveness of the operation. Amount: US$ 35 millionOperation TypeDevelopment Policy OperationMain Policy AreasBasic EducationKey Outcome IndicatorsDeputy CEO for teacher development and management appointed under the Rwanda Education BoardGuidelines for in-service teacher training providers developed “Awarded textbook status” given to publishers for up to four textbooks per subject for Grades 1-12Number of schools with Textbook Selection Committee established (Primary=1926 out of 2408; Secondary=1159 out of 1449)250 textbook evaluators trained Core gender-sensitive indicators available and discussed during the annual Joint Review of Education SectorDisseminate Girls’ Education Policy to every district, including awareness raising workshops with relevant stakeholders to include NGOs, faith-based organizations, and school administratorsThe indicators were agreed upon by GoR and partners during appraisal and have been submitted to MINECOFIN to be incorporated in the updated version of the CPAF. Program Development Objectives and Contribution to CASThe Program Development Objective is to support the GoR’s policy reforms on Teacher Development and Management, Textbooks, and Girls’ Education with the overall aim to improve the quality of basic education. The operation will support the GoR’s efforts to meet its objectives of poverty reduction and transitioning to an inclusive, productive, knowledge-based economy and society, consistent with the country’s fiscal framework and with the CAS. The operation’s DPO supports both CAS themes of promoting economic transformation and growth and of reducing social vulnerability. The CAS document explicitly identifies basic education, and the continued role of the Bank as administrator of the EFA FTI CF Grant, as a key example of an area in which the Bank has a comparative advantage and is able to help achieve clear policy and implementation outcomes.Risks and Risk MitigationRwanda’s internal security and political situation remains stable. However, instability in the region and particularly in eastern DRC presents an important risk. The Bank continues to support efforts aimed at fostering peace and security between Rwanda and its neighbors including through the ongoing Demobilization and Reintegration Program, a third phase which has been approved. The global economic slowdown began to affect Rwanda’s economy in early 2009, having adverse growth effects thereby posing a risk to GoR’s potential to reach its EDPRS objectives. Economic growth is projected to decline from 11 percent in 2008 to just over 5 percent in 2009-10. To withstand the crisis, GoR aims to continue implementing prudent fiscal and monetary policies and structural reforms. Particularly in the light of the recent global financial crisis and Rwanda’s heavy dependence on international assistance, the unpredictability of aid flows poses a significant risk which could hinder implementation of government policies. Increasing the proportion of international on-budget assistance, as well as allocating domestic and external financing towards the highest-priority activities as defined in the CPAF, contribute to mitigating this risk. The provision of a substantial share of financial support in support of the GoR Education Program through pooled sector budget support contributes to mitigating this risk in the education sector. The GoR has committed to accelerating its implementation of reforms in the area of Public Financial Management (PFM). These reforms are advancing, and those areas that still need strengthening are being addressed through implementation of a comprehensive PFM strategy with support from the World Bank and other donors. A recently executed audit of the education sector revealed a number of weaknesses which are being addressed by MINECOFIN and MINEDUC. The small number of staff in MINEDUC and the weak capacity at lower administrative and school levels poses risks for the successful implementation of the government’s program. A restructuring process is ongoing that is expected to address these constraints. This operation aims to mitigate these risks by supporting the government in the development and implementation of reforms that take into account current capacity and by helping to build capacity at, particularly, the central level. GoR faces the challenge to pursue its objectives for both basic and post-basic education while facing capacity and financial constraints. With the support of partners, including the Bank, MINEDUC is developing a costed Post-Basic Education strategy to support the inclusion of a well-balanced resource allocation across education sub-sectors in its revised Long Term Strategic and Financing Framework. Operation ID P115816PROGRAM DOCUMENT FOR AN EDUCATION FOR ALL – FAST TRACK INITIATIVE development policy GRANTTO The REPUBLIC OF RWANDAINTRODUCTIONThe 1994 conflict left the Rwanda education system infrastructure devastated and the teacher force decimated. The initial focus of the Government of Rwanda (GoR) in the area of basic education has been on increasing access to primary education. These efforts have been largely successful. Over the last decade, gross and net enrollment rates increased from 88 to 128 percent and 70 to 94 percent, respectively, with the share of girls comprising slightly more than half of the primary school level student population. The Government is now turning its focus on both increasing access to basic education (including lower secondary education, or tronc commun) and improving the quality of education. Government efforts to improve the quality of basic education aim to increase completion rates and reduce both repetition and drop-out rates, both of which are significantly lower than those benchmarked in the Education For All – Fast Track Initiative (EFA-FTI) Indicative Framework. The primary completion rate, at 53 percent in 2008, is low. Repetition rates are around 18 percent and drop-out rates at 14 percent in primary education (2007). Transition rates from primary to tronc commun are about 62 percent and 55 percent for boys and girls, respectively (2006 data). While 48 percent of pupils participating in the exam at the end of the tronc commun are girls, they constitute only 34 percent of those who pass the exam successfully. The pupil to teacher ratio was 65:1 in 2008 (down from 74:1 in 2007), and the distribution and range of suitable textbooks and other learning materials remain variable. The GoR faces constrained financial resources and administrative capacity, as well as the challenge to manage the implementation of the Government’s decentralization strategy without distorting the implementation of the Education Sector Strategic Plan (ESSP).The EFA-FTI Catalytic Fund (CF) is a multi-donor trust fund that supports countries worldwide to achieve the Millennium Development Goals for education. The Government of Rwanda received a total of US$70 million from the EFA-FTI CF in 2007 and 2008. As of December 2008, the full amount of this grant has been disbursed: US$26 million in 2007 and US$44 million in 2008. The CF grant equaled 23 percent of the GoR’s budgetary expenditures for basic-education, and was used to fund primary and lower secondary school Capitation Grants, basic education textbooks, the construction and rehabilitation of basic education classrooms and other school buildings, and teacher training. For instance, in 2008, the teacher-pupil ratio was significantly reduced through capitation grants by enabling schools to contract nearly 2,000 additional teachers, nearly 7.2 million textbooks were procured for primary schools, and 2,315 classrooms for basic education were constructed.The 2007-08 CF Grant was designed within a sector-wide approach and a financing mechanism that transfers the CF grants to a Designated Account for the financing of the Government’s Education Sector Strategic Plan (ESSP). The Designated Account is a pooled fund providing budget support to the education sector. In addition to the EFA-FTI CF Grant, sector budget support was provided by the United Kingdom’s Department for International Development (DFID), the African Development Bank (AfDB), the Netherlands, Belgium, and the Canadian International Development Agency (CIDA). While most of these development partners are likely to continue providing at least part of their financial assistance to the education sector through this Designated Account, this operation will provide funding through general budget support. The EFA-FTI CF Grant assigns an important coordinating and monitoring role to the in-country education sector development partner group, which in Rwanda is coordinated by DFID. Over the past two years, the Bank has been the Supervising Entity of the CF Grant. DFID and the World Bank have worked intensively and closely with the Government and other development partners to ensure the smooth and well-coordinated implementation of the grant agreement that has been put in place between the Bank and the GoR. The GoR has expressed interest in continuing to receive CF funding in 2009 and beyond to help fill the financing gap for its Nine Year Basic Education Program, after taking into account available resources from domestic and external sources. The Government applied for a one-year Bridge Grant from the EFA-FTI CF Steering Committee for 2009/2010, providing resources for what is considered to be the last year of a three-year program (2007-2009). The allocation of funding by the Steering Committee depends, in addition to the strength of GoR’s program, on the availability of sufficient funding to basic education from both domestic resources and other external sources. As invited by the EFA-FTI CF Steering Committee, Rwanda intends to apply in 2010 for a new three-year Second Grant for the period 2010-2012. Receiving the Bridge Grant in 2009 will allow the GoR sufficient time to revise and update its Long Term Strategic and Financing Framework (LTSFF) and ESSP, which would provide a basis for the three-year Second Grant, and seek the endorsement of these documents from the development partners before submitting the application for the three-year Second Grant to the EFA-FTI CF Steering Committee.In response to a request from the GoR and Donor Partners, the Bank will remain the Supervising Entity of the EFA-FTI CF Bridge Grant for 2009. As a consequence, in addition to the documents that are required by the CF Steering Committee, the application package includes the current Program Document and a draft Grant Agreement between the GoR and the Bank. The EFA-FTI CF Steering Committee approved Rwanda’s application for a Bridge Grant of US$35 million in April 2009. COUNTRY CONTEXTRECENT ECONOMIC DEVELOPMENTS IN RWANDAEconomic growth between 2001 and 2008 has been strong, averaging 6.8 percent annually and peaking at 11.2 percent in 2008. While the services and industrial sectors contributed to growth, a strong recovery in agriculture in 2008 helped improve average growth performance significantly over the period. Agriculture grew by about 15 percent in 2008 largely due to crop intensification and crop disease prevention. The expansion was also partly attributable to an increase in roots and tubers, bananas, and to a lesser degree maize, which are mainly cultivated for domestic consumption and are little affected by external market conditions. Sustaining agricultural production will help Rwanda in efforts towards attainment of EDPRS targets on growth and poverty reduction. Increased agriculture production will also help in managing inflation given that inflation averaged 15 percent in 2008 and rose to 22 percent by the end of the year due mainly to high food and fuel prices.Growth is anticipated to decline from its peak of 11.2 percent in 2008 to just over 5 percent in 2009-10. Contributing to slower growth are expected declines in activity in the services and industrial sectors, particularly tourism and construction, as the global economy slows. The agriculture sector, on the other hand, is expected to continue to perform strongly in 2009, helping to mitigate adverse growth effects from the weakening external environment. With increasing activity expected in the food sub-sector, along with productivity improvements, agricultural output could rise by 10?percent in 2009. As Rwanda is vulnerable to climatic shocks and increases in global fertilizer prices, the country remains susceptible to the possibility of food shortages. GoR will therefore continue to implement its crop intensification program which is focused on providing improved inputs and training to farmers, particularly for food crops. A few factors could lead to slower growth than projected. In particular, some large scale investments in energy and agriculture that are expected to be funded from external borrowing could be delayed should the global recession persist, and external resources become scarce. Fiscal policy would strive to support economic growth and poverty reduction efforts without compromising inflation objectives. Past fiscal expansion was driven by economic growth and improvements in domestic revenues, as well as increased international aid flows. Economic growth, improvement in regular revenue collection and one-off receipts boosted revenues from 13.5 percent of GDP in 2005 to 15.6 percent in 2008. Revenues are projected to fall to about 13 percent of GDP in the 2009/10 fiscal year, and then to rebound steadily in subsequent years reflecting both economic recovery and further increases in tax collection efficiency. Grants are envisaged to remain high at about 11 percent of GDP in 2009/10. These cautious projections only take into account already existing donor commitments. Since most donors are unable to make commitments beyond a 12-18 month period, current projections anticipate a reduction in grants of between 7 and 8?percent of GDP in 2011/12. However, as donors make firm commitments in the next 18 months, the share of grants as a percentage of GDP in 2011/12 is expected to increase. In the event that donor commitments remain low, the macroeconomic framework will be revised accordingly to avoid a financing gap for the fiscal years 2010/11 and 2011/12. The domestic fiscal deficit was about 5.3 percent of GDP in both 2007 and 2008, and is projected to expand to an average of 6.3 percent of GDP in 2009/10, with the aim of supporting growth while maintaining inflation in the single digits. The increase in the fiscal deficit will be financed by draw-downs on government deposits in the central bank accumulated through the savings from one-off revenues in previous years. Government investments in infrastructure will remain high in 2009/10, contributing to poverty-reduction efforts and providing much-needed stimulus to economy.Fiscal projections for both the calendar year 2009 and fiscal year 2009/10 envisage no financing gap, even though there are risks that the impact of economic slowdown on the fiscal revenues turns out stronger than expected. Rwanda’s acceptance of the East African Community (EAC) common external tariff (CET), elimination of tax on large tracks and some other taxes could lead to revenue losses of up to 0.7 percent of GDP in 2009/10. However, the losses from adopting the CET could be partially covered using the European Union (EU) facility that compensates countries for revenue losses arising from membership in regional trade arrangements, and remaining permanent losses from adopting CET and tax elimination would be largely offset by additional revenue measures contemplated by the government. These measures include raising fuel price levy earmarked for road maintenance, gradually eliminating the implicit subsidy applied to the petroleum products, and increasing taxes on cell phone air time. Should revenue losses turn out to be greater than anticipated, the Bank could explore the possibility of bringing forward some IDA resources. Government will also strive to raise grants from additional sources. The balance of payments projections envisage an increase in the current account deficit in 2009 and beyond, which would require using the international reserves accumulated in previous years. Reflecting falling world prices and shrinking demand, Rwandan export receipts declined sharply from early 2009. The decline in imports did not match the reduction in exports, leading to an expanding current account deficit leading to pressure on the official international reserves. As a result, the reserve coverage of imports is projected to decline from more than 5 months at end-2008 to about 4 months in 2012.Inflation is projected to return to single digits in the second half of 2009. Inflation is projected at around 11.5 percent, on an annual average basis, in 2009 and is expected to gradually decline to between 5 and 6 percent over the medium term, after the impact of international fuel and food prices has passed through. Achievement of these objectives and targets also hinges on the continuation of prudent macroeconomic policies. Table 1 provides the most recent projections of macroeconomic indicators.Table 1 – Rwanda: Medium Macroeconomic Framework 2005-2013The approaches to addressing a potential tightening of fiscal space will help maintain the overall budget envelope and ensure priority and poverty reducing areas are protected in the budget. Due to improved revenues from domestic sources and international grants, the GoR increased its expenditure and net lending in 2008 to nearly 27 percent of GDP. Spending will remain at about this level in the 2009/10 fiscal year. In 2008, capital spending was equivalent to 11 percent of GDP, while current spending amounted to about 15 percent of GDP. Projections for 2010-12 envisage keeping current expenditures at the same level of about 15?percent of GDP, while capital expenditures are projected to conservatively decline to about 10?percent of GDP in 2011/12. Monetary management remains a challenge amid slowing economic activity and limited choice of instruments for monetary policy. The National Bank of Rwanda carried out liquidity injections in the face of liquidity constraints in the first quarter of 2009. Looking forward, the main challenge would be to support the growth of the banking sector and credit to the economy without compromising the medium-term inflation objectives. Should the balance of payments deteriorate more than currently envisaged, greater exchange rate flexibility may be needed to prevent the loss of foreign exchange reserves.Rwanda is highly aid dependent although debt relief and grants have maintained external debt at a sustainable level. International grants and loans represent about half of total GoR revenue. On-budget aid flows, including budget support, have substantially increased in recent years. Debt relief following the HIPC Initiative and MDRI debt had reduced Rwanda’s external debt in 2008 to around 15?percent of GDP, which was a significant reduction from earlier years when debt was over 60 percent of GDP. Rwanda’s export base (goods and services) is still small, which limits the country’s capacity to carry external debt. The debt service reduction and trends in grants facilitated continuation of spending in key programs to support growth such as investments to improve agricultural productivity. The external current account deficit (including grants) is projected to increase to between 8 and 10 percent of GDP over the medium term, and is to be financed largely by international donor flows and FDI to help keep reserves at adequate levels. Box SEQ Box \* ARABIC 1: Likely Impact of the Global Economic Crisis in Rwanda, 2008-2010 Rwanda’s economy began to experience the impact of the global economic crisis in early 2009 when exports declined sharply with falling international commodity prices and external demand, and economic activity slowed particularly in the construction, mining and tourism sectors. A continued global slowdown would negatively affect GDP growth through the impact on grants, foreign investment, remittances and the financial sector. There would need to be a downward revision on spending as revenue declines, particularly if foreign aid becomes scarce. Export receipts would also be negatively affected leading to a widening of the current account deficit. Also, health and education outcomes are particularly susceptible to household economic conditions. Financing of services could be adversely affected due to lower revenues, reduced household ability to pay user fees, and any potential reductions in grants.A continued global slowdown would lead to an average annual projected growth of just over 5 percent (compared to 11.2 percent for 2008), over the medium term. The lower growth trend would arise from lower tourism receipts, reduction in remittances and a slowdown in the construction sector. Mineral exports would also be affected, as China and India (both destinations for mineral exports) cut back on production and imports. Lower demand for Rwanda’s key exports, tea and coffee, could also affect export receipts and growth in agriculture. Over the medium term, improved agricultural productivity –especially for food crops—in line with the Crop Intensification Program and the LWH Program could help mitigate adverse effects on agricultural and broader growth. Reflecting the sharp deterioration in the external environment, exports of goods and services are expected to decrease by over 30 percent in dollars terms in 2009/10 compared to 2008. This decline will be partially offset by a reduction of approximately 7 percent in imports. Despite frontloading of foreign assistance, the current account deficit (including official transfers) is expected to deteriorate slightly from 5.5 percent of GDP in 2008 to about 6.6 percent of GDP at end 2009. Foreign direct investment and other capital inflows are also expected to fall resulting in a deterioration of the overall balance of payments .This deficit will be funded with a draw-down of reserves. From 2010 exports are expected to recover as the global environment improves. However the current external shock could have a lasting impact on the reserve coverage of the country which could stabilize at about 4 months of imports over the medium term down from about 5.3 months at end 2008. The fiscal program in 2008 remained broadly on track despite increased expenditures for the purchase of seed, fertilizer, and food storage (largely financed by grants from IDA and AfDB, and the road maintenance fund). Revenues outperformed their targets reflecting an increase in collections from income and consumption taxes, high inflation and GDP growth. Although it is too early to get a good assessment of the overall and concrete impacts of the global financial crisis, the authorities are taking proactive measures to mitigate any possible negative impacts. In its mini-budget for January to June 2009, fiscal policy is aiming at: i) limiting contingent spending; and ii) saving higher-than-programmed revenues for future use. The budget deficit is expected to remain on track for 2009 due partly to these measures.In terms of the financial sector, all 8 commercial banks have been in compliance with the minimum capital requirements of RwFr 5 billion (approx. $9.2 million); foreign exchange exposure ratios reported have been within the prudential BNR benchmarks; and the quality of the credit portfolio has improved. As of end June 2008, gross non-performing loans (NPLs) reached RwFr 32.2 billion against RwFr 40.1 billion in December 2007 and the average ratio of NPLs to total loans declined to 12 percent from 18.5 percent in 2007. Although to date there is yet no impact of the crisis on the level of capitalization of banks and NPLs, slower growth could result in rising credit risks and heighten the tight liquidity situation, increasing the vulnerability of the banking sector.To manage the pressure of high resource inflows on inflation, the Central Bank has instituted measures to increase the flexibility of the exchange rate enabling more effective sterilization of liquidity (which is the Central Bank’s primary instrument for monetary policy). In 2008, the real exchange rate appreciated by 22 percent following the rise in the US dollar—to which the Rwandan franc is closely tied—against other currencies. It has been exacerbated by the high rate of domestic inflation (estimated at 22 percent in December 2008). The result has been a rising demand for foreign exchange and imports. This acceleration in imports relative to exports is a concern for the authorities even as world commodity prices continue to fall. Despite higher sales of foreign currency by the authorities, foreign exchange reserves exceeded programmed levels due to higher than expected external budget support disbursements. The one-time TIGO license fee of US$60 million also contributed to an increase in foreign reserves. As a result, the actual level of international reserves was $580.7 million at end September 2008, and is estimated to have increased to $596 million by end-2008. Increasing the flexibility of the nominal exchange rate would help maintain external competitiveness and keep the current account at a sustainable level. The pace of real appreciation has slowed in recent months, to about 15 percent currently.ADEQUACY OF THE MACROECONOMIC FRAMEWORKThe medium term macroeconomic framework is adequate for the purposes of the proposed operation and the program supported by the IMF is on-track. Medium-term policies aim at maintaining macroeconomic stability and sustaining debt at prudent levels. Consistent with these policy objectives, the central bank is committed to containing price pressures arising from fiscal expansion and scaled-up external assistance. Inflation is expected to be reduced to single-digits in the second half of 2009. Fiscal policy has been prudent and well managed, and along with monetary policy, is expected to be implemented cautiously over the medium-term to achieve overall macroeconomic objectives, including easing inflation and possible balance of payments pressures without stifling economic growth. In line with agreements reached with the IMF, the government is following policies to ensure that the external debt burden will remain sustainable. External debts are limited to loans with minimum of 50 percent grant element and volumes are being kept consistent with debt sustainability analysis. A comprehensive debt management strategy has been developed which sets limits for loans and loan guarantees. The Bank is providing technical support in the implementation of the strategy. Improvements continue to be made in the financial sector with all financial indicators remaining within their prudential benchmarks recently. A few concerns relating to liquidity ratios are being addressed through IMF technical assistance to the central bank. Foreign exchange reserves would continue to accumulate over the medium-term, albeit more slowly than in recent years; reserves amounted to the equivalent of more than 5 months of imports at end-2008. Rwanda continues to perform well under its program with the IMF, a demonstration of the government’s commitment to continue to pursue prudent macroeconomic policies, and implement much needed structural reforms.In August 2009, the IMF completed the sixth review under its three-year Poverty Reduction and Growth Facility (PRGF), approved in June 2006. Rwanda’s program performance through March 2009 was deemed broadly satisfactory. All quantitative end-December 2008 performance criteria for the sixth review were met. However, largely due to external and domestic shocks in early 2009 (international commodity prices fell, external demand weakened, and the conflict in Eastern Democratic Republic of Congo escalated), several indicative targets for end-March were missed. The IMF noted that the Government’s policy response to the shocks was broadly appropriate. Fiscal performance in 2008 was better than envisaged under the program, but delayed donor disbursements and external shocks created challenges to budget execution in early 2009. The macroeconomic program for the 2009/10 fiscal year is designed to cushion the impact of the global economic crisis, while preserving medium-term fiscal and external sustainability. While growth is projected to reach about 6 percent on average over the medium term, from a little over 5 percent during 2009-10, significant downside risks arise from the uncertain path of recovery in the world economy. Additional policy adjustments may be required should the world economic crisis or its impact on Rwanda worsen beyond current expectations. Liquidity shortages or solvency problems in the banking system may also warrant some additional policy adjustments. The sixth review of the PRGF also highlights the GoR’s continued commitment to implementing structural reforms. In the period ahead, focus will be on further reforms in the areas of public financial management, tax administration, financial sector development and improvement in the business environment. THE GOVERNMENT’S PROGRAM ECONOMIC DEVELOPMENT & POVERTY REDUCTION STRATEGYThe 2008-12 Economic Development and Poverty Reduction Strategy (EDPRS) emphasizes economic growth and poverty alleviation, continuing to build on achievements in human development and basic social services, with an emphasis on decentralization and a greater role for the private sector. The EDPRS is the country’s second PRSP and emphasizes accelerating progress towards the MDGs, including improving education outcomes and gender equality (MDGs 2 and 3). The EDPRS encompasses three flagship programs: i) Sustainable Growth for Jobs and Exports, ii) Governance, including expanding decentralization and enhancing accountability; and iii) the Vision 2020 Umurenge Program (VUP), designed to alleviate rural poverty and improve productivity. With active support from the Bank, the development of the EDPRS has involved extensive consultation with a wide range of stakeholders. The process was led by a National Steering Committee providing high level guidance, supported by a Technical Steering Committee made up of central and decentralized government representatives as well as representatives of civil society, the private sector, and development partners. Sector-specific and selected cross-cutting issues were discussed by the nineteen sector working groups and cross-cutting issues teams, which were chaired by a government representative, co-chaired by a development partner, and included representatives of government, partners, the private sector and civil society.The GoR’s medium term expenditure framework (MTEF) to implement the EDPRS during the period 2008-12, including information on 2007 budget allocations, is presented in Table 2. The annual budget allocation to education grew from US$179 million in 2007 to US$190 million in 2008 (an increase of 6 percent), and is expected to increase further to an average annual allocation of US$260 million during the period 2009-12. Rwanda’s objectives for education are reflected in the EDPRS, the Growth Flagship, and Vision 2020 and support Rwanda’s overall goal to transition to an inclusive, productive and knowledge-based economy. To achieve these objectives it is essential to improve equitable access to quality education which should be increasingly relevant for making social and economic progress. This is projected to be achieved by the establishment of a curriculum that imparts basic skills in traditional subjects, while also promoting social cohesion and making closer links between the content of education and the needs of the labour market. As per the EDPRS, the priority areas for the education sector in Rwanda are to increase the coverage and quality of nine year basic education, strengthen Technical and Vocational Education and Training (TVET) and improve the quality of higher education. Table 2. Medium term expenditure plan for implementation of the EDPRS, 2008-12 (US$ million)*200720082009-12Total2009-12Annual AverageHuman Development and Social Sectors3013391,689422Education1791901,040260 % of totalHealth & Population89108463116Social Protection273116341Youth, Culture & Sport611236Infrastructure & Productive Sectors2803471,947487Governance & Sovereignty3904333,814954Total9711,1197,4511,863* Expenditure figures include on-budget international grants and loans, which includes the EFA-FTI CF Grant.Source: Government of Rwanda, Ministry of Finance and Economic Planning (2007) “Budget Framework Paper 2008-10,” SeptemberEDUCTION SECTOR STRATEGY AND PROGRAMThe education sector’s financing framework and strategy are described in the Long Term Strategy and Financing Framework 2006-2015 (LTSFF) and further elaborated in the Education Sector Strategic Plan 2006-2010 (ESSP). With the main goal of providing a foundation for increased and equitable access to education for all children, the ESSP provides the overarching framework for a sector-wide approach to the development and delivery of education services in Rwanda. The purpose is to assist the poverty reduction process by enhancing Rwanda’s human resources through the development of a learning society and provision of knowledge and skills. The ESSP sets out objectives, policies, priorities, strategies, key activities and indicative targets. It is updated on a rolling basis and has been revised to ensure consistency with the 2008-2012 EDPRS. Both the ESSP and the sector’s MTEF are guided by the LTSFF. The Ministry of Education (MINEDUC) aims to develop an updated version of the LTSFF by the end of FY09. Both the ESSP and the LTSFF were endorsed by the education sector development partners in Rwanda in 2006, prior to the approval of the first EFA FTI CF Grant (2007-08).The Nine Year Basic Education Policy, adopted by Cabinet in February 2006, translates the objectives from the LTSFF and ESPP into more detailed and elaborate indicators, targets, and associated strategies for basic education. Implementation of the policy is expected to result in universal primary education both in terms of enrolment and completion, and a rapid increase in enrollment in tronc commun (lower secondary). In the implementation of the program, particular focus and resources have been directed to capitation grants, classroom construction, textbooks, and training. A portion of the increased amount of the capitation grant (from Rwandese Franc (RwFr) 2,500 per child in 2006 to about RwFr 7,000 per child in 2008) enables primary schools to provide teachers with additional monthly allowances. The provision of capitation grants enabled schools to contract 1,968 teachers in 2008, which contributed to significantly reducing the teacher-pupil ratio. GoR increased its targets for classroom construction from 1,500 primary and tronc commun classrooms in 2005 to 2,500 in 2007. In 2008, more than 2,300 primary classrooms were built. Yet, due to the increase of new students enrolled (332,000, or 18 percent more in 2008 than in 2005), pupil to classroom ratio increased from 62:1 to 71:1 between 2005 and 2008. The number of textbooks procured for primary schools in 2008 has reached nearly 7.2 million books. Finally, MINEDUC provided training for district education officers in teacher management, as well as for pre-school and primary school classroom and head teachers in topics such as language of instruction, school management, and special needs education. Rwanda’s consistent focus on reaching the education MDGs has contributed to positive outcomes in primary and secondary education in the past years (see Table 3 above). Both gross and net enrollment in primary education continues to increase, reaching 128 percent and 94 percent, respectively, in 2008. Although completion rates are on the rise (53 percent in 2008 compared with 47 percent in 2005), they need to increase faster to keep Rwanda on track to reach 100 percent completion rate by 2015, as per the MDGs targets. While the increase in student enrollment has put pressure on the system, the pupil-teacher ratio improved in 2008 compared with 2005, while the share of qualified teachers grew from 94 percent to 97 percent during the same time period.There is equal gender access to primary education and, although gender equality in access to secondary education is improving, significant gaps persists in terms of performance, particularly in the later years of basic education. There are slightly more girls enrolled than boys in primary education and the gender gap in transition rates to tronc commun decreased from 7 percentage points in 2005 to 3.9 percentage points in 2007. However, substantial gender disparities persist in the later years of basic education, as demonstrated by the share of girls among those pupils who successfully complete the examination at the end of tronc commun, which has hovered around one-third during the past years. Table 3: Primary and secondary education indicators (2005-2008)Level of Education2005200620072008PRIMARY*Number of students 1,857.8412,017.9912,150.4302, 190.270Gross enrollment rate137.3145.3151.9127.9- Girls137.8147.2152.5128.5Net enrollment rate93.595.095.894.2- Girls94.797.096.895.1Repetition rate15.818.117.7-- Girls15.818.117.7-Drop-out rate14.614.313.9-- Girls 13.814.413.1-Completion rate46.751.752.052.5- Girls46.552.053.052.9Pupil-Teacher ratio697174.065Pupil-qualified teacher ratio74717567Pupil-classroom ratio62667071Tronc Commun**Transition to TC58.358.754.6-- Girls54.855.352.7-Number of students142.209148.958169.682182.284Gross enrollment rate16.618.420.5-Net enrollment rate9.010.1013.10-Repetition rate8.77.7--Pupils taking exam350234471246719-- % Girls47.846.847.7-Pupils passing exam129261971320578-- % Girls32.434.334.2-* Source: MINEDUC, Indicators in Education System, February 2008** Source: JRES June 2008 Aide Mémoire, and National Examinations councilAs access to primary education grew, GoR has increasingly focused on improving the quality of basic education and on increasing the transition from primary school to tronc commun. The need for this shift of focus, while not losing sight of improving and maintaining access to primary education, was acknowledged and supported by development partners during the Joint Review of the Education Sector (JRES) held in June 2008. Since then, the Cabinet adopted three strategies to accelerate the implementation of the Nine-Year Basic Education program with the combined aim of strengthening access and quality: (i) double shift schooling at the primary level, (ii) reduction of core subjects, and (iii) subject-based teaching specialization. For the 2009 school year, the GoR implemented double shifting for all primary schools. The initiative is expected to expand access to primary education while limiting the burden on the existing supply of teachers. The reduction of core subjects—from 9 to 4 subjects for Grades 1-3 and from 12 to 6 for Grades 4-6—is expected to offset the potential negative effect on quality of reducing class time available for pupils within the double shift schedule. Finally, each teacher is expected to teach a maximum of two subjects out of the reduced number of core subjects. The subject-based teaching specialization has resulted in teachers rotating from subject class to subject class while the students remain in one classroom. Since the three strategies have only recently been introduced, close monitoring of the impact on the ground is needed.An innovative Capacity Building Fund has been established to support the effective implementation of the dual goal of quickly expanding access and improving quality of education through managed growth. Institutional and human resource capacity is critical to ensure that expanded access does not compromise education quality in the classroom. An innovative Capacity Building Fund has been established, which pools funds provided by DFID, UNICEF and CIDA. MINEDUC has developed a rolling two year Institutional Development and Change Management plan targeting key priorities that will be financed through this fund over the next three years. Financing of the Education sector Total public expenditure on education as a share of GNP was 3.8 percent in 2006, which lags behind the Sub-Saharan Africa medium of 4.4 percent and the global medium of 4.9 percent. Although the government has restricted the relative growth of the higher education budget allocation since 2003, the portion of tertiary education has remained around 30 percent since 2003 and is higher than all other countries listed in the below table. In primary and secondary education expenditures, the country lags behind its neighbors but the discrepancy is particularly noticeable at the secondary level. Table 4 below compares education spending as a share of GDP in selected neighboring countries.Table 4: Comparative Education Expenditure (2006)?RwandaBurundiKenyaMalawiUgandaSSA AveWorld AveEducation as % of GNP3.85.26.95.95.34.44.9Education as % of Gov Spending191818?181815Primary as % of GNP1.92.73.632.51.91.4Secondary as % of GNP0.41.71.50.50.811.6Source: UNESCO, Global Monitoring Report 2009The recurrent budget for education, expressed in real terms, has increased. This is particularly the case for expenditures on primary and secondary education. As figure 1 below illustrates, real recurrent expenditures on both primary and secondary education in 2006 were approximately 40 percent higher than they were in 2003. Tertiary education recurrent expenditures increased by a moderate 7.5 percent in this period. The rise in overall recurrent expenditures for the education sector is the result of an increase of spending on both salaries and on goods and services, with an increasing share of the recurrent budget being allocated to goods and services. In 2007 for instance, 43 percent of recurrent expenditures were allocated to goods and services, compared to only 19 percent in 2004. In the same period, the share of recurrent expenditures allocated to salaries fell from 68 percent to 48 percent. These figures are somewhat misleading, however, as the salary top-ups for teachers, which are funded through the capitation grants, are not included in the ‘salaries’ expenditure category. The update of the Country Status Report for the Education Sector (CSR), which will be finalized in FY10, is expected to shed more light on recurrent expenditure trends and their underlying causes.Figure 1 – Education Sector Recurrent Budget 2001-2006 by level (real 2001 terms) Source: Rwanda Education PER Report, July 2007.Rwanda made substantial achievements in the planning and decentralization of expenditures for the education sector. The move toward a results-oriented budget and MTEF has been accompanied by reforms in the education sector. Important actions were taken, including the development of an Education Sector Strategic Plan (ESSP) aligned to the results-oriented sector MTEF, the initiation of capitation grants for primary schools, and provision of grants to promote access for the most vulnerable segments of the population. Capitation grants were transferred from the central government to primary schools to cover the loss in fee income from the introduction of the Government’s policy of fee-free primary education. Fee-free basic education was introduced in 2007 and capitation grants are also provided to tronc commun classes, supporting 9 years of basic education provision.Decentralized budgets for districts include funding for salaries to teachers, capitation grants, and school feeding. Since 2008, capitation grants for primary schools are divided in two distinct components: learning support and teacher support. For example, the capitation grants provide bonuses of 12,500 RwFr per teacher/month, 3,500 RwFr per pupil/month and an additional supplement for hiring contract teachers to improve teacher-student ratios and reduce the burden of double shifts for teachers.Rwanda’s government resources for education represent a mix of both external and domestic funds, which supports one comprehensive education plan. A well-established coordination mechanism is in place overseen by DFID on the development partners’ side. In 2006, several partners signed a Memorandum of Understanding (MoU) with GoR to provide sector budget support (SBS) for implementation of the ESSP through government systems. The current SBS donors include DFID, AfDB, the, Netherlands, Belgium, and Canadian CIDA. A significant step to improve donor coordination and proper and timely funding for the sector is Rwanda’s acceptance into the Education for All - Fast Track Initiative (EFA-FTI) to help the sector meet its MDG. The US$70 million that the EFA-FTI Catalytic Fund Steering Committee granted in 2007 and 2008 provided a substantial contribution to MINEDUC for the implementation of the basic-education aspects of its ESSP and LTSFF. The first EFA-FTI CF Grant has had a very positive effect on access to free primary education (and now free nine-year basic education) by assisting in the provision of capitation grants to schools, classroom construction, teacher education, and textbooks. The GoR now faces the challenge of improving the quality of basic education, which requires several reforms, such as better qualified and equitably deployed teaching staff, increased access to appropriate learning equipment, an improved learning environment for girls, monitoring of learning achievement, and a more focused core curriculum Such reforms are critical both for achieving the Government’s objective of universal completion of primary education (e.g., repetition and dropout rates remain quite high, completion rates low) and later universalizing the nine-grade basic education cycle.BANK SUPPORT TO THE GOVERNMENT’S STRATEGYCHOICE OF INSTRUMENTA stand-alone Development Policy Operation (DPO) was chosen over an investment operation for the following reasons. First, a DPO provides a vehicle for effective support for the Government’s Nine Year Basic Education program by allowing consultations between the government and development partners to focus on the needed policy and institutional reforms better than an investment operation would.. This operation provides resources for what is considered to be the last year of a three-year program (2007-2009) that is funded by the EFA-FTI CF. In 2007 and 2008, when the Government received EFA-FTI CF resources, well-coordinated stakeholder consultations focused on the implementation of the key aspects of the LTSFF and ESSP, rather than on specific activities that are supported by various donors. This is considered to be a key factor that contributed to the successful results of the joint education sector reviews in the past years. Second, a DPO is a step forward in the implementation of the Paris Declaration commitments. The US$70 million in EFA FTI CF funding that was allocated to Rwanda for 2007 and 2008 was deposited into a designated pooled account for the financing of the implementation of the program of the Ministry of Education. Both the GoR and development partners have considered this to have been an effective mechanism to aid the Ministry of Education, and a substantial share of assistance to the education sector continues to be provided through the designated account. Due to revised Operational Policy 14.40, the EFA FTI CF Grant can no longer be disbursed through this mechanism if the Bank continues to be the trust fund’s supervising entity. As a consequence, the operation must be either a DPO or a SIL. The GoR, local development partners, and the Bank have expressed a strong preference for general budget support over investment operations in Rwanda. Stakeholders have indicated that disbursing EFA FTI CF funds through an investment operation would be considered as a step backwards vis-à-vis Paris Declaration commitments. Many of the other development partners provide the bulk of their financing through sector budget support. Finally, inclusion of EFA FTI CF funds into either the Fifth Poverty Reduction Strategy Grant (PRSG V) or the First Community Living Standards Grant (CLSG-I), was rejected principally because the availability of EFA FTI CF funds will remain uncertain until the EFA FTI CF Steering Committee decides whether to approve Rwanda’s current application at the end of April 2009. It was deemed unacceptable by the Country Management Unit to delay the development of the PRSG V or CLSG-I to allow the inclusion of EFA-FTI CF funds. In addition, the program document for this operation constitutes one of the main documents that will be used by the EFA FTI CF Steering Committee to determine whether funding will be allocated to Rwanda. From the perspective of the Committee, it would be preferable to propose a self-standing operation where the objective is explicitly aligned with government’s EFA-FTI program rather than proposing an operation of which basic education objectives are merely one among many that the operation supports. LINK TO CASThe operation will support the GoR’s objectives of poverty reduction and transitioning to an inclusive, productive, knowledge-based economy and society, consistent with the country’s fiscal framework and with the new CAS. The CAS document explicitly identifies basic education, and the continued role of the Bank as administrator of EFA FTI CF funding, as a key example of an area in which the Bank has a comparative advantage and is able to help achieve clear policy and implementation outcomes. The operations development objective of supporting the GoR’s policy reforms on Textbooks, Teacher Development and Management, and Girls’ Education with the overall aim to improve the quality of basic education, supports both CAS themes of promoting economic transformation and growth, and of reducing social vulnerability. Concerning the former, growth diagnostics demonstrate that low human capital and lack of skills result in low returns on economic activity which are one of the main causes of insufficient growth. Low skills levels are higher obstacles to economic growth than, for example, the high costs of finance or governance constraints. Improvements in the quality basic education will address this constraint by increasing the productivity of those who enter the labor market after completing basic education. It will also boost both the number and preparedness of those pupils who will pursue post-basic education. Concerning the latter, quality basic education has a demonstrated positive impact on reducing poverty and social vulnerability. In particular, improving access to and quality of basic education for girls has shown to affect positively the age at which they have their first child, their fertility rate, and their children’s life span. COLLABORATION WITH THE IMF AND OTHER DONORSThe Bank’s PRSG in Rwanda has been prepared in parallel with the IMF’s Poverty Reduction and Growth Facility (PRGF) review. The IMF leads the macroeconomic dialogue in Rwanda and recently completed its sixth review of Rwanda’s economic performance under its PRGF arrangements. The completion of the review brings total disbursements under the arrangement to a total of SDR 8.01 million (about US$12.4 million). The IMF’s work complements the PRSG’s focus on structural and institutional reforms. The proposed EFA-FTI CF Bridge Grant will work closely to align objectives, resources and dialogue with that of the IMF primarily through its close collaboration with the PRSG IV Bank operation. This operation is consistent with the other documents of the Bridge Grant application package as prepared by the government and endorsed by the education sector development partners. In particular, the education sector development partners will provide guidance to the Bank as Supervising Entity on whether the prior actions are met and use their coordination and monitoring mechanisms to track progress of performance and monitoring indicators.Within the framework of the EFA-FTI CF operation in Rwanda, the Bank has responsibilities both as one of the partners in the education sector development partners group, and as the Supervising Entity. As a member of the education sector development partners group, the Bank consults with the government on the implementation of the ESSP. It also shares responsibility with the other partners in endorsing MINEDUC’s progress and implementation plans of the Nine Year Basic Education program. As administrator of the CF Bridge Grant, the Bank’s fiduciary framework will apply in the implementation of the Grant. RELATIONSHIP TO OTHER BANK OPERATIONSHuman Resources and Development Project (HRDP, P045091). The HRDP was approved in June 6, 2000 and is expected to close on December 31, 2009. The HRDP’s objective is to assist Rwanda in its efforts to develop and implement a sustained program of capacity building through education and skills development in order to develop a critical mass of trained human resources. The Development Project Objectives of the HRDP are: (i) improve access to basic education by increasing its intake capacity through community participation in rehabilitating, constructing and equipping schools; (ii) improve the quality of inputs (teaching, instructional materials, methods of supervision) in primary and secondary education; (iii) heighten awareness and train students, parents and educators to combat the AIDS epidemic; and (iv) build institutional capacity and improve efficiency in the management of the education system through focused training, studies and policy development, and initiation of a Sector-Wide Investment Program. The principal remaining activity under the HRDP is the construction of a secondary school for girls. LESSONS LEARNEDLessons drawn from PRSG operationsThe Bank’s budget support experience has demonstrated that substantial outcomes can be achieved with strong commitment on the part of GoR and with Bank support designed to develop the needed capacity for implementation. Key lessons drawn from the first PRSC/G series in Rwanda highlighted the importance of (i) cross-sector linkages and synergies; (ii) strong stakeholder commitment; (iii) sound joint analytical work to inform policy dialogue and reforms; and (iv) a common harmonized accountability framework aligned around policy objectives to lessen transaction costs and enhance ownership. As indicated below, these principles have been largely taken into account during the implementation of the sector budget support to the education sector.Lessons drawn from supporting the education sector A variety of lessons has been drawn from the implementation of the ESSP and the cooperation between GoR and development partners in the education sector in recent years. These lessons have been incorporated in the design of this operation, have helped identify reform priorities within the ESSP, and have helped shape the current coordination mechanism among stakeholders. In particular:The sector budget support modality through which development partners, including the EFA-FTI CF Grant, pooled funds for the implementation of (basic) education objectives, reduces transaction costs and allows consultations between the government and the education sector development partners to focus on essential policy and institutional reforms; A well-functioning education sector development partners group greatly contributes to the effective provision of external support, both financially and in terms of policy discussions with the government. A continuous and transparent consultative process between the government and development partners is essential to inspire sufficient confidence among partners to be willing to rely on the domestic quality assurance and fiduciary systems. This requires among others a rigorous monitoring and evaluation process based on jointly agreed, measurable objectives and targets, as well as a communication process that is satisfactorily open and extensive to all stakeholders involved. For example, consultations initiated by MINEDUC on the accelerated implementation of the Nine Year Basic Education program have improved the common understanding and commitment of the program’s objectives by key stakeholders. The Joint Review of the Education Sector, conducted by MINEDUC, and the Joint Sector Budget Reviews conducted with the Ministry of Finance and Economic Planning (MINECOFIN) are important tools for monitoring budget execution and sector performance. The incorporation of a Capacity Building and Institution Development Fund in MINEDUC’s organizational structure is considered to contribute to a strengthened implementation of the ESSP by providing pooled funding for capacity building and enabling MINEDUC to plan and manage the overall capacity building process. In the past two years, the Fund has supported among others the improvement of capacity for school management of both school directors and parent-teacher associations (all primary and secondary school directors received in-service training), and the development by the Inspectorate of Minimum Quality Standards for primary and secondary education and Guidelines for School Effectiveness.The pace at which appropriate reforms can be developed and successfully implemented is in great part determined by the capacity at central and decentralized administrations and educational institutions. In line with the EDPRS and ESSP, there is a strong drive within the government to gain fast and strong results in improving access to and quality of both basic and post-basic education. However, staffing numbers in MINEDUC and District Education Units are low and capacity at lower administrative levels and in schools are weak and need to be strengthened. A restructuring process is ongoing that is expected to assist in addressing capacity and administrative constraints. In addition, the Capacity Building and Institution Development Fund (see above) provides resources for capacity building at schools as well as decentralized and central administrative levels. ANALYTICAL UNDERPINNINGSThe analytical work that the GoR and partners have undertaken in recent years reflects the progress that has been made toward reaching basic education objectives, supports the shift in focus to the quality of basic education, and forms the basis for selecting teacher competencies, textbooks, and girls’ education as the policy areas which this operation supports. This research base has also helped identify the areas that require further analytical work in the short to medium term. The update of the education sector’s Country Status Report (CSR), which will be completed in FY10, is expected to provide further insights into relevant areas such as teacher supply and demand, the transition from primary school to tronc commun, and the impact of decentralization on decision-making and resource allocation. Table 5: Analytical Underpinnings of the Operation Education in Rwanda: Rebalancing Resources to Accelerate Post-Conflict Development and Poverty Reduction, World Bank, June 2003 (“Country Status Report”)GeneralChallenges shifted from post-conflict re-establishment of the education system to charting an appropriate and sustainable long term course for the sector. Main challenges include mobilization and efficient use of resources, balancing school accessibility against economies of scale, and increasing access of vulnerable groups. Teacher competenciesNeed to improve teacher competencies to enhance student learning, in a context of fast-growing enrollment and low completion rates.TextbooksNeed to increase textbook availability to enhance student learning, in a context of fast-growing enrollments and low completion rates. Girls EducationNeed to address the persistently inferior test scores of girls throughout the education system.Public Expenditure Review of the Education Sector – Rwanda, REPIM / MINEDUC, July 2007GeneralRwanda was able to allocate increased resources to the sector, expanded primary and secondary education, decentralized education administration and management, and introduced performance contracts. Required changes include increased support to districts and sector for improved service delivery.Teacher CompetenciesNeed for a substantial increase in the provision of in-service training across the country, supported by the strengthening of teacher training centers. TextbooksNeed to reform approach to textbook procurement and strengthen procurement capacity, as the current mechanism is time-consuming and costly. Teacher Motivation and Incentives in Rwanda: A Situational Analysis and Recommended Priority Actions, Bennel &Ntagaramba, 2008Teacher Education for Quality Education, Rutayisire, 2008 (paper presented at the 2008 JRES)Teacher CompetenciesCurrent provision of in-service training is ineffective, supply-driven, ad hoc, with little reinforcement, unevenly distributed across regions, and considered to be of poor quality by a majority of teachers. A more effective system of continuous professional development should be institutionalized at central and district levels.Rwandan Textbook Study, Bontoux & Read, 2007Report of the Rwanda Textbook Study, Read, Bontoux, & Umubyeji, 2008 Reform of Textbook Provision in Rwanda, Bontoux, Buchan & Read, 2009TextbooksDistribution is uneven, there are shortages in key subject areas, and procurement is monopolistic and costly. Distribution and quality is constrained by inadequate planning, time-consuming procurement processes, and inadequate distribution and stock management. There is a need for greater competition, strengthened local publishing and printing industry, decentralized procurement, commercial distribution, and school-level selection of textbooks. Analysis in preparation of the Girls’ Education Strategic Plan 2008-2010, MINEDUC 2008, presentation to partnersGirls’ EducationGender imbalances particularly relate to academic performance, as evidenced by girls’ low scores at end-of-primary and end-of-tronc commun examinations. Constraints to gender equitable education relate to performance rather than access, and are both demand and supply based. They include socio-cultural dimensions, such as the private costs to education and school related factors, such as infrastructure facilities, curriculum, the share of female teachers, and gender-insensitive teaching.Rwanda’s progress in increasing enrollment, albeit from a low-base post-conflict situation, was already signaled in the Country Status Report in 2003. Five years after the genocide, enrollment rates at primary level exceeded those of the average low-income African country, and the number of students at secondary level had increased by 20 percent a year since 1996. As a consequence of this quick recovery in access, Rwanda’s education challenges have shifted from re-establishing the education system after the conflict to charting an appropriate and sustainable course for the sector’s long-term development. Mobilization of resources and their efficient use, balancing of school accessibility against considerations of economies of scale, and increasing access of vulnerable groups were mentioned in the 2003 report as main concerns. In the area of gender imbalances, the CSR noted that while girls are about as likely as boys to be in primary school, they perform consistently worse than boys in both primary school and tronc commun, and that these persistent inferior scores take their toll in the competition for places in higher education. Finally, the CSR highlighted the expected increased pressure on primary completion rates as access expanded, as well as the need to manage classroom conditions and processes – including the number and competencies of teachers and the availability of textbooks - to enhance student learning.The 2007 Public Expenditure Review of the Education Sector in Rwanda (PER), while recognizing a number of achievements and strengths in the education sector, identifies the need for increased in-service teacher training. The PER describes Rwanda’s successful expansion of primary and secondary education, the increased resources for these sub-sectors, the decentralization of education administration and management to promote a more efficient use of resources, the introduction of performance contracts for district and school staff, and the generally high quality of school management. It also highlights a number of required changes, some of which were at the time already incorporated in policy and strategy documents but were not yet being implemented. Recommended changes include support to districts and sector for improved service delivery and a substantial increase in the provision of in-service training across the country, supported by strengthened teacher training centers. The PER also notes the long time it takes to procure textbooks (up to several years) and the rapid improvement in procurement capacity needed to achieve textbook-pupil objectives, and suggests that Rwanda could benefit from international professional support in procurement methodology (similar to that provided in 2003). Teacher competencies need to be improved through the provision of better pre-service and in-service training. Most teachers are formally qualified according to national qualification standards (in 2008, 97 percent of primary school teachers were qualified, according to MINEDUC data). However, within the existing challenging context (e.g., large classrooms, new curricula, double shifting, languages of instruction and decentralized school management), GoR has not yet been able to ensure that teachers have the necessary competencies to successfully operate in the taxing school environment. There are widespread concerns that pre-service education in Rwanda is too academic and theoretical with the bulk of lecturers having little or no direct experience of the day to day challenges of classroom teaching. The study “Teacher Motivation and Incentives in Rwanda: A Situational Analysis and Recommended Priority Actions” (2008), highlights the importance of teacher motivation and satisfaction to attract and retain high-quality teachers across the country. The study concludes that, as prospects of sizeable pay increases are unlikely in the near future, it is important to improve non-salary material benefits and enhance more intrinsic, non-material motivators such as pre-service teacher education, in-service training to facilitate continuous professional development, and improved teacher management. The study emphasizes the importance of providing regular, high-quality in-service training to attain consistently high teaching standards. However, the provision is ineffective because it is largely supply-driven, ad hoc and one-off, with little or no reinforcement. The provision of in-service training varies widely across regions, and a large majority of teachers consider the availability of in-service training to be poor or very poor. The study recommends the creation of a more effective system of continuous professional development, institutionalized at both the central and district level.Recent initiatives of the government to address the above issues include the adoption of student-centered learning approach under the national qualification framework in several institutions and efforts to improve non-salary incentives for teachers. Efforts to improve teacher training include the establishment of two new colleges of education (in Rukaru and Kavumu), activities to strengthen the existing teacher training colleges as well as the Kigali Institute of Education, and the earmarking of 15 percent of capitation grants for school-based training. There exist several constraints affect the distribution and quality of textbooks. After the approval of a comprehensive Textbook Policy in 2003, textbook availability increased substantially. However, this occurred at a high cost and resulted in an unequal distribution of books of varying quality. In 2007, MINEDUC initiated a DFID-supported series of textbook studies to build the analytical foundation for developing further reforms, particularly to draft a strategy to achieve its objective of providing every pupil with a textbook in core subjects at the primary and secondary levels (see table 5 for reference to these studies). These studies, based on extensive field research, reveal several constraints that have affected the distribution and quality of textbooks in Rwanda: (i) Textbook distribution is heavily dependent on availability of funds, lacks adequate planning, and does not take into account supply and demand data; (ii) Textbook bid evaluation takes a long time; (iii) Teachers voiced dissatisfaction with textbook choices; (iv) Textbooks are often damaged due to poor distribution and stock management, resulting in discrepancies in pupil-to-textbook ratios between individual schools and within districts; and (v) Supplementary reading materials to encourage early literacy in all languages are lacking, particularly at lower levels of primary school. The academic underperformance of girls is linked to various aspects of the school-based learning environment. The underperformance of girls that was highlighted in the CSR is assessed in more detail in an analysis conducted in 2008 by MINEDUC. While slightly more girls than boys are enrolled in primary education, fewer of them still make the transition to tronc commun, even though the gender gap in transition rate has decreased in the past years (from 7 percentage points in 2005 to 3.9 percentage points in 2007). Although Rwanda currently has no system to assess student learning from year to year, the results of examinations at the end of primary school and tronc commun do shed light on gender disparities in learning outcomes. For instance, although girls constituted more than half of those who took the primary school leaving examination in 2006, they represented only 38 percent of those who passed it. While there is no significant gender difference in average test scores on languages, girls score lower on mathematics (21 percent for girls compared to 25 percent for boys) and particularly on sciences (26 percent and 33 percent for girls and boys, respectively). Similarly, in examinations at the end of tronc commun, only around one third of those who passed were girls, even though girls made up 48 percent of those who participated in the examination. MINEDUC’s analysis highlights a variety of causes of these gender disparities, which can be both socio-cultural and related to the learning environment. As for the learning environment, school facilities and the curriculum are identified as factors that need to be addressed. Also, the low share of female teachers (25.5% of secondary school teachers) and their uneven distribution, as well as gender-insensitive teaching are considered to contribute to persistent gender imbalances. MINEDUC is currently carrying out further analyses of the school-based causes of underperformance of girls to provide a sound basis for the Girls Education Strategic Plan which is being developed. THE PROPOSED EDUCATION FOR ALL – FAST TRACK INITIATIVE CATALYTIC FUND DEVELOPMENT POLICY GRANTOPERATION DESCRIPTION The Program Development Objective is to support the GoR’s policy reforms on Teacher Development and Management, Textbooks, and Girls’ Education, with the overall aim to improve the quality of basic education. Improving the quality of basic education is one of the key objectives of the Nine Year Basic Education Policy and Strategy (February 2006). The 2008 Joint Review of the Education Sector (JRES) identified improving the quality of basic education as a key priority, requiring that quality factors related to among others teacher supply and qualification, textbook procurement and distribution, and gender imbalances be addressed. Anticipated benefits from the Grant include substantial progress on policy reforms that contribute to the acceleration of the Nine Year Basic Education Policy and Strategy. The reforms are expected to lead to improved coordination and management of the in-service teacher education structure; decentralization of textbook procurement with enhanced school-level decision-making to ensure that textbook distribution and choice are adapted to local conditions; and school environments that are more conducive to girls’ further success in school. These will in turn contribute to several objectives of the Nine Year Basic Education Policy and Strategy, including improved primary completion rates, reduced primary school repetition and drop-out rates, and improved transition rates to tronc commun. Core aspects of UNICEF’s child-friendly program, including improved school management, structured community participation, school based in-service teacher training, and specific support to rural girls, will be scaled up in 2009/10 to support these policy actions. There has already been considerable success in the 70 schools targeted by UNICEF in improved learning outcomes, teacher motivation, and school/community collaboration. The Operation is aligned to the Common Performance Assessment Framework (CPAF), which the Government prepared in consultation with development partners. The prior actions for this Operation have been agreed with GoR and the education sector development partners. This one-year Operation consists of a single tranche disbursement, after which Rwanda will apply for a new three-year Second Grant from the EFA-FTI CF Steering Committee with an updated analytical foundation. Consequently, no prior actions for the next operation are identified. The prior actions are (i) Adoption of a Teacher Development and Management Policy (TDMP) establishing an entity for the oversight of teacher services professionalization; (ii) Adoption of a cost-calculated strategic plan for the establishment of a framework for coordinated in-service teacher training; (iii) Adoption of a framework and procedures for the implementation of decentralized procurement and school-level selection of textbooks, as set out in the Textbook Policy; (iv) Issuance of an invitation to publishers for the submission of proposals of teaching and learning materials for inclusion in the national approved list of such materials; (v) Adoption of a Girls’ Education Policy including measures for improved gender-disaggregated data collection and analysis; and (vi) Adoption of a cost-calculated strategic plan for the implementation of said girls’ education policy. All actions were endorsed by MINEDUC and donor partners and formally submitted to MINECOFIN for inclusion in the revised CPAF. (See also the Policy Matrix, Annex 2). The first two prior actions would contribute to the CPAF Indicator of improving the primary pupil per qualified teacher ratio, while the other four would help improve primary school completion rates, disaggregated by sex. The following box describes the application of good practice principles of conditionality to reinforce ownership and accountability of policy reforms that will contribute to the successful results of this operation. Box 2: Good Practice Principles on ConditionalityPrinciple 1. Reinforce OwnershipThis operation supports government reforms aimed at improving quality in basic education, an objective which is incorporated in the EDPRS and education sector strategies reflected in the LTSFF and ESSP, and which was reiterated as being an education sector priority by both government and partner representatives during the JRES of June 2008. The GoR has a strong track record in committing to and implementing reforms, both in general and in the education sector. With active support from the Bank, the EDPRS was developed in a participatory manner involving extensive consultations with a wide range of stakeholders. The process was led by a National Steering Committee providing high level guidance. The GoR articulates its vision for improved aid management and policies in the formal Aid Policy. The ‘Memorandum of Understanding between the Government of Rwanda and Development Partners Regarding Partnership Principles for Support to the Rwanda Education Sector’ stipulates that the ESSP provides the overarching framework for a sector-wide approach to the development and delivery of education services, and establishes harmonization and alignment principles consistent with the overall Framework for Aid Coordination in Rwanda (2002, MINECOFIN). Development partners endorsed the ESSP in 2006, as a prerequisite for approval of the first EFA-FTI CF Grant (2007-08). The ESSP explicitly recognizes the importance of partnership and continuous consultation between the GoR, parents, communities, development partners, the private sector, NGOs and civil society. There exist various regular forums to facilitate these consultations, among others the annual JRES, during which key indicators and expenditure performance are evaluated and forward looking discussions on policy issues and development take place. Principle 2. Agree up front with the GoR and other financial partners on a coordinated accountability frameworkThe GoR and budget support donors have agreed on a common assessment framework for public financial management (PEFA). The GoR, together with donors, also developed a Common Performance Assessment Framework (CPAF) which is aligned with the EDPRS. The CPAF is one of the three complementary monitoring and performance management frameworks under the newly signed MoU between budget support donors (including the Bank) and GoR. The MoU stipulates the intent of all parties to base budget support operations to the extent possible on policy actions and indicators that are incorporated in the CPAF. Government and partners in the education sector have agreed to sector-specific mechanisms, including a SWAp MoU and a sector matrix, and a pooled sector budget support financing mechanism is in place. The GoR also passed an Accountants Bill in December 2007 and adopted and gazetted the Rwanda Public Procurement Authority (RPPA) and appointed its Board of Directors in March, 2008. This operation was developed at the same time that the CPAF for all sectors was being updated. The prior actions for this operation build upon the prior actions that were incorporated in the existing CPAF, were agreed upon by GoR and partners during the JRES that was held in March 2009 and further revised during the appraisal mission of May 2009, and have been incorporated in the CPAF’s revised version that has been submitted to MINECOFIN for approval. The revised version of the CPAF will also include the indicators for this operation.Principle 3. Customize the accountability framework and modalities of Bank support to country circumstancesThe EFA-FTI process, with its large role for the education sector development partners group, is the main umbrella for consultations on access to and quality of basic education between the government and the development partners. The DPO modality is considered to be well-fitted to the country context and in support of the Paris Declaration commitments. (See also Section IV - Choice of Lending Instrument of this program document.)Principle 4. Choose only actions critical for achieving results as conditions for disbursementThe EFA-FTI CF Bridge Grant focuses on six prior actions, each representing a critical step for implementing the GoR’s program for basic education, and identified through dialogue with the GoR and other relevant stakeholders.Principle 5. Conduct transparent progress reviews conducive to predictable and performance-based financial supportA full review of the program will take place in line with the review agreed in the MOU governing the provision of budget support in the implementation of Rwanda’s EDPRS. Joint budget reviews and joint sector reviews take place twice a year, aligned with the budget cycle. A Joint Review of the Education Sector takes place annually. (See also Section VI - Implementation, Monitoring and Evaluation of this program document.)POLICY AREAS COVERED BY THE OPERATION The EFA-FTI CF Bridge Grant supports GoR efforts to incorporate good international practice into the design and implementation of reforms that are critical for improving the quality of basic education. These critical reform areas are the improvement of teacher competencies, the effective and efficient procurement and distribution of textbooks, and the improvement of girls’ academic performance. The Cabinet will approve a Teacher Development and Management Policy (TDMP). The implementation steps will be outlined in a strategic plan, which will include a section that describes the institutional reforms to be undertaken to develop a coordinated in-service teacher education structure. MINEDUC’s ability to improve the in-service teacher education structure is a key policy challenge under the Nine Year Basic Education Policy and Strategy and a clear priority area for the sector in Rwanda. Teachers’ access to systematic and tailored opportunities to enhance their skills and knowledge is essential to enable them to provide pupils with an appropriate learning environment. Reforms in this area are expected to have a substantial positive impact on quality-related outcome indicators. The prior actions for this operation are for the Cabinet to adopt the Teacher Development and Management Policy, which foresees the establishment of an entity to oversee the professionalization of teacher services, and for MINEDUC to adopt a cost-calculated strategic plan for establishing a coordinated in-service teacher education structure. The TDMP is a broad strategic policy that encompasses a range of reforms to improve the pre- and in-service teacher training system, as well as the management of the supply and demand of teachers. The Government foresees a key institutional reform, which will provide the institutional structure for the provision, monitoring and evaluation of the development and management of teachers, with the aim of improving teacher knowledge, skills, competencies, and qualifications. In-service teacher education programs have been implemented in an ad hoc manner, with MINEDUC and several donor partners operating programs without centralized oversight or monitoring and evaluation. The Government intends to put in place a well-structured program of Continuous Professional Development (CPD) for teachers that will enhance synergy among currently implemented programs, avoid duplication of efforts among the various programs, and provide a strategic framework for the GoR to develop the right skills-mix within its teaching force. The reform is expected to enhance the quality of basic education, as well as address the teacher shortage problem by allowing teachers to gain professional qualifications while remaining in the teaching force.At the time that the policy was written, it was envisaged that the Teacher Services Commission (TSC) would be given this mandate. Due to the Government-wide effort to reduce the number of public entities, Cabinet adopted plans to establish the semi-autonomous Rwanda Education Board (REB) at the national level, with various education-related entities subsumed under its umbrella. Current plans for the REB include the appointment of a Deputy CEO with a mandate to oversee the development and management of teachers, thereby transferring the roles and functions of the TSC to the newly appointed Deputy CEO (see Results Indicators in the Policy Matrix in Annex 2).The Government will refine its textbook policy by adopting a more decentralized approach to textbook provision. The 2003 Textbook Policy determines the standards, roles, and responsibilities for all stakeholders in textbook provision, within the framework of overall coordination by MINEDUC. The Policy stipulates that MINEDUC is the main purchaser of textbooks, but also acknowledges the intention to work towards devolving the process to lower levels of government. Recent analyses have highlighted weaknesses in the current centralized process for textbook provision, thus GoR is adopting a new approach to ensure the more timely and efficient provision of appropriate textbooks, teacher guides, and related learning materials in every subject for Grades 1-6 (177 titles in total). This new approach concerns the decentralization of both the selection and procurement of textbooks to the school-level. Publishers will submit bids with partial textbook manuscripts, of which up to four manuscripts per subject will be selected by the Textbook Approval Committee, comprising of representatives of MINEDUC, the National Examinations Commission, and the Inspectorate. Publishers on the “awarded textbook status” list will have the opportunity to market their textbooks to schools and possibly provide training to teachers. Schools will then select one textbook per subject from the list developed by the Textbook Approval Committee. The process is expected to provide up to four textbook choices per subject from which schools can choose, thereby enhancing the relevance and quality of textbooks. The price of textbooks is expected to decrease considerably as a result of increased competition among publishers. Distribution of the textbooks will no longer be done by the National Curriculum Development Center through the districts, but carried out directly by the publishers to schools and local booksellers. Responsibilities for selection, choice of pedagogical materials, procurement, and distribution will be progressively devolved to individual schools. This process will start with the provision of training to textbook evaluators and the establishment of Textbook Selection Committees in primary and secondary schools (see Results Indicators in the Policy Matrix in Annex 2). As a prior action to this operation, GoR will establish an implementation framework and procedures for the Textbook Policy with the aim to decentralize procurement and allow school-level selection and begin the tender process by issuing an invitation to publishers to submit manuscripts for evaluation and inclusion on the approved list of learning and teaching materials. Enhanced school-level decision-making is expected to better align the selection of textbooks with the local needs of students and teachers, improve the utilization of learning materials, and enhance ownership by schools and teachers. The decentralized procurement process, in alignment with international good policy practice, should ensure the better and more timely delivery of textbooks and other learning materials to improve the general learning environment, which in turn is expected to improve retention and completion rates in both primary school and tronc commun and encourage a more effective engagement of students in the learning process. Cooperation between MINEDUC and the publishers is also expected to enhance the public-private partnership in the sector. The Government will develop and approve a Girls’ Education Policy (GEP) and finalize a costed Strategic Plan for its implementation. The Girls’ Education Policy and the parallel Strategic Plan will target institutional and school-based constraints to gender equity that have been identified by MINEDUC. The GEP will mainstream the practice of disaggregating data and analysis for key education indicators of access and achievement. The GEP will also address gender disparity among school administrators by fast tracking women into entry level and middle management positions. The Government intends to build more all-girls boarding schools and establish them as centers of academic excellence. The GEP will also include the development of laws and codes of conduct for teachers and pupils to protect all children, but especially girls, against sexual, physical, and mental abuse. The GEP will be disseminated in each District through awareness raising workshops with relevant stakeholders including NGOs, faith-based organizations, and school administrators (see Results Indicators in the Policy Matrix in Annex 2). The Strategic Plan, for the period 2009-2013, will clarify the role of central and local levels of Government with respect to implementing the Girls’ Education Policy, and will support the alignment of the sector policy with the GoR’s National Gender Policy. As prior actions for this operation, GoR will adopt a Girls’ Education Policy as well as a cost-calculated strategic plan for its implementation. GoR’s efforts to address gender imbalances in basic education will include a number of institutional measures at both the central and the district level. At the central level, a Girls’ Education Task Force (GETF) will be established to provide strategic leadership on the issue of girls’ education and coordinate collaboration among stakeholders relevant for implementing the Girls’ Education Policy. A Girls’ Education Professional Officer will be appointed to lead this task force, who will be responsible for overseeing the implementation of the reforms described above. At the district level, the Government will establish a Joint Action Forum for Girls’ Education (JAFGE), comprised of Vice-Mayors in charge of Social Affairs, to ensure the integration of girls’ education issues and indicators into district development plans. JAGFE will report to the GETF at the end of every term. Finally, the National Youth Council will establish the Girls’ Education Alliance in Rwanda (GEAR), which will be a member of the GETF at the central level. At the district level, GEAR will support JAFGE to evaluate and implement activities stipulated in the costed strategic plan. The strategic plan will be presented to relevant stakeholders (including the Forum for African Women Educationalists [FAWE] and other local and international NGOs, foundations, faith-based organizations, schools, and directors of education at the district level) and revised accordingly, before submission for adoption by the MINEDUC management. OPERATION IMPLEMENTATIONPOVERTY AND SOCIAL IMPACTOverall, the reforms and measures to be supported under this operation are geared toward improving the quality of basic education, which is expected to have a positive socio-economic impact on those who benefit from increased and extended access to high-quality basic education. Therefore, no adverse poverty or social impacts are foreseen. In the medium term, the GoR’s efforts to improve the quality of basic education is expected to lead to both higher completion rates, as well as an increased skills level of those who complete primary or basic education. While the positive impact of increased skills levels due to increased quality of education is hard to quantify with available data, the economic benefits of completing primary and basic education are illustrated in a forthcoming Bank study on the linkages between poverty, economic growth, and labor. Analyses conducted for this report show that median earnings of those who completed primary education are 38 percent higher than of those who entered but did not complete primary school. Similarly, median earnings of those who completed tronc commun exceed earnings of those who completed only primary by 42 percent. In addition, the likelihood that a person is employed in the private waged or public sector (i.e. jobs that are generally considered to be of ‘high quality’) increases substantially with educational attainment.Distributional impacts are expected to be pro-poor and support gender equity. Pupils who currently do not complete primary school and, particularly, tronc commun tend to reside disproportionally in poorer households. An across-the-board increase in basic education quality will therefore be particularly beneficial for these households. In addition, the particular policy reforms that are supported by this operation are expected to particularly benefit those in rural areas and girls: (i) reforms in the area of in-service teacher training aim to improve teacher motivation and satisfaction and thus attract and retain high-quality teachers across the country; (ii) textbook reforms intend to address deficiencies in distribution and stock management which are more likely to affect remote areas; and (iii) the girl’s education policy explicitly aims to improve school-based constraints to girls’ academic performance. Negative distributional impacts in terms of a reduction of the skills premium may exist for tronc commun but is considered to be beneficial for the economy as a whole. An increase in the relative supply of workers with a certain educational attainment may result in a fall of the skills premium of this group of workers in case demand for these skills does not increase at a similar or higher rate. While this effect may be positive for the economy as a whole, it would reduce the earnings capacity of individual workers in this group. Over the past period, however, the increase in demand for those who completed primary education seems to have kept pace or even exceeded the increase in supply, as their skills premium slightly widened over that of unskilled workers between 2000 and 2006. In the same period, the premium of skilled workers (defined as those who completed tronc commun, TVET, upper secondary and higher education) fell by approximately 19 percent. Nevertheless, as the premium does remain very large, with the earnings of the skilled typically being more than triple those of the unskilled, this reduction can be considered a logical result of an increased skills base of the labor force that benefits the investment climate by reducing the costs of skilled labor. Any (adverse) distributional impacts directly related to the specific policy reforms supported by this operation are expected to be non-existent or marginal. Textbook policy reforms may result in a redistribution of the size of textbook orders between the various providers and an increase in orders from local (rather than foreign) booksellers. The girls’ education policy may result in an increased preference of hiring female teachers.Improvements in the education sector’s monitoring and evaluation framework will enable MINEDUC to better track pro-poor spending and the distributional impacts of its policies. In particular, the Education Management Information System (EMIS) is expected to be operational and a Public Expenditure Tracking Survey is planned to be carried out in the course of 2009 (see also below).IMPLEMENTATION, MONITORING AND EVALUATIONImplementationIn September 2008 all budget support donors and the GoR signed a Memorandum of Understanding governing the provision of direct budget support in the implementation of Rwanda’s EDPRS. The MoU, which replaces the 2003 Partnership Framework, outlines monitoring and performance management responsibilities and guidelines. Under this MoU, monitoring and performance management will be undertaken according to the Harmonization Calendar in the context of three complementary frameworks:The Common Performance Assessment Framework (CPAF) summarizes the GoR’s performance in the implementation of the EDPRS;The Donor Performance Assessment Framework (DPAF) summarizes donor performance in adhering to the various commitments related to the aid effectiveness agenda;The Joint Governance Assessment (JGA), which will be revised and agreed upon annually by the GoR and the development partners, summarizes GoR’s performance in the implementation of governance reforms.The Budget Support Harmonization Group (BSHG) brings together GoR and donors who provide budget support for the implementation of the EDPRS and its related flagship programs. The dialogue in the bi-annual Joint Budget Support Reviews (JBSR) is based on the joint assessment of EDPRS implementation progress, including governance indicators and PFM reform, using the CPAF as the single framework. For governance topics not covered in the CPAF, an assessment of underlying principles is based on the Joint Governance Assessment annual review. Policy actions and targets of the CPAF are to be revised on an annual basis during the forward-looking Joint Budget Support Review. Under exceptional circumstances, indicators may be changed as long as they remain consistent with the EDPRS and ongoing GoR policies and programs. The Ministry of Finance and Economic Planning is responsible for the implementation of the EFA FTI CF Bridge Grant operation.The Policy Matrix (Annex 2) for the proposed operation presents a results framework that describes the critical reforms that this operation addresses, the prior actions, as well as the results indicators and targets to measure implementation progress. The matrix and indicators are consistent with the CPAF and the sector-specific framework. Monitoring and Evaluation Framework Monitoring of all education sector targets takes place through a number of mechanisms that bring Government, development partners and civil society representatives together in open and transparent processes. Some of these are specific to the education sector; others are part of a broader economic framework of planning and monitoring performance including the national budget allocation, execution and review process. The main mechanisms for the education sector are as follows: The Annual Joint Review of the Education Sector (JRES) brings together donors, ministries, districts, education institutions and Non Governmental Organizations (NGOs) to discuss expenditure, development priorities and progress on agreed action areas; The annual Joint Budget Sector Reviews by the Government of Rwanda (GoR) provides summaries of expenditure, budget execution performance, targets and allocation percentages for discussion with budget support donors and the International Monetary Fund (IMF);Bi-monthly Education Sector Cluster Group meetings monitor education policies, program priorities and progress on JRES Action Points. Members include the main development partners, one Civil Society Organization (CSO) and one United Nations (UN) representative, and the Ministries of Education (MINEDUC), Local Government, and Finance and Economic Planning (MINECOFIN); Periodic Public Expenditure Reviews: MINEDUC conducted its most recent review in 2007 and is planning a Public Expenditure Tracking Survey for 2009; and A Public Expenditure tracking survey is planned for the second half of 2009, as recommended in the 2008 Joint Annual Review.The Education Management Information System (EMIS) is being rolled out and is expected to be operational by 2009. The EMIS collects all school and college-based data relating to pupils, teachers, equipment and infrastructure in public and private institutions, and support semi-autonomous agencies such as TSC, NEC and NCD. The below table presents the operation’s key performance and monitoring indicators as well as their base and target values. The indicators have been agreed by MINEDUC and partners and included in the new CPAF. All indicators will be tracked by the JRES monitoring and evaluation system. Table 7 - Key IndicatorsIndicator2008(Actual)2009/2010(Target)Deputy CEO for teacher development and management appointed under the Rwanda Education BoardNoYesGuidelines for in-service teacher training providers developedNoYes“Awarded textbook status” given to publishers for up to four textbooks per subject for Grades 1-12NoYesNumber of schools with Textbook Selection Committee establishedPrimary: 0Secondary: 0 Primary: 1926Secondary: 1159Number of textbook evaluators trained0250Core gender-sensitive indicators available and discussed during the annual Joint Review of Education SectorNoYesDisseminate Girls’ Education Policy to every district, including awareness raising workshops with relevant stakeholders to include NGOs, faith-based organizations, and school administratorsNoYesIn the medium term, the reforms that are supported by this operation are expected to contribute positively to the basic-education related medium term indicators from the CPAF (table 8). It is not expected that the implementation of the reforms supported by this operation will result in a measurable positive impact on these indicators within the implementation period of this operation. Table 8 – Medium Term CPAF IndicatorsIndicator2008(Actual)2009/2010(Target)Primary school completion rate, disaggregated by sex52.5% (total)56% (total)52.9% (girls)55% (girls)Primary school pupil to qualified teacher ratio 6765ENVIRONMENTAL ASPECTSOperational Policy (OP) 8.60, Development Policy Lending, requires the determination whether specific country policies supported under the operation are likely to cause significant effects on the country’s environment, and, in the event of such likely effects, assess country systems for reducing any such adverse effects and enhancing such positive effects. In the event of significant gaps in the analysis, or shortcomings in the country systems, the Bank is required to identify how such gaps or shortcomings would be addressed before or during program implementation, as appropriate. This operation is not subject to OP 4.01, Environmental Assessment. The proposed operation is expected to have no significant adverse effects on Rwanda’s environment, natural resources, and forestry. The operation will provide general budget support to the GoR. Implementation of the Girls’ Education Policy may result in changes in school infrastructure, such as the addition or expansion of latrines for girls. In the long term, implementation of reforms in textbook procurement and distribution may result in an increase in locally produced textbooks. At this stage it seems likely that in this case production inputs (paper) would be imported. Country systems have adequate capacity to safeguard the environmental aspects of this operation. The framework for environmental management in Rwanda has steadily evolved over the last decade resulting in noticeable improvements in the institutional framework during the last five years. The Ministry of Natural Resources, responsible for environment, mines, land, forest, and water resources, secured the adoption of several pieces of legislation by the national assembly over the past four years that will improve the management of natural resources. Rwanda’s Environmental Management Authority (REMA) is responsible for reviewing the Terms of References for Environmental Assessments that must take place on all proposed projects in the country (GoR, donor or private). They also then review the assessment and provide the certificate without which no one can proceed. At district level, Environmental Officers are charged with supervising implementation of the environment policy commensurate with the legal framework established. In 2007, UNDP and GoR developed guidelines to help mainstream environmental issues in all sectors during the EDPRS process Furthermore, in collaboration with sector ministries, REMA is moving towards developing more custom-made environmental guidelines for each of the ministries to replace the general guidelines. However, capacity constraints are severe, particularly at the district level where most of the responsibilities for sector policy implementation are located. Sufficient resources and well-targeted capacity building are needed to address these constraints. MINIRENA seeks to mainstream improved environmental stewardship into its medium-term expenditure framework, focusing on long-term sustained support to building capacity to address environmental concerns in the implementation of the EDPRS. In the education sector, UNICEF supported MINEDUC in the development of new school construction norms. UNICEF also provides assistance in the roll-out of the Child-Friendly Schools framework, which includes ensuring a healthy and hygienic school environment. FIDUCIARY ASPECTS The legal text to establish the Rwanda Public Procurement Authority (RPPA), which is in line with international good practice, was adopted and its Board of Directors was appointed in March 2008. The text includes all functions belonging to a modern procurement regulatory and oversight body. In addition, procurement audits were completed in 66 procuring entities. Independent review panels have been established and made operational at the national and district levels (according to the law, five members are from the private sector and civil society organizations). Bidders on public procurement contracts have recourse to independent appeal. Finally, the National Tender Board (NTB) website now publishes a list of debarred firms.Parliament also passed the Accountants Bill in December 2007. The Bill now requires all financial institutions and large companies and public companies to comply with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Rwanda’s first Public Expenditure and Financial Accountability (PEFA) Assessment was completed in 2007 and confirmed that while the PFM system performs strongly in some areas, others still require considerable strengthening. In particular, the areas of accounting, reporting, external audit and oversight require attention. Reporting at decentralized levels is weak and in need of capacity support, thus posing an area of risk. However, PFM reforms have advanced considerably: a sound procurement legal framework has been put in place and a Public Procurement Agency to regulate and oversee public procurement is now operational. District budget reports are now published on the GoR’s website. MIFOTRA, the Ministry of Public Service and Labor, has completed the functional audit of 6 ministries. The results of the review will be used to develop an action plan for each ministry to address identified weaknesses in their structure, staffing and procedures. A monitoring framework for the EDPRS has also been developed along with a CPAF adopted by all budget support donors to focus and align their fiduciary requirements. Further, the Governance flagship program under the EDPRS seeks to strengthen political governance, economic governance, and build institutions and capacity of the state. It envisages, inter alia, a wide range of reforms to strengthen public sector institutions and capacity, including further decentralization, enhancing accountability at all levels of GoR, strengthening public financial management at all levels and increasing the predictability and transparency of policy-making. Rwanda is widely recognized for low levels of corruption compared to the rest of Sub-Saharan Africa. Strong political commitment to fighting corruption is evident by the following: (i) there is vigorous prosecution of corruption cases; (ii) the Ombudsman Office effectively coordinates an annual exercise of assets declaration by public officials involved in the management of public funds – together with the Office of the Auditor General, it exposes corrupt behaviors and makes recommendations for action by the Prosecutor General; and (iii) following the new 2003 Constitution, the judicial sector was reformed to give independence to the Prosecution Office – this office with the help of other institutions like the National Police is able to independently and systematically prosecute all cases of misappropriation of public funds.The fifth review of the Poverty Reduction Growth Facility (PRGF), completed in November 2008, noted that under the Fund’s safeguards assessment policy, the National Bank of Rwanda (NBR) was subject to a safeguards assessment with respect to the PRGF arrangement approved on June 12, 2006. The updated assessment was completed on January 26, 2007 and considered the results of the previous 2003 assessment. It proposed recommendations to address continuing vulnerabilities in the external audit and financial reporting areas. The implementation of these measures is being monitored by IMF staff. In addition, the Bank coordinates with the Fund and other donors to provide support toward strengthening the audit and reporting functions of the PFM system, drawing from the results of the PEFA. The overall fiduciary framework for monitoring of the grant is therefore adequate.A recent audit of MINEDUC activities revealed a number of weaknesses, which the government is currently addressing. MINEDUC has received a qualified audit opinion from the Auditor-general on its financial statements for the year ending December 3, 2007. The audit opinion indicates that proper books of accounts have been kept and the financial statements give a true and fair view of the state of financial affairs of MINEDUC. Notwithstanding, there are significant lapses of compliance to laws and prescribed procedures, certain weaknesses in controls over payments, bank accounts and assets and lapses in implementation of prior year audit recommendations. MINEDUC is subject to the general PFM reform program of the Government of Rwanda that aims to improve these cross cutting mattersDISBURSEMENT AND AUDITING The grant will be disbursed as a single tranche of US$35 million upon effectiveness. The proposed grant will follow the Bank’s disbursement procedures for development policy operations. The grant will be disbursed against satisfactory implementation of the development policy and not tied to any specific purchases. Subsequent to grant effectiveness and at the request of the Recipient, the Bank will disburse the proceeds of the grant into an account designated by the Recipient at the central bank of Rwanda (National Bank of Rwanda) and forming part of Rwanda’s foreign exchange reserves. The Recipient will ensure that upon deposit of the grant proceeds into said account, an equivalent amount is credited in the Recipient’s budget management system, in a manner acceptable to the IDA, with an indication of the exchange rate applied, where applicable. IDA reserves the right to request an audit of such account. If the proceeds of the grant are used for ineligible purposes as defined in the Grant Agreement, the Recipient will be requested to refund to IDA, an amount equal to the amount of said payment, promptly upon notice from IDA. Amounts refunded to the Bank upon such request shall be cancelled. Within two business days, the National Bank of Rwanda will credit the Rwanda Franc equivalent of the grant proceeds to the consolidated account maintained on behalf of the GoR, which finances budgeted expenditures. The Accountant General will be notified accordingly. The NBR will not impose any charges or commissions on the GoR for these transactions. The conversion from USD to Rwanda Franc will be based on the prevailing exchange rate on the date that the funds are credited to the consolidated account. The GoR, through the MINECOFIN, will (i) provide written confirmation within 30 days to the Bank that an amount equivalent to the grant proceeds from the Bank has been credited to the consolidated account, with an indication of the exchange rate applied; (ii) provide evidence that the Rwanda Franc equivalent of the grant proceeds was recorded as financing for GoR budget; and (iii) ensure that the Rwanda Franc equivalent of the grant proceeds are subject to controls to ensure its use for eligible budgeted public expenditures only.RISKS AND RISK MITIGATIONThere are four main risks potentially associated with the program: i) political risk; (ii) macroeconomic and financial sector risk (including risk related to the global financial crisis); (iii) aid provision and predictability risk; and iv) program risks. Political Risk. Currently, Rwanda’s internal security and political situation remains stable but continued effort is needed to address the remaining political effects of the 1994 genocide. To address constraints surrounding the Gacaca system, the law on Non-Governmental Organizations (NGOs) is being revised in line with international good practice. Though international and regional efforts to mitigate instability in the Great Lakes sub-region are continuing, there is a substantial risk of flare-ups in the parts of the Democratic Republic of Congo (DRC). Continued international support from the United Nations, the African Union for peace efforts, and the Tripartite Plus Joint Commission, work toward identifying measures to counter the negative forces operating in the region. The governments of Rwanda and the Democratic Republic of Congo are also collaborating to increase regional stability. Macroeconomic and Financial Risk (including risk related to the global financial crisis). Given the GoR’s record in macroeconomic management and its overall satisfactory rating as evidenced by reviews under the PRGF, the last few years’ economic reforms, and experience with budget support under the first PRSC/G series, the rating of this risk is low. Fiscal revenues rose from 13.6 percent of GDP in 2007 to 15.6?percent of GDP in 2008. This was largely attributable to one-off receipts and revenue collection efforts. Nonetheless, with high aid dependency and a low tax base, managing injections of liquidity into the economy may present dilemmas. While external aid doubles, the extent to which aid dependency falls depends a great deal on realization of very high GDP growth rates, not easily given considering the ongoing global economic crisis. Even if high GDP growth rates are realized, in the medium-term the country remains highly aid dependent with a low tax base and the GoR may consider concessional loans, on a selective basis, to enable the necessary investments to generate growth. To mitigate these risks, the Bank and the IMF will continue to provide support to the GoR for macroeconomic reforms and commitment to use market-based instruments to contain inflation and exchange rate appreciations. The global economic crisis began to affect Rwanda’s economy from early 2009, resulting in lower demands for exports, a slowdown in construction, deterioration in the balance of payments, in addition to reduced remittances, FDI, and foreign aid levels. This has adversely affected growth prospects for 2009-10 and can reduce GoR’s potential to reach its EDPRS objectives. To mitigate this risk, GoR aims to continue implementing prudent and coordinated fiscal and monetary policies as well as structural reforms to improve private and financial sector performance and diversify the product and export base. Aid Provision and Predictability Risk. Given the high dependency on international assistance, particularly in the area of education, there is a risk that reduced or unpredictable aid flows could hinder the implementation of GoR policies and reduce the extent to which it can achieve its EDPRS objectives. The recent financial crisis poses a real threat to the global economy and could lead to a reduction in aid flow from developed countries. Nonetheless, improved coordination between GoR and donors and efforts of the GOR to prioritize on-budget resources are examples of efforts to mitigate this risk. Although firm donor commitments to predictable aid flows are not forthcoming, donor attitudes are encouraging. Both budget support donors and GoR demonstrated their commitments by signing a MoU in September 2008 governing the provision of direct budget support in the implementation of Rwanda’s EDPRS. The potential non-approval of the proposed EFA-FTI CF Bridge Grant (representing roughly one percent of GDP and four percent of expenditures and net lending) would leave Rwanda without essential resources to implement its programs and might discourage other development partners, particularly those providing support to the education sector, from allocating additional resources. Strong government commitment, GoR’s good performance with respect to improving access to education, and close donor coordination and harmonization mechanisms mitigate this risk. Local development partners have endorsed the application package for the Bridge Grant, and there is agreement on the general direction of the GoR education policies. Program Risks (1). Risks also relate to the implementation of the ESSP. First, the small number of staff in MINEDUC poses constraints to carry out the necessary policy formulation, capacity building, supervision, technical advice, and monitoring and evaluation functions that are required to implement the ESSP. The weak capacity at lower administrative and school levels also poses risks for the successful implementation of the government’s program. MINEDUC’s donor-funded Capacity Building and Institution Development Fund provides funding for essential capacity building activities based on a long-term capacity building plan and shorter-term implementation action plan for the sector, in the context of the ESSP. In 2009-2010, the fund is likely to support capacity building activities in the areas of among others the decentralization of service delivery, the roll-out of child-friendly schools including improved teacher training, textbook provision and distribution reforms, and improved monitoring and evaluation through EMIS and the establishment of a Monitoring Learning Achievement system. This operation aims to support the government in the development and implementation of reforms that take into account capacity constraints and to help build capacity particularly at the central level. The government’s capacity to design reforms and guide their implementation is likely to be a central component of discussion between the government and development partners in the framework of the government’s application for the next three-year round of funding from the EFA-FTI CF. Program Risks (2). Second, the GoR’s drive to improve the skills base of its labor force to facilitate economic growth and Rwanda’s transition to a knowledge-based value-added export economy has resulted in an increased focus on post-basic education. The government faces the challenge to pursue its objectives for both basic and post-basic education while facing capacity and financial constraints. One key challenge is determining the appropriate balance of resources allocated to basic and post-basic education, in particular TVET. With the support of development partners, including in particular the Bank, DFID and Germany’s Agency for Technical Cooperation (GTZ). This is being done by developing a costed Post-Basic Education strategy which will feed into GOR’s revised Long Term Strategic Financing Framework by the end of the 2009 fiscal year. Both documents should serve to determine the most cost-efficient approaches to delivering post-basic education services, including TVET, and will help define an appropriate balance of financing between the various sub-sectors of the education system. ANNEX 1: LETTER OF DEVELOPMENT POLICYANNEX 2: OPERATION POLICY MATRIXGOVERNMENT OF RWANDA’S POLICY MATRIXEDUCTION FOR ALL - FAST TRACK INITIATIVE CATALYTIC FUND DEVELOPMENT POLICYGRANT POLICY MATRIXEDPRS Strategic Objective: Managing population growth rates and enhancing population developmentPolicy Area: Basic Education (CPAF 2.7: Enhanced Population Skills)Critical Issue Prior ActionsResults Indicators and Targets by June 2010CPAF Medium-Term Indicators (baseline=2008; target=2009/10)Teacher Development and Management PolicyIn-service teacher education is being provided in an ad-hoc and fragmented manner, without central-level oversight or a sound monitoring and evaluation mechanism. Also, in-service training has not been adapted to the needs of teachers who have received no or little pre-service training. As a consequence, Rwandan teachers do not have the professional competencies necessary to apply pedagogical approaches and adapt them to local learning environments, and student learning suffers. Adoption of a teacher development and management policy establishing an entity for the oversight of teacher services professionalization.Adoption of a cost-calculated strategic plan for the establishment of a framework for coordinated in-service teacher training.Deputy CEO for teacher development and management appointed under the Rwanda Education BoardGuidelines for in-service teacher training providers developedPrimary school pupil to qualified teacher ratioBaseline=67Target=65Textbook policyQuality of instruction is compromised because textbooks and other learning materials do not arrive to schools in a timely manner and in the required quantity and quality. As a result, the GoR has not been able to reach its objective of supplying one textbook per pupil in core subjects. The centralized procurement and distribution system in Rwanda does not take into consideration local conditions and needs, is costly, and results in low accountability at all levels of the procurement process.Adoption of a framework and procedures for the implementation of decentralized procurement and school-level selection of textbooks, as set out in the Textbook Policy.Issuance of an invitation to publishers for the submission of proposals of teaching and learning materials for inclusion in the national approved list of such materials.“Awarded textbook status” given to publishers for up to four textbooks per subject for Grades 1-12Number of schools with Textbook Selection Committee established:Primary: 1926 (out of 2408)Secondary: 1159 (out of 1449)250 textbook evaluators trained Primary school completion rate, disaggregated by sexTotalBaseline=52.5%Target=56%GirlsBaseline=52.9%Target=55%Girl’s Education PolicyAlthough gender equity practically exists at the primary school level in terms of enrollment, girls persistently underperform on examinations at the end of primary school and at the end of tronc commun. This seriously impedes girls’ access to post-basic education. Aspects of the school environment that contribute to this gender imbalance include gender insensitive teaching and teacher practices, the low share of female teachers at secondary level and low level of female school administrators, and inadequate or unsafe school environments for girls. With the broader move towards government decentralization, the key points of the Girl’s Education Policy will need to be transferred to the district level.Adoption of a girls’ education policy including measures for improved gender-disaggregated data collection and analysis.Adoption of a cost-calculated strategic plan for the implementation of said girls’ education policy.Core gender-sensitive indicators available and discussed during the annual Joint Review of Education SectorDisseminate Girls’ Education Policy to every district, including awareness raising workshops with relevant stakeholders to include NGOs, faith-based organizations, and school administratorsPrimary school completion rate, disaggregated by sex TotalBaseline=52.5%Target=56%GirlsBaseline=52.9%Target=55%ANNEX 3: FUND RELATIONS NOTE Public Information Notice (PIN) No. 09/14February 6, 2009 On January 12, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Rwanda. HYPERLINK "" \l "P30_353#P30_353" 1BackgroundOver the past decade, Rwanda's economic performance has been strong, backed by sound macroeconomic and structural policies and substantial donor assistance. During this period, real GDP growth has been robust at 7?percent on average and inflation has been generally low. Rising revenues and assistance from international donors created fiscal space to scale up public spending, including on pro-poor initiatives. Rwanda qualified for debt relief under the Heavily Indebted Poor Countries Initiative (HIPC) in 2005 and benefited from Multilateral Debt Relief Initiative (MDRI) in 2006, which significantly reduced its external debt. Rwanda's external position has strengthened with the aid flows, allowing an adequate reserve coverage of imports.Rwanda is advancing toward the Millennium Development Goals (MDGs). It has made significant progress in achieving the objectives on universal primary education, gender equality and empowering of women, and reducing child mortality. Nonetheless, poverty remains pervasive.The Rwanda's macroeconomic policies have been supported by a three-year Poverty Reduction and Growth Facility (PRGF) arrangement, which was approved in June 2006. The program is designed to maintain macroeconomic stability while setting the stage for stronger growth and poverty reduction.Policy implementation under the PRGF-supported program in 2008 has been satisfactory. Growth is expected to reach 8.5 percent, reflecting buoyant activity in the agriculture, manufacturing, construction, and services sectors. Nevertheless, inflation accelerated to double digits in the second half of the year, reflecting the impact of international commodity prices and expansion of domestic demand. The fiscal stance was tighter than envisaged in the first half of the year, largely reflecting strong revenue performance. The monetary program also remained broadly in line with the program.The authorities made good progress in implementing the structural reforms agenda. In particular, in the second half of 2008 the authorities finalized a medium-term action plan for the public financial management reform, the national payments strategy, designed to improve the payments infrastructure and address the development of basic payment services in Rwanda, and the debt management strategy, which sets the limits for external debt accumulation consistent with the medium-term fiscal policy objectives.Executive Board AssessmentExecutive Directors commended the Rwandan authorities for implementing sound macroeconomic policies and important structural reforms over the past years. These policies and reforms helped achieve high economic growth, keep inflation relatively stable, and improve debt sustainability.Downside risks to the near-term economic outlook have increased because of the global financial crisis and economic slowdown. Also, poverty remains widespread, and social indicators lag behind those of many other African countries, despite high economic growth rates. Over the medium term, Directors emphasized that the main challenge will be to maintain high and broad-based economic growth and reduce persistent poverty, while pursuing macroeconomic stability and debt sustainability.Directors considered the authorities' macroeconomic policy framework and structural reform agenda to be appropriate for tackling these challenges. They encouraged the authorities to implement cautious fiscal and monetary policies that would ease inflation and possible balance of payments pressures without stifling economic growth. Continued determined implementation of structural reforms will be important to raise investment rates, expand the private sector, deepen the financial sector, and diversify the production and export base.Directors commended the authorities' prudent fiscal stance, which focuses on priority spending while containing inflationary pressures and keeping debt at a sustainable level. They observed that while Rwanda's revenue collection has improved, it is still relatively low. They encouraged the authorities to monitor revenue developments carefully, and to further enlarge the tax base and strengthen tax administration in order to reduce over time Rwanda's substantial aid dependence. Directors underscored the importance of improving public financial management and, in this regard, welcomed the efforts to improve the institutional framework for formulating and executing the public investment program.Executive Directors supported a scaling up of public investment in view of Rwanda's substantial development needs. They encouraged the authorities to rely on grants and highly-concessional loans for its financing in order to safeguard debt sustainability gains. In this respect, Directors welcomed the authorities' development of a comprehensive debt management strategy, which sets limits for loans and loan guarantees. They recommended that the debt strategy incorporate the fiscal risks associated with contingent liabilities, particularly those relating to planned public-private partnerships. Directors stressed that the financing of infrastructure projects should be consistent with a well-prioritized medium-term expenditure framework.Directors noted that domestic demand pressures and higher world food and fuel prices led to an acceleration of inflation in the second half of 2008. Although recent signs of easing core inflation are encouraging, Directors supported the authorities' tight monetary stance to contain the second-round effects of the commodity price shocks. They recommended that steps be taken to raise interest rates to positive levels in real terms. They encouraged efforts to improve liquidity forecasting and management, particularly through better coordination of monetary and fiscal policies.Directors noted the staff assessment that the real exchange rate of the Rwandan franc is broadly in line with economic fundamentals, although rising inflation led to real appreciation pressures toward the end of 2008. In this context, they welcomed the authorities' commitment to increase nominal exchange rate flexibility and subordinate the foreign currency sales to monetary policy objectives. Directors underscored the importance of structural reforms and of the removal of infrastructure bottlenecks to safeguard Rwanda's external competitiveness.Directors commended the measures taken in recent years to strengthen the banking sector, including the passage of legislation in October 2008 to counter money laundering and terrorism financing. Noting that credit and operational risks remain high, Directors welcomed the central bank's intention to improve banking regulation and supervision. They looked forward to the timely implementation of the financial sector development plan.Directors welcomed the authorities' commitment to promote private sector-led diversified growth and employment generation. They supported the reforms to improve the investment climate, and attached high priority to measures aimed at addressing land use and other structural problems that hinder agricultural development. They encouraged further trade integration with the East African Community. Given Rwanda's financing and capacity constraints, Directors underlined the importance of properly calibrating the scope, timing, and pace of reforms.Rwanda: Selected Economic and Financial Indicators, 2006-09???2006200720082009(Annual percentage changes, unless otherwise indicated)??Proj.Proj.Output and pricesReal GDP growthReal GDP (per capita)????GDP deflator7.37.98.56.0Consumer prices (end of period)5.45.76.23.8External sector9.410.515.310.7Export of goods, f.o.b. (in U.S. dollars)12.26.622.06.0Imports of goods, f.o.b. (in U.S. dollars)????Export volume16.920.125.46.2Import volume26.230.243.95.9Terms of trade (deterioration = -)12.76.213.019.3Money and credit27.031.024.014.6Net domestic assets14.313.7-4.4-3.7Domestic credit1????Of which: Economy11.37.31.314.1Broad money (M2)7.89.71.310.2Reserve money13.811.810.815.5(Percent of GDP)31.530.813.617.0National income accounts11.930.722.318.0National savingsGross investment????Government finance4.35.45.05.1Total revenue (excluding grants)20.421.023.423.5Total expenditure and net lending????Total expenditure and net lending, excl. privatization13.313.614.214.4Primary fiscal balance24.524.927.127.0Domestic fiscal balance24.526.127.727.0Overall balance, after grants-2.1-3.5-3.1-4.5External sector-5.4-6.1-6.5-6.8External current account balance, including official transfers-0.4-1.50.10.9External debt (end of period)????Gross reserves (in months of imports of goods and services)-7.4-4.9-7.1-8.2(Millions of U.S. dollars)16.916.815.414.9External debt (end of period)5.65.25.14.6Gross official reservesMemorandum item:477.6574.2652.8726.2Nominal GDP (billions of Rwanda francs)439.6552.4599.0581.0?????Sources: Rwandese authorities; and IMF staff estimates and projections.1 As a percent of the beginning-of-period stock of broad money.1,563.81,866.12,333.12,737.6 HYPERLINK "" \l "P30_354#P30_354" 1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. ANNEX 4: COUNTRY AT A GLANCE ANNEX 5: MAP OF RWANDA ................
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