The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) @#&OPS~Doctype~OPS^blank@pidcondpfcoverpage#doctemplate Program Information Document (PID) Concept Stage | Date Prepared/Updated: 18-Jul-2024 | Report No: PIDIC00073 The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) @#&OPS~Doctype~OPS^dynamics@piddpfbasicinformation#doctemplate BASIC INFORMATION A. Basic Project Data Project Beneficiary(ies) Operation ID Operation Name Guinea-Bissau Reengagement and Reform Advancement Guinea-Bissau P500567 Development Policy Financing Region Estimated Approval Date Practice Area (Lead) Financing Instrument WESTERN AND CENTRAL Macroeconomics, Trade Development Policy 02-Dec-2024 AFRICA and Investment Financing (DPF) Borrower(s) Implementing Agency Government of Guinea- Ministry of Finance Bissau Proposed Development Objective(s) The development objective is to: (i) strengthen public financial management and domestic resource mobilization; (ii) enhance energy and water utility viability and digital growth. @#&OPS~Doctype~OPS^dynamics@pidpfrprojectfinancing#doctemplate Financing (US$, Millions) Maximizing Finance for Development Is this an MFD-Enabling Project (MFD-EP)? No Is this project Private Capital Enabling (PCE)? No SUMMARY Total Financing 10.00 DETAILS Total World Bank Group Financing 10.00 World Bank Lending 10.00 @#&OPS~Doctype~OPS^dynamics@piddpfdecision#doctemplate Decision The review did authorize the preparation to continue Page 1 The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) B. Introduction and Context Country Context The proposed operation aims to support the Government of Guinea-Bissau (GoGB) to strengthen fiscal governance and to improve public service delivery. The proposed standalone Development Policy Financing (DPF) is the first budget support operation in 14 years and will provide a Development Policy Grant of US$10 million. This operation reflects the Government’s commitment to reform and the strong partnership established with the multilateral and bilateral development partners in recent years, as evidenced by the increase in development partner grants and the ongoing IMF Extended Credit Facility (ECF) program. The Program Development Objective and Pillars are to support the government’s efforts to: (i) strengthen public financial management and domestic resource mobilization; (ii) enhance energy and water utility viability and digital growth. Guinea-Bissau is a fragile state with low socio-economic development. The economy is over-reliant on the export of raw cashew nuts, which account for around 90 percent of export value and are the income source for around 80 percent of the population. This dependency renders the country susceptible to external shocks, including highly volatile international prices and adverse climatic conditions, such as irregular rainfall or floods. Despite rich natural resources (extractives, agricultural land, fisheries, and forests), significant economic potential, and a strategic location, the country has failed to translate these advantages into broad-based development for its citizens. The provision of vital public services, including access to electricity and digital infrastructure, is severely hampered by limited resources and mismanagement. This DPF supports the GoGB’s efforts to address the challenges threatening the country’s sustainable growth and development. Poverty is widespread and intensifying in Guinea-Bissau. According to the latest household surveys, poverty increased from 47.7 percent in 2018 to 50.5 percent in 2021. The poverty gap, which measures the extent to which individuals fall below the poverty line on average, increased from 13.7 percent in 2018 to 15.2 percent in 2021. The poverty severity index, which puts more weight on the low-income households and is measured by squaring the poverty gap, has also increased, from 5.4 to 6.2 over the same period. These indicators collectively highlight the growing depth and intensity of poverty in the country. Guinea-Bissau’s Human Development Index score fell to 0.483 in 2021, reflecting low human capital and placing the country at 177 out of 191 countries. Guinea Bissau has been in a state of repeated political crises characterized by numerous coups and a civil war. The political instability since independence has hindered the establishment of stable institutions and impeded socio-economic progress. Frequent government turnovers are a key feature of Guinea-Bissau’s political and institutional fragility. In December 2023, the President dismissed the opposition-led Government after the arrest of high-ranking finance officials over corruption charges. The violence between the National and Presidential Guards led to the dissolution of the recently elected Parliament and the formation of a new government. Relationship to CPF The proposed operation supports the objectives of the World Bank Group’s Country Partnership Framework (CPF) for the Republic of Guinea-Bissau covering the period FY18-FY21 and extended by the Performance and Learning Review (PLR) through FY23 as well as the CPF under development. DPF Pillar A directly contributes to the CPF high-level outcome “Increased Government Effectiveness and Transparency.� Pillar B contributes to two CPF objectives: “increase access to sustainable energy� and “increase access to and use of broadband connectivity�. The PAs and result indicators of the Page 2 The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) proposed operation are directly linked to the New WBG Scorecard Indicators. These indicators are: (i) a target of tax revenue equal to or higher than 15 percent of GDP; (ii) the percentage of the population with access to electricity; (iii) percentage of the population using the internet; and (iv) state of online e-government service provision. Ongoing and planned IPF and TA programs will accompany the implementation of the DPF across the two pillars. C. Proposed Development Objective(s) The development objective is to: (i) strengthen public financial management and domestic resource mobilization; (ii) enhance energy and water utility viability and digital growth. Key Results The operation is expected to increase domestic revenues; reduce the number of public entity accounts held at private commercial banks; ensure that Treasury Committee reports are produced, published, and audited on a quarterly basis; increase the share of Civil Servants and Pensioners with ECOWAS-compliant biometric identification required for the forthcoming census exercise; reduce the price of a data-only 2GB mobile-broadband basket; reduce the operating deficit of EAGB; reduce average cost of electricity; and increase percentage of green energy in the energy mix. D. Concept Description The DPF directly supports four objectives of the NDP. Pillar A reflects the objectives of consolidating democracy and modernizing public institutions; and reforming the economy to promote growth and employment. Pillar B reflects the objectives of developing infrastructure; and fighting climate change and preserving biodiversity and natural capital. Under Pillar A - strengthen public financial management and domestic resource mobilization, PA#1 supports improving domestic revenue mobilization and reduce fragility by enhancing the social contract; PA#2 supports improving cash management and budget execution as well as related fiduciary risks; PA#3 supports improving oversight and audit of public resources, fiscal transparency, as well as related fiduciary risks; and PA#4 supports improving efficiency of wage bill and pension expenditures. Under Pillar B - enhance energy and water utility viability and digital growth, PA#5 supports ensuring the effective management and deployment of the future national fiber optic backbone, PA#6 supports improving the financial and operational performance of the national utility company; PA#7 supports reducing the high dependence on expensive imported oil and use of environmentally damaging hydrocarbon power generation. Page 3 The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts The proposed policy reforms are expected to support long-term economic growth and positively impact poverty reduction, household living standards and social inclusion. The assessment indicates the operation is unlikely to have any significant adverse social effects. Mitigating mechanisms include supportive investment projects and technical assistance when needed. Environmental, Forests, and Other Natural Resource Aspects Policy actions under this proposed operation are not expected to have a significant negative impact on Guinea-Bissau’s environment, forests, and natural resources. The Ministerial Order for the prioritization of a more environmentally sustainable energy source (PA#7) will have positive impact as it promotes the transition from the current heavy fuel oil polluting products to more renewable energy, including imports from neighboring countries. The deployment of the optic fiber (PA#5), could, if not controlled, have potential negative but reversible environmental impacts including nuisances, construction waste generation as well as OHS risks. However, the risk of such outcomes can be minimized by inclusion in the ICT law of a provision to minimize and mitigate the potential impacts of the deployment of ICT infrastructures, as per the national regulations. @#&OPS~Doctype~OPS^dynamics@contactpoint#doctemplate CONTACT POINT World Bank Demet Kaya Senior Economist Patrick John McCartney Economist Borrower/Client/Recipient Government of Guinea-Bissau H.E.M. Soares Sambu Minister Of Economy sosambu1958@hotmail.com H.E.M. Ilidio Vieira Te Minister of Finance ilidio_94@hotmail.com Page 4 The World Bank Guinea-Bissau Reengagement and Reform Advancement Development Policy Financing(P500567) Implementing Agencies Ministry of Finance H.E.M. Ilidio Vieira Te Ministry of Finance ilidio_94@hotmail.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects @#&OPS~Doctype~OPS^dynamics@approval#doctemplate APPROVAL Task Team Leader(s): Demet Kaya, Patrick John McCartney Approved By Practice Manager/Manager: Hans Anand Beck 02-Jul-2024 Country Director: Pierre Xavier Bonneau 18-Jul-2024 Page 5