Download Report - Independent Evaluation Group - World Bank

24second after completion of 50 percent of reconstruction in the most affected areas. 24 Thefirst installment was disbursed in September 2000. Reconstruction took much longerthan planned and the second installment was disbursed only in July 2002.6.8 The doubling of oil prices between 1998 and 2000 to more than US$30 per barrelput heavy pressure on foreign exchange and the stabilization program, with additionalfinancing requirements for 2001 estimated at US$80 million. The Bank approved asecond Supplemental Credit of US$30 million in December 2000 to cushion the impactof the oil shock and avoid disruption in program implementation. The counterpart fundswere to reduce the specific taxes on petroleum products and/or maintain existing rebatesto mitigate the impact on the poor. The balance of the financing gap was expected to befilled by extraordinary donor contributions and higher export growth. The Credit wasdisbursed in June 2001, without conditions.6.9 Although implementation continued to be slow and uneven during 2001, the Bankwas of the opinion that, overall, the program was achieving its objectives, given themaintenance of a relatively strong macro-economic performance in a stable price anddeficit environment. For second tranche release, GOM had chosen, by mid-2001, theprivatization of TELMA over Air Madagascar. 25 It had planned to send an invitation tonegotiate to the winning bidder, upon receiving the bids in December 2001. However,with the conditions relating to the regulatory framework already fulfilled and four of theeight additional conditions also met (1: mining; 3: business environment and judicialprocesses; 5: revenue policies and monitoring; and 6: expenditure monitoring in socialsectors - see para. 6.2), the Board approved in December 2001 a waiver to therequirement of a sale of 34 percent of TELMA’s voting stock to avoid undue pressure onGOM during negotiations. Instead, issuance of the invitation to negotiate was consideredas meeting the core condition. At the same time, the closing date was extended fromDecember 2001 to December 2002, and the second tranche was released in January 2002.6.10 Following the crisis of 2002, consultations between GOM and the Bank were heldin July/August 2002 to take stock of progress achieved and to review the priorities of thenew government to readjust the program accordingly. The review concluded as follows:(i) since December 2001, no progress had been made in financial sector reforms (audit ofpension and savings funds), in facilitating access to land, and no invitation had been sentto investors for the development of tourism and industrial zones; (ii) there had beenprogress in the mining sector (adoption of a law on large mining projects) and in airtransport (in May 2002, GOM had signed a two-year management contract withLufthansa Consulting to operate Air Madagascar); (iii) during the crisis, illegal licenseshad been issued in the fishery, mining, and forestry sectors by various officials; and24 GOM planned to withdraw the second installment after 350 primary schools in the 10 most heavily damaged schooldistricts and 33 out of 82 primary health centers destroyed had been rehabilitated, reequipped, and staffed.25 A tender to sell a majority stake in Air Madagascar had been launched in 1999 but had not been brought to closure.