Regions and Countries

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p. 5 of 5 BACK | NEXT I. Country Strategy II. Current Development Trends and Issues III. Implementation of the Country Strategy and Program IV. Portfolio Management Issues V. Country Performance and Assistance Levels

Country Strategy and Program Update 2004-2006: Tuvalu

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V. Country Performance and Assistance Levels

A. Lending Level Proposed

38. Consistent with ADB’s policy on performance-based allocation of the Asian Development Fund (ADF), the level of ADF allocated to Tuvalu is linked to the country’s performance with respect to policy, reforms, and portfolio management. Accordingly, the proposed base case 3- year rolling allocation is US$1.2 million for 2004–2006. Depending on ADF resource availability in 2004, the ADF lending program will need to be reviewed. The issue will be revisited and confirmed during the Country Program Confirmation Mission. The 2005 and 2006 ADF lending program will depend on the outcome of the discussions regarding ADF replenishment. The final allocation of ADF resources will also depend on performance against the agreed upon triggers. These triggers include continued progress in macroeconomic management, sector reform and governance, sector-specific achievements, and portfolio management. The proposed lending triggers are given in Appendix 2, Table A2.13.

39. Tuvalu’s overall performance assessment score is well above the average for PDMCs. However, the country has experienced the largest drop in the rating for 2002, primarily as a result of less than prudent macroeconomic management and some deterioration in the civil service and public expenditure management categories.

40. The absorptive capacity of Tuvalu is limited, and the lending levels based on performance for 2004–2006 assume a “low case” lending program of US$1.0 million, a “base case” lending program of US$1.2 million, and a “high case” lending program of US$1.5 million. For 2003–2007, a US$2.0 million loan is proposed for an education project in 2005. At an average of US$0.4 million allocation per year, the proposed loan for 2003–2007 programmed for 2005 is generally consistent with the base case scenario. Details of the lending program are shown in Appendix 2, Table 2.11.

42. The drawdown from the CIF has been substantial and the Government's contribution to the TTF A-account⁴ has been lower than what would normally have been expected. As a result, it is doubtful if any automatic distribution from the TTF is likely in either 2002 or 2003.

43. The absorptive capacity of Tuvalu is limited, and the lending levels based on evaluation of performance for 2003-2005 assume a "low case" lending program of $1.5 million, a "base case" lending program of $1.9 million, and a "high case" lending program of $2.3 million.

B. Nonlending Program

41. The nonlending assistance for the period 2003–2006 focuses on (i) fostering good governance through ADTAs on Improving Public Finance Management and Accountability in 2003 and Improving Governance of SOEs in 2006, and (ii) enhancing human and social development through ADTAs on Effective Waste Management and Recycling in 2003, and on Water, Sanitation, and Waste Management in 2005, and a PPTA for Support to Secondary Education Programming in 2004. Details of the nonlending program are shown in Appendix 2, Table 2.12.

C. Summary of Changes to the Lending and Nonlending Program

42. A number of changes with respect to the 2003 TA program were discussed with the Government. These changes were made to reflect changing priorities and have the full concurrence of the Government. A new loan for a secondary education project is proposed for 2005. For the TA program, (i) the TA for Improving Governance of SOEs, which was initially planned for 2003, has been deferred to 2006; (ii) a new TA for Improving Public Finance Management and Accountability has been included in the program for 2003 to more realistically reflect the public finance and administration priorities of the Government; (iii) the TA for Future Electricity Supply for Funafuti, which was initially planned for 2004, has been cancelled; (iv) new TAs for Effective Waste Management and Recycling, as well as for Water, Sanitation, and Waste Management have been included in the program for 2003 and 2005, respectively; and (v) a new PPTA for Support to Secondary Education Programming has been included in 2004.

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