Background

In 2007/2008, IFAD's Office of Evaluation (OE) conducted a Country Programme Evaluation (CPE) in Ethiopia. The main objectives of the CPE were to: (i) assess the performance and impact of IFAD's strategy and operations in Ethiopia; and (ii) develop a series of findings and recommendations that would serve as building blocks for the preparation of the new IFAD results-based country strategy and opportunities programme (COSOP) for Ethiopia. The COSOP would be formulated by the Eastern and Southern Africa Division (PF) of IFAD in close collaboration with the Government of Ethiopia.

This ACP includes the key findings and recommendations contained in the CPE. It also benefits from the main discussion points that emerged at the CPE national roundtable workshop, organised in Addis Ababa on 26-27 June 2008. This ACP captures the understanding between the IFAD and the Government of Ethiopia on the core CPE findings, and their commitment to adopt and implement the evaluation recommendations contained in this document within specified timeframes.

The main CPE findings

First of all, it is important to recognise that this section contains only the salient findings from the CPE. For a more exhaustive overview of the findings, readers are encouraged to refer to the evaluation report.

The CPE noted that the 1999 Ethiopia COSOP had clear objectives in terms of portfolio development, especially with regard to the priority areas for sub-sector investments. However, in accordance with the COSOP design format at the time, it did not have clearly measurable objectives that would have facilitated an assessment of the contribution made by IFAD operations to the country's broader rural poverty reduction efforts. Nonetheless, the objectives of individual projects and programmes were well defined, albeit with weak monitoring and evaluation systems.

Overall, the CPE found that post-COSOP operations funded by IFAD in the areas of rural finance, pastoral community development and small-scale irrigation were highly relevant. The results of most of the projects financed by IFAD in Ethiopia are generally satisfactory. In fact, the performance of the project portfolio is better than IFAD global averages - as reported in the 2007 Annual Report on the Results and Impact of IFAD Operations – especially in the areas of relevance, effectiveness, sustainability, innovations promotion, and overall project achievement.

While the CPE agrees with the need to support the development of a national agricultural research system (NARS), it is important to strengthen linkages between the NARS, extension services and farmers as end users. Likewise, the design of the recent agricultural marketing project is broadly consistent with IFAD's private sector and partnership development strategy. However, while recognising that the marketing project has only been effective for just over two years, the CPE noted that the project needs to explore opportunities for greater public-private sector partnerships.

The CPE also found that IFAD-assisted activities have been designed and implemented with limited linkages among each other. Linkages with regional grant-funded initiatives have also been limited, even though this is likely to change given the recent evolution in IFAD's grant policy and priorities. The CPE recognises that in 2007, IFAD established the Country Programme Forum in Ethiopia, which will serve as a framework for exchanging information and cross-fertilise experiences across IFAD-financed projects and programmes in the country. This should contribute to building synergies and better co-ordination in the country programme.

The CPE found that implementation capacity varies between the different regions and districts. Moreover, the quality and capacity for implementation may also change abruptly and significantly with the transfer of staff. These are issues that need to be considered in moving forward by innovatively using grants to strengthen institutional capacity, especially given the deeper attention by the country to promoting decentralised administration, design and implementation, and monitoring and evaluation.

The CPE found good prospects for sustainability of benefits. In fact, in recent years, more than 10% of the government budget has been allocated for agriculture and food security. Another positive element is that IFAD-financed project management units are well embedded within the decentralised government structure or in permanent national organisations. However, there are some sustainability concerns particularly in rural development and microfinance. MFIs in Ethiopia have excellent portfolio quality and good operational efficiencies. However, the returns on assets and equity are both negative, primarily because of negative real interest rates due to recent inflation. The issue of double-digit inflation is a recent phenomenon, which is currently being addressed by the Government and development partners.

The CPE found that inadequate resources have thus far been devoted to non-lending activities, namely knowledge management, policy dialogue and partnerships. The recently established country presence of IFAD in Ethiopia has contributed, among other issues, to better donor harmonisation, dialogue amongst projects and key partners at different levels, and communication. However, the effectiveness of IFAD's current country presence model in Ethiopia is affected by the limited resources and decision-making authority.

IFAD's main contributions to policy dialogue are project specific. According to the CPE, the move by IFAD to itself take the lead in directly supervising and providing implementation support to its operations in the country is appropriate.

Recommendations

Recommendation 1: Where to Focus

• Targeting and synergy between interventions. According to the new COSOP guidelines and IFAD's Targeting Policy, COSOPs need to include a targeting strategy. There should be scope for focusing on food deficit woredas, which are nowadays better mapped thanks to the available data and supporting dynamic economic changes in the rural economy with trickle-down effects. The new COSOP should identify measures to link different interventions (for example how to link rural finance with small-scale irrigation and agricultural marketing) and ensure better synergy between programmes.
• Sectoral focus. For the next some 10 years, IFAD should prioritise areas where it has developed a lead position, such as in small-scale irrigation and rural finance, where the achievements are satisfactory and promising. However, a second phase of the Rural Finance Intermediation Programme (RUFIP) will depend on the results of a dedicated interim evaluation by OE in 2009, and in particular on progress with respect to addressing the current problem of negative interest rates. While jointly initiated with the World Bank, support for pastoral community development has been a success for which continued IFAD involvement seems justified, perhaps promoting synergies with rural finance in the way it worked in phase one of the operation.
• Within small-scale irrigation it is a matter of scaling-up, refining and consolidating participatory approaches to improve sustainability, and effectively addressing water use management, and soil and watershed conservation.
• Within rural finance, much remains to be done in automating the manual systems and introducing proper, real time, management information systems. Furthermore, support is needed for developing services in pastoral and other access deficit areas. RUFIP has already spent most of the budget. In order not to lose important momentum, the Government has mobilised additional resources from the banking sector (approximately USD 120 million) to continue support for MFI on-lending operations until the second phase becomes operational in 2010.
• As the evaluation ratings for the PCDP are mostly highly satisfactory or satisfactory, and in order to ensure continuity of activities and benefits, Government and the World Bank have concluded a financial package for phase two of the project. Given the positive results of this project and the importance of pastoral development in reducing rural poverty in Ethiopia, the Government has requested IFAD to jointly cofinance the second phase of the project within the framework of the current PBAS cycle which ends on 31 December 2009.
• Currently, IFAD is participating with GEF in the design of sustainable land use and management project around Lake Tana, which, if approved, will open a new strategic focus area for IFAD. Though there is no doubt that natural resource degradation is an area that warrants attention, the strategy for dealing with the problem needs to be carefully developed. First of all, the factors that in the first place caused the felling of trees and overexploitation of steep slopes need to be identified and proper solutions found, otherwise the project may fail to benefit poor households. In densely populated mountain countries, the poorest are often both victims of and contributors to natural resource degradation (they have to use common lands and forests for firewood collection, grazing their livestock). Strict protection, without providing alternatives, may even make them worse off.

Recommendation 2: tools to promote innovations

• Using grants in a smart way for knowledge management and pilot testing. IFAD could innovatively use supplementary grant funds for preparatory studies, baseline surveys and impact studies, which could be contracted to independent third parties.
• Policy dialogue. Project design and implementation offers IFAD the best opportunities for influencing systems and approaches. However, project financing alone may not be sufficient for policy dialogue. Supplementary activities such as specific studies and symposia on thematic issues may be required and objectives, instruments and resources (staff time, particularly for the country office staff, and financial resources) have to be allocated. Finally, well targeted study tours to other countries that have passed through similar challenges as Ethiopia is facing, should be considered as an effective tool of policy dialogue.

Recommendation 3: Working with whom?

• Partnership has involved many different public institutions in Ethiopia at the Federal level (at least four Ministries: Finance and Economic Development, Agriculture and Rural Development, Federal Affairs, and Water Management and, in addition, EARI Development Bank of Ethiopia) as well as at the regional and sub-regional (woreda) level. These partnerships should continue in the context of relevant future interventions. It is recommended to increase the focus on constructing partnerships between the public sector, civil society and the private sector at the regional and sub-regional level (as tested in pastoral community development). The recently-created IFAD country forum is a good starting point.
• Positive experiences have been gained in working civil society organisations in supporting grassroots organisations in pastoral areas. These experiences should be considered when supporting capacity development of grassroots organisations.
• Private sector is a relatively new partner of IFAD, with some successful initial experiences in pastoral community development and agricultural marketing. Although AMIP is at its initial implementation stage, successful experiences at the local level should be encouraged in order to enhance public-private sector collaboration.
• The current active portfolio has no cofinancing partnerships with bilateral donors. Even though aid modalities and priorities of bilateral donors have undergone major changes in the recent period, the CPE finds that IFAD should not stop seeking cooperation opportunities, as some bilaterals are active in sub-sectors supported by IFAD.
• The financing and supervision arrangements for the support to rural finance have involved two cofinanciers (IFAD and AfDB) and one cooperating institution (the World Bank). The complexity of diverse procurement procedures has not been conducive to smooth implementation and should be avoided unless one set of procedures and rules for procurement can be agreed.

Recommendation 4: Programme and project cycle management

• Planning period for the strategy. The ideal planning period for the new COSOP would appear to be three years, synchronised with the PBAS cycle and the Medium Term Expenditure Framework (MTEF). However, given IFAD's limited resources for strategy work and COSOP formulation, a 6-year planning period (covering two PBAS periods) is recommended, with a review at mid-term. As prescribed by the current COSOP guidelines, the COSOP should have a clearly specified implementation period and updated at mid term review.
• Implementation support and country office. Starting with AMIP and PASIDP, more projects will henceforth be supervised directly by IFAD which requires adequate budget and human resources, currently not at the disposal of the Field Presence Office. Therefore, IFAD needs to implement a proper assessment of financial and human resources requirements and training needs for managing direct supervision, beginning with its field presence office whose resources deserve to be increased.

Proposed timeframe to implement the recommendations

The recommendations in the ACP will be implemented in the context of ongoing operations, as well as during the design and implementation of the new results-based COSOP for Ethiopia.

Key partners to be involved

The recommendations will be implemented by IFAD and the Government in collaboration with civil society organisations, community based organisations, the private sector and other development partners.