PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3629 Project Name. Ethiopia Protection of Basic Services II Region
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1 Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3629 Project Name Ethiopia Protection of Basic Services II Region AFRICA Sector General education sector (35%); Health (35%); General water, sanitation and flood protection sector (10%);Agricultural extension and research (10%);Transport (10%); General public administration sector (10%) Project ID P Borrower(s) FED DEM REPUBLIC OF ETHIOPIA Implementing Agency Ministry of Finance and Economic Development Environment Category [ ] A [ X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared August 21, 2008 Estimated Date of October 28, 2008 Appraisal Authorization Estimated Date of Board December 18, 2008 Approval Public Disclosure Authorized Public Disclosure Authorized 1. Key development issues and rationale for Bank involvement The Government of Ethiopia (GOE) has a strong track record of commitment to poverty reduction and to improvements in service delivery outcomes, as evidenced by the significant increases in the pro-poor spending on education, health, agriculture, and water, all of which are fundamental to achieving the country s MDG targets. These improvements are taking place during a period of massive decentralization of fiscal resources, which started with regions in 1994 and was later extended to woredas in 2002, and which has ensured that greater levels of resources are available at sub-national levels for service delivery. At the same time, GOE has invested heavily in building administrative capacity at sub-national levels and strengthening the accountability relationships between citizens and public service providers. Indeed, decentralization of service delivery is a key development strategy as outlined in GOE second poverty reduction plan Plan for Accelerated and Sustained Development to End Poverty (PASDEP) that covers the period until Official development assistance to Ethiopia has significantly increased over the past decade, and the Protection of Basic Services (PBS) program is an important instrument within this. Started in 2006 and supported by eight donors, 1 the PBS was designed to ensure continuity of support for basic service delivery following the withdrawal of direct budget support. The development objective of existing PBS is to protect and promote the delivery of basic services by sub-national governments while deepening transparency and local accountability in service delivery, and PBS partners remain committed to increasing resources at the sub-national level in order that GOE can continue to implement its programs to enhance decentralization, good governance and service delivery. The program is currently delivered through four components which: (i) supplement regional and district expenditure on basic services; (ii) fund essential health commodities that are centrally procured; (iii) build public financial transparency and accountability; and (iv) help build social accountability on issues of financial transparency and accountability by supporting government-led efforts to make public budget information more accessible and understandable by the average citizen, and by supporting CSO-led initiatives to engage citizens in public planning and budgeting processes. A total of $1.2 billion has been committed by donor partners to 1 African Development Bank, Canada, DFID, EC, Irish Aid, KfW, Netherlands, The World Bank
2 the PBS program to-date. Between and donors will have provided approximately $1.0 billion to the block grant transfer between federal and regional governments annually with the federal government providing about $2.8 billion. Designed initially as an interim measure, PBS has proven to be a successful instrument for supporting the PASDEP (Ethiopia s Poverty Strategy Reduction Paper, the Plan for Accelerated and Sustained Development to End Poverty) not just a second best alternative to direct budget support. With majority of the funding for the PBS by the World Bank and DFID scheduled to run out in July 2007, the two institutions sought additional financing in order to reduce financing gaps for the program and to synchronize the funding cycles of all partners. The additional financing being provided by IDA amounts to US$215 million, which would meet a part of the financing gap associated with promoting the delivery of basic services by sub-national governments, and promoting the health MDGs. In addition, the additional financing also supports restructuring to scale up project impact through the implementation of a new and complementary activity related to the delivery of basic services, termed the Pilot Local Investment Grant (LIG). Funding to initiate the LIG window would expand the mechanisms available to better achieve the project development objective. While the existing Component 1 reimburses GOE for recurrent costs related to basic service delivery by regional and local (woreda) governments, the LIG finances a pilot effort to increase both the quality and quantity of capital investment by local governments and thereby scale up the Project s impact and development effectiveness in the delivery of basic services. The rationale for the Bank s continued involvement in supporting the decentralized delivery of basic services is strong. The PBS program has been a successful means of contributing to government implementation of plans to deepen fiscal decentralization, expand access to basic services, increase the availability of essential health commodities and strengthen financial transparency and social accountability. Overall development investments in Ethiopia, including from PBS, has resulted in notable achievements in human development and accountability. Over 2.6 million more children are in primary school compared with two years ago and the net enrolment rate in primary grades 1-4 has now reached almost 80 percent. The number of Health Extension Workers has increased to 24,500 from only 2,787 two years ago, greatly increasing access to primary health services. Over 20 million insecticide treated nets have been distributed reaching 91 percent of households in malarial areas and reducing the number of new malaria cases by 53 percent in 2 years. Almost half the rural population has access to safe drinking water, up from 35 percent 2 years ago. The share of expenditure executed at regional levels has increased from 41 percent of pre-actual expenditure in to 51 percent of the budget for 2007/08, leading to a real increase in resources at local levels for the implementation of the above sources in line with decentralized mandates. And, for the first time, citizens now have access to information on Woreda- and National-level public budget and expenditure information. A formal structure for dialogue between government, civil society and donors that enables multi-stakeholder collaboration towards improved social accountability has been established. The objectives of the proposed PBS program are consistent with the Bank s Country Assistance Strategy (FY08-FY11). This CAS aims to support Ethiopia in achieving four main strategic objectives, consistent with PASDEP: (i) fostering economic growth, in order to help sustain the emerging economic take-off ; (ii) improving access to and quality of basic service delivery, in order to sustain the emerging basic service take-off ; (iii) reducing Ethiopia s vulnerability to help improve prospects for sustainability; and (iv) fostering improved governance to support citizens empowerment and progress on the previous three objectives. The PBS helps achieve all these four goals. The program focuses strongly on increasing access to and quality of basic service delivery, as well as promoting accountability (hence fostering improved governance). But at the same time it promotes investments (e.g. in health) that reduce vulnerability, and promotes economic growth through investments in human capital and local infrastructure (especially through the Local Investment Grants).
3 2. Proposed objective(s) The main objective of the second phase of the PBS program is to contribute to expanding access and improving the quality of basic services in education, health, agriculture, water supply and sanitation, and rural roads delivered by sub-national governments, while continuing to deepen transparency and local accountability in service delivery. PBS I was built around a set of principles or shared commitments by Government and partners, adherence to which was regularly tested through the PBS Reviews. The tests/shared commitments have been re-focused under PBS Phase II to reflect changes in the risks relative to Phase I and are embodied in a SAFE approach Sustainability (including additionality), Accountability (including fairness), Fiduciary standards, and Effectiveness. 3. Preliminary description The next phase of PBS will build on the successes of the current phase, and will continue to supplement the transfer between federal and regional governments. While the focus will remain on basic service delivery by sub-national governments, there will be a renewed emphasis on issues linked to quality, effectiveness of decentralization, and a further deepening of transparency and accountability. PBS II is being designed as a Sector Investment and Maintenance Credit in order to bring sector expenditures, policies and performance in line with Ethiopia s development priorities by helping to create an appropriate balance among new capital investments, rehabilitation, reconstruction, maintenance and capacity building. This instrument also supports the development of the institutional capacity to plan, implement and monitor expenditure as well as investment programs. It was agreed that given the multi-sector SWAp nature of the PBS, it should be regarded as a Program rather than a narrowly conceived Project. PBS II is proposed to have the following four core Subprograms. Sub-Program A Support to Delivery of Basic Services. Two types of support are envisaged under this Sub-Program. (a) Part A1 Basic Services Block Grant (IDAUS$510 million equivalent; DFID GBP180 million; Spain Euro 30 million, EC Euro 50 million, KfW Euro 30 million, Ireland Euro 30 million). PBS I included (i) education, (ii) health, (iii) agricultural extension, and (iv) water supply and sanitation services delivered by sub-national governments as the basic service sectors. It has been agreed by Government and the Development Partners that in PBS II rural roads will also be included as a basic service sector. As a result of this expanded scope of basic services, the JBAR data and analysis will include all (recurrent and capital) spending allocated to rural roads as well as the other four services at sub-national levels, particularly woreda level. Results indicators will be identified to cover this revised scope, and the Roads Sector will be expected to participate in PBS Reviews to discuss issues related to the financing and delivery of rural roads. As with PBS I, sub-national delivery of basic services would constitute the Program with two financing modalities: first, only recurrent expenditures (salaries, operations and maintenance) in these service sectors will be eligible for re-imbursement from pooled PBS donor and Government financing sources, and second, sub-national capital expenditures in the basic service sectors would be financed exclusively from Government sources and not World Bank funds (except in Pilot LIG woredas, see below). (b) Part A2 Pilot Local Investment Grant (LIG) (IDA: US$55.00 million equivalent). Part A2 will continue to support the introduction, on a pilot basis, of a multi-sector Specific Purpose Grant (SPG) from the Federal Government for capital investment in the health, education, agriculture, natural resources (including water), and rural roads sectors. The ultimate objective of Government is to introduce a National LIG program, open to all woredas, which would be a performance-based SPG with access
4 criteria established in areas relevant for improving the quality of service delivery, and capital investment particularly, at the local-level. The objective of the Pilot LIG is to better understand the constraints at the local level to increased and improved capital spending and to support the development of policies and instruments to address these constraints. One area of particular focus for the Pilot LIG under PBS II will be to support the role-out of a new national system for local-level participatory planning. Additionally, the Pilot LIG will support the rolling-out and testing of new national standards for procurement and environmental screening of capital projects. The financing for Pilot LIG will be transferred to all regions according to the intergovernmental Block Grant Formula (as is the case under Part A1). The Regions will then provide funds to a total of approximately 60 woredas, over a period of up to three fiscal years. The LIG Grant is scaled so that the funds transferred to each local government represent 30% of their total budget. The objective is to provide woredas with a substantial increase in their capital budget as compared with current trends, within the bounds of increases that might be expected in the coming years, while at the same time not overwhelming existing systems and capacity. Eligible woredas will use the funds allocated to them in each fiscal year and incorporate them as part of their overall resource envelope in their annual planning and budgeting cycle. LIG resources will be used to fund new capital works, major rehabilitation of existing infrastructure, and capital equipment that is critical for the effective functioning of this infrastructure. Sub-Program B Health MDGs Support Facility (IDA US$75 million equivalent; CIDA C$60 million; Italy Euro 11 million). Support for the health sector under PBS II will focus on assisting Government in its efforts to accelerate the attainment of health MDGs. This sector support is designed in line with the goals and targets of Health Sector Development Program (HSDP III) and the Government s vision to move towards better harmonization and alignment, working progressively to support one plan, onebudget, one-report, at all levels of the health care system. Funds provided under Sub-Program B of PBS Phase II would go towards three types of expenditures: (a) Matching Grants: This is a novel feature of PBS II. The bulk of the funds under PBS II Sub- Program B would go towards matching grants. These would be administered in accordance with two steps. In Step One, donor funds for this category of expenditures would be channeled through the Federal block grants for funding of basic services at the regional level, in the same way as funds are channeled and used under Sub-Program A Part 1. These funds would increase the donor share of the total amount of block grants; the total amount of the block grants would remain the same. In Step Two, following a matching grants concept, an equivalent amount of Treasury funds would be deposited directly into the principal account of the MDG Performance Fund. (b) Critical Health Commodities and Support for Systems Strengthening : Each of these is considered a distinct type of expenditure. Sub-Program will B will fund Critical Health Commodities, that is the procurement on the international market of key inputs for accelerated implementation of the HSDP such as vaccines, replacement of insecticide-treated bed nets, Indoor Residual Insecticide Spraying (IRS), contraceptives, other essential and high-impact commodities and equipment/supplies. Financing would also go towards Support for Health Systems Strengthening. This will include the following key areas of intervention: (i) support for logistics, distribution, warehousing, stock-keeping and other activities to be handled by the newly established Pharmaceuticals Funding and Supply Agency (PFSA); (ii) procurement systems; including procurement capacity building of PFSA, (iii) financial management and reporting systems; (iii) results-based monitoring and evaluation; (iv) improved health financing systems appropriate for a decentralized service delivery system; (v) supporting Monitoring and Evaluation activities including those related to the Health Management Information System (HMIS); and (vi) supportive activities related to the planning process.
5 Sub-Program C Transparency and Accountability (IDA US$10 million equivalent). This Sub- Program will support the following three sets of activities (a) Part C1: Monitoring the broader framework of accountability reforms Part C1 of Sub-Program C will monitor, within the PBS Results Framework, the progress of selected accountability-related reforms financed and implemented outside PBS but relevant to the effective delivery of services at the local level, including the Good Governance package of the District Level Decentralization Program (DLDP) and other activities that are linked with Public Sector Capacity Building Program (PSCAP). No funding will be allocated from PBS to Sub-Program C Part C1. (b) Part C2: Targeted support to Public Financial Management Building on the experience of Component 3 of PBS I, part 2 of Sub-Program C will finance a series of activities designed to strengthen public financial management at the Federal and regional levels, to help create a system that effectively supports the delivery of high-quality basic services. These will include: (i) support and training for the Office of the Federal Auditor General (OFAG) and (Office of Regional Audit General (ORAGs), to strengthen fiscal accounting and reporting capacity; (ii) enhancing PFM capacity at woreda levels (IBEX and so forth); (iii) financing the PBS accountants?; (iv) Continuous Audits reformed so that (among other things) they include transactions testing (verification of reported fiscal data); (v) other capacity building activities to support Public Finance Management (PFM) strengthening at Federal and regional levels. (c) Part C3: Financial Transparency and Social Accountability. This activity aims to strengthen and deepen Financial Transparency and Accountability (FTA) and social accountability initiatives which the government initiated under PBS. The objectives of this activity, and the initiatives supported under it, are to work further towards significantly enhancing transparency around public budget procedures (planning, budget preparation, expenditures, and audits), and to further foster broad engagement and strengthened voice of citizens and citizen representative groups on public planning and budget processes and public service delivery. Consistent with these objectives, funding for Part 3 of Sub-program C will support the following: (i) the continued roll-out of FTA tools at the regional, woreda and kebele levels. (ii) Budget literacy and media dissemination (social marketing); (iii) strengthening local accountability structures and Woreda Community Planning and Budgeting (WCP&B); (iv) capacity Building on FTA and Social Accountability; and (v) benchmarking FTA Progress: Sub-Program D Monitoring and Evaluation (M and E) This sub-program will finance an enhanced set of M and E activities for the PBS program. This will include household surveys, the FTAPs and a number of studies on how to build a robust system to allow effective monitoring and evaluation of the LIG pilot. In addition, this sub-program will finance activities (e.g. a Public Expenditure Tracking Survey and a survey of ghost workers in one of the relevant sectors to verify the accuracy of the current data collection system, as well as the current structures for financing, channeling of funds and service delivery. 4. Safeguard policies that might apply While the proposed operation is still in the design phase, it is envisaged that the environment classification of the proposed operation will remain a Category B, as core activities being financed under the ongoing PBS Project, including PBS Additional Financing, are expected to continue.
6 The safeguard policy for Environmental Assessment OP/BP4.01 is triggered in the context of ensuring proper guidelines for the management of medical waste. The available guideline provides sufficient safeguards for handling and management of medical waste and its full implementation is regularly assessed. The Amharic version of the Government s Guidelines on the Handling and Disposal of Waste in Health Facilities has been distributed by Government widely to health institutions providing for such services, while the English translation was submitted to the Bank and disclosed in February 2006 as part of the ongoing PBS Project. Safeguard Policies for Environmental Assessment and Involuntary Resettlement OP/BP4.12 are also triggered in the context of the support for the construction of small-scale civil works implemented through the multi-sector Specific Purpose Grants (SPG) from the Federal Government. The Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RFP) have been completed and disclosed in country in August Safeguard Policy for Pest Management OP4./09 is triggered in the context of the indoor use of insecticides. The Guidelines for Malaria Vector Control and Indoor Residual Insecticide Spraying have been prepared, are in use, and disclosed in August 2007 Additional requirements to ensure full compliance with safeguard policies will be further reviewed and agreed during the preparation phase and prior to appraisal. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT Tbd IDA Credit CANADIAN INTERNATIONAL DEVELOPMENT AGENCY 69.0 DEPARTMENT FOR INTERNATIONAL DEVELOPMENT, UK GOVERNMENT EUROPEAN COMMISSION 77.5 GOVERNMENT OF SPAIN 46.5 GOVERNMENT OF ITALY 11.6 IRISH AID 46.5 KFW 46.5 TOTAL: Contact point Contact: Ms. Trina Haque Title: Lead Economist and Task Team Leader Tel: (251-11) Thaque@worldbank.org
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