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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No.44822-RW
PROGRAM DOCUMENT
ON A
PROPOSED GRANT
IN THE AMOUNT OF SDR 4 MILLION (US$6 MILLION EQUIVALENT) FUNDING
TO THE
REPUBLIC OF RWANDA
FOR A
FIRST COMMUNITY LIVING STANDARDS GRANT (CLSG-1)
March 2,2009
Human Development I11 Eastern Africa Country Cluster 2 Africa Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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Rwanda - GOVERNMENT FISCAL YEAR January I -June 30,2009; July I, 2009 -June 30, 2010; July I, 2010 -June 30, 2011
CURRENCY EQUIVALENTS (Exchange Rate Effective as o f January 3 1,2009)
Currency Unit = Rwandan Franc US$l.OO = RWF 565.8853
1 SDR = US$1.51123
Weights and Measures Metric System
ABBREVIATION AND ACRONYMS
AfDB ARI BSHG CAS CDF CFAA CHW CLSG CPAF CSR DALY DCDP DFID DHS DIP DPAF DPL DPO DS EA EC EDPRS EO FARAP FDI FDLR HLSS GDP GNI GNP GoR HIDA HIMO-PDL
African Development Bank Acute Respiratory Infection Budget Support Harmonization Group Country Assistance Strategy Conhon Development Fund Country Financial Accountability Assessment Community Health Workers Community Living Standards Grant Common Performance Assessment Framework Civil Service Reform Disability-adjusted L i f e Year Decentralization and Community Development Program Department for International Development Demographic Health Survey Decentralization Implementation Program Donor Performance Assessment Framework Development Policy Lending Development Policy Operation Direct Support Environmental Assessment European Commission Economic Development and Poverty Reduction Strategy Environmental Officers Financial Accountability Review and Action Plan Foreign Direct Investment Rwandan Liberation Democratic Forces Household Living Standard Survey (EICV2) Gross Domestic Product Gross National Income Gross National Product Government o f Rwanda Human Resources and Institutional Capacity Development Agency Labor-intensive Local Development Program
.. 11
FOR OFFICIAL USE ONLY
HIPC n’
HIV/AIDS HRITF HSSP I A S IBRD IDA IFC IFRS IMF I T N S JBSR JGA LDP LWH M&E MAP MBB MDG MDRT MIFOTRA MINAGRI MINALOC MINECOFIN MINEDUC MININFRA MINITERE HMIS M O H M o U MTEF NBR NPLs ORT ovc PBF PDO PEFA PER P F M PSTA P M T PRGF PRSC/G PRSG PRSP PSCBP
Heavily Indebted Poor Countries Human Immunodeficiency VirudAcquired Immune Deficiency Syndrome Health Results Innovation Trust Fund Health Sector Strategy Paper International Accounting Standards International Bank for Reconstruction and Development International Development Association International Finance Corporation International Financial Reporting Standards International Monetary Fund Insecticide-treated Mosquito Nets Joint Budget Support Review Joint Governance Assessment Letter o f Development Policy Land Husbandry, Water Harvesting and Hillside Irrigation Monitoring and Evaluation Multisectoral HIV/AIDS Program Marginal Budgeting for Bottlenecks Millennium Development Goal Multilateral Debt Relief Initiative Ministry o f Public Service and Labor Ministry o f Agriculture and Animal Resources Ministry o f Local Government Ministry o f Finance and Economic Planning Ministry o f Education, Science, Technology and Research Ministry o f Infrastructure Ministry o f Lands, Environment, Forestry, Water, and Natural Resources Health Management Information System Ministry o f Health Memorandum o f Understanding Medium-tern Expenditure Framework National Bank o f Rwanda Non-performing Loans Oral Rehydration Therapy Orphans and Vulnerable Children Performance-based Financing Program Development Objective Public Expenditure and Financial Accountability Assessment Public Expenditure Review Public Financial Management Strategic Plan for Agricultural Transformation Proxy Means Test Poverty Reduction and Growth Facility Poverty Reduction Strategy CredidGrant Poverty Reduction Strategy Grant Poverty Reduction Strategy Paper Public Sector Capacity Building Program
has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
PW RDB REDEMI REMA RPPA RSDF RS SP RWF SDR SIDA SP SWAP UNDP UNICEF USAID US$ VUP
Public Works Rwanda Development Board Rwanda Mines Exploitation and Development Agency Rwanda Environmental Management Authority Rwanda Public Procurement Authority Rwanda Strategic Decentralization Framework Rural Sector Support Project Rwandan Franc Special Drawing Rights Swedish International Development Association Social Protection Sector-wide Approach United Nations Development Program United Nations Children’s Fund United States Agency for International Development United States Dollar Vision 2020 Unzurenge Program
Vice President : Obiageli K. Ezekwesili Country Director : Johannes Zutt
Sector Director : Yaw Ansu Sector Manager : Lynne D. Sherburne-Benz
Task Team Leader : Verdon S. Staines
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization.
i v
RWANDA THE FIRST COMMUNITY LIVING STANDARDS GRANT
TABLE OF CONTENTS
GRANT AND PROGRAM SUMMARY .......................................................................................................... vi I . INTRODUCTION .............................................................................................................................................. 1 I1 . COUNTRY CONTEXT ..................................................................................................................................... 2
RECENT ECONOMIC DEVELOPMENTS IN RWANDA ................................................................................ 2 MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ............................................................... 3
111 . THE GOVERNMENT’S PROGRAM .............................................................................................................. 9 ECONOMIC DEVELOPMENT & POVERTY REDUCTION STRATEGY ..................................................... 9 VISION 2020 UMURENGE PROGRAM ........................................................................................................... 11 HEALTH SECTOR POLICY .............................................................................................................................. 12
I V . BANK SUPPORT TO THE GOVERNMENT’S STRATEGY ...................................................................... 15 CHOICE OF LENDING INSTRUMENT ............................................................................................................ 15 LINK TO CAS ..................................................................................................................................................... 16 COLLABORATION WITH THE IMF AND OTHER DONORS ....................................................................... 16 RELATIONSHIP TO OTHER BANK OPERATIONS ....................................................................................... 17 ANALYTICAL UNDERPINNINGS ................................................................................................................... 19
V . THE PROPOSED FIRST COMMUNITY LIVING STANDARDS GRANT ............................................... 22 OPERATION DESCRIPTION ............................................................................................................................ 22 POLICY AREAS ................................................................................................................................................. 25
V I . OPERATION IMPLEMENTATION ............................................................................................................... 28 POVERTY AND SOCIAL IMPACT ................................................................................................................... 28 IMPLEMENTATION. MONITORING AND EVALUATION .......................................................................... 28 ENVIRONMENTAL ASPECTS ......................................................................................................................... 31 FIDUCIARY ASPECTS ...................................................................................................................................... 32 DISBURSEMENT AND AUDITING ................................................................................................................. 34 RISKS AND RISK MITIGATION ...................................................................................................................... 34
ANNEXES
ANNEX 1 : LETTER OF DEVELOPMENT POLICY ....................................................................................................... 37 ANNEX 2: OPERATION POLICY MATRIX ................................................................................................................... 43 ANNEX 3: FUND RELATIONS NOTE ............................................................................................................................ 48 ANNEX 4: COUNTRY AT A GLANCE ........................................................................................................................... 49 ANNEX 5 : OVERVIEW OF UBUDEHE .......................................................................................................................... 51 ANNEX 6: RECENT DECENTRALIZATION REFORMS IN RWANDA ...................................................................... 53
ANNEX 8: INTERNATIONAL GOOD PRACTICE IN SOCIAL ASSISTANCE (DIRECT SUPPORT) PROGRAMS 60
ANNEX 10: ENVIROMENTAL ASPECTS IN THE RWANDAN CONTEXT ............................................................... 67 ANNEX 1 1 : EXTRACT FROM VUP MONITORING & EVALUATION MANUAL .................................................... 69 ANNEX 12: VUP IMPLEMENTATION PROCESS FOR RWANDA’S NEW SOCIAL PROTECTION POLICIES ..... 74 ANNEX 13: MAP o f RWANDA ........................................................................................................................................ 76
ANNEX 7: INTERNATIONAL GOOD PRACTICE IN PUBLIC-WORKS EMPLOYMENT PROGRAMS .................. 56
ANNEX 9: PERFORMANCE-BASED FINANCING O f HEALTH SERVICES in RWANDA ........................................ 64
V
GRANT AND PROGRAM SUMMARY
F Borrower Implementing Agency Financing Data Operation Type
M a i n Policy Areas Key Outcome Indicators
Program Development Objectives; Contribution to CAS
REPUBLIC OF RWANDA RST COMMUNITY LIVING STANDARDS GRANT (CLSG-1) Republic o f Rwanda Ministry o f Finance, Ministry o f Local Government, and Ministry o f Health
Type: IDA grants. Terms: Single tranche to be released on effectiveness o f the operation. Amount: SDR 4 mi l l ion (US$6 mi l l ion equivalent). CLSG-1 i s the first o f three programmatic development policy grant operations o f similar size, approximately one year apart, with complementary co-financing o f US$4 mi l l ion by a Health Results Innovation Trust Fund grant'. Social Protection and Community Health, Nutrition, and Population Services
Social Protection: After three years, the Vision 2020 Umurenge (VUP) Program will be assessed with reference to (1) o f those households eligible for support, the percentage that are granted public works in a sample o f VUP pilot sectors (2008: 35%; 2009: 35%; 2011: 35%); (2) o f those households eligible for support, the percentage that are granted direct support in a sample o f VUP pi lot sectors (2008: 0%; 2009: 60%; 2011: 80%); and ( 3 ) the proportion o f households in the bottom two categories o f extreme poverty (as identified by the Ubudehe process) in a sample o f V U P pi lot sectors (2008: 28.7%; 2009: < 28.7%; 201 1: < 28.7%).
Communiq Health, Nutrition, and Population Services: At the end o f three years, pol icy reforms o f community health, nutrition and population service provision will also be assessed with reference to: (4) increase in the proportion o f married women aged 15-49 using modern contraceptives f rom 27% (2008) to 38% (201 1); (5) increase in the proportion o f under-five children with diarrhea who receive oral rehydration therapy (ORT) from 30% (2008) to 50% (2010-1 1); (6) increase in the proportion o f births that are cared for in an accredited health facility f rom 45% (2008) to 50% (201 1); and (7) increase in the annual per capita allocation to performance-based financing (PBF) for health facilities and community health cooperatives from US$1.45 (2008) to US$2.25 (201 1).
These indicators are part o f the Common Performance Assessment Framework (CPAF), which governs general budget support for the Government o f Rwanda (GoR) or, in one case, part o f the related health sector matrix. All indicators are agreed between GoR and development partners. The Program Development Objective i s to support the Government o f Rwanda's social protection and health policy reforms designed to reduce extreme poverty, initially in 30 pi lot sectors, and to expand access to high-impact health, nutrition and population interventions at the community level.
' The IDA grant and co-financing would total U S $ l O million.
v i
Risks and Risk Mitigation
Operation ID
The operation will support GoR’s poverty reduction objectives, consistent with the country’s fiscal framework and with the current CAS. The second strategic theme o f the CAS i s to reduce social vulnerability and “to ensure that the most vulnerable Rwandans also benefit from growth and to help Rwanda make further progress in building a more stable society. A smaller program will support the Flagship Vision 2020 Umurenge initiative; help Rwanda get on track on child and maternal mortality goals.. . .”* The mains risks to the program arise from two areas: (i) continued instability in the Great Lakes subregion and the effects on economic stability and donor support; and (ii) continued global economic slowdowns. International and regional efforts to mitigate instability in the Great Lakes sub-region continue. Flare-ups o f fighting occurred in Eastern DRC in late 2008. Sweden and the Netherlands, which suspended budget support due to these flare-ups, are currently in discussions with GoR aimed at resolving the issues that have arisen. On January 20, 2009, GoR and the Government o f DRC signed a joint military agreement to disarm the Rwandan Liberation Democratic Forces (FDLR), within the framework o f an accord signed between them on December 5, 2008. Rwanda depends heavily on international assistance, particularly for social protection and health. Given this and the recent global financial crisis, significant program risk includes unpredictable aid flows, which could hinder implementation o f GoR policies. Applying a higher proportion o f international assistance on-budget and allocating more predictable domestic on-budget international financing towards the highest-priority activities contribute to mitigating this risk. Related efforts to improve harmonization include: (i) a Memorandum o f Understanding (MoU) and Common Performance Assessment Framework (CPAF) agreed between GoR and donors to govern provision o f direct budget support for implementation o f Rwanda’s EDPRS; and (ii) in the health sector, an agreed sector-specific framework for sector budget support by several donors and an M o U to initiate a sector-wide approach. P106834
Protection DPL”, referring to the CLSG operation
The First Community Living Standards Grant was prepared by a World Bank team consisting o f Verdon Staines, Senior Economist, AFTH3 (TTL); Patrick Mullen, Health Specialist, AFTH3; Alex Kamurase, Operations Officer, AFTH3; Kalanidhi Subbarao , Social Protection Consultant, AFTH3; Alan Thompson, Social Assistance Consultant, AFTH3; Abebe Shimeles Abebe, Consultant, AFTPM; Aly B. Sy, Consultant, AFTH3; Annika Kjellgren, Consultant, AFTH3; Michael Karangwa, Consultant, AFTH3; Bahie Mary Rassekh, Consultant, AFTHD; Diego Garrido Martin, Monitoring and Evaluation Specialist, AFTRL; Sameena Dost, Senior Counsel, LEGAF; Aissatou Diallo, Finance Officer, LOAFC; Gert Van Der Linde, Lead Financial Management Specialist, AFTFM; Otieno Ayany, Financial Management Specialist, AFTFM; Sylvie Ingabire, Team Assistant, AFMRW; and Nadege Nouviale, Program Assistant. AFTH3.
v i i
PROGRAM DOCUMENT FOR A
TO THE REPUBLIC OF RWANDA PROPOSED FIRST COMMUNITY LIVING STANDARDS GRANT (CLSG-1)
I. INTRODUCTION
1. As a country o f modest geographical size with an estimated population of 9.6 million, Rwanda i s one of the world’s most densely populated countries, and it remains among the poorest, despite having made significant progress in the past decade. The proportion o f the population that national household surveys identified as poor decreased slightly from 60 percent in 2000-01 to 57 percent in 2005-06. However, because o f relatively rapid population growth, the estimated total number o f people living in poverty (see paragraph 8) rose from 4.8 million in 2000- 01 to 5.4 mill ion in 2005-06. Over 90 percent o f those who were poor lived in rural areas, and poverty remains pervasive and deep. High fertility rates, maternal mortality, and child malnutrition also remain serious concerns.
2. Rwanda’s Economic Development and Poverty Reduction Strategy (EDPRS) for 2008- 12 “builds on strong achievements in human capital development and promotes three flagship programs” to accelerate growth. These flagship programs focus on encouraging growth that creates jobs and increases exports, on strengthening governance, and on introducing the Vision 2020 Umurenge2 Program (VUP). The VUP i s expected to accelerate poverty reduction “by promoting pro-poor components o f the national growth agenda.. .by releasing the productive capacity o f the poor in rural areas through a combination o f public works, credit packages and direct su~por t ” .~
3. The second strategic theme of the Bank’s newly approved Country Assistance Strategy (CAS) for Rwanda i s reducing social vulnerability. The theme’s objective “is to ensure that the most vulnerable Rwandans also benefit from growth and to help Rwanda make further progress in building a more stable society. A smaller program will support the Flagship Vision 2020 Umurenge initiative; help Rwanda get on track on child and maternal mortality goals; and promote peace and social cohesion through demobilization and reintegrati~n”.~
4. GoR’s innovative VUP program needs to be sufficiently anchored by appropriate policy and institutional reforms if it i s to succeed in reducing poverty and vulnerability. The proposed First Community Living Standards Grant (CLSG-l), the first o f a programmatic series of three, i s a development policy operation that will support this CAS objective. I t s Program Development Objective i s to support GoR’s social protection and health policy reforms designed to reduce extreme poverty, initially in 30 pilot sectors, and to expand access to high-impact health, nutrition and population interventions at the community level. Given GoR’s commitment to achieving quick results in the domain o f poverty reduction, even in the midst o f the ongoing global economic financial crisis, the urgency o f social protection policy and institutional reforms cannot be over-emphasized.
GoR has progressively devolved responsibilities and transferred resources to decentralized levels o f the administration - Province, District, Sector (Umurenge), Cell (Akuguri) and Village (Umudugudu). Of these, the last three are subordinate tiers o f the district governments. The VUP i s implemented through this newly restructured decentralized local government system. See paragraph 26 and Annex 6.
The Government’s “Economic Development and Poverty Reduction Strategy (2008-20 12)”, page ix. World Bank “Rwanda’s Country Assistant Strategy (2008-20 12)”, page 18.
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5. The policy actions to be supported focus on ensuring that GoR’s policy reforms follow international good practice in the domain of social protection by adopting a non-distortionary wage policy, a policy to pay workers directly without intermediaries5, a voluntary savings policy, a policy of determining direct support benefits to poor families with no adult labor that i s based on the household as a unit, a policy to make the eligibility determination process clear and transparent, and health policies to expand poor households’ access at the community level to high-impact health, nutrition and population interventions using performance-based financing mechanisms. (“High-impact” interventions are those that have had high impact on reducing disease burden in developing countries).
6. The first single-tranche development policy operation (DPO) i s proposed to total US$6 million IDA financing, to be complemented by an estimated US$4 million from the Health Results Innovation Trust Fund, totaling an estimated US$lOmillion. The second and third operations would similarly be around US$lO mi l l ion each, o f which US$6 mi l l ion i s expected to come from IDA financing each year. The proposed series o f three operations would total an estimated US$30 million, o f which U S $ l 8 mi l l ion would be from IDA and approximately US$10 to 12 mi l l ion from the Health Results Innovation Trust Fund (depending on exchange rates).
11. COUNTRY CONTEXT
RECENT ECONOMIC DEVELOPMENTS IN RWANDA
7. Rwanda’s economy has grown on average between 2001 and 2008 at 6.8 percent annually. However, population growth has impeded increases in per capita GDP, growth in the agriculture sector has been slow, and inflation i s an emerging concern. The economy grew at 7.3 percent in 2006 and 7.9 percent in 2007. Recent GoR data projected real GDP growth o f 8.5 percent in 20086. Due to population growth o f 2.7 percent, the realized per capita GDP growth rates have been much lower than the GDP growth rates. Economic growth has been driven by the services and industry sectors, while agriculture has performed poorly. Notwithstanding the impressive growth performance during 2008, 12-month inflation during this period gradually increased to over 20 percent in September 2008 as a result o f the passing through o f rising international commodity prices into domestic demand pressures. Inflation is projected to return to 5 percent over the medium term, after the impact o f international fue l and food prices has been absorbed. Achievement o f this objective also hinges on the continuation o f prudent macroeconomic policies and the success o f measures to boost domestic agricultural output and reduce the price
Since December 2008, Rwandan policy requires that a l l wage payments and other payments made by the government to individuals be made by direct deposit into an account for the individual in a bank or fmancial institution. An individual entitled to receive such payments must have or create an account in a bank or fmancial institution into which the payment can be made. In the context o f this operation, and within the Vision 2020 Umurenge Program (VUP), payment of wages under the public works program and of household benefits under the direct supports program will be into such an account in a bank or fmancial institution. Furthermore, provided that private contractors are neither involved in making payments to VUP workers or beneficiaries nor in selecting the participants in the VUP public works or direct supports programs nor in determining their wage payments, private contractors can be used within the VUP for other purposes such as providing technical advice or supervising specific activities. Also see later discussion in paragraph 64.
GDP Growth from IMF “Staff Report for the 2008 Ar t i c le I V consultation, Fifth Review under the Poverty Reduction & Growth Facility Arrangement (PRGF), and Request for Waiver of Performance Criterion”, December 2008.
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volatility o f fresh food products7.
8. Poor people have grown in number and live mostly in rural areas. The country’s target for MDG 1 by 2015 i s to reduce the proportion under the poverty l ine to 30 percent. By 2012, GoR’s EDPRS aims to lower the population living under the upper poverty l ine to 46 percent and those living in extreme poverty to 24 percent. Based on the most recent household survey (EICV2, 2005-06), only modest improvements in poverty levels have been achieved.
i) The extreme poverty line in Rwanda i s defined as per capita consumption equivalent to less than RWF 175 per day (around US$0.29). This represents the level o f expenditure needed to provide minimum food requirements o f 2,100 kilocalories per adult per day. In 2005-06, one-third o f the population, or about 3.5 million people, (93 percent o f them living in rural areas) did not reach this level o f average daily,consumption.
ii) The upper poverty l ine i s defined at RWF 250 equivalent per adult daily consumption (around US$0.45), some 57 percent o f the population, or 5.4 mill ion people, were under this l ine in 2005-06, o f whom 92 percent lived in rural areas. Poverty has been modestly reduced from 60.4 percent o f the population under the upper poverty l ine in 2000-01 to 56.9 percent in 2005-06.
9. Health indicators have improved significantly since 2000, although child and maternal malnutrition and mortality levels are still high. Rwanda has made considerable progress in a number o f health indicators in recent years, including under-five mortality, which declined from 196 per 1,000 live births in 2000 to 103 per 1,000 in 2008 (as measured by household surveys). Considerable progress in malaria control in particular i s evident, as reported incidence has decreased by two-thirds since 2000. Modern contraceptive prevalence has increased from 4 to 27 percent between 2000 and 2008. In 2006,28 percent o f deliveries were in health facilities, which improved to 45 percent in 2008. This progress notwithstanding, maternal mortality i s high, estimated at 750 per 100,000 l ive births during the period 2000-04. At the same time, despite improvement, child mortality remains high and child malnutrition i s a persistent problem, as the prevalence o f stunting among under-five children was 45 percent in 2005-06.
MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY
10. The macroeconomic framework i s adequate for the purposes of the proposed operation, and the program supported by the IMF i s on-track. In January 2009, the IMF completed i ts fifth review under i ts three-year Poverty Reduction and Growth Facility (PRGF), approved in June 2006 in an amount o f about US$12.2 million, enabling the immediate disbursement o f an amount equivalent to about US$1.7 million, bringing total disbursements to date to about US$10.4 million. The review reaffirmed the generally positive review o f Rwanda’s performance from June 2008’. The IMF concluded that program performance in 2007 was satisfactory, macroeconomic management was broadly on track, while growth was robust. Inflation has fluctuated but remains under control. Furthermore, the recent IMF Article IV Consultation
Discussion on macroeconomic situation and inflation trends draws from IMF “Staff Report for the 2008 Article I V consultation, Fifth Review under the Poverty Reduction & Growth Facility Arrangement (PRGF), and Request for Waiver of Performance Criterion”, December 2008. * IMF press release “IMF Executive Board Completes Fifth Review under PRGF with Rwanda and Approves US$1.7 million Disbursement”, January 12,2009.
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concluded that the medium-term economic framework i s favorable, due to Rwanda’s strong growth, prudent macroeconomic policies, and far-reaching structural reforms, although capacity constraints remain a concerng. However, continuation o f the global economic slowdown may result in significant downside risks to the balance o f payments, remittances, FDI, and external finance. The greater risk to the balance o f payments might also result from a reduction in grants, should budget support donors have to substantially curtail their commitments. External finance amounts to 13 percent as a share o f GDP (or close to 50 percent o f the budget). In contrast, remittances and FDI, although they have increased significantly in recent years, are s t i l l estimated, in total, to be around 5 percent o f GDP. Therefore, the greater immediate risk to Rwanda’s macro-economic framework might arise f rom a sudden and significant reduction in grants. Additional concerns relate to how GoR will manage fiscal expansion and the recent surge in inflationary pressures, although the authorities have committed to slowing the pace o f domestic spending should inflation accelerate. To this effect, GoR authorities aim to continue to implement cautious and coordinated fiscal and monetary policies, to continue structural reforms that improve the private and financial sectors and that diversify the product and export base. This will enable Rwanda to take full advantage o f the recent steep decline in world commodity prices to lower inflation”.
1 1. Fiscal expansion has been driven by economic growth and consequent improvements in domestic revenues, as well as increased international aid flows. Economic growth and some improvement in revenue collection brought revenues from 13.5 percent o f GDP in 2005 to 14.2 percent in 2008. Revenues are projected to be around 14 percent in subsequent years, while grants are predicted to fal l to 9.4 percent o f GDP in 2010 compared to 13 percent in 2008. The domestic fiscal balance” was 6.1 and 6.5 percent o f GDP in 2007 and 2008, respectively and i s estimated at 6.8 percent o f GDP in 2009. At the same time, there has been a significant reduction in debt service requirements due to debt relief.
12. GoR’s earlier medium-term expenditure framework (MTEF) for the EDPRS projected GDP growth of 7.1 percent in 2008, but real GDP growth rose to 8.5 percent in the year. I t i s anticipated to decline to 6 percent in the subsequent years. The 2008 real GDP growth proved higher than earlier projections for growth o f 5.5 to 6.5 percent annually, which were in l ine with earlier IMF and IDA staffs’ assessment12. Table 1 provides GoR’s most recent projections o f macroeconomic indicators. GoR i s increasing i t s expenditure and net lending in 2008 compared to previous levels due to improved revenues from domestic sources and international grants, so that the most recent estimate is 27.1 percent o f GDP in 2008. Projections for 2009 are similar, with somewhat lower projections for 2010-13 at around 25 to 26 percent. In 2008, capital spending was equivalent to 10.9 percent o f GDP, while current spending was expected to be 15.8 percent o f GDP. Projections for 2008-10 are for a similar proportional allocation between capital and current spending.
IMF “Staff Report for the 2008 Article I V consultation, Fifth Review under the Poverty Reduction & Growth Facility Arrangement (PRGF), and Request for Waiver o f Performance Criterion”, December 2008. lo IMF press release “IMF Executive Board Completes Fifth Review under PRGF with Rwanda and Approves US$1.7 million Disbursement”, January 12,2009.
Excluding demobilization spending. Macro-economic and fiscal projections are drawn fiom:
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12 Government o f Rwanda (2008) “Letter o f Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum o f Understanding,” May 29; Government o f Rwanda (2007), “Budget Framework Paper 2008-10”; September 2008; and IMF and IDA (2008) “Rwanda: Joint Staff Advisory Note of the Second Poverty Reduction Strategy Paper / Economic Development and Poverty Reduction Strategy,” February 13.
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Table 1 - Rwanda: Medium-Term Framework 2005-2013
2005 2006 2007 2008 2009 2010 2011 2012 2013
Economic growth and inflation (percentage change) Real GDP (percentage change) Real GDP (per capita) Consumer price index (eop)
Central government budget (percent o f GDP) Revenue Grants Government expenditure and net lending
Current expenditure Capital expenditure
Domestic fiscal balance (excl. demobilization spending) Overall balance (payment order)
After grants Before grants
National accounts (percent o f GDP) Gross domestic investment
Of which : private Gross national savings Current account bal. (excl. grants)
Balance o f payments (percent o f GDP) Exports o f goods and services Imports o f goods and services Current account balance (id grants) Overall balance
Gross official reserves (months of imports o f G&S)
7.2 5.4 5.6
13.5 12.6 25.6 16.1 9.1
-5.1
0.6 -12.0
21.6 12.5 6.0
-15.6
10.2 26.7 -1.1 4.6
6.2
7.3 5.4
12.2
13.3 10.7 24.5 16.3 7.6
-5.4
-0.4 -11.1
20.4 12.8 4.3
-16.1
9.7 27.5 -7.4 2.9
5.6
7.9 5.7 6.6
13.6 9.9
24.9 16.8 8.6
-6.1
-1.5 -11.3
21.0 12.4 5.4
-15.5
9.7 27.7 -4.9 3.2
5.2
8.5 6.2
22.0
14.2 13.0 27.1 15.8 10.9 -6.5
0.1 -13.0
23.4 12.5 5.0
-18.4
9.0 30.1 -7.1 0.9
5.1
6.0 3.8 6.0
14.4 13.6 27.0 15.9 10.9 -6.8
0.9 -12.6
23.5 12.6 5.1
-18.4
8.7 29.3 -8.2 -0.5
4.6
6.0 3.8 5.0
14.6 9.4
26.4 15.6 10.5 -6.6
-2.5 -11.9
23.1 12.7 6.1
-17.0
9.3 28.6 -9.4 0.9
4.6
6.0 3.8 5.0
14.7 8.1
25.9 15.5 10.1 -6.8
-3.0 -11.2
22.9 12.8 6.6
-16.3
9.5 28.7 -9.5 0.9
4.6
6.0 3.8 5.0
14.8 7.5
25.6 16.2 9.1
-5.1
0.9 -12.6
22.0 12.9 5.7
-16.3
9.6 28.9
-10.6 0.7
4.6
6.0 3.8 5.0
15.0 7.4
25.8 16.6 9.0
-5.1
-2.5 -11.9
22.0 13.0 6.0
-16.0
9.5 28.5
-10.3 0.8
4.6 Nominal GDP (billions o f Rwandan francs) 1332.9 1563.8 1866.1 2333.1 2737.6 3049.5 3394.9 3175.6 4199.2
Sources: Rwandan authorities; and staff estimates and projections.
13. The medium-term outlook o f GoR’s EDPRS assumes that Rwanda will continue to be able to cushion itself from the adverse impacts o f the global slowdown. The impact o f the global slowdown on Rwanda’s economic growth rates, over the medium term, will depend on how strongly the expected future drivers o f growth -Le., agriculture and services- are impacted. Among the critical factors for growth are large-scale investments expected to be financed from external borrowing as well as investment in the energy and agriculture sectors. These could be adversely impacted as the global economic slow-down persists and external resources become more scarce. All o f this could potentially lead to stronger adverse growth effects in the medium-to-longer t e r m for GoR’s EDPRS program.
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Box 1: Likely Impact o f the Global Economic Crisis in Rwanda, 2008-10
At present, the global economic slowdown has had a limited effect on Rwanda’s economy due to its relatively closed nature. However, a continued global slowdown would negatively affect GDP growth through the impact on grants, foreign investment, remittances and the financial sector. There would need to be a downward revision o f spending as revenue declines, particularly if foreign aid becomes scarce. Export receipts would also be negatively affected, leading to a widening o f the current account deficit. Also, health and education outcomes are particularly susceptible to household economic conditions. Financing o f services could be adversely affected due to lower revenues, reduced household ability to pay user fees, and any potential reductions in grants.
A continued global slowdown would lead to projected growth o f around 6 percent (compared to 8.5 percent for ZOOS), over the medium term. The lower growth trend would arise from lower tourism receipts, reduction in remittances and a slowdown in the construction sector. Over the medium term, growth would be driven by increased productivity in agriculture in line with implementation o f the Crop Intensification Program. However, Rwanda’s low level o f integration with the global economy and i ts relatively high dependence on subsistence agriculture could be expected to limit Rwanda’s vulnerability to the crisis over the medium term.
Despite the strong increase in export receipts of coffee, tea, minerals and tourism, the trade deficit i s expected to widen in 2009 due to the higher growth in import payments. The appreciation o f the Rwandan franc would exacerbate the situation. Over the medium term, with continued strong growth in volume and production, exports are projected to grow at 10 percent per annum, which wi l l be outpaced by import growth o f 20 percent per annum. As a result, the current account deficit i s projected to increase from US$303.5 million (or 7.1 percent o f GDP) in 2008 to US$400.7 million (or 8.2 percent o f GDP) in 2009 (including official transfers). To date, no large reductions in foreign direct investment (FDI), grants and borrowing are expected, as most planned investments have already been reconfirmed by donors. Although there are no visible pressures yet on the balance o f payments, a continued global recession would eventually lead to lower grants. As a precaution, given last year’s high level o f inflation, GoR i s reducing or postponing spending from off-budget accounts.
The fiscal program in 2008 remained broadly on track, despite increased expenditures for the purchase o f seed, fertilizer, and food storage (largely financed by grants from IDA and AfDB, and the road maintenance fund). Revenues outperformed their targets, reflecting an increase in collections from income and consumption taxes, high inflation and high GDP growth. Although i t i s too early to get a good assessment o f the overall and concrete impacts o f the global financial crisis, the authorities are taking proactive measures to mitigate any possible negative impacts. In its mini-budget for January to June 2009, fiscal policy i s aiming at: i) limiting contingent spending; and ii) saving higher-than-programmed revenues for future use. Due partly to these measures, the budget deficit i s expected to remain on track for 2009.
In the financial sector, al l eight commercial banks have been in compliance with the minimum capital requirements of FRw 5 billion (approx. US%9.2 million); reported foreign exchange exposure ratios have been within the prudential BNR benchmarks; and the quality of the credit portfolio has improved. As o f end-June 2008, gross non-performing loans (NPLs) reached RWF 32.2 billion against RWF 40.1 billion in December 2007, and the average ratio o f NPLs to total loans declined to 12 percent from 18.5 percent in 2007. Although to date there i s no impact o f the crisis on the level o f capitalization o f banks and non-performing loans, slower growth could result in rising credit risks, increasing the vulnerability o f the banking sector.
T o manage the pressure of high resource inflows on inflation, the Central Bank has instituted measures to increase the flexibility of the exchange rate, enabling more effective sterilization o f liquidity (which i s the Central Bank’s primary instrument for monetary policy). In the last six months, the real exchange rate appreciated by 15 percent following the rise in the U S dollar-to which the Rwandan franc i s closely tied-against other currencies. It has been exacerbated by the high rate o f domestic inflation (estimated at 22 percent in December 2008). The result has been a rising demand for foreign exchange and imports. This acceleration in imports relative to exports i s a concern for the authorities even as world commodity prices continue to fall. Despite higher sales o f foreign currency by the authorities, foreign exchange reserves exceeded programmed levels due to higher than expected external budget support disbursements. As a result, the actual level o f international reserves was US$580.7 million at end September 2008 and i s estimated to have increased to US$599 million by end-2008. Source: Rwanda PRSG IV
14. While short-term r isks to economic growth and the balance o f payments have emerged because of the global financial crisis and economic slowdown and the appreciation of the Rwandan franc in real terms in 2008, continued economic growth, efforts to increase domestic revenue, and measures to control inflation should maintain macroeconomic stability in the
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context o f fiscal expansion. Monetary management remains an increased challenge and to this end, the National Bank o f Rwanda (NBR) carried out large sterilization operations in the face o f rapid fiscal expansion in the second hal f o f 2007. Reserve money targets were met but at the expense o f much broader money levels (about 30 percent higher than p r~g rammed) ’~ as well. as a higher stock o f domestic debt. The IMF and IDA staffs’ assessment i s that GoR’s fiscal stance should not undermine macroeconomic stability over the next few years, although GoR needs to maintain debt at sustainable levels to avoid acceleration in inflation, reserve depletion and crowding-out o f the private sector. GoR remains committed to monitoring developments closely, to increasing the flexibility o f the exchange rate, to containing fiscal spending, and to tightening monetary policy. Together they will avoid a rekindling o f inflation, maintain an adequate level o f reserves, and ensure smooth adjustment to volatility in commodity prices while advancing GoR’s medium-term agenda.
15. Rwanda i s highly aid dependent, although debt relief and grants have maintained external debt at a sustainable level. International grants and loans represent about ha l f o f total GoR revenue. On-budget aid flows, including budget support, have substantially increased in recent years. In 2008, on-budget grants were 13 percent o f GDP compared to 9.9 percent in the previous year. However, the importance o f international sources i s projected to decrease somewhat after 2009. Debt relief following the Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) debt had reduced Rwanda’s external debt by 2007 to around 15 percent o f GDP, considered a sustainable level and a significant reduction from earlier years when debt was over 60 percent o f GDP. Rwanda’s export base (goods and services) i s s t i l l small, at less than 10 percent o f GDP. This limits the country’s capacity to carry external debt. The debt service reduction and trends in grants facilitated continuation o f spending on sectoral objectives such as agricultural productivity growth. The external current account deficit i s projected to remain at around 8 to 10 percent o f GDP over the medium term, and i s to be financed largely by international donor flows and FDI to help keep reserves at adequate levels14.
16. Sectors such as agriculture and health that are important to poverty reduction and to achieving progress towards the MDGs have experienced substantial growth in public spending. For example, public spending in the health sector has grown significantly, although greatly dependent on international assistance. Total public and private health spending i s expected to r ise from US$318 mi l l ion (US$35 per capita) in 2006 to US$446 mi l l ion (US$47 per capita) in 2008. In 2006, total public sector health spending was US$223 million, or US$24 per capita and 7.8 percent o f GDP. O f this, US$58 mi l l ion (26 percent) was GoR spending from domestic revenue sources and US$165 mi l l ion (74 percent) was from international sources (both on- and off-budget). In 2008, it i s projected that total public spending on health will be US$3 13 million, or US$33 per capita and 8.2 percent o f GDP. It i s expected that off-budget international assistance will increase, while on-budget support will decrease, undermining the government’s mitigation strategy to address the risks associated with poor predictability o f international aid to the sector. This strategy involves increasing, as far as possible, the proportion o f international funding that is on-budget and allocating to the highest priority activities the more predictable on-budget domestic and international financing. The current operation will facilitate this pattern.
l3 Sterilization operations kept end-month reserve money within the targets, but average intra-month reserve money exceeded the end-month targets. l4 IMF “Staff Report for the 2008 Art ic le IV consultation, Fifth Review under the Poverty Reduction & Growth Facility Arrangement (PRGF), and Request for Waiver o f Performance Criterion”, December 2008.
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17. In the second half o f 2006, the Ministry of Local Government (MINALOC) undertook a program expenditure review for the social protection sector. Unl ike health, no clear-cut estimates o f social protection expenditures are possible, because social protection expenditures are embedded in various budgets o f l ine ministries, expenditures can have multiple objectives, and disentangling social protection spending i s empirically difficult. Nonetheless, two main findings are worth noting:
i) items, though absolute levels are small.
Public expenditures contributing to social protection objectives can be found in numerous l ine
ii) Donor contributions, mostly off-budget, have been extensive. The largest shares o f donor spending went to direct support for orphans and vulnerable children, and food for work programs, whereas the largest share o f public spending went to genocide victims, social insurance contributions for public employees, Ubudehe’’ expenditures, premium subsidies for mutuelles health insurance, and support for households affected by HIV-AIDS (Table 2).
Table 2. Proportion of total public social protection spending (on & off-budget) by type of program, 2006
%
Contributions for public employees Other direct support to households, of which:
Genocide survivors Orphans and vulnerable children Labor-intensive public works Women Health insurance for the poor Refugee & returnee programs HIV/AIDS affected Ex-com batants People with disabilities Ubudehe program
Policy and management
10.1 86.7 16.2 16.3 1.8 1.9 9. I 4.4 7.9 0.8 0.3
11.0 3.2
Total 100.0
Source i s 2007 Public Expenditure Review.
18. One question raised by some studies i s whether more efficient o r sustainable ways of delivering assistance could be found. The number o f people reached by the programs examined was extremely limited, with expenditures fragmented and poorly aligned with policies on aid. There was no systematic monitoring o f the poverty impact and no coordination between interventions. Consequently, the poverty impact o f the expenditures was unknown. Moreover, social protection interventions in the past were poorly coordinated - a drawback that VUP n o w attempts to correct, by setting up architecture for effective coordination o f al l social protection interventions at the
l5 See Annex 6 for details about the Ubudehe village-level community decision-making process.
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sector (Umurenge) level16. In addition, under the VUP, previously missed critical vulnerable groups wi l l be reached by public works and direct support.
19. To meet Rwanda’s development goals, public spending will need to continue to increase, with much o f the funding gap to be met by external grants. IMF and IDA staffs’ projections are that total financing requirements will rise from US$595 mill ion in 2008 to US$720 million in 2010, with capital spending representing 40 percent o f the annual total. The projected funding gap in 2009 i s US$36 million, while the projected gap in 2010 i s US$48 mi l l i~n ’~. Although domestic revenue i s expected to continue to increase, much o f the required funding i s expected to come from increased external grants.
111. THE GOVERNMENT’S PROGRAM
ECONOMIC DEVELOPMENT AND POVERTY REDUCTION STRATEGY
20. The 2008-12 Economic Development and Poverty Reduction Strategy (EDPRS) emphasizes economic growth and poverty alleviation, continuing to build on achievements in human development and basic social services, with an emphasis on decentralization and a greater role for the private sector. The EDPRS i s the country’s second Poverty Reduction Strategy Paper (PRSP) and emphasizes accelerating progress towards the MDGs. O f particular concern for policy makers are the hard-to-reach MDG 1 (reducing poverty and malnutrition) and MDG 5 (reducing maternal mortality), while Rwanda seeks to continue to build on progress with MDG 4 (reducing child mortality) and MDG 6 (combating priority diseases including HIV/AIDS and malaria), as well as improving education outcomes and gender equality (MDGs 2 and 3). The EDPRS encompasses three flagship programs: i) Sustainable Growth for Jobs and Exports, ii) Governance, including expanding decentralization and enhancing accountability; and iii) the Vision 2020 Umurenge Program (VUP). These are designed to alleviate rural poverty and improve productivity through a multi-sectoral combination o f support and services, including labor-intensive public works, direct financial support for the most needy and vulnerable households, micro-credit initiatives, and programs for water and sanitation, health, nutrition and family planning services.
2 1. GoR’s medium term expenditure framework (MTEF) to implement the EDPRS during the period 2008-12 assumes that the medium term outlook for real GDP growth will be maintained at 6 percent. The MTEF i s contingent upon several factors. They include increased productivity in the agricultural and mining sectors, strong public and private sector investment activity, favorable weather conditions in the next few years, continued implementation o f policies to promote commodity exports, and successful implementation o f the medium-tern policy agenda. These are outlined in the EDPRS on five fronts: (i) carrying out Government’s planned investments in infrastructure; (ii) improving agricultural yields, supported by actions in the new fertilizer strategy; (iii) sustaining progress on the private sector development program; (iv) accelerating overall export growth and diversifying the export base; and (v) taking actions aimed at enhancing
l6 GoR has progressively devolved responsibilities and transferred resources to decentralized levels of the administration - Province, District, Sector (Umurenge), Cell (Akugari) and Village (Umudugudu). Of these, the last three are subordinate tiers o f the district governments. See paragraphs 22 and 26 and Annex 6 for fbrther information on Sector (Umurenge) level o f local governments. l7 World Bank (2008) “Program document for a proposed grant in the amount o f SDR 44.1 million (US$70 million equivalent) to the Republic o f Rwanda for a Fourth Poverty Reduction Support Grant,” Report No. 41750-RW, January 15, Washington.
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the efficiency o f investment, as outlined in the new Public Investment Policy. This would counter the apparent slowdown in growth, as the economy has moved beyond the post-conflict recovery period, and raise growth from the average o f 5.6 percent during 2003-07 to about 6 percent over the period 2009-1 1. The medium-term outlook within GoR’s EDPRS assumes that Rwanda continues to be able to cushion i t se l f from the adverse impacts o f the global slow down (see discussion in Section 11). Table 3 presents the medium-term human development and social sector expenditures plan, with information on 2007 budget allocations, for implementation o f EDPRS. (Expenditure figures include on-budget international grants and loans).
Table 3. Medium term human development & social sector expenditure plan
for implementation of the EDPRS, 2008-12 (US$ million)
2009-12 2009-12 2007 2008 Average
Human Development and Social Sectors 301 339 1,689 422 Education 179 ‘190 1,040 260 Health & Population 89 108 463 116 Social Protection 27 31 163 41 Youth, Culture & Sport 6 11 23 6
Source: Government o f Rwanda, Ministry o f Finance and Economic Planning (2007) “Budget Framework Paper 2008-10,” September, 2008.
22. GoR’s recent r e f o r m initiatives cover, inter alia, four areas: macroeconomic, decentralization, social protection, and health reforms.
0 Economic reforms. GoR’s economic reforms have focused on improving public financial management, deepening the financial sector and removing constraints in key economic sectors such as agriculture, power, transport and water. Attention has also been given to improving the legal and regulatory environment for business as well as to strengthening the public service and building i ts capacity. Several measures have been taken, including introduction and increased application o f the MTEF.
0 Decentralization reforms. GoR adopted a National Decentralization policy in M a y 2000 to achieve three main goals: (i) good governance, (ii) pro-poor service delivery, and (iii) sustainable development. This resulted in the restructuring o f local governments into 5 provinces, 30 districts, 416 sectors and 2,148 cells, covering an estimated total o f 15,000 villages across the country. The provinces serve as the coordinating arm o f the central GoR. The districts each have their own elected council and mayor, prepare their own budget, and are responsible for service delivery, economic development, coordination and planning. Sectors and cells, through elected representatives, serve as constituencies within districts and as an important vehicle for citizen’s voice. While sectors have more fiscal and service-delivery responsibilities, cells’ main responsibility remains community mobilization. Annex 6 and its table provide a f i l l e r summary o f the structure and the progress made by Rwanda in decentralization. To support decentralization reforms, GoR is strengthening monitoring and appropriate oversight o f transfers to the districts to ensure accountability and performance and to align these transfers with monetary and fiscal policies.
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0 Social protection reforms. In social protection, a major pol icy reform has been the institutionalization o f the Ubudehe” process o f village-level community decision-making. Ubudehe incorporates what i s essentially a “poverty-mapping” process, which has a systematic methodology and allocates each household to one o f six ordinal income and poverty-related categories differentiated by well-defined qualitative criteria. The maps have become the basis for community decision-making about income support in cash or in kind to ultra-poor households from local and donor sources, as wel l as a guide to which households should receive subsidies for health insurance. In the last year, M I N A L O C has initiated a broader review o f the social protection policy framework and has pursued development o f a Joint Action Development Forum to improve coordination o f government, c iv i l society, and development partners’ social protection activities at both national and local levels.
0 Health reforms. Significant reforms to improve the equity and efficiency o f health financing have helped translate increased funding into improvements in outcomes. These include, in particular, expansion o f the community health insurance system (Mutuelles) and performance- based financing (PBF) o f preventive and curative services provided by health facilities.
23. The above reform initiatives notwithstanding, there has previously been little systematic policy development in the area o f social protection. In its relative absence, many government and private programs currently assist in meeting the country’s social protection objectives, including those o f Ministry o f Local Government (MINALOC), Ministry o f Agriculture (MINAGRI), Ministry o f Education (MINEDUC), Ministry o f Health (MoH), development partners and non-government organizations. This myriad o f programs by various Ministries renders coordination a difficult and time-consuming job. At the recipients’ end, i t i s hard to assess who i s accessing which programs, and difficult to detect ‘double-dipping’, and inclusion and exclusion errors.
VISION 2020 UMURENGE PROGRAM
24. The Vision 2020 Umurenge Program (VUP) aims at ensuring that economic growth is pro- poor and that the majority o f the population takes part in the improvements in living standards that the country as a whole is experiencing. The VUP is managed by M I N A L O C and i s implemented through the newly restructured decentralized local government system.
25. The VUP i s organized around the following: (i) labor-intensive public works that will provide support to extremely poor landless families and encourage savings and development o f productive activities; (ii) support to the most vulnerable households that i s intended to alleviate poverty, and (iii) micro-credit initiatives for investment in income-generation and entrepreneurial activities 1 9 .
26. The empowerment of local government and citizens all the way down to village level i s a key objective of GoR’s decentralization efforts and integral to implementation o f the VUP. GoR has progressively devolved responsibilities and transferred resources to decentralized levels o f the administration - Province, District, Sector (Umurenge), Cell (Akagari) and Village (Umudugudu). O f these, the last three are subordinate tiers o f the district governments. Rwanda
See Annex 5 for details about the Ubudehe village-level community decision-making process l9 GOR currently envisages VUP funding for public works, direct supports and credit packages in the ratio 50:20:30.
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uses the term “local government” to encompass the district through village levels listed above. In 2006, GoR implemented both major territorial reform, reducing the number o f administrative units, and a significant push on fiscal decentralization that saw the transfer o f 30 percent o f budget resources to District budgets, along with associated implementation and reporting responsibilities. A large proportion o f the central civil service was moved to the district level and significant efforts were invested in improving districts’ capacity. This capacity-building has also been supported by an IDA operation, the Decentralization and Community Development Program (DCDP). Collectively, these changes, coupled with the ongoing civil service reform program, created strains on limited human resource and implementation capacity at both the central and district levels. Implementation of the VUP wi l l be planned and coordinated by the sector administrations with participation at the local (Umudugudu) level and with the districts responsible for technical support and supervision. The Government i s also strengthening sector (Umurenge) stewardship o f community-level social services while relying on technical and administrative capacity in health centers that has been strengthened by the reforms and improved financing o f recent years.
27. VUP will complement the delivery of basic health and education services, which i s now a responsibility o f the local government level. Scope exists for local governments to play an expanding role in coordinating the delivery o f various local services. Community-based participatory processes will play important roles in the identification o f VUP beneficiaries and the selection and implementation o f local public works processes. The strategy will be piloted in the poorest sector (Umurenge) in each o f the 30 districts, for a total o f 30 sectors. Pilots are currently being implemented to varying degrees in all 30 sectors. Lessons learned will be applied to national scale-up o f the program.
28. incorporates international good practice approaches. These are:
Significant policy challenges remain in order to implement the VUP in a way that
Public works program policies were not anchored in international good practice policies. As originally formulated, for example, the VUP provided for higher-than-market wages and incorporated a mandatory savings approach.
Likewise, in relation to prior policies that have provided support to poor or disadvantaged households, these direct support policies often used the ‘individual’ or ‘family’ as the unit when structuring assistance rather than the international good practice o f using ‘household’ as the unit.
The CLSG-1 supports policy reforms addressing both these challenges and are further discussed in later sections. Accordingly, the manuals for both public works and direct supports programs have now been revised, focusing on approaches to better targeting. Whi le this i s a step in the right direction and i s supported by the DPO, overall monitoring and impact evaluation o f various components o f the VUP program at the Umurenge level, and validation o f targeting approaches wi l l be required.
HEALTH SECTOR POLICY
29. The EDPRS supports Rwanda’s commitment to achieving the health, nutrition and population-related MDGs, as it includes the objective of improving health status and slowing down population growth. To achieve this EDPRS objective, the 2005-09 Health Sector Strategic Plan (HSSP) encompasses the following areas o f focus: i) health human resources; ii) drugs,
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vaccines and consumables; iii) geographical access to health services; iv) financial access to health services; v) quality o f and demand for health services in the control o f disease; vi) national referral hospitals and treatment and research centers; and vii) institutional capacity.
30. Since 2004, there has been significant progress in implementing reforms in these areas. With general and sector-specific budget support f rom IDA and other partners, and in the context o f cross-sectoral reforms, important initiatives in the health sector have included:
Fiscal decentralization with performance-based block grants under contracts between districts and the President o f the Republic (Imihigo) that include health service utilization indicators as measures o f performance;
C iv i l service reform, including decentralization o f the wage bill and devolution o f personnel management authority to the service provider level (health centers and hospitals);
Scale-up and institutionalization under the national budget o f the Performance-Based Financing (PBF) Program that provides financing to health facilities o n the basis o f performance in terms o f service utilization and quality indicators;
Scale-up o f the community based insurance program (Mutuelles), reducing financial risk and burden o n enrolled households and increasing utilization o f health services;
Increased domestic and international public financing for health, rising from US$3 per capita in 1998 to US$24 per capita in 2006 and US$33 in 2008; and
Improved harmonization o f international support to the sector through on-budget financing (including budget support and other more ring-fenced mechanisms) and initiation o f a SWAP process.
31. Public financing of health services has been significantly reformed on both the supply and demand sides. O n the supply side, health services are publicly-financed through the fol lowing mechanisms:
Needs-based transfers in the form o f monthly block grants to health centers and hospitals determined by formulae that include catchment population size and poverty level;
History-based transfers based on previous fwnding levels, designed for the maintenance o f existing assets;
Performance-based financing o f facility-based services in the form o f quarterly transfers to facilities on the basis o f a set o f indicators;
Performance-based financing o f community health workers through transfers to district administrations;
Investment expenditures for construction and equipment; and
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0 A variety o f off-budget donor support, often in-kind transfers o f technical assistance, drugs and medical supplies, equipment and infrastructure investment, as well as staff incentive payments, sometimes through performance-based mechanisms.
32. through:
On the demand side, health services are financed from public and private sources
User payments for services, medication and supplies, mostly going to private pharmacists and other providers, but also including payments and co-payments for services provided by government facilities;
Formal insurance payments, particularly from the civ i l service and military insurance systems; and
Payment for services by the community health insurance (Mutuelles) system, which has an office in each health center, involves risk-pooling at the sector (Umurenge), district, and national levels, and i s reported to have attained coverage o f over 75 percent o f the population.
33. maintain progress towards the hard-to-reach MDGs. These are:
Significant policy reforms and their implementation remain a challenge in order to
Access to health care services by the poorest in rural areas. Rapidly expanded coverage o f the Mutuelle system has significantly reduced financial barriers to access to care, but health services in rural areas often remain poorly accessible and o f l o w quality.
Health human resources in rural areas. Among the systemic weaknesses that remain at the facility level are shortages and inequitable distribution o f trained health care workers, contributing to gaps in access to services by the poor. Health facilities in poor rural areas are l ikely to be under-staffed with less access to higher-skilled providers.
Access to maternal health care services. The maternal mortality MDG is considered hard-to- reach because o f i t s complex set o f determinants at the household, community and facility levels, including cultural and social attitudes, family planning practices, care-seeking behavior, physical and financial accessibility o f antenatal and delivery care, and accessibility and quality o f emergency obstetric care at the referral level. An important factor is coverage o f skilled delivery care. Although this has improved substantially, in 2008 more than hal f o f pregnant women s t i l l delivered at home, with poor women in rural areas less likely to go to a health facility for delivery.
Coverage o f high-impact interventions delivered at the community level. The malnutrition and chi ld mortality MDGs are considered hard-to-reach because they are affected not just by health services but by a variety o f socio-economic factors, most importantly related to household economic status and food security. Several community and household-level interventions, such as mass coverage o f insecticide-treated nets for malaria prevention, have had a significant health impact in Rwanda. However, further emphasis on high-impact interventions that can be delivered to households at the community level i s necessary to further improve population health outcomes.
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0 Mitigating risks o f donor dependency. Mitigating the risks associated with high donor dependency in the sector should involve greater on-budget international financing, prioritization o f the most cost-effective services, and better alignment o f off-budget support with these priorities. Greater on-budget support for cost-effective community health, nutrition and population interventions, combined with better integration with off-budget donor-financed programs in this area, can make a contribution on this issue.
34. The above-mentioned policy reforms and implementation challenges in both social protection and health sectors are the main focus o f this operation. These are discussed further in Section V.
IV. BANK SUPPORT TO THE GOVERNMENT’S STRATEGY
CHOICE OF LENDING INSTRUMENT
35. A DPO was chosen over an investment operation for the following reasons:
The social protection sector in Rwanda i s at the early stages o f policy development and needs important policy and institutional reform to achieve the development results desired by the Government. A DPO provides a vehicle for effective support to the Government’s flagship social protection policies (that is, the VUP) by focusing on the needed policy and institutional reforms that would not easily be incorporated in an investment operation.
Government has a strong preference for budget support to help ensure donor consistency with the broader harmonization agenda in support o f the EDPRS, reducing transaction costs. All policy reforms and budget support policies and indicators are joint ly agreed by the Government and development partners through the Common Performance Assessment Framework (CPAF).
Rwanda has a successful record o f significant health policy reforms financed by budget support, so that an investment operation supporting reforms in this sector would in many ways be a step backwards from successful support to country systems in recent years.
The proposed operation also serves to increase on-budget support to government priorities in both sectors, contributing to mitigating the risks associated with poor predictability o f international aid. At the same time, it provides a policy framework for increased alignment o f the significant off-budget donor-funded community health and social protection programs.
36. reasons:
An operation separate f rom the current PRSG series i s proposed for the following
0 The social protection and community health policy reforms supported by the proposed DPO operation are new and innovative, requiring a number o f specific, sectorally-focused pol icy and institutional reforms that would be difficult to provide under the macro-framework o f the PRSG series without ballooning the already full PRSG policy actions. Through this operation, GoR requests assistance in tackling specific policy implementation challenges o f the VUP relating to the adoption o f international good practice policies. Support for the implementation o f the proposed CLSG series will include an emphasis on policies relating to monitoring and
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evaluation, including a randomized impact evaluation supported by the Health Results Innovation Trust Fund. ,
The proposed CLSG operation fits wel l into the existing framework o f harmonized donor support in the health sector, while in the social protection sector it provides a basis for sector harmonization and eventual development o f a similar SWAP process. In particular, GoR i s keen o n a sector-specific operation and policy framework that can attract the interest and support o f other donors, particularly those that are not willing to provide general budget support to achieve social protection objectives.
The three-year period o f the DPO will also provide the necessary timeframe for a critical series o f pol icy actions to take hold and for the implementation o f the performance-based financing required by the Health Results Innovation Trust Fund.
37. Integration in the PRSG series may be a more realistic option after this init ial period o f three programmatic grants, once adequate advances have been achieved in policy development, implementation arrangements, and M&E.
LINK TO CAS
38. The operation will support GoR’s poverty reduction objectives, consistent with the country’s fiscal framework and with the new CAS. The latter has reducing social vulnerability as its second strategic theme. It states that the objective o f this theme “is to ensure that the most vulnerable Rwandans also benefit from growth and to help Rwanda make further progress in building a more stable society. A smaller program will support the Flagship Vision 2020 Umurenge initiative; help Rwanda get o n track on chi ld and maternal mortality goals; and promote peace and social cohesion through demobilization and reintegration.”*’
COLLABORATION WITH THE IMF AND OTHER DONORS
39. The Bank’s PRSG in Rwanda has been prepared in parallel with the IMF’s Poverty Reduction and Growth Facility (PRGF) review. The IMF leads the macroeconomic dialogue in Rwanda and recently completed its fifth review o f Rwanda’s economic performance under its PRGF arrangements. The completion o f the review brings total disbursements under the arrangement to a total o f SDR6.84 mi l l ion (about US$10.4 million) (www.imforg press release No. 09/07). The IMF’s work complements CLSG and the PRSG’s focus on structural and institutional reforms. The proposed CLSG will work closely to align objectives, resources and dialogue with that o f the IMF primarily through i t s close collaboration with the PRSG IV Bank operation.
40. The Bank’s portfolio of support has been coordinated with that o f other donors. The f i rs t PRSC/G series contributed to strengthening the framework for harmonized budget support in Rwanda, which currently includes five development partners (Africa Development Bank (AfDB), Department for International Development (DFID), European Commission (EC), Germany, and the World Bank). In the health sector, several donors are providing general budget support while four partners are providing sector-specific budget support. In the health sector, this includes AfdB,
2o “HealtWSocial Protection DPL” i s also mentioned in Table 6 o f the CAS, referring to the CLSG operation.
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Belgium, DFID, and Germany. Over the last few years, the dialogue amongst donors and between donors and GoR has been strengthened and trust has been built. Most recently, in September, 2008 al l budget support donors and GoR signed a Memorandum o f Understanding governing the provision o f direct budget support in the implementation o f Rwanda’s EDPRS (replacing the Partnership Framework o f November 2003). The proposed CLSG operation has been prepared to ensure close collaboration and consultation o f the proposed interventions with the donors involved in these critical sectors and to ensure ownership in the program’s outcomes, alignment o f other stakeholders’ objectives, and the provision o f complementary interventions. The proposed CLSG operation will be co-financed by the Health Results Innovation Trust Fund2’. Recently, DFID announced a firm commitment to provide sectoral budget support to the VUP program under the EDPRS for 2008-12 period. This will provide additional financing to facilitate implementation o f GoR’s program.
RELATIONSHIP TO OTHER BANK OPERATIONS
41. The proposed operation complements other IDA financial assistance for Rwanda. That includes the Decentralization and Community Development Program (DCDP), the recently closed Multi-Sectoral HIV/AIDS Program (MAP), and the Poverty Reduction Support Grant (PRSG) series.
42. GoR’s Decentralization and Community Development Program, (DCDP) supported by the Bank, has built an important foundation for the VUP and this proposed operation. Under the DCDP, Rwanda and the Bank have registered achievements in: (i) capacity building for districts and sectors in key functional areas o f procurement, financial management and planning; and (ii) developing community-initiated infrastructure including schools, health centers, roads and administrative structures. The proposed CLSG series will complement the work being done under DCDP by providing the appropriate pol icy framework to deepen decentralized service delivery and strengthen the weaker capacities at the point o f service delivery to target the bottom tier o f the population. The DCDP will also be very helpful in continuing capacity development at decentralized levels that will implement social protection policies.
43. The Multi-sectoral HIV/AIDS Program (MAP) strengthened basic health services and supported pi lot performance-based financing strategies, contributing to the groundwork for the community health, nutrition and population strategy supporting the VUP. Furthermore, the proposed operation complements the MAP-supported social assistance to the most vulnerable households - especially orphans and vulnerable children (OVCs) - and skill-enhancing training such as management o f small income-generating projects.
44. This broad CLSG operation also strongly complements the PRSG. The f i rs t PRSC/G series supported health sector reforms. It also supported a pilot social protection initiative that was a forerunner o f the VUP. Through broad policy measures, the new PRSG series will further strengthen investment in human capital and sk i l ls for growth; improve water resources, supply and sanitation; complement investments under the recently approved Transport Sector Development Project; and raise agricultural productivity and value added through exports. The proposed CLSG has complementary policy objectives, including support for policy development in the domain o f
’* An estimated $4 million has been allocated by the Health Results Innovation Trust Fund which, together with the IDA grant o f $6 million, would bring the CLSG-1 operation to US$ 10 million.
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targeted social assistance (direct support), public works, incentive-driven voluntary savings to move people out o f poverty, and fostering community-based health, nutrition and population programs. All o f these objectives strongly complement PRSG goals, but are much more strongly and specifically focused on helping GoR to set the basis for a sound safety net and to attain i t s hard-to- reach MDGs.
LESSONS LEARNED
45. The Bank’s budget support experience has demonstrated that substantial outcomes can be achieved with strong commitment on the part o f GoR and with Bank support designed to develop the needed capacity for implementation. Key lessons drawn from the f i rst PRSC/G series in Rwanda highlighted the importance of: (i) cross-sectoral linkages and synergies: (ii) strong stakeholder commitment: (iii) sound joint analytical work to inform policy dialogue and reforms: and (iv) a common harmonized accountability framework aligned around pol icy objectives to lessen transaction costs and enhance ownership.
46. GoR has in the past implemented a public works program, known as the HIMO program. Rigorous evaluation o f the HIMO experience i s not available. However, a M I N A L O C document, Labor Intensive Local Development Programme, (2003) pointed out problems. Specific lessons learned include the following: the wage rates offered by some implementing agencies (including some donors) were well above the market wage so fewer jobs were created; wages were not paid in full and on time by contractors; it was difficult to exercise control over contractors; timely provision o f technical help became a problem; and financial reporting was weak. The CLSG will address these deficiencies which are largely driven by inappropriate policies adopted in the execution o f the program. The operational manuals will be revised to reflect international good practices in wage fixation, payment modalities, financial flows, and convergence o f technical and managerial inputs at worksites.
47. Specific lessons for social protection and health policy reforms include:
0 Rwanda has successfully established a number of unique features within its governance structure that are effective, nationally operative, and well-owned by the population. Two key examples are the Ubudehe system o f community decision-making and program management and the Imihigo system o f holding national and local government accountable. The Ubudehe system, although present throughout the country and assisting in meeting national objectives, currently functions primarily as a local initiative. For Ubudehe to become a significant component o f the implementation system for national social protection programs l ike the VUP, GoR will need to frame national policies in ways that are locally acceptable. For example, if national social protection programs seek to have uniform targeting criteria applied nationally, then there will be a need to address the recognized differences in living standards that are reflected in the criteria used by different local communities. One way to address this could be, over time, to develop improved non-income indicators o f household vulnerability and data systems that enable their measurement to be used alongside the partly subjective indicators that have made Ubudehe feasible.
A review of international experience, as well as Rwanda’s own experience in public works and direct support programs, reveals that several key policy choices have been systematically associated with successful programs o f this kind. In public works, lessons
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include the need to determine wage rates below the market wage, to pay wages directly to workers avoiding intermediaries, to enl ist communities in decision-making, and so on. In direct supports, the main lessons include the need to adopt the household rather than the individual as the unit for determining benefit levels and to create transparent systems to identify beneficiaries. The main policy choices associated with successful programs are drawn from international experience and are summarized in Annexes 7 and 8. This operation supports the adoption o f these good practice policies from international and Rwandan experience.
0 Support to performance-based financing o f health services was piloted by an investment operation and scaled up within the framework of general budget support. A s noted above, the MAP supported pi lot experiences with performance-based financing o f facility-based health services, allowing GoR to develop a policy model that has been adopted and scaled up with the support o f the PRSG series. A randomized impact evaluation o f this strategy i s ongoing and the lessons are informing the community-level performance-based financing pol icy supported by this operation.
Nonetheless, capacity remains limited at many points within governance and administrative systems. The limitations can relate to both the number and skills o f people within the systems, or to the facilities and resources that administrators have available to facilitate their work. In low-capacity environments, broader institutional reforms and better coordination among sectors need to be closely coupled with capacity building programs o n the ground. In th i s operation, the targeted outcomes are closely aligned with the SP and health policies and vision, paying considerable attention to the capacity issue, which is also supported by the IDA-financed DCDP.
ANALYTICAL UNDERPINNINGS
48. The Bank and GoR have undertaken substantial analytical work in the last few years that has been used in preparing this operation. That work has also helped inform both the Bank’s most recent CAS and GoR’s EDPRS and VUP program to which the proposed operation i s closely aligned. Public expenditure reviews (PERs) completed in social protection, agriculture, and water & sanitation, a series o f analytical studies o f the health sector, analyses o f national household survey data, and syntheses o f relevant international policy and programmatic experience represent discrete but complementary strands within the body o f analytical work underlying the proposed operation. Analytical work is summarized in Table 4.
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Table 4. Analytical Underpinnings for the First Community Living Standards Grant
Area Poverty Data
Public Expenditure Social Protection
Health
Transparency and Accountability
Studyhteport EICV I/Household Living Standards Survey (2000/200 1) Core Welfare Indicators Questionnaire (2001) Rwanda Poverty Assessment (2003) EICV II/Household Living Standards Survey (2006) Draft Extreme Poverty in Rwanda: Profile and Correlates Budgeting for Effectiveness in Rwanda 2003-2007: fiom Reconstruction to Reform (2008) MINECOFIN Budget Framework Paper 2008-2010 (2007) “Systemic Shocks and Social Protection: Role and Effectiveness of Public Works Programs” The World Bank: HDNSP Working Paper Series. [K. Subbarao (2003)l Rwanda: Assessment o f Risk, Vulnerability & Vulnerable Groups [Prywes & Venvimp (2005)l Social Protection Public Expenditure Review (Foster, 2006) Health, Nutrition, and Population Country Status Reports (2004 and 2008 draft) Demographic and Health Surveys (2000,2005-06 and 2007-08) Scaling Up to Achieve the MDGs in Rwanda: A Background Study for High-Level Forum Meeting in Tunis (2006) Rwanda: Fiscal Space for Health and the MDGs Revisted (2008) Capacity to Produce Qualified Health Personnel in Rwanda (2006) Marginal Budgeting for Bottlenecks (MBB) modeling (2007-08) Health Medium-Term Expenditure Framework 2009/11 - 201 1/12 (2008) Impact evaluation o f facility PBF scheme (baseline report 2008) Financial Accountability Review and Action Plan (2003/2004) Country Procurement Issues Paper (2004) Country Financial Accountability Assessment (CFAA) (2005) Financial Sector Assessment Progradeview o f Observance o f Standards and Codes (2005) Report o f the Auditor General to Parliament (2005)
49. The poverty assessment has provided important insights on poverty and vulnerability, geographic poverty, households’ characteristics that contribute to deepening poverty gap, and potential escape routes out o f poverty. This operation makes full use o f these findings, and builds o n an understanding o f past failures and future promising approaches to poverty reduction in Rwanda. O f particular relevance are the findings pertaining to the absolute level o f the poverty gap by decile group (Table 5) confirming the vast distance the poorest groups have to traverse, evidently caused by a combination o f a lack o f assets and o f gainful employment. This operation helps address these very facets o f poverty.
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Table 5: Resource gap to reduce moderate and absolute poverty in Rwanda
Consumption decile Poorest
Per capita income Per capita income Mean per capita shortfall in 2007 shortfall in 2007
consumption prices fkom prices fkom expenditure Household moderate poverty extreme poverty
(RWF) size l ine (RWF) line (RWF) 18141 5.5 -58967 -34917
2 29506 5.4 -44 193 -20143 3 38076 5.3 -33052 -9002
50. In the community health, nutrition and population policy area, there has been significant analytical work on health system components, financing and results. A series of high-quality household surveys, namely Demographic and Health Surveys (DHS) in 2000, 2005-06, and 2007-08, provide trend data on key health, nutrition and population service and outcome indicators. The Bank has undertaken or assisted GoR with considerable analysis o f the health system and i t s financing, including modeling to estimate the cost o f achieving the health, nutrition and population-related MDGs, fiscal space analysis, and technical work on community health insurance and performance-based financing.
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51. There are persistent socio-economic disparities in access to health services and in health outcomes. For example 55 percent o f under-five children in the lowest quintile were stunted in 2005-06, compared to 30 percent in the highest quintile. The pattern o f health indicators by socio-economic group described in Table 6 suggests that the mass o f the population suffers f rom poor health as the estimates are similar across the f i rs t four quintiles (i.e. 80 percent o f the population) while the highest quintile, living mostly in urban areas, experiences significantly better outcomes. Increased coverage o f community-based interventions is designed to improve access to health services by the poor in rural areas thereby reducing these socio-economic inequalities.
55942 5.0 -9826 14224
Table 6. Health indicators by socio-economic status quintile, 2004-05
6
stunting total fertility rate
(per 1,000) children) years)
socio-economic under-5 mortality (YO under-5 (women 15-49 status quintile
67278 4.9 4912 28962
Lowest 55.1 2 48.3 3 45.1 4 45.4 Highest 29.7 Source i s 2004-05 DHS.
7 8 9 Richest Total sample size
211 6.1 195 6.3 170 6.7 204 6.4 122 5.0
83448 4.6 25932 49982 107670 4.8 5742 1 81471 156643 4.7 121086 145136 501947 4.8 569980 594030
6900 5.02
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52. Health, nutrition and population interventions delivered to households at the community level are highly cost-effective. Rwanda’s package o f community health, nutrition and population services has been defined o n the basis o f international evidence on effectiveness and cost-effectiveness. The interventions listed in Annex 9 have been shown to be effective in addressing the major causes o f maternal and chi ld morbidity and mortality in developing countries in Sub-Saharan Africa.22
53. Models indicate that the incremental cost o f scaling up these high-impact community health, nutrition and population interventions to achieve significant progress towards the MDGs i s around US$ 3 per capita annually. Applied to Rwanda, the Marginal Budgeting for Bottlenecks (MBB) model finds that to reach the EDPRS and MDG targets, increased spending on community and facility-based interventions o f U S $ 6 per capita annually in a f i rs t phase o f two years would reduce chi ld and maternal mortality by 20-30 percent. Available data, most notably the 2007-08 DHS, indicate that this has largely been achieved in the past two to three years. In a subsequent phase, covering the period 2009-12, it i s estimated that additional resources o f US$ 10 per capita annually for the total package o f health services would be needed to achieve additional 30-40 percent reductions in child and maternal mortality. Expansion o f coverage o f interventions delivered at the community level accounts for around US$ 3 o f this additional required annual spending, leading to an estimated 20 percent reduction in chi ld mortality in this second phase. I t i s notable that although community health workers can have a role in inciting demand for antenatal and delivery care, improvements in facility-based services and referral systems are required for a significant effect on maternal mortality.
V. THE PROPOSED FIRST COMMUNITY LIVING STANDARDS GRANT
OPERATION DESCRIPTION
54. The Program Development Objective i s to support GoR’s social protection and health policy reforms designed to reduce extreme poverty, initially in 30 pilot sectors, and to expand access to high-impact health, nutrition and population interventions at the community level. The grant will help Rwanda to integrate international good practice within i t s poverty-reducing policies under the EDPRS flagship Vision 2020 Umurenge Program (VUP). The policy actions to be supported focus on ensuring that GoR’s pol icy reforms fol low international good practice relating to public-works employment; cash transfers to extremely poor, landless, labor-poor households; and delivery o f high-impact health, nutrition and population interventions at the community level using performance-based financing mechanisms. GoR already has plans to scale- up its VUP program.
55. Expected benefits from the operation include a VUP policy framework and an MTEF that are closely aligned with the PRSG and EDPRS goals, while at the same time incorporating international good practice. The operation is thus closely linked with GoR’s program, but enhances i t s quality and outcomes. Adoption o f international good practice policies in each area o f social protection ensures that programs are better targeted, better administered and more closely in tune with community wishes, and contribute to the overall pol icy goal o f a reduced poverty gap over a three-year horizon. Another important expected benefit f rom the operation i s
22 Jones, Steketee, Black, Bhutta and Morris (2003) “How many deaths can we prevent this year?” The Lancet 362: 65- 71.
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improved coverage o f high-impact health, nutrition and population interventions at the community level. This will contribute to meeting immediate health needs o f poor households, as wel l as to reducing the financial and other costs o f caring for the sick. The transfer o f knowledge and health services to communities will help households better manage their own health care, which can be expected to contribute to improved productivity and higher income-earning potential.
56. GoR’s objectives and policies as delineated in the VUP program, coupled with an improved policy framework drawn f rom international good practice, are consistent with the Bank’s CAS objectives and with the fiscal sustainability and effectiveness o f public resource allocation as reflected in the EDPRS. In addition, the proposed operation’s outcomes strongly complement and enhance the PRSG goals. The impacts o f the operation include appropriate wage rates in the public works employment program that do not distort the labor market; successful targeting o f a cash transfer program that, without creating dependency, reaches extremely poor households whose members are unable to work; and an improved environment for a voluntary incentive-driven savings program that creates an enabling environment for self-employment in informal activities. All o f these contribute to the overall poverty alleviation objectives o f the EDPRS.
57. Policy reform to improve community health, nutrition and population services supports the E D P R S objective to “improve health status and slow down population growth.” EDPRS targets for Rwanda include expanding access to basic health services to improve hard-to- reach MDGs, including reducing ferti l i ty, malnutrition and maternal and chi ld mortality, as wel l as combating infectious diseases, particularly HIV/AIDS , malaria and tuberculosis. Building on substantial progress in improving facility-based services, this operation will support the EDPRS objectives through policy improvements to expand highly cost-effective community-based health, nutrition and population services.
58. K e y pr ior policy actions include, in the area o f social protection, the adoption o f good international policy-practice for both public works and direct supports, including fixing the public works wage no higher than the prevailing local market wage in different sectors, direct payments o f wages to workers without i n te rmed ia r ie~~~ , and using the household as the unit for determining level o f benefit. In the area o f health, key prior actions include development o f a community health, nutrition, and population service package for high-impact interventions (such as ITNs), a Community Health Policy implementation plan and budget, a community performance-based financing strategy, and development o f a health sector MTEF that supports policies in community health, nutrition and population services.
59. K e y triggers for the next operation in the planned DPO series in the domain o f social protection include commitment by GoR to adopt good international policy-practice o f voluntary savings and o f making the eligibility determination process both clear and transparent to al l potential recipients and non-recipients. In the community-based health, nutrition and population services area, key triggers include development o f an incentive strategy to increase antenatal care and deliveries in health facilities, policy on CHW on the basis o f evaluation o f the requirement for supplementary community health training, policy modifications to be tested in the areas o f community PBF and maternal health incentives, including the design o f an impact evaluation.
23 Also see paragraph 64 and footnote 5.
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60. T h e fol lowing Table summarizes the p r i o r policy actions and triggers. Details are provided in the Policy Matrix (Annex 2).
'able 7. Prior A Medium
Term
Establish a public works policy framework that incorporates good international practice Establish a direct supports policy framework that incorporates good international
Enhanced family planning; improved health and nutrition status
Strengthened health financing and pro-poor approaches
tions for the First Proposed Operatio
CLSG-1 Prior Action (by end January 2009)
Adopt international good practice policy o f fixing public works wage no higher than the prevailing local market wage in different pilot sectors.
Adopt a wage payment policy that ensures direct payment o f wages to workers without intermediaries.
Adopt international good-practice policy o f using the household (rather than family or individual) as the unit for determining the level o f benefit.
rnmunity Wealth, Nutrition and Popu Community health, nutrition and population service package (including high-impact interventions, such as ITNs), and Community Health Policy implementation plan and budget, including partners' programs, are approved by Ministry o f Health (MoH).
Community PBF strategy i s approved by MoH.
Health sector MTEF that supports community health, nutrition and population policy reforms, including community PBF, C H W training and lncentive strategy for maternal health, is drafted by M o H for submission to Ministry o f Finance.
and Triggers f o r t Current Status of Prior Actions
Completed.
Completed.
Completed.
Completed.
Completed.
Completed.
Second Operation:
CLSG-2 Trigger (by end 2009)
Adopt international good practice policy o f voluntary savings.
Adopt international good-practice policy o f making the eligibility determination process both clear and transparent to al l potential recipients and non-recipients by making program ru les widely known and selection outcomes publicly available.
Incentive strategy to increase antenatal care and deliveries in health facilities, including conditional in-kind transfers to mothers, i s approved by MoH.
Policy on C H W training i s developed on the basis o f evaluation o f requirement for C H W supplemental training. Decisions are made on policy modifications in the areas o f Community PBF and maternal health incentives and the randomized impact evaluation to test these policy modifications i s designed.
61. T h e following box describes the application o f good practice principles o f conditionality in the proposed operation, relating to principles grounded in reinforced ownership and accountability o f policy reforms that will ensure successful results o f the operation.
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Box 2: Good Practice Principles on Conditionality
Principle 1. Reinforce Ownership GoR has a strong track record in committing to and implementing reforms. The first CLSG grant supports GoR’s Economic Development and Poverty Reduction Strategy (EDPRS), which was developed in a participatory manner involving extensive consultations of a wide range o f stakeholders. The process was led by a National Steering Committee, comprised o f Ministers and Governors, providing high level guidance. The Bank has actively supported GoR in t h i s process. In addition, the VUP program i s expected to enhance the longer-term perspective of Vision 2020 by creating new capacity at Sector levels. GoR has furthermore completed a formal Aid Policy, articulating GoR’s vision for improved aid management and policies. Moreover, in September 2008, GoR and al l budget support donors signed a new Memorandum of Understanding governing the provision of direct budget support in the implementation of Rwanda’s EDPRS. These actions underscore the strong commitment by GoR to implement prior policy actions and accomplish the triggers o f this operation.
Principle 2. Agree up front with GoR and other financial partners on a coordinated accountability framework GoR and budget support donors have agreed on a common assessment framework for public financial management (PEFA). In a further step, GoR has elaborated together with donors a common performance assessment framework (CPAF) that i s aligned with the EDPRS. The CPAF framework i s also identified as one of the three complementary monitoring and performance management frameworks under the newly signed Memorandum of Understanding between budget support donors and GoR. Sector-specific mechanisms, including a SWAP MOU and a sector matrix have been agreed between government and partners in the health sector, governing in particular “sector budget support” financed by several donors. GoR also passed an Accountants Bi l l in December 2007 and adopted and gazetted the Rwanda Public Procurement Authority (RPPA) and appointed i t s Board of Directors in March, 2008. Rwanda i s widely recognized in the region for low levels of corruption.
Principle 3. Customize the accountability framework and modalities of Bank support to country circumstances The CLSG series i s fully aligned with the EDPRS’ overall objectives to accelerate progress towards the MDGs which include poverty alleviation and improvements in basic social services. The CLSG should be seen as the overall umbrella for Bank support and policy dialogue in the social protection and community health, nutrition and population policy areas, which i s complemented both by the second PRSG series and by specific investment projects.
Principle 4. Choose only actions critical for achieving results as conditions for disbursement The CLSG focuses on a few selected triggers and prior actions, representing critical steps for implementing GoR’s program. These triggers and prior actions have evolved from extensive discussion with GoR and other relevant stakeholders and are aligned with EDPRS objectives, CPAF and sector-specific frameworks, as related to social protection and community health, nutrition and population.
Principle 5. Conduct transparent progress reviews conducive to predictable and performance-basedfinancial support A full review of the program will take place in line with the review agreed in the newly-signed MOU governing the provision of budget support in the implementation o f Rwanda’s EDPRS. Joint budget reviews and joint sector reviews take place twice a year, aligned with the budget cycle.
POLICY AREAS
Policv Area: Social Protection
62. Rwanda faces the broad challenge of pervasive and deep poverty among landless households principally in rural areas. GoR has incorporated i t s innovative VUP flagship program within the EDPRS. VUP pursues important reforms to expand social protection assistance while promoting and maintaining an efficient private labor market. The CLSG series will enable GoR to adopt policies that incorporate good international practice policy principles into the design and implementation o f the VUP program.
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63. An important policy challenge i s the adoption of a wage policy f o r public works participants that does not distort the labor market. Rwanda wants potential workers to choose appropriate available private employment in preference to public-works employment. Accordingly, to avoid creating distorting incentives for workers, one key pol icy reform i s to ensure that, throughout the country, the public-works wage rate i s regularly set no higher than the private wage rate for similar labor-intensive unskilled work in the same geographic labor market area. T o this end, GoR has under the CLSG-1 operation revised i t s operation manual for public works to incorporate good-practice policy approaches.
64. In the past, public works wages have been paid through intermediaries (typically contractors), which resulted in payments lower than the stipulated wage rate. To preclude scope for private contractors skimming o f f part o f the intended wage o f public-works employees, as had reportedly occurred within the precursor HIM0 program, and to encourage greater use o f secure payment arrangements that are becoming more widely available in rural areas, the VUP public works program will reflect a new GoR policy o f direct payment o f wages to workers, without intermediaries. This policy will take advantage o f the ability, including in rural areas, o f an improved system o f financial services that facilitates households’ access to such services and makes possible direct payments o f wages to workers and o f direct support benefits to households without intermediaries. Since December 2008, Rwandan policy requires that al l wage payments and other payments made by the government to individuals be made by direct deposit into an account for the individual in a bank or financial institution. An individual entitled to receive such payments must have or create an account in a bank or financial institution into which the payment can be made. In the context o f this operation, and within VUP payment o f wages under the public works program and o f household benefits under the direct supports program will be into such an account in a bank or financial institution. Furthermore, provided that private contractors are neither involved in making payments to VUP workers or beneficiaries, nor in selecting the participants in the VUP public works or direct supports programs nor in determining their wage payments, private contractors can be used within the VUP for other purposes such as providing technical advice or supervising specific activities. This social protection good-practice policy change is reflected in GoR’s revised public works manual and i s being effected through direct transfers f rom district governments to household accounts in local financial institutions.
65. Another key policy challenge in the area of direct support (cash social assistance) i s the adoption of a ‘household’ rather than an individual o r family, as the basis for the determination of award levels, duration of support, and related matters. The VUP direct support program, with guidance under the CLSG-1 operation, has adopted the household, rather than the individual or the family, as the unit for which the level o f benefit will be determined. Therefore, the program achieves a better match o f needs and resources among recipient units and minimizes incentives for manipulation o f household structure to maximize the level o f new direct support payments received. Earlier pol icy on determination o f beneficiaries and award levels has been a local function rather than a national one. With support under the CLSG- 1, GoR has adopted a clear national policy for VUP benefits to be defined for the household, in l ine with good international practices. This has been incorporated into GoR’s revised direct supports manual.
66. Another important policy challenge i s encouraging incentive-driven voluntary savings rather than mandatory savings, as earlier envisioned under the VUP. Such a pol icy change will inculcate a savings-habit and, at least for some households, open up the possibility o f launching
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small-scale income-generating activities. This is a policy challenge that the second-year operation will support.
67. In line with international good-practice policy, GoR also faces the challenge of ensuring a process for determining eligibility that i s both clear and transparent to all potential recipients and non-recipients. Such a policy would establish program rules that are widely known and would make selection outcomes publicly available. This policy challenge will be addressed in the second year o f the operation.
68. Finally, a major policy challenge i s to put in place at all levels of a rigorous monitoring and evaluation framework, with a baseline at the beginning o f the operation. I t i s envisioned that a key objective under the CLSG series will be support for adoption o f policies that a im to strengthen institutional capacity. Such policy reform would involve adoption o f institutional strengthening to (i) strengthen financial management o f V U P at decentralized levels o f GoR; and (ii) facilitate regular monitoring and evaluation o f direct support and public works programs, further strengthening the already existing VUP monitoring and evaluation system (see Annex 1 l), including policy on upward feedback o f related outcomes in pi lot sectors. Under this broader policy area, the proposed operation will support the adoption o f a policy to strengthen the coordination between V U P and other social protection policy.
Policy Area: Communitv Health, Nutrition and Population Services
69. Community health, nutrition and population policy development contributes to addressing challenges relating to access to basic services by the poor, access to maternal health services, coverage o f high-impact interventions, and health human resource gaps in rural areas, all o f which are critical for making progress on the hard-to-reach MDGs. The proposed operation will support a series of policy reforms (discussed here and immediately below) in GoR’s community health, nutrition and population policies that complement the VUP in addressing these challenges, including a strategy to deliver high-impact interventions to households by a network o f community health workers (CHWs), designed to contribute to improved access to services by the rural poor. Through a jo int planning process, Ministry o f Health (MoH) is developing an implementation plan and budget that integrates support financed by GoR with community health programs largely supported by partners.
70. An important policy challenge i s development of a performance-based mechanism to provide incentives for community health workers. Based on experience with a performance- based mechanism for CHWs piloted since 2006, M o H has redesigned the strategy and intends to scale-up nationwide. Sector administrations will sign performance-based contracts with CHW cooperatives and incentive payments will be made on the basis o f reported health service indicators, with technical support and supervision provided by health centers. A portion o f incentive payments will be used by the cooperatives to develop livelihoods activities, part o f the overall V U P strategy.
71. GoR’s policy framework also needs to address gaps in health human resources in rural areas. Implementation o f GoR’s Community Health Policy involves integrated training o f CHWs in provision o f a package o f high-impact preventive and curative services. GoR will evaluate community health training to inform development o f a supplementary training program to progressively increase the skills o f CHWs, with the intention o f providing in the medium term a staffing pool for Basic Health Units in rural areas that are planned to be built under the VUP.
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72. GoR also faces a key policy challenge to address factors that affect maternal mortality. GoR i s developing an innovative strategy that includes incentives for pregnant women, CHWs, and health facilities to encourage safe deliveries in health facilities.
VI. OPERATION IMPLEMENTATION
POVERTY AND SOCIAL IMPACT
73. In line with GoR’s overall objective to alleviate poverty under its EDPRS, GoR’s V U P flagship social protection program and the policy reforms and measures to be supported under this operation aim to reduce extreme poverty among Rwandan households and to expand access to high- impact health, nutrition and population interventions at the community level.
74. GoR’s social protection policies supported by this operation are expected to contribute to (a) a reduction in the poverty-income gaps in pi lot sectors over a three-year period and (b) greater opportunities for beneficiaries to seek self-reliance and to graduate o f f the public works and direct supports programs and into income-generating activities. More specifically, adoption of international good practice policy with respect to the level o f the wage rate under public works i s most l ikely to self-select the poorest into the program. Likewise, in the direct support area, choosing the household for the purposes o f determining benefit level i s most l ikely to reduce poverty among critically vulnerable households. These impacts are to be measured by an impact evaluation o f the program at the end o f three years.
75. Community health, nutrition and population policies are intended to improve access to high- impact services by the poor, particularly in rural areas, contributing to addressing persistent socio- economic disparities in utilization o f health services and in health outcomes. The expected outcomes will be closely monitored by specific indicators and rigorous impact evaluation will be undertaken with support f i om the Health Results Innovation Trust Fund.
IMPLEMENTATION, MONITORING AND EVALUATION
76. In September 2008 all budget support donors and GoR signed a Memorandum o f Understanding governing the provision of direct budget support in the implementation of Rwanda’s EDPRS. The MoU, which replaces the 2003 Partnership Framework, outlines monitoring and performance management responsibilities and guidelines. Under this MoU, monitoring and performance management will be undertaken according to the Harmonization Calendar in the context o f three complementary frameworks:
i. Common Performance Assessment Framework (CPAF), which summarizes GoR’s performance in the implementation o f the EDPRS;
ii. Donor Performance Assessment Framework (DPAF), which summarizes donor performance in adhering to the various commitments related to the aid effectiveness agenda; and
iii. Joint Governance Assessment (JGA), which will be revised and agreed upon annually: by GoR and the development partners, which summarizes GoR’s performance in the implementation o f governance reforms.
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77. I n line with the MoU between GoR and budget support donors, the CLSG-1 i s fully aligned with the CPAF, with the exception of one health indicator that, by mutual agreement, i s drawn from the agreed health sector matrix. This was achieved through close collaboration with GoR and other budget support donors. The CLSG operation will continue this dialogue and support the ongoing evolution o f the CPAF.
78. The Budget Support Harmonization Group (BSHG) brings together GoR and budget support donors relating to the provision of budget support for the implementation of the EDPRS and its related flagship programs.24 The dialogue in the bi-annual Joint Budget Support Reviews (JBSR) is based on the joint assessment o f progress in EDPRS implementation, including governance indicators and PFM reform, using the CPAF as the single framework. For governance topics not covered in the CPAF, an assessment o f underlying principles i s based on the Joint Governance Assessment annual review. Policy actions and targets o f the CPAF are to be revised on an annual basis during the forward-looking Joint Budget Support Review. Under exceptional circumstances, indicators may be changed as long as they remain consistent with the EDPRS and ongoing GoR policies and programs. In addition, in the health sector, an MOU between GoR and partners was recently signed to implement a SWAP process and a sector-specific policy framework and outcome indicators were joint ly agreed to govern “sector budget support” financed by several donors. Indicators for the third year will be further developed during the design o f the second year programmatic grant, in the light o f implementation experience.
79. The Ministry of Local Government (MINALOC) i s responsible for implementation of the VUP public works and direct supports elements and its monitoring over time, while the Ministry o f Health (MOH) i s responsible for implementation of the community health, nutrition and population strategy in support o f the VUP. A VUP task force, supported by donor-supported international staff, has been set up for inter-ministerial coordination. Within M I N A L O C a coordination unit will manage implementation across the various departments, Districts and Sectors.
80. The Policy Matrix (Annex 2) for the proposed operation provides a results framework that describes expected immediate and short-term outcomes as well as indicators to measure progress during the annual operations and responsible agencies which are accountable for reporting. The matrix and indicators are consistent with the CPAF and sector-specific frameworks. Benchmarks will be regularly evaluated and interim steps taken by GoR will be monitored25.
Social Protection M&E framework
81. Monitoring of the VUP program and policy will draw on data and findings from a range of sources to monitor progress on various expected outcomes of this operation. This will include the existing information system at the District and Sector levels, the VUP M&E system, baseline and follow-up household surveys in a sample o f 10 sectors among the 30 pi lot VUP Sectors and a sample o f 10 sectors among non-VUP sectors, regularity o f financial flows, data on wages and employment in public works and in the private sector for unskilled labor, assets created and the
24 Membership o f the BSHG in a given year i s restricted to partners contributing a minimum o f US$ lO million o f budget support (general or sectoral) per year. 25 GoR’s detailed monitoring framework for the VUP program i s described in Annex 12.
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maintenance scheme, appeals process, etc. M I N A L O C is the responsible agency and is accountable for reporting the progress.
Indicator
(1) O f those households eligible for support, % granted public works
(2) O f those households eligible for support, % granted direct support
(3) The VUP program at end o f three years wi l l be assessed with reference to the proportion o f households in the bottom two categories o f extreme poverty (as identified by the Ubudehe process), This exercise i s expected to be done in a sample o f pilot sectors26.
82. As part o f a larger impact evaluation of this program, a baseline survey will be implemented. To learn from experience and to modify the design o f the program accordingly, an impact evaluation will be undertaken three years after the inception o f the operation. This evaluation will examine the impact o f the VUP program and the modified pol icy framework underlying this operation on households’ socioeconomic status, and health and education outcomes. The baseline survey will include: (a) Household survey; (b) Village survey o n major characteristics o f villages such as access to roads, schools, clinics, banking outlets, post offices, distance to main roadddistrict headquarters, etc.; (c) Key informant interviews with unstructured schedules that provide insights into the prevailing poverty, health and employment situation; and (d) focus group interviews to get feedback on the implementation arrangements. The responsible agency i s MINALOC.
Target Intermediate Target
(2009) (201 1)
Baseline (most recent estimate)
35% 35% 35%
0% 60% 80%
28.7% < 28.7% < 28.7%
83. The key performance and monitoring indicators that will need to be collected at the commencement of the program, which will establish base values and determine targets, are presented in the table below. These indicators have been discussed with M I N A L O C and MINECOFIN and are consistent with CPAF.
Table 8: Key Social Protection Performance and Monitoring Indicators in W P Sectors
Community Health, Nutr i t ion and Population Services M&E framework
84. The community health, nutrition and population policy will be implemented in conjunction with the VUP through the decentralized administration, notably the District and Sector administrations, as well as health centers at the Sector level. The Government intends to scale-up nationwide implementation o f the community health, nutrition and population policy, including in the 30 V U P pi lot sectors. MOH will provide technical guidance and oversight and lead coordination o n community health programs with sector partners. A pi lot program to provide
26 Baseline figure was calcnlated for 18 VUP pilot sectors for which UBUDEHE data are well analyzed.
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incentives to CHWs in several Districts since 2006 provides lessons for scale-up - in particular the need to strengthen capacity for supervision and reporting - at the District and health center levels. The program will make use o f already-established information system capacity in health centers to meet the data requirements o f the community-based PBF strategy. A steering committee including representation f rom the Umurenge administration will authorize payments under the Community PBF mechanism as well as be responsible for verification o f reporting.
Indicator
85. The main indicators and targets for the community health, nutrition and population policy relate to increased financing and coverage of interventions with high impact on maternal and child health. Indicators are among those that have been agreed between GoR and partners within the Common Performance Assessment Framework (CPAF) or by agreement in the case o f indicator 2 in Table 9 (below), within the health sector matrix. The 2008 D H S provides baseline estimates, and the routine reporting system to be set up as part o f the performance-based payment mechanism will provide follow-up measures. The impact o f the community health, nutrition and population policy reforms will be rigorously evaluated, including a randomized design and baseline and follow-up household surveys. This i s part o f a global study in nine countries that i s being supported by the Health Results Innovation Trust Fund. Significant technical assistance implemented by the Bank team in this area will be financed by an additional U S $ l mi l l ion f rom the trust fund over the three-year period o f the proposed CLSG series. The exercise will benefit f rom the experience o f the ongoing impact evaluation o f the facility-based PBF scheme.
Baseline(2008) I Target (201 1)
86. MoH.
Key indicators for monitoring progress are shown below. The responsible agency is the
(1) Annual per capita allocation to PBF for health facilities and community health cooperatives (2J % o f under-five children with diarrhea who receive oral rehydration therapy (ORT)
contraceptives (3) % married women aged 15-49 using modem
(4) % o f births in an accredited facility
Table 9: Community Health, Nutrition, and Population Services: Key indicators
US$1.45 US$2.25
30% 50%
27% 38%
45% 50%
ENVIRONMENTAL ASPECTS
87. Under Operational Policy 8.60, on Development Policy Lending, the Bank i s required to determine whether specific country policies supported under the operation are likely to cause significant effects on the country’s environment, and, in the event o f such likely effects, assess country systems for reducing any such adverse effects and enhancing such positive effects. In the event o f signzpcant gaps in the analysis, or shortcomings in the country systems, the Bank i s required to identify how such gaps or shortcomings would be addressed before or during program implementation, as appropriate.
88. This operation i s governed by Operational Policy (OP) 8.60, Development Policy Lending, and therefore i s not subject to OP 4.01, Environmental Assessment. Following these policy requirements, specific country policies supported by the CLSG are not likely to cause
significant effects on Rwanda’s environment, forests and other natural resources. The proposed CLSG will provide general budget support to GoR. Policy actions for public works elements o f the V U P relate to promoting efficient, effective labor market functioning for example, through public works wage rates that do not exceed the private market wage, transparent and direct arrangements for paying workers, selection o f projects and locations that facilitate participation o f women, and involvement o f local communities in the process o f determining priorities among public works activities. Accordingly, GoR’s policies relating to the CLSG- 1 operation are, in themselves, not l ikely to cause significant effects on the country’s environment, forests, or natural resources with respect to the country’s public works program. Annex 10 provides a discussion o f environmental aspects in the Rwandan context. GoR has established a Cabinet Subcommittee to facilitate implementation o f the VUP program and to facilitate coordination among various actors during implementation. In addition, the VUP public works manuals prepared by GoR to train staff and guide implementation o f the VUP public works program also incorporate the General Environmental Impact Assessment Guidelines o f 2006, and the relevant sectoral guidelines for public works activities.
89. While GoR’s policies relating to the CLSG-1 operation are, in themselves, not likely to cause significant effects on the country’s environment, forests, o r natural resources with respect to the country’s public works program, MINALOC has sought to facilitate cooperation in this area by incorporating prevailing environmental and technical assistance guidelines within its operational manuals for its public works program (see Annex 10). Furthermore, Rwanda’s Environmental Management Authority (REMA), in collaboration with sector ministries, i s moving towards developing more custom-made environmental guidelines for each o f the ministries to replace the general guidelines. In 2007, in collaboration with UNDP, GoR developed guidelines in 2007 to help mainstream environmental issues in al l sectors during the EDPRS process. In addition, in the context o f GoR’s Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) program, MINAGRI recently requested the various participating donors and partner organizations to work with it to develop a common framework o f engagement to make possible common quality standards and approaches (e.g. to social and environmental safeguards), despite different implementation arrangements. Furthermore, the current PRSG series (PRSG 4 to 6), will rely on two areas to address potential environmental concerns: (i) continued strengthening o f the overall framework for environmental management in Rwanda; and (ii) environmental management assessments undertaken in the context o f other Bank projects.
90. In sum, while the proposed operation i s expected to have no significant adverse effects on the environment, country systems have adequate capacity, and appropriate arrangements have also been made through Bank work, (as outlined above and in Annex lo), to address any such minor effects that might arise. The operation therefore complies fully with the requirements o f OP 8.60.
FIDUCIARY ASPECTS
91. The legal text to establish the Rwanda Public Procurement Authority (RPPA), which i s in line with international good-practice was adopted and gazetted and the Board of directors appointed in March 2008. The text includes al l functions belonging to a modem procurement regulatory and oversight body. In addition, procurement audits were completed in 66 procuring entities, (80 audits in total were scheduled). Independent review panels have also been established
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and made operational at the national and district levels (according to the law, 5 members are f rom the private sector and c iv i l society organizations). Bidders on public procurement contracts have recourse to independent appeal. Finally, the RPPA website now publishes a l i s t o f debarred firms.
92. Parliament also passed the Accountants Bill in December 2007. The Bill now requires al l financial institutions and large companies and public companies to comply with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).
93. Rwanda’s first Public Expenditure and Financial Accountability (PEFA) Assessment was completed in 2007 and confirmed that while in some areas the PFM system performs strongly, several others still require considerable strengthening. In particular, the areas o f accounting, reporting, external audit and oversight require particular attention. Reporting at decentralized levels i s particularly weak and poses an area o f r isk in need o f capacity support. However, P F M reforms have advanced considerably - a sound procurement legal framework has been put in place and a Public Procurement Agency to regulate and oversee public procurement i s now operational. District budget reports are now published on GoR’s website. MIFOTRA, the Ministry o f Public Service and Labor, has completed the functional audit o f 6 ministries - the results o f the review will be used to develop an action plan for each ministry to address the issues raised pertaining to weaknesses in the structure, staffing and procedures. A monitoring framework for the EDPRS has also been developed along with a CPAF around which all budget support donors have agreed to focus and align their fiduciary requirements. Further improving governance, i s a flagship program under EDPRS and seeks to strengthen political governance, economic governance, and build institutions and capacity o f the state. It envisages, inter alia, a wide range o f reforms to strengthen public sector institutions and capacity, including further decentralization, enhancing accountability at al l levels o f GoR, strengthening public financial management at a l l levels and increasing the predictability and transparency o f policy-making.
94. Rwanda i s widely recognized for low levels o f corruption compared to the region and the rest o f Sub-Saharan Africa. Strong political commitment to the fight against corruption i s evident from the following: (i) there i s vigorous prosecution o f corruption cases; (ii) the Ombudsman’s Office effectively coordinates an annual exercise o f assets declaration by public officials involved in the management o f public funds; (iii) this office, together with the Office o f the Auditor General, exposes corrupt behaviors and makes recommendations for action by the Prosecutor General; and (iv) the judicial sector was reformed to give independence to the Prosecution Office in the 2003 Constitution. Consequently, this office, with the help o f other institutions l ike the National Police, i s able to prosecute independently and systematically al l cases o f misappropriation o f public funds.
95. The fifth review of the Poverty Reduction Growth Facility (PRGF), completed in November 2008, noted that under the Fund’s safeguards assessment policy, the National Bank of Rwanda (NBR) was subject to a safeguards assessment with respect to the PRGF arrangement approved on June 12,2006. The updated assessment was completed on January 26, 2007, and considered the results o f the previous 2003 assessment. I t proposed recommendations to address continuing vulnerabilities in the external audit and financial reporting areas. The implementation o f these measures is being monitored by IMF staff. In addition, the Bank coordinates with the Fund and other donors to provide support toward strengthening the audit and reporting functions o f the PFM system, drawing from the results o f the PEFA. The overall fiduciary framework for monitoring o f the grant is therefore adequate.
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DISBURSEMENT AND AUDITING
96. The I D A grant will be disbursed as a single tranche of SDR 4 million (US$6 million equivalent) upon effectiveness. The proposed grant will fo l low the Bank’s disbursement procedures for development policy operations. The grant will be disbursed against satisfactory implementation o f the development pol icy and not tied to any specific purchases. Subsequent to Bank Board approval and grant effectiveness, the Bank will disburse the proceeds o f the grant into an account designated by the Recipient at the central bank o f Rwanda (National Bank of Rwanda) and forming part o f Rwanda’s foreign exchange reserves. The Recipient will ensure that upon deposit o f the grant proceeds into said account, an equivalent amount is credited in the Recipient’s budget management system, in a manner acceptable to IDA, with an indication o f the exchange rate applied, where applicable. IDA reserves the right to request an audit o f such account. If the proceeds o f the grant are used for ineligible purposes as defined in the Financing Agreement, the Recipient will be requested to refund to IDA, an amount equal to the amount o f said payment, promptly upon notice f rom IDA. Amounts refunded to the Bank upon such request shall be cancelled.
97. Within two business days, the National Bank of Rwanda will credit the Rwanda Franc equivalent o f the grant proceeds to the consolidated account maintained on behalf of GoR which finances budgeted expenditures. The Director o f Treasury will be notified accordingly. The NBR will not impose any charges or commissions o n GoR for these transactions. The conversion from U S D to Rwanda Franc will be based on the prevailing exchange rate on the date that the funds are credited to the consolidated account. GoR, through the MINECOFIN, will - (i) provide wr i t ten confirmation within 30 days to the Bank that an amount equivalent to the grant proceeds from the Bank has been credited to the consolidated account, with an indication o f the exchange rate applied; (ii) provide evidence that the Rwanda Franc equivalent o f the grant proceeds was recorded as financing for GoR budget; and (iii) ensure that the Rwanda Franc equivalent o f the grant proceeds are subject to controls to ensure i t s use for eligible budgeted public expenditures only.
R I S K S AND RISK MIT IGATION
98. There are four main r isks potentially associated with the program as follows: i) macroeconomic and financial sector risk; ii) regionalhountry risk; iii) program risk; and iv) fiduciary risk.
99. Macroeconomic and Financial Risk. Given GoR’s record in macroeconomic management and i t s overall satisfactory rating as evidenced by reviews under the PRGF, the last few years’ economic reforms, and experience with budget support under the f irst PRSC/G series, this rating i s low. Nonetheless, with high aid dependency and a l o w tax base, managing injections o f liquidity into the economy may present dilemmas. While external aid doubles, the extent to which aid dependency falls depends a great deal on realization o f very high GDP growth rates, not easy given the ongoing global economic crisis. Even if high GDP growth rates are realized, in the medium- term the country remains highly aid dependent with a l o w tax base and GoR may consider concessional loans, on a selective basis, to enable the necessary investments to generate growth. To mitigate these risks, the Bank and the IMF will continue to provide support for macroeconomic reforms and a commitment to use market-based instruments to contain inflation and exchange rate appreciations.
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100. Country & Regional Risk. Currently, Rwanda’s internal security and political situation remains stable but continued effort i s needed to address the remaining political effects o f the 1994 genocide. International and regional efforts have been made to mitigate instability in the Great Lakes sub-region and the Bank supports efforts aimed at fostering peace and security between Rwanda and its neighbors. Regional efforts include the Joint Communique between GoR and the Democratic Republic o f Congo in November 2007, with the objective o f resolving the question o f the presence o f combatants o f Rwandese armed groups on Congolese territory. Continued international support f rom the United Nations, the African Union for peace efforts, and the Tripartite Plus Joint Commission, work toward identifying measures to counter the negative forces operating in the region. Flare-ups o f fighting in Eastern DRC occurred in late 2008. Sweden and the Netherlands, which have suspended their budget support due to these flare-ups, are currently in discussions with the Government with a view to resolving the issues that have arisen. On January 20, 2009, GoR and the Government o f D R C signed a jo int military agreement to disarm the FDLR, within the framework o f an accord signed between them on December 5,2008. This agreement has been supported by the EU and is viewed as a sign o f improving relations between the two countries. The joint initiative demonstrates the willingness o f both Rwanda and the D R C to find a lasting solution to the problems o f instability in the region. The operation has increased the number o f Rwandans-including FDLR sympathizers and combatants - returning to Rwanda. I t s impact on completely dismantling the FDLR i s not yet clear. If successful, this could mark an important breakthrough in achieving greater peace and stability in the region.
101. Program Risk. Given the high dependency on international assistance, particularly in the areas o f social protection and health, there i s a significant risk that unpredictable donor aid flows could hinder the implementation o f GoR policies. Furthermore, the recent financial crisis poses a real threat to the global economy and could lead to a reduction in aid f l ow from developed countries. Nonetheless, improved coordination between GoR and donors and efforts o f GoR to prioritize on-budget resources towards the most effective services are efforts to mitigate this risk. Although firm donor commitments to predictable aid flows are not forthcoming, donor attitudes are encouraging. Both budget support donors and GoR demonstrated their commitments by signing in September, 2008 a Memorandum o f Understanding that governs the provision o f direct budget support in the implementation o f Rwanda’s EDPRS. Incremental risks also relate to the implementation o f the V U P program. In part, the proposed operation will reduce the operational r isks associated with the V U P implementation as it seeks to mitigate risk by ensuring that the policies embody international good practice in public works and social protection programs, establish a baseline for evaluating VUP piloting, and enhance district-level capacity to manage performance-based support to community health workers. This will be accomplished by providing ongoing support to GoR to assess i t s VUP pilots and i t s impact o n targeted households, and to address the challenges on the ground for making the implementation o f these policies sustainable within budget constraints.
102. Fiduciary Risk. The rapid decentralization undertaken by GoR has heightened potential procurement and public financial management risks. GoR has committed to accelerating i t s efforts to address these risks and progress has been made in recent years including the recent passing o f the procurement law and the Accountants Bill and completion o f its f i rs t Public Expenditure and Financial Accountability Assessment (PEFA) in 2007. While PFM reforms are advancing, including the new Public Procurement Agency to regulate and oversee public procurement, and a monitoring framework for the EDPRS i s being finalized, some PFM areas s t i l l need strengthening. GoR i s addressing these issues with the help o f development donors, including the Bank. For
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example, in September 2008, the Bank led a mission to Rwanda to discuss with stakeholders the PFM and C iv i l Service Reform (CSR) progress, to agree on institutional arrangements for PSCBP (given HIDA’s integration into the newly created Rwanda Development Board) and to finalize arrangements for the transfer o f implementation responsibilities for related project activities to MINECOFIN, Rwanda Development Board (RDB) and the Auditor General’s office. It is also accelerating the implementation o f the Rwanda Expertise Scheme that is training accountants, to be deployed at decentralized levels, in the Rwanda public accounting system, and it is sponsoring the best among them for professional accountancy qualification. In addition, the VUP processes wil l incorporate the most direct and transparent payment mechanism available (including direct deposit to bank accounts) as wel l as systematic, coordinated, record-keeping at district, sector and cell levels o f local government. To further address fiduciary risks, particularly those related to rapid decentralization, both the Bank and other donors are providing ongoing support and guidance. (Also see section Fiduciary Aspect above and the annex for Recent Decentralization Reform).
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ANNEX 1: LETTER OF DEVELOPMENT POLICY
REPC‘BLIC OF RWANDA
MINISTRY OF FINANCE AND ECONOMIC PLANNING P.O. Box 158 Kigali TeYFax: +25&596134 E-mail: info~~dcvoartners.eo\.Fw
Mr. Johannes Zutt, Country Director The World Bank KENYA
Dear Zutt,
Re: Letter of Development Policv
1. Rwanda’s development challenge i s to raise living standards for its predominantly rural population. Achieving this will require it to maintain a stablc macroeconomic environment that sustains strong, soundly-bad, pro-poor growth; to invest rapidly both in infrastructure and in the next generation’s human capital as the foundation of a skill-based, service- oriented economic future with a clearly defined international comparative advantage; and to maintain civil harmony, including by improving health and living standards, introducing new policies that strengthen social protection, broadening the non-agricultural employment base for densely populated rural areas, and enhancing effective, transparent, and inclusive governance.
2. Growth and Povertv Patterns. Rwanda’s economy grew on average between 2001 and 2008 by 6.8 percent annually. However, population growth of 2.7% has impeded increases in per capita GDP; and inflation i s a concern. Recent Government projections imply real GDP growth of 8.5 percent and 7.4 percent in 2008 and 2009 respectively which would raise real GDP per capita to US$322 in 2008. Economic growth has been driven by the services and industry sectors, with growth in agriculture slow. The poverty picture is complex and challenging. Although the household poverty rate decreased from 60 percent in 2000-01 to 57 percent in 2005-06, the number of poor individuals rose from 4.8 million to 5.4 mill ion in this period because of sharp growth in the relatively young population. The poverty gap, defined as t h e aggregate household consumption shortfdll below the poverty line, fe l l from 21 percent to 19 percent in this period, when the average poor Rwandan’s consumption rose only 2 percent to about RwF 150 a day (about US$O.27). Some 37 percent of Rwandans then lived in extreme poverty and could not afford the minimum food requirements of 2,100 kcal a day. Poverty i s extremely high-91 percent-in families mainly dependent o n agricultural wage labor (which typically are landless). It i s above average in those families with smaller landholdings, in female-headed households, and +j&
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- 2 - in more densely populated areas. Inequality was high by international, including African, standards. The Gini coefficient increased from 0.47 to 0.5 1 between the two household surveys.
3. Government’s EDPRS - Vision 2020 Umureme (VU4 Program. Rwanda’s Economic Development and Poverty Reduction Strategy (EDPRS) for 2008- 12 builds on strong achievements in human capital development and promotes three flagship programs to accelerate growth. These flagships focus o n growth for jobs and exports, governance, and the VUP. VWP‘s main objective is to accelerate poverty reduction ‘by promoting pro-poor components of the national growth agenda,,. by releasing the productive capacity of the poor in rural areas through a combination of public works, credit packages and direct support.” The Public Works policy area i s targeted to benefit adult members of landless, extremely poor households who have the capacity, but not the opportunity, to engage in labor-intensive employment. The Direct Supports policy area is targeted to benefit those landless and extremely poor households that are deemed the poorest in their village and least able to help themselves. The Credit Packages policy area is targeted at households in varying circumstances that could benefit from improved access to credit. While pilot projects in public works have begun in 28 sectors of t h e 30 selected sectors, policy and implementation challenges need to be addressed to ensure that operational risks associated with the W P implementation are minimized and are m l ine wi th good international policy practice.
4. Government’s EDPRS - Millennium Development Goals IMDGsl. The EDPRS includes strategies and targets to achieve significant progress towards t h e MDGs, including in the areas of health, nutr i t ion and population. With the objective of improving health status and reducing population growth, t h e EDPRS includes action in seven areas to allow Rwandans to break out of the vicious circle of poverty and poor health. These are: i) to strengthen institutional capacity at al l health facility and administrative levels; ii) to increase the quantity and quality of hea l th sector human resources, inchding by efforts to improve t h e availability of well qualified health professionals throughout the country, particularly in rural areas; iii) to ensure that health care i s accessible to all the population irrespective of their ability to pay; iv) to increase geographical accessibility to quality health care services; v) to increase availability and affordability of drugs, vaccines and consumables; vi) to improve the quality of, and demand for, services in the control of diseases; and vii) to develop accessible national reference, training and research facihties.
5. h-ogress to Date in Social Protection. To address the challenge of pervasive and deep poverty among landless households principally in rural areas, the Government has made its innovative Vision 2020 Umurenge (VUP) program one of three flagship programs under its EDPRS. In addition to the development of a new strategy, the social protection policy reform has also institutionalized t h e Ubudehe process of village-level community decision- making. Ubudehe incorporates what is essentially a “poverty-mapping“ process, which has a systematic methodology and allocates each household to one of six ordinal income and poverty-related categories differentiated by well-defined qualitative criteria. The maps have become the basis for community decision-making about income support in cash or in kind to ultra-poor households from local and donor sources, and about which
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- 3 - households should receive subsidies for health insurance. However, the Government has committed to introduce policy and institutional reforms adopting international good practice in t h e domain of social protection so that the development results and expectations of the VUP flagship program are realized.
6. Promess to Date in Health. Also, the Government has achieved significant policy reforms in the health sector. These include the hihigo, which are performance contracts between the President of the Republic and District mayors that incorporate a variety of indicators, including integrated heal th service indicators. Enrolment in mutueIZes has rapidly expanded, reducing financial barriers to care and improving health service financing while building solidarity. Performance-based financing (PBF) of health services has enhanced accountability and incentives for improving preventive arid curative services. Administrative and fiscaI decentralization has increased the financing and responsibilities of local government, while community participation in health system governance and heal th promotion has been enhanced. The autonomy of health facilities in budget and human resource management has been considerably increased. These reforms have shown impressive results in terms of improved heal th service delivery, such as greater availability of skil led staff in rural areas, improved service utilization and better health outcomes. Malaria incidence has dramatically fallen while child mortality has dropped from 152 per 1,000 in 2005 to 103 in 2008. Significant challenges remain, however, to reach t h e EDPRS targets above, including continued high child malnutrition and socio-economic disparities in access to h e a l t h services, particularly affecting the poor in rura l areas.
7. Social Protection and Health Reform Proerram and Key Reform Pillars. The Government’s policy reforms designed to reduce extreme poverty among Rwandan households include social protection policy reforms comprising public works interventions and a direct support program embodying international good-practice approaches. The CLSG- 1 supports the following pillars of the Government’s Reform Program in the area of Social Protection and Health:
(i) Policy reforms following global good practice in relation to public works employment that creates community assets through unskilled labor, supports extremely poor households’ incomes, potent idy augments skills, and encourages voluntary saving for new income-generating activities;
(ii) Policy reforms following global good practice in relation to direct support (social assistance) in the form of cash transfers to extremely poor, landless, labour-poor households, and which encourage voluntary saving for new income-generating activities, where possible;
(iii) Policy reforms that strengthen delivery of high-impact health and nutrition interventions at the community level using performance-based financing mechanisms to expand poor households’ access to heal th services; and
(iv) Complementary policy reforms that address a shortage of skilled community health workers by strengthening performance-based mechanisms to train, incentivize, and support such workers through cooperatives at sector level.
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- 4 - 8. Public Works Policv. More specifically, the Government’s policy reforms in the domain of public works program include: adoption of community-driven targeting of the program to extremely poor, Iandless households in which adults are capable of participating in labor-intensive activities but lack employment opportunities; adoption of a wage rate n o higher than the prevailing market wage for unskilled labor in various locations (ratia of public works wage to market wage <l); creating community assets and amenities while providing income support to participating households; and encouraging voluntary saving for development of income-generating activities.
9. Direct Supports Policv. In the domain of direct supports (social assistance) too, the Government intends to pursue policies that incorporate good international practice. For example, benefit levels wil l be set for a household unit (rather than an individual] and in a manner that reflects household size, economies o f scale, budget constraints, and the program’s overall fiscal sustainability in t h e longer t e r m if t h e program i s cxtended nationwide.
10. Common Elements of Social Protection Promams. Some other good- practice policies will be common to both programs. In both programs, Ubudehe-based processes (Le. , community invofvement) will play significant roles. Systematic poverty-mapping exercises that use specified qual i tat ive and quantitative criteria wil l be conducted at the village levet to group all households into six categories with progressively higher living standards. Of these, those in the lowest two categories, additional land and labour criteria wi l l b e applied to identify those households eligible for direct support, public works and those households who are non-eligible. Community-led processes will also be used to determine village priorities concerning local community assets to be created through the public works program. Finally, community processes will also be used for ensuring transparency, dissemination of program information, and for monitoring program inputs and outputs. Few countries across the world have adopted this good policy of using communities as gate-keepers for identifying potential recipients of safety net programs, conflict resolution, and for monitoring to ensure good governance.
11. Health Reform Prowam. Development of community health and nutr i t ion policy remains a continuing challenge, in particular relating to access to basic services by the poor, access to maternal health services, coverage of high-impact interventions, and heal th human-resource gaps in rural areas. The Government’s continued policy response to these challenges includes support to the Vision 2020 Umurenge Program (VUP) through improving access by the poor in rural areas t o community health, nutrition and population services, which the proposed operation supports.
12. Performance-Based Financing IPBFI Policv, Supporting the draft National Community Health Policy, the PBF policy i s based on t h e success of performance-based financing of facility-based services. Two Community Health Workers (CHW) have been elected in each Umudugudu, while traditional birth attendants and other community-level health workers focusing on specific issues (such as HIV/AIDS) will be tramed and integrated in the community health program. In accordance with the national strategy of encouraging the formation of cooperatives to diversify economic activity and reduce poverty in rura l areas, CHW Cooperatives are being formed in
40
- 5 - each Umurenge. Performance-based payments wil l be made to the CHW Cooperatives on t h e basis of a set of reported indicators and the proceeds will be used to invest in revenue-generation activities as well as for incentives to individual workers. Community PBF will support ongoing and planned community health programs financed by Government and Partners through integrated planning and implementation.
13. Matern a1 Health P olicv. In line with the Government's commitment to reducing maternal mortality, i t i s introducing a policy to improve incentives for antenatal care and delivery in accredited heal th facilities a s well improving referral care and vital registration. This will include modifying the facility PBF and user co-payment policies to improve incentives for antenatal care and deliveries in facilities, as well as providing in-kind incentives to pregnant women and communities.
14. Human Resource DeveloDment Policv. In support of the Community Heal th Policy and contributing to the EDPRS goal of improving t h e availability of skilled health human resourccs in undcr-scrved rural arcas, t h e Government is scaling up integrated training of Community health workers and will evaluate requirements for supplemental training, This evaluation and policy development process i s designed to contribute to developing a pool of skilled community health workers for the network of village health posts that are envisioned under t h e VUP over the medium term. Measurement of Progress. Several indicators have been identified to measure the progress of the VUP and health, nutrition and population services policy reforms. On the social protection side, the Government i s intending to assess the VUP program at the end of three years with reference to the proportion of households in the bottom two categories of extreme poverty (as identified by the Ubudehe process) in a sample of pilot sectors. Additional indicators include: extremely poor households performing granted
. public works (2008: 17150; 2009/2010: 32585; 2010/2011: 35723; 20 1 1 /20 12: 36437); the percentage of households eligible for PW-support granted public works (2008:35%; 2009/2010: 35%; 2010/2011: 35%; 201 1/20 12:35%, the number of extremeiy poor households assisted through direct support packages (2008:O; 2009/2010: 13034; 2010/2011: 16636; 201 1/2012: 19973); the percentage of households eligible for direct support granted direct support (2008: Q%, 2009/2010: 100%; 2010j2011: 100%. On t h e health side, indicators to measure progress toward the Government's EDPRS targets for 2012 (compared to a 2000 baseline) in order to achieve progress towards MDGs 1, 4 and 5, include: tD increase the proportion of married women aged 15-49 using modern contraceptives from 27% in 2008 to 38% by 201 1; to increase the per capita utilisation rate of primary health care services (all visits at health centres, private dispensaries and visits by community health workers) from 0.75 in 2008 to 0.85 by 2011; to increase t h e proportion of births that are delivered in an accredited facility from 45% in 2008 to over 50% by 20 1 1 ; and to increase annual per capita allocation to PBF for healL11 facilities and coinniunity hedLh cooperatives from US$1.45 in 2008 to US$2.25 by 201 1.
15. Monitoring 8a Evaluation. To measure the progress of the VUP program, the Government is undertaking a baseline survey in 10 VUP pilot sectors and 10 non-VUP control sectors. This baseline survey i s led by MINALOC with support from the National Institute of Statistics of Rwanda
41
- 6 - and World Bank. The survey intends to provide baseline information on the socio-economic and demographic characteristics of the poorest population eligible for assistance, which i s expected to validate the initial subjective ranking of households through the Ubudehe process. The Government later intends to complete a follow-up survey to evaluate t h e impact o f the whole VUP program. The survey i s expected to b e completed by early 2009 . In addition, in the area of health policy, a rigorous monitoring and evaluation of policy implementation and results wil l include strengthening the information system in the context of the PBF mechanism, as well as regular reporting and randomized impact evaluation. The Government i s committed to the appropriate use of results-based financing, to the rigorous evaluation of the impact that w i l l be achieved from policies supported by this grant, and to sharing the results of such evaluation with the global community.
16. Concluding Statement. Our government is committed to the welfare and well being of the less privileged sections o f the community. The VUP program is a clear reflection of the Government’s commitment to reduce poverty and illness among the poorest segments of t h e population. However, implementation o f t h e program would require policy and institutional reforms for which the Government of Rwanda seeks the Bank’s assistance in the form of a development policy grant (DPG). The DPG reforms fit well with the overall PRSP and EDPRS framework for Rwanda. We are confident that these reforms, together with t h e sector-specific reforms supported by the DPG, will go a long way towards providing sustainable livelihoods for poor Rwandan households. The program i s built around a well-thought out and integrated monitoring and evaluation framework. We submit this program to seek support for it from the International Development Association through a CLSG grant of $10-million as the first of the series of CLSG grants to support our Medium Term Program 2008-10. We believe the program i s strong and focused, and presents a new, holistic and ambitious vision of our medium t e r n economic and social development based on strategic prioritization of key actions after extensive consultations and intensive learning of lessons from the past.
Yours sincerely,
<qt ’.i
James Minister o f Finance
cc: - H.E The President of the Republic of Rwanda; - The Right Honorable Prime Minister; - The Honorable Minister o f Local Government, Community
Development and Social Affairs; - The Honorable Minister of Health.
42
I
I
0
I x
r
I
c
ANNEX 3: FUND RELATIONS NOTE
G 2009 Iuternatioixal Monetary Fund February 1009 M F Country Report No 09.58
Rwanda: 2008 Article I%' Consultation, Fifth Review Uucler the Three-Year Awangernent Cnder the Poverty Reduction aud Growth Facility, and Request for Waiver of Nonobservance of Performance Ciiteiiou-Staff Report; Staff Supplement aud Statement; Public Iufoimation Notice w d Press Release on the Executive Board Discussion; and Statement by the Executive Director for Rwanda
Under h i c k N of the I M F ' s Articles o f Agreement, the IMF holds b l l a t e d discussions with members, usually evei-y year. In the context o f a combmed &scussioii o f the 2008 Article I" Consultation with Rwanda wd the fifth rewew under the three-yew anrlngement under the Poverty Reduction and Growth Facdity and a request for a waiver o f nonobsenance o f a per fo imnce critenon, the followmg documents have been released and are mcluded in t k s package.
+ The staff report for the coinbined 2008 Article N Coiuulmt~on F iRh Rewew Under the Three-Year Anrlngement Under the Poverty Reduchon and Growth Facdity and Request for Waiver of Nonobservance o f Perfontmice Cntenon, prepared by a s ta f f team of the MF. fol lowmg discussions that ended on November 4 2008, with the officials o f Rwanda on e c m o m c developments and p f i c i e s Based on dormahon available at the hrne o f these discnssims, the staff report was completed on December 19. 2008. T h e views expressed m the staf f report are those o f the staff team and do not necessarily reflect the nen7s o f the Executive Board of the MF
A staff supplement on the jomt IMF/Wor ld Bank debt sustamabihty a n a l p s
b A staff statement o f Januaiy 12. 3009 updakng iiifoimation on recent developments
A Pubhc Infoination Nohce (PIN) and Press Release. s m m g the PICWS o f the Executive Board as expressed d w g i t s Januruy 12.3009 discussion o f the staff report 011 issues related to the Article ni coiudtation and the review. respectively
+ A statement by the Executise D m c t o r for Rwanda
The docuinents fisted below have been separately released
Letter o f Iu te i i t sent to the IMF by the authonties o f Rwanda* Memorandum of Econoimc and F m c i d Pohcies by the authorities of Rwanda* Techmcal Memoranduini o f Uiideistandmg* *Also mcluded tn SraffRqmit
The p f i c y of pubficatioii of staff reports and other documents allows for the deletioil of market-swsit~ve infoiina t i on
Copies of this report are available to the public from
International Monetary Fund Publrcation Services 700 19" Street, N W Washington, D C. 20431
Telephone (202) 623-7430 Telefax (202) 623-7201 E-mail publtcetions@imf ora Internet http J / w imf org
I u t e r n a t i o n d M o n e t a i y Fund Washington, D.C.
48
ANNEX 4: COUNTRY AT A GLANCE
Rwanda at a dance 9124108
POVERTY and SOCIAL
2007 Population, mid-year (millions) GNI per capita (Atlas mefhod, US$) GNI (Atlas mefhod. US$ billions)
Average annual growth, 2001-07
Population (%) Labor force (%)
Most recent estimate (latest year available. 2001-07)
Poverty (% of population below national m v e m line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% of children under 5) Access to an improved water source (% of populafion) Literacy (% ofmpulaflon age 15+) Gross primary enrollment I% of schwl-age WDUlatiOn)
Male Female
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1987
GDP (US$ billions) Gross capital formationlGDP Exports of goods and serviceslGDP Gross domestic savingsJGDP Gross national savingslGDP
Current account balancelGDP Interest paymentsJGDP Total debffGDP Total debt servicelemrts Present value of debffGDP Present value of debffexports
2.2 15.7 7.5 4.0 9.2
-6.5 0.3
27.8 13.4
1987-97 1997-07 (average annual growth) GDP -4.7 6.7 GDP per capita -2.5 2.7 Exports of goods and services -12.1 14.4
Rwanda
9.7 320 3.1
2.2 2.8
18 46 98 18 65
140 137 142
1997
1.9 13.8 7.8
-4.1 4.3
-9.4 0.4
60.0 14.5
2006
5.4 2.9
23.6
Sub- Saharan
Africa
800 952 762
2.5 2.6
36 51 94 27 58 59 94 99 88
2006
2.9 20.3 10.3 3.2
13.8
-6.7 0.3
14.6 10.6 5.6
55.3
2007
6.0 3.0 7.0
LOW- income
1,296 578 749
2.2 2.7
32 57 85 29 68 61 94
100 89
2007
3.3 22.5 9.4 4.2
17.6
-4.8
2007-11
levelopmnt dlamond'
Life expectancy
GNI Gross per primat) capita enrollmenl
Access to improved water source
-Rwanda Low-income group --
Economic ratios.
Trade
Domestic Capital savings formation
I Indebtedness
Rwanda - - Low-income gmup
STRUCTURE of the ECONOMY
37.7 46.0 41.3 35.6 I% of GDP) Agriculture Industry 17.8 18.6 13.3 14.1
Services 44.5 35.4 45.4
Household final consumption expenditure 82.5 94.5 General gov't final consumption expenditure 13.5 9.6 11.7 10.9 imports of goods and services 19.1 25.7 27.4 27.7
Manufacturing 10.8 12.0
(average annual growth) Agriculture Industry
Services
Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services
Manufacturing
1907-97
-1.8 -9.7
-10.5 -4.9
-0.7 -1.0 -9.8 6.7
1997-07
5.6 7.4 5.1 7.4
5.4 5.1 8.9 4.5
2006 2007
11.0 -2.9 8.2 13.4
13.1 9.8 -0.8 12.0
5.4 7.1 2.8 -1.5
22.3 26.2 26.8 21.8
1 1 Growth of exports and Imports (Oh)
Note; 2007 data are preliminaly estimates. This table was produced from the Development Economics LDB database. *The diamonds show four key indicators in the country (in bold) compared with its income-group average: If data are missing. the diamond will
be incomplete.
49
Rwanda
PRICES and GOVERNMENT FINANCE
Domestic prices (%change) Consumer prices Implicit GDP deflator
Government finance ( % o f GDP, includes currentgants) Current revenue Current budget balance Overall surpluddefidt
TRADE
(US $ millions) Total exports (fob)
Coffee Tea Manufadures
Total imports (cif) Food Fuel and energy Capital goods
Expo rl price index (2000= 100) Import price index (2000=100) Terms of tade (2000=100)
BALANCE of PAYMENTS
(US$ millions) Exworts of goods and services Imports of goods and services Resource balance
Net inmme Net current transfers
Current acmun t balance
Financing items (net) Changes in net reserves
Memo: Reserves including gold (US$ m'llions) Conversion rate (DEC, locaVUS$)
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions) Total debt outstanding and disbursed
IBRD IDA
Total debt service IBRD IDA
Composition of net resource Rows Official grants Official aed itors Private creditors Foreign direct investment (net infiows) Portfolio equity (net inflows)
World Bank program Commitments Disbursements Principal repayments Net Rows Interest payments Net transfers
1987
4.1 0.7
1987
114 92 8 2
313 24 52 96
84 84
100
1987
160 412
-252
-14 126
-1 40
5 135
79.7
1987
5 98 0
251
23 0 3
70 92 -3 18 0
38 39
1 39
2 37
1997
11.7 15.6
17.2 5.7
-2.5
1997
93 45 21 18
343 54 37 62
127 97
131
1997
144 474
-330
-1 7 172
-175
204 -29
301.5
1997
1,111 0
558
22 0
10
124 62 0 3 0
50 53 5
48 4
43
2006
5.5 13.1
23.8 7.7
-0 4
2006
142 54 32 42
438
75 120 83
2006
269 783
-494
-19 322
-191
273 -83
440 551.7
2006
41 9 0
169
31 0
13
1,484 46 0
11 0
0 37
8 29 5
24
2007
8.9
24.8 7.5
-0.4
2007
170 34 32 71
57 1
89 133 67
2007
306 91 3
-607
-14 460
-161
276 -115
559 550.1
2007
0 204
0 2
0 28 0
28 2
26
~Expoctandport levels (us$ mill.) I roo
i:: I O
I /cunent =count balanae to GDP (Oh)
1
A - IBRD E - Bilateral 1 &IDA D-Othermutilateml F-Private I C - I M F G - Skit-term
Note: This table was produced from h e Development Economics LDB database. 9R 4/08
50
ANNEX 5: OVERVIEW OF UBUDEHE
1. An important, relatively early aspect of SP development within Rwanda was the re- establishment of Ubudehe, a traditional Rwandan process o f village-level community decision-making based on discussion, gathering o f systematic information, and decision- making through community meetings in which al l villagers participate.
2. “Ubudehe i s a traditional practice and culture of collective action to solve community problems. I t has been adopted by GoR as an approach to fight poverty. It i s present at 9,000 cells al l over the country. The 2006 Ubudehe survey results suggest i t should be a core method o f GoR’s approach to fighting poverty because it i s embedded in Rwandan mind sets, i s seen as an approach that benefits the poor, primarily through increasing access to livestock, promotes social capital and unification, increases participation in planning and decision making, and empowers the poor and women.” 27
3. Under Ubudehe, two village committees are elected: one to oversee implementation of communal decisions, and the other to function as a sentinel o r oversight committee that activates itself only if concerns arise about the functioning o f the first committee. These community-driven processes have been used in al l villages, for multiple purposes, including identifying and overseeing projects to address community problems, identifying village priorities as part o f local government planning processes, and identifying the poorest households in the village that would receive community-managed income support. The last o f these functions entails a systematic process through which each village has created i t s own geographic and social map o f the villages which shows physical features and structures, each household’s home, and codes for relevant socioeconomic characteristics o f each family. T h i s “poverty-mapping” process, which has a systematic methodology, allocates each household to one o f six ordinal income and poverty-related categories differentiated by well-defined qualitative criteria. The maps have become the basis for community decision-making about income support in cash or in kind to ultra-poor households from local and donor sources, and about which households should receive subsidies for health insurance. More recently, similar processes have been used to identify community priorities for consideration within district government plans for public works programs. Similar approaches wil l be used, at least in the init ial phases o f the pilot VUP programs, to select households to receive assistance and, separately, to select community assets to be created through the VUP public works component.
4. Development partners played a significant role in the redevelopment of Ubudehe by providing technical support for development o f related ski l ls within local communities (e.g., DFID) and by offering operational funding (e.g., European Union) for each village community to select, design, and oversee the contractual implementation o f a substantial locally selected investment project to address what each village perceived to be i ts most challenging solvable problem. Resulting projects included modern market premises, road-building, new primary health care or education facilities or their foundations, and even a small, hydroelectric system powered by a local stream.
EDPRS, p.3, footnote 2 21
51
5. The pilot sectors for the implementation of the VUP program have been selected based on a set o f criteria such as food security, water access, distance to education and health center, and level of village settlement (see annex table below):
/
Table 1: Vision 2020 Umurenge - Targeting the most disadvantaged Umurenge in each District Columns 1 to 3 in each panel show the province name, district name, and selected pilot sectors.
Selection criteria: Food security, water access, distance t o education, distance to health center, and level o f vil lage settlement
(Imidugudu)
52
ANNEX 6: RECENT DECENTRALIZATION REFORMS IN RWANDA
Entity Province (incl. Kigali City Council (KCC))
District
Sector
Cell
1. I n May 2000, GoR adopted a National Decentralization policy that reflected nationwide grassroots consultations. Its goals were good governance, pro-poor service delivery, and sustainable development. More generally, the reforms sought to boost community participation, accountability and transparency, sensitivity and responsiveness o f public administration, sustainable capacities at local levels, and effective, efficient planning, monitoring and service delivery.
# o f Units Responsibilities Administrative Structure 5 - Coordination of local development plans
- Strategic planning for urban development; monitoring & evaluation; provision of complex services and those cutting across district governments.
- Governor for Provinces - Mayor for CC - Administrative units
30 - Economic development coordination -Elected council (mayor) -Planning & coordination of services - Executive committee
- Technical staff - Administration of basic services (plan, implement & monitor -Elected council service delivery) - Technical staff - Management o f community development - Collection o f statistical data - Collection of taxes (50% of taxes collected by sectors i s banded over to the districts)
416
2,148 - Community mobilization - Council (all adult population) - Executive committee
2. Phase one (2000-03) established democratic and community development structures and enhanced their capacities through legal, institutional, and policy reforms. These covered roles and responsibilities, financing o f services, and mechanisms to ensure accountability. Phase two (2004-08) consolidated and expanded decentralization by emphasizing local service delivery through well-integrated, accountable networks that empower communities to participate more fully in planning and managing local affairs. Phase three (post-2008) will continue to improve, support and sustain the efforts o f phases one and two.
Implementation has occurred in three phases.
3. The decentralization reforms restructured Rwanda into provinces, districts, sectors and cells. Currently, there are five provinces (including the Ci ty o f Kigali), 30 districts, 416 sectors, and 2,148 cells, covering an estimated total o f 15,000 villages across the country. The provinces serve as the coordinating arm o f the central GoR while the districts have their own selected councils and mayors and prepare their own budgets, implying that districts have their own taxing powers and are responsible for service delivery, economic development coordination, and planning. Sectors and cells, through elected representation, serve as constituencies within districts and hence provide an important vehicle for the citizens’ voices. ’
Although sectors are assigned more fiscal and service delivery responsibilities, including administration o f basic services, management o f community development, and collection o f statistical data and tax revenue collection (of which 50percent i s handed over to the districts), the cells’ main responsibility remains community mobilization**.
Table 1: New Administrative Structures:
** Source: “Making Decentralization Service Delivery Work in Rwanda”, Republic o f Rwanda, September 2006, pg. 28.
53
4. A key component of Rwandan decentralization i s the introduction o f IMMIGO, a performance management tool for reform introduced in 2006. Borrowed from Rwanda’s traditional culture and values, the term now designates a written one-year performance management contract between the President and each district mayor on behalf o f local constituents and extending to al l levels o f local government from State, to Provinces, to Districts, t o Sectors, and culminating in a series o f pledges made by households to their communities or villages (imidugudu). The contract i s recorded publicly and presents a set o f development targets backed by specific, measurable performance indicators, creating visible accountability mechanisms and incentives for local officials and communities to ensure implementation o f decentralization policies so as to meet regional and national development targets such as those set out in the EDPRS and VUP. IMMIGO contracts are now an integral part o f GoR’s governance and decentralization reforms and are important in the context o f the VUP program as it provides a basis for mainstreaming the development o f behavioral changes needed to make the VUP program a success, including commitment to a savings culture and commitment to undergo needed training.
5. Empowerment o f local government and citizens’ rights down to village level is a key objective of both decentralization and VUP implementation. GoR progressively devolved responsibilities and transferred resources to decentralized levels o f the administration. Key initiatives that complement the decentralization reform include the public service reform strategy (2004), the territorial reform (2006), and ongoing c iv i l service reform program. The last o f these reforms incorporated the autonomization o f service providers, the block-granting o f schools and health facilities, the introduction o f performance-based incentives, the delinking o f al l health workers from the c iv i l service and the possibility given to service providers to hire and fire.
6. The second phase o f decentralization has highlighted the urgent need to put in place reporting mechanisms and elaborate a framework for oversight. To this end, GoR developed the Rwanda Decentralization Strategic Framework (RSDF) in 2007 that provides a framework for the coordination o f technical and financial resources in support o f decentralization. This builds on key national strategies, the MDGs, EDPRS, VUP, and the Aid Development Strategy. I t s Decentralization Implementation Program (DIP) serves as a road map toward phasing out the provincial level o f Government.
7. The current system of intergovernmental transfers i s based largely on a recurrent block grant to finance administrative costs (including salaries), and a development grant through the Common Development Fund (CDF) to fund capital projects. In addition to these flows, a significant level o f international funding contributes to local development priorities on either an on- or off-budget basis. The Fiscal and Financial Decentralization Policy, adopted by GoR in 2006, sets the objectives and guiding principles for the h tu re reform work. This transferred to Districts 30 percent o f budget resources and associated implementation and reporting responsibilities.
8. When the MTEF was introduced in the central administration, GoR decided to extend the approach simultaneously to local governments. Progress has been in the development o f local government budgets and the incorporation into the MTEF process. Ministry o f Finance i s drafting new planning and budgeting guidelines that will cover the various phases in the local planning and budgeting process to streamline and strengthen district financial management. Local governments are required to submit monthly reporting o f
54
financial transactions that meet transaction requirements to ensure receipt o f intergovernmental transfers, which remain the main source o f revenues for districts.
9. Decentralization has devolved decision-making and budget implementation to district-level authorities, and responsibility for service delivery to the sectors. As weak administrative capacity has been a major challenge to decentralization and implementation o f GoR’s reform agenda, efforts in the area o f capacity building and c iv i l service reform have been, and remain, critical. Donors are providing support for capacity building, including the Decentralization and Community Development Project (DCDP) and the PRSC/G companion Public Sector Capacity Building Project which supports Rwanda’s Human Resources and Institutional Capacity Development Agency (HIDA). HIDA i s GoR’s institution to coordinate al l capacity building interventions, though i ts role i s one o f facilitator and not implementer.
10. The implementation of the VUP and of the delivery o f basic health services through results-based financing will play a key role in operationalizing the roles, functions, and services at sector levels. These administrative structures require additional support in capacity building and technical assistance beyond that already provided by the districts. The VUP implementation will be coordinated by Sector administrations with participation at the Umudugudu level with technical support and supervision from the districts; results-based financing o f community health, nutrition and population services will rely on administrative capacity in health centers at the sector level, which has been strengthened by the reforms and improved financing o f recent years. The community-based participatory processes, Ubudehe, will play an important role within the VUP program, while also strengthening governance and accountability at sector level.
55
ANNEX 7: INTERNATIONAL GOOD PRACTICE IN PUBLIC-WORKS EMPLOYMENT PROGRAMS
PUBLIC WORKS PROGRAMS: SOME GOOD PRACTICE DESIGN FEATURES DRAWN FROM INTERNATIONAL, EXPERIENCE2'
1. A number o f countries placed in diverse socio-economic circumstances - countries emerging from long periods o f conflict, or serious macro economic collapse, or serious natural disasters such as earthquakes or floods - have introduced public works programs. There i s much international experience that enables one to delineate some good practices in the management o f such programs. In particular, five design features are critical for the success o f any public works program. These are: the level o f the wage rate, labor intensity, seasonality o f operation, project selection procedures, and monitoring and evaluation. Box 1 provides a summary o f these five and other good-practice design features based on the experience o f various countries that launched such a program.
Box 1. What are the Key Design Features of a Good Public Works Program?
To realize the full potential o f a public works program as a poverty-reducing and risk-coping instrument, it i s recommended that:
unskilled manual labor in the setting in which the scheme i s introduced.
ideally be the only requirement for eligibility.
the program should be targeted to poor areas, as indicated by a credible "poverty map". However, flexibility should be allowed in future budget allocations across areas, to reflect differences in demand for the scheme. If further rationing i s required within a community, i t i s best to identify some critical, easily observable, household characteristics that best predict an individual or household's vulnerability, and select such individuals for participation.
100 percent. No public works activity o f some quality can be done with labor alone. The level o f labor intensity wi l l depend on the relative importance attached to immediate income gains versus (income and other) gains to the poor from the assets created. This wil l vary fkom setting to setting.
value to poor people in those areas. Any exceptions - in which the assets largely benefit the non-poor - should require co-financing from the beneficiaries, and this money should go back into the budget o f the scheme. Communities must be consulted in project selection.
e The wage rate should be set at a level which i s no higher than the prevailing market wage for
Restrictions on eligibility should be avoided; the fact that one wants work at this wage rate should
If rationing i s required (because demand for work exceeds the budget available at the wage set) then
e
e
e The labor intensity (share o f wage bi l l in total cost) should be as high as possible, but not too high at
e The projects should be targeted to poor areas, and try to assure that the assets created are o f maximum
e e
Public works should be synchronized to the timing o f agricultural slack seasons. In order to encourage female participation, the appropriate form o f wages i s important - for
example, women can benefit from piece rates or task-based wages; sometimes wage in the form o f food has attracted more women to work sites. Also, provision o f childcare or preschool services can improve participation by women.
locating project sites close to villages. I t i s also necessary to ensure appropriate mediation o f NGOs for protecting the rights o f the poor vis-&vis program managers.
iource: Subbarao (1997,2003), Ravallion (1999,2000).
e Transaction costs to the poor are kept low - one important means to accomplish this i s through
The program should include an asset maintenance component. 0
2. Wage rate. To promote self-selection o f participants into the program, it i s best to fix the wage rate at a level equal to, or lower than, the prevailing market wage for unskilled labor. International experience suggests that in countries where public works programs enabled pro- poor targeting (such as Bangladesh, Pakistan, India before 1988, and Republic o f Korea), the
29 This short note i s drawn from Subbarao (2003), and Carlo del Ninno, K. Subbarao and A. Milazzo (2008).
56
public works program wage was maintained at a level lower than the prevailing market wage for unskilled labor (Table 1).
Bangladesh Pakistan Philippines
Table 1: Program Wage Relative to Minimum and Market Wages in Public Works Schemes
1 Country 1 Program I PW in relation to minimum wage (MW) and market wage (MKW)
Cash for work, 1991-92 PWiMKW IGPRA 111, 1992 PW<MKW Cash for work, 1990 PW>MKW
Country
Bangladesh Argentina
Korea Maharashtrdndia South Africa
1
Source: K. Subbarao (2003).
Program
FFW 60-70 percent Trabajar
1998 crisis program EGS 60-70 percent FFW (Western Cape)
Average labor cost as share of total cost
30-70 percent range, and 40-50 percent average Around 70 percent
39 percent, with range o f 6-86 percent
3. Labor intensity. Depending upon the nature o f the asset created and various other factors, there i s much variation in the proportion o f non-labor inputs needed to run a public works program. In general, a non-labor share o f 40 percent appears to be,the norm reached in most low income countries (Table 2).
Table 2: Labor Intensity in Public works Schemes
4. Seasonality of operation. Ideally public works programs should operate at times o f the year when the opportunity cost o f labor i s low. Experience with public works programs around the world suggests that indeed in most countries the program i s operating intensively in agricultural slack seasons. However, in most countries the program i s available throughout the year so it acts as a proxy program o f “unemployment insurance” in countries where formal unemployment insurance systems have not developed. In other words, whenever an individual i s unemployed for a short period o f time, the program i s available for himher to seek work at the going market wage for unskilled labor. The maximum number o f days a single individual could be employed i s either le f t open-ended, or restricted (to, say 50 days or 75 days).
5 . Targeting effectiveness. In general, in comparison with other safety net programs, public works programs around the world seem to reach ultra poor households better than other programs, provided the above mentioned design features are incorporated. O f these design features, the most critical one i s o f course the level o f the wage rate. A relatively low wage
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rate seems to ensure that the poorest benefit from the program more than the rest, though it i s possible that near-poor households can also be expected to participate in the program. Box 2 provides a summary o f available international experience with respect to targeting effectiveness o f public works programs.
Box 2: Targeting Effectiveness o f Public Works Programs: International Experience
While there i s a need to keep in mind the ultimate objectives o f static and dynamic poverty reduction, targeting effectiveness clearly remains an important factor in assessing cost effectiveness o f public works programs. I n general, targetingperformance has been good relative to other targetedpublic interventions.
In Chile, almost 100 percent o f participating households were poor.
In Argentina’s Trabajar program, around 80 percent o f households were from the poorest quintile, and 60 percent from the poorest decile. In addition to the low program wage rate, this outcome was achieved by including the local level poverty rate in the scoring formula for determining program allocations.
Various researchers have found positive targeting outcomes on the India’s Maharashtra Employment Guarantee Scheme (MEGS), at least prior to the 1988 increase in minimum (and hence program) wages. A dedicated survey o f MEGS participants from 1978-79 found 90 percent o f workers living below poverty line, even including EGS earnings in the calculation, at a time when the poverty headcount similarly calculated was 49 percent. A later survey in 1985-86 found mean incomes o f participating MEGS households to be around 20 percent below the poverty line. The positive targeting outcomes are confirmed by other analysis for 1979-85. There i s also evidence that the scheme’s targeting performance deteriorated when the wage rate rose substantially in 1988.
In Bangladesh, targeting o f the Food-for-Work Program was also found to be good, with program participants coming from poorer households than the rural population as a whole, and the total number o f person days o f work created even more pro-poor. While around 25 percent o f all rural households had incomes below 1500 taka in 1981-82, around 60 percent o f FFWP participants had incomes below this level. Equally, around 70 percent o f program employment went to the 25 percent o f rural households with income below this level.
Under the Bolivia Social Investment Fund, 77 percent o f participants came from the poorest 40 percent o f the population.’ Assessments o f other SIFs in Honduras, Nicaragua and Peru have also found pro-poor incidence o f SIF benefits.
In Philippines, most public works participants were from marginally poor and non-poor households rather than the very poor. This outcome was largely driven by program compensation which provided for official M W in cash plus in-kind benefits which took the total compensation package above the market wage.
In Indonesia, assessment o f safety net programs introduced after the Asian crisis found that public works schemes which relied on self-targeting were much more likely to reach households which had suffered large shocks than programs which relied on administrative targeting methods, including subsidized rice, scholarships and health subsidies.
Analysis from all-India N S S data on public works schemes for 1993-94 indicates pro-poor targeting performance, but that inclusion errors remained significant. Targeting performance was also better in comparison to both PDS (then untargeted) and micro finance program (IRDP). Sources: K. Subbarao (2003) and Carlo del Ninno, K. Subbarao and A. Milazzo (2007).
6. The reviewed experience suggests that it i s important to bear in mind the good practice design features prior to introduction o f a public works program. Failure to pay attention to the design features may render public work-fare programs both inefficient and expensive.
7. Project selection procedures. There i s much cross-country variation in the actual selection o f projects. Some good practices are worth noting. In Korea, for example, a combination o f community selection, and the l ine Ministry selection, was followed. 50 percent o f projects were selected by communities, and 50 percent by line Ministries. The
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Government was keen to ensure a igh labor intensity. To accomplish this goal, the Government estimated labor coefficients for various types o f activities such as soil conservation, afforestation, garbage disposal, etc. and gave a l i s t o f potential candidates (projects) to communities. Communities selected projects from this l i s t o f labor-intensive activities that are most needed by communities. International experience suggests that local governments (and communities) are capable o f selecting and implementing small projects (with a penchant for maintaining quality), but lack capacity to implement larger and more complicated projects. (Subbarao 2003). Even when projects are selected by communities, it i s usefbl t o ensure that these projects are well integrated with the overall rural development plans o f local communities. While community selection o f projects i s generally the good practice, care needs to be taken that project benefits are not captured by local elites.
8. Monitoring and evaluation. By far the most critical missing link in the experience o f public works programs i s the presence o f a credible monitoring and evaluation framework. Though over 40 countries, both developed and developing, have implemented public works projects at various stages in their development, only three or four countries have documented their performance with rigorous monitoring and impact evaluations. Two countries with extensive evaluation experience o f public works programs are India and Argentina. Several ongoing programs in countries such as Ethiopia and Kenya now have incorporated an extensive monitoring and evaluation fiamework.
9. Important indicators for monitoring o f public works programs include, on the inputs side, budget expenditures and/or available food (to be used as wage), program staff composition and number etc. and, on the outcome side, number o f projects by type and labor intensity, wages paid and periodicity and regularity o f payments and/or amount o f food distributed as wages, number o f workers participating in programs and their key characteristics (by gender, age, previous economic activity) and beneficiaries o f any potential training or other incentives offered to escape from poverty. Impact evaluation would require a good baseline on a random sample o f households gathering information on al l household characteristics o f both participating and nonparticipating households.
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ANNEX 8: INTERNATIONAL GOOD PRACTICE IN SOCIAL ASSISTANCE (DIRECT SUPPORT) PROGRAMS
Some Good Practice Design Features for Social Assistance (Direct Support) Drawn from International experience3'
I. This note provides a brief summary o f good practices in the design o f social assistance (direct support) programs, drawn from a few select countries. The note addresses four design features: (a) selection o f households for direct support; (b) determination o f the level o f benefits; (c) the mode o f payments and selection o f the delivery mechanism; and (d) monitoring and feedback and mid-course correction.
A. Selection o f households for direct support.
2. It i s common knowledge that the more generous the definition o f eligibility, the larger will be the pool o f applicants for social assistance and the cost o f the program. The cost o f the program also depends on the level and duration o f benefits (discussed in the section below). For example, for the old age social assistance pension program, Nepal defined the cut-off age limit for eligibility as 75. This undoubtedly restricted the pool o f beneficiaries and kept the program within the limits set by the available budget, but the program could not reach some o f the critical vulnerable groups even slightly below the age 75. On the other hand, some countries set the limit for eligibility low at 60 (or even lower), leading to the opposite effect o f too many beneficiaries and a very large budget. To overcome difficulties o f this kind, many countries now resort to limiting the cash transfer social assistance to, say, the poorest 10 percent o f the population. One such example i s the Kalomo District Pilot Social Cash Transfer Program in Zambia, which limited the outreach to the bottom 10 percent o f the population.
3. Determining the eligibility and selection o f eligible beneficiaries has varied a great deal from one country to another, depending upon (a) administrative feasibility, and (b) the available information. Where both these sets o f conditions are weak, countries (such as Rwanda) have resorted to community targeting approaches. However, good practice dictates validation o f such selections via a transparent communication system. For example, in Mexico's Oportunidudes program (a conditional cash transfer program), beneficiary l i s ts are presented at community meetings which has given communities a chance to pick both exclusion and inclusion errors. In all cases, a complaints mechanism i s critical for ensuring community satisfaction with the targeting approach.
4. Where the information constraint i s less severe, countries have adopted a proxy means test (PMT). This i s a targeting method by which a score for each applicant i s generated based on household characteristics that are fairly easy-to-observe - usually non-income characteristics) such as the location and quality o f housing unit, ownership o f durable assets, number o f children, level o f education, etc. A threshold score level i s set below which a household becomes eligible for the benefit. When a community targeting approach such as the one described in paragraph 3 above i s adopted, it i s s t i l l possible to move gradually to a PMT method, short-list households for the benefit, and then use community meetings to
30 This short note draws from M. Grosh et. al. The Design and Implementation of EfSective Safety Nets: For Protection and Promotion The World Bank, 2008.
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ensure transparency and avoid exclusion and inclusion errors. Many low income countries are resorting to this combination o f a PMT and community validation as a means to select beneficiaries for safety net programs generally. A recent example i s Bangladesh, which i s now sponsoring a safety net program using a combination o f PMT and community validation.
B. Determining Benefit Levels
5. Determining the size o f social assistance direct support i s a tricky issue in al l countries. It i s hard to provide clear-cut policy advice based on international experience, but some guiding principles can be offered. Typically, in last resort programs such as the one proposed for Rwanda, which aims to reduce extreme poverty, the benefit levels are set as a fraction o f the income gap o f target beneficiaries. H o w high or low that fraction should be depends on the available budget and the number o f people in extreme poverty. Using a proxy means test, Armenia and Georgia have used this principle.
6. In this regard, some number crunching might be helpful with the available household level information. For example, information on the number o f extremely poor households can be combined with information on their income (poverty) gap and, from both these sets o f information, one can derive the financial requirements for a given level o f benefit. One can then see the feasibility (affordability) o f alternative benefit levels and decide on the level that can be defended within the available budget envelope.
7. Benefit levels need not be fixed at a flat level for a l l types o f households. Instead, the levels can be varied. Variable benefit formulas are often the norm in many countries, mainly because such formulas allow for variation in household circumstances (such as number o f children, presence o f a disabled child or person, long term sickness o f a household head, etc). A very good (successful) example o f such a variable benefit formula i s that o f Brazil’s Bolsa Famil ia Program. This program provides two types o f benefits: a base benefit to al l families in extreme poverty, and a variable benefit that depends on family composition and income.
8. Whatever method i s adopted to determine the benefit level, it i s useful to assess the level o f benefit as a percentage o f the consumption expenditure o f extremely poor households. H o w generous the program i s can be assessed from this proportion. The higher the benefit level as a percentage o f the household’s consumption expenditure, the more generous the program. Maintaining a generous benefit level i s likely to impact on labor supply through adverse disincentive effects: Le., households, even when provided with opportunities to work in the labor market, may opt to stay in the “generous” program. While this concern for the impact o f benefit levels on work disincentives i s theoretically valid, it does not apply to programs that target extremely poor households with no adult labor to participate in the labor market, or the disabled, or the elderly.
C. Delivery Mechanisms and Payment modalities
9. Four principles generally guide the delivery mechanism: (a) ensuring reliability and regularity o f payments; (b) maintaining accountability (governance issues) and prevention of fraud; (c) reducing transaction costs to the beneficiaries; and (d) minimizing the administrative cost o f delivery. While a number o f delivery agencies or routes are available - bank branches, mobile banks, post offices, decentralized government agencies, NGOs - the selection o f the delivery mode eventually must satisfy the above four principles, and be
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available and suitable for a given country situation. No t surprisingly, countries have varied a great deaI in this regard. If contractors or a specific agency i s selected, performance-based incentive contracts can be developed as was done in the Brazil’s Bolsa Familia program. Kenya has tried a pilot program for a cash transfer to orphans and vulnerable children through a bidding process to select a lowest-cost service agency. The advantage o f these contract- based service agencies i s that the contracts can be revised based on performance. In countries with somewhat developed IT infrastructure, debit cards and smart cards are being used to transfer cash assistance. In the state o f Gujarat in India, a pilot program i s being tried to use smart cards to transfer in-kind social assistance. I t i s hard to recommend one specific option or delivery mechanism: the main challenge i s to adapt any one reliable mechanism to country circumstances, and avoid any unintended adverse effects.
D. Monitoring and Evaluation of Cash Transfer programs
10. Program monitoring i s extremely important for any safety net program and especially for cash transfer programs. Systematic monitoring helps one to assess how well the program i s being implemented at a l l levels, and helps mid-course correction in the event o f poor implementation. Evaluation complements the monitoring system, inasmuch as it allows an assessment o f the distributive effects o f cash transfer programs. Despite the critical importance o f monitoring and evaluation, unfortunately most safety net programs lack a credible M&E system in place.
1 1. Monitoring i s a continuous activity, and i s typically done at a l l levels - village, district and at the national levels. I t s main role i s to assess whether or not the program i s being implemented in accordance with i ts design with outcomes as expected. I t s annual cost must be factored into the program costs and it must become an integral part o f the programmatic framework. A good monitoring system must collect information on the program’s key outcomes. A good practice procedure i s that monitoring should be done by an independent agency, outside o f the agency or institution implementing the program. A well-documented international experience o f good monitoring i s from Zambia. The Kalmo District Pilot Social Cash Transfer program (which operated with technical assistance from Germany) implemented third-party monitoring that focused on the quality o f program management, the effectiveness o f targeting, regularity o f transfer payments, and even beneficiaries’ use o f the transfers.
12. It i s not enough to know the program’s outcomes; it i s important also to know the impact o f the program on household welfare, which i s the ultimate goal o f a cash transfer program. Several techniques are available to do an impact evaluation. Two approaches can be distinguished. One i s a quantitative approach that collects information on a random sample o f households belonging to both the treatment group and the control group, both at the launch o f the program and after a given period o f time (say, one year). Econometric techniques are then used to assess the impact o f the program.31 A complementary approach i s qualitative evaluation, which i s based on focus group interviews, key informant interviews, and direct observation. Though qualitative evaluations are not representative, they do offer r ich information on the program’s functioning, i ts merits, and shortcomings.
For a good understanding o f the techniques and applications, see World Bank website on Impact Evaluation. 3 1
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13. A variant of descriptive evaluation i s “process evaluation”, which i s probably the most common evaluation technique followed in many countries. I t s abproach i s to assess and document how each o f the processes underlying a cash transfer program i s being implemented. It helps address the question: what i s happening through the program. Process evaluation strongly complements, but does not substitute for, an internal monitoring system and other evaluations mentioned above. For example, the Zambia example i s worth repeating: it included a process evaluation by external evaluators in addition to other evaluations which helped improve the monitoring capacity as it revealed specific flaws in specific processes underlying the program’s implementation.
14. The short review above i s not meant to be a substitute for the vast literature that exists on cross-country experience o f cash transfer programs. Readers requiring fbrther information are advised to refer to the World Bank’s most recent publication, viz., M. Grosh et. al. “For Protection and Promotion: The Design and Implementation o f Safety Net Programs” (World Bank, 2008).
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ANNEX 9: PERFORMANCE-BASED FINANCING OF HEALTH SERVICES IN RWANDA
1. Performance-based financing (PBF) o f health services in Rwanda can be classified as “output financing,” as these models link payment to outputs, often on a fee-for-service reimbursement or on a case reimbursement basis. “Output financing” i s in contrast to “input financing” through line item budgets o f the necessary inputs (personnel, drugs, equipment, infrastructure) to delivery health services. The Rwanda PBF system is essentially meant as an incentive for providers to supply more o f certain services. These incentives work on the ‘supply-side’, i.e. on the providers, as opposed to ‘demand-side’, which work on inducing demand among patientdclients.
Performance-Based Financing o f Health Facility Services32
2. In Rwanda, PBF pilot schemes were introduced in 2001 by several internationally-financed NGOs supporting health services. Until then, health workers were being paid salary supplements or incentives without explicit links to their performance. PBF pilot schemes were introduced by several NGOs in the south, southwest and Kigal i between 2001 and 2005. Evaluations o f the schemes concluded that they had improved health service utilization and the government adopted in 2006 a national model for scale-up across the country. A rigorous impact evaluation was done during scale-up, comparing services and populations where the PBF scheme was introduced to those where it had not yet been applied, and results will soon be available. By end-2008, the PBF mechanism was functioning in al l o f the over 400 government health centers in the country.
3. The national PBF model draws on elements o f the previous pi lot schemes. Payments are based on the quantity o f outputs achieved (through case-based remuneration), conditional on the quality o f the health services. Outputs are measured monthly by 15 health service indicators while quality i s measured quarterly through the use o f a supervisory checklist. Health center staff can increase their performance, and hence their earnings, by increasing the quantity o f outputs, increasing the quality o f services delivered, or both. The District health department i s responsible for auditing reported outputs, while District hospitals measure quality. The administrative system to manage PBF payments involves invoices transferred to the District level, where data are entered into a national database using the internet. Payments are then made by the Ministry o f Health, through direct transfers to health center bank accounts, on the basis o f the reported data. A website, (www.pbfrwanda.org.r) allows registered users to access this database, as well as to share information and documentation.
4. A PBF mechanism has also been applied in District hospitals, with a performance measurement formula consisting o f 52 indicators covering al l aspects o f hospital operations and services. Performance i s assessed through a peer-evaluation mechanism, whereby staff o f neighboring hospitals undertake a quarterly review, accompanied by a representative o f the Ministry o f Health in Kigali. Budgets available for the PBF mechanism in District hospitals range between US$70,000 and US$175,000 per hospital per year.
5. approximately US$l.SO per capita, partly financed from external sources.
In 2007, the government budget allocated to the PBF strategy was. equivalent to The level o f
This section i s drawn from the 2009 Rwanda Country Status Report on Health and Poverty (draft). 32
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funding for the PBF mechanism represented around 9 percent o f total public spending on health (from domestic and international sources).
Performance-Based Financing o f Community Health Workers33
6. In 2006, in conjunction with the adoption o f a national PBF model for services provided by health facilities, the government piloted a PBF scheme intended to remunerate community health workers (CHWs) on the basis o f outputs. Budgets were transferred to 23 District administrations for this purpose, but it i s generally though that the pilot did not meet i t s objectives due to a lack o f guidance and technical support t o implementation. Following Rwanda’s success in improving health service quality and utilization at the, facility level, due to the PBF strategy, expanded coverage o f community health insurance (rnutueZZes) and decentralization reforms, the government decided that remaining gaps in access to services, particularly by the poorest, could be addressed through renewed effort in improving community-based service provision, including performance-based remuneration o f CHWs. The service package includes interventions that have been shown, to be highly cost effective (see Table 1).
Table 1. Cost-effectiveness estimates for community health, nutrition and population interventions
Estimates of cost per DALY averted (US$)
Family-oriented community- based services insecticide-treated bednets indoor residual spraying improved drinking water, sanitary latrine, hygiene promotion early breastfeeding and temperature management for neonatal care breastfeeding promotion community nutrition program oral rehydration therapy (ORT) zinc for diarrhea management deworming artemisin combination therapy (ACT) for malaria in children antibiotic treatment for acute respiratory infection (ARI) in children family planning
11 - 17 17 141
930 42 - 225 1,062 73 3
349 - 839
129 117
Source i s Disease Control Priorities Project.
7. Coordinating closely with partners that support community health services, notably USAID, the Global Fund, UNICEF and the Clinton Foundation, the Ministry o f Health has developed a standard package o f services to be delivered by CHWs as well as an integrated training curriculum. In 2008, each o f the over 15,000 communities in the country elected one female and one male C H W who will receive training as wel l as support in the form o f commodities and technical supervision. One staff member in each health center i s being recruited to be responsible for supervision and support to the CHWs. In addition, a number o f additional community-level workers, providing services related to specific issues, particularly HIV/AIDS, wil l be integrated into the national system. In l ine with the government’s overall strategy to address rural poverty, intended to contribute to sustainable financing o f community
33 This section i s drawn from the Ministry o f Health’s “Community Performance-Based Financing Guide” (draft).
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health services, the government plans to form cooperatives o f CHWs in each o f the over 400 Sectors (Umurenge). Under the Community PBF mechanism, reporting o f outputs will be compiled by each cooperative and payments will be made to the cooperatives, who will invest part o f the proceeds in revenue-generating activities.
8. The “Purchaser-provider split” refers to the concept o f division o f responsibility for the financing o f health service and service provision (see Figure 1). The PBF strategy will involve establishment o f a contract between the Purchaser and the Provider. The Purchaser will be the Government o f Rwanda through the health center, while the Provider will be the CHW cooperative. The function o f the Controller will be fi l led by the “Umurenge PBF Steering Committee,” which will include the Umurenge administrator, the health center administrator and representatives o f other public institutions such as the education system and faith-based organizations.
Figure 1. The Purchaser-Provider split in the National Community PBF model
9. The Umurenge Administration will sign a contract with the C H W cooperative detailing the performance indicators and the content o f quarterly performance reports that the cooperative will submit on the basis o f data reported by each CHW. Funding for the Community PBF mechanism f iom the national budget and international donors will be pooled in a special health center sub-account and the health center will be responsible for making payments. The Umurenge PBF Steering Committee will review and validate the quarterly performance report by the C H W Cooperative and will approve payment after determining the level o f performance on the basis o f indicators. Along with providing technical supervision and support, the health center will f i l l an auditing role by verifying through household visits samples o f the C H W performance reports. The Community PBF will make use o f the information and data capacity o f the facility-based PBF system that i s already in place at the health center and District levels. The set o f performance indicators i s being finalized by the Ministry o f Health based on work to date on a Community Health Information Management System (HMIS).
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ANNEX 10: ENVIROMENTAL ASPECTS IN THE RWANDAN CONTEXT
1. To address environmental challenges, GoR has developed an environmental framework as part o f i ts PSTA (Plan Statkgique pour la Transformation Agricole) for marshland development. A centerpiece o f the implementation strategy i s the Second Rural Sector Support Project (RSSP), under which marshland development i s being undertaken at a rate now approaching 1,500 ha per year. By 2005, nearly 10,000 ha o f arable land had been improved through so-called “radical terracing,” and in 2006 performance contracts were negotiated at the district level between mayors and the President o f the Republic calling for the development o f an additional 100 ha o f radical terraces per district. The development o f irrigation schemes wil l require adequate resources to control the incidence o f water-borne diseases, pollution o f surface and groundwater by agrochemicals, water-logging and salinization o f soils, and population resettlement.
2. Despite many remaining challenges facing Rwanda, the framework for environmental management in the country has steadily evolved over the last decade, resulting in noticeable improvements in the institutional framework during the last five years. Prior to the restructuring o f MINITERE in spring o f 2008, MINITERE had been responsible since 2004 for the environment, mines, land, forest, and water resources. For policy formulation and implementation, MINITERE relies on a number o f specialized public agencies including Rwanda Environmental Management Authority (REMA) (environmental agency), REDEMI (mining), and the National Land Center (land use planning and delivery o f titles). Over these last four years, MINITERE secured the adoption o f several pieces o f legislation by the national assembly, including laws on forests, land, water, environment, and mining that will improve the management o f natural resources. MINITERE i s now being restructured, and for example, water and sanitation are being moved to MININFRA.
3. REMA, set up in 2006 after the introduction o f the Environmental Law, i s the agency responsible for reviewing the Terms o f References for Environmental Assessments (EA) that must take place on all proposed projects in the country (GoR, donor or private). They also then review the EA i t se l f and provide the certificate without which no one can proceed. To date, GoR has adopted environment organic law, environmental policy, and environmental impact assessment guidelines to hr ther address and coordinate i t s environmental concerns and challenges. Given the decentralized framework, at district level, there are Environmental Officers (EOs) charged with supervising implementation o f the environment policy commensurate with the legal framework established by the law. REMA trains the EOs and supervises their technical work as provided for by the law and policy. Furthermore, in collaboration with sector ministries, REMA i s moving towards developing more custom-made environmental guidelines for each o f the ministries to replace the general guidelines. UNDP and GoR also put together guidelines in 2007 to help mainstream environmental issues in al l sectors during the EDPRS process
4. Under the PRSC/G I an Environmental Assessment and Social Analysis34 was undertaken during i t s preparation (which was governed by O D 8.60, Adjustment Lending Policy3’). The
34 “The Republic of Rwanda Environmental Assessment and Social Management Analysis for the Proposed Poverty Reduction Support Credit I”, July I , 2004. ’’ Operational Directive 8.60, Adjustment Lending Policy, deemed a sector adjustment operation; subject to OP 4.01, and classified category B for purposes of environmental assessment.
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study intended to assist GoR in identifLing and eventually establishing regulatory, administrative, and technical capacity within Rwanda to ensure that for each development project undertaken in the country, environmental and social impacts are identified, mitigated, and monitored as part o f the sustainable use and management o f Rwanda’s natural resources and the environment. In the current PRSG series, such minor environmental effects may arise through measures to support irrigation, watershed management and terracing, rural road maintenance, and fertilizer distribution. As with the first series o f PRSGs, the current series (PRSG 4 to 6), will rely on two areas to address potential environmental concerns: (i) continued strengthening o f the overall framework for environmental management in Rwanda; and (ii) environmental management assessments undertaken in the context o f other Bank projects.
5. The more recent RSSP o f Rwanda has undertaken an Environmental Assessment ( I P B P 4.01) amongst other safeguard policies. This project will work on conservation o f hills through reforestation and terracing, marshland development, reforestation and improvements in farming techniques through water resource and soil conservations, f lood control and rehabilitation and management. The second RSSP will serve to h r ther strengthen GoR’s capabilities in regards to environmental safeguards.
6. Also, GoR’s Land Husbandry, Water Harvesting and Hillside Irrigation (LWH) program consists o f a two-phased operation to implement improved land husbandry and increased productivity in 101 pi lot watersheds covering some 30,000 hectares including 10,000 under cultivation. I t s development has led to a request by MINAGRI for a standard or common framework o f engagement for the various participating donors and partner organizations. This would permit support o f the larger LWH Program by many different financiers while maintaining some common quality standards (e.g. dam safety) and common approaches (e.g. to social safeguards), despite different implementation arrangements. The Bank i s assisting MINAGRI in this process. The framework would be based on experiences from similar operations in the country, e.g. on progressive and radical terracing and other engineering aspects, and would include a step-wise process to develop beneficiary involvement and empowerment. It would also include a participatory site and technology selection process, based on specific indicators, in particular demonstrated interest from beneficiaries, as wel l as social and environmental safeguards.
7. MINALOC, as a major national ministry and as the national ministry responsible for local government, has an ongoing responsibility to follow and conform with national laws, policies and processes concerning environmental management. In i ts role as the ministry responsible for local government, it has taken the necessary steps to incorporate environmental safeguards and infrastructure technical advice guidelines in i t s operational manuals prepared for i ts VUP flagship program, which i s supported by this CLSG.
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ANNEX 11: EXTRACT FROM MONITORING AND EVALUATION
1. Introduction to the M&E system
Purpose of the manual
1.1 The purpose o f this manual i s to l i s t the indicators to be used for monitoring and evaluating the implementation o f VUP, to describe the sources o f data to be collected, to detail the routine report formats and to allocate responsibilities for maintaining and managing the M&E system.
1.2 The main users o f the manual include:
VUP Management Team in CDF within MINALOC a District Statistics Officers
Umurenge Statistics Officers.
1.3 There i s a wider audience that needs to be informed about the M&E system so as to better understand how the system supports the wider implementation processes for VUP. The important stakeholders include:
Council members at District and Umurenge levels Officials working in Districts, Imirenge and Cells
a Umudugudu representatives and officials working in the umudugudus
1.4 The procedures described in this manual will be subject to change as lessons are learned with the experience o f implementation. Therefore the manual needs to be viewed as work in progress and the adoption o f the proposed approaches needs to be reviewed annually. An annual revision and update o f the manual wil l be completed under the direction o f the VUP Management Team.
0 b j ectives
1.5 three key questions:
Monitoring and evaluation i s intended to meet three major types o f objectives and
1. 2. 3.
Strategic objectives: i s the social transfer programme achieving its goals? Operational objectives: how can programme managers improve implementation? Learning objectives: what can be learned from the programme?
Therefore the objectives for the VUP M&E system include the following:
a To assess and document progress towards inputs, outputs, purpose and goal as proposed in the logical framework and annual work plans; to measure the links between outputs, outcomes and impact
36 A full version o f the VUP M&E Manual i s available upon request.
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0 To systematize data collection, synthesis, analysis and reporting procedures allowing for the prompt dissemination o f reliable information; to provide the evidence base for policy development
o f future interventions.
EDPRS as well as the overall decentralisation programme.
In addition, during the init ial pi lot phase, there i s a further objective o f lesson learning - to capture the experiences during this init ial implementation phase, which can be used to inform the ro l l out o f the programme nationally.
0 T o determine the effectiveness and efficiency o f interventions and to inform the design
To demonstrate the links between, and contributions to, other components o f both
Definition of terms
1.6 In this manual the following words and terms are used:
0 Inputs - These are materials and resources that the programme uses in i t s activities, or processes, to serve clients. It involves the consumption o f a financial (money), physical (materials, goods or services) or human (time) resource. The wages paid on public works are a financial input; the equipment used i s a physical input; and the time spent managing the work i s a human input.
the client in order to meet the clients’ needs. Completing public works i s an activity; providing credit i s an activity; delivering training i s an activity.
Activities - These are the actions, or processes, that the programme undertakes with/to
Process indicators measure whether the programme or a specific component o f it are
Outputs - These are the units o f service and results delivered by the programme.
Outcomes - These are actual effects/benefits/changes/differences for clients arising
being implemented as originally designed
0
Additional assets available to the community, such as schools and health clinics, are outputs.
from the programme either during or after implementation. Improved health care, arising from increased access to health facilities, i s an outcome. Increased savings, arising from higher incomes, i s an outcome.
Outcome indicators measure whether the situation o f individuals or households in terms o f their knowledge, behaviour, or well-being has changed
programme. It i s expressed in the form o f an outcome statement but due to logical framework rules only one purpose statement i s allowed. Therefore in elaborating an M&E system, there i s a need to disaggregate the single purpose statement into a number o f related and inter- dependent outcome statements or measurable indicators
objective which the programme i s contributing to achieving.
relating to improved well being37.
0
0 Purpose - Used in the logical framework to define the reason for undertaking a
0 Goal - Also used in the logical framework, to define the national development
Impact - This i s the ultimate benefit for the population normally expressed in terms 0
37 ‘Impact’ i s used also in the context o f asking what difference a set o f activities has made; this question can be asked at a l l levels in the logframe: output, purpose and goal.
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a Impact evaluation assesses the extent to which the programme has produced i ts intended effects and the extent to which changes in individuals’ or households’ well-being can be attributed to VUP. It estimates the magnitude o f the effects o f the programme and assesses attribution
result o f the programme’s outputs a Attribution i s the causal link between the observed changes in outcomes directly as a
Structure of the manual
1.7 Following this introduction, the manual i s structured as follows:
Overall M&E architecture Indicators to be measured Baselines Studies and surveys Reporting Roles Data storage and maintenance Phased implementation o f the M&E system.
In addition there are several annexes providing greater detail on issues referred to in the main text.
2. Overall M&E architecture
System architecture
2.1 The VUP M&E system i s structured around accessing existing M&E systems across government and their data sources and collection procedures. The relationship and linkages within the overall structure i s illustrated in Figure 1 below. These existing systems will be supplemented by VUP- specific information systems which are tailored to the particular needs o f the programme. The intention i s to fully integrate VUP’s requirements into existing systems and thus avoid parallel and duplicate procedures.
National surveys and statistics
2.2 There are several nationwide surveys carried out by the National Institute o f Statistics (NIS), usually on a‘three or five yearly cycle. These surveys include the household surveys (EICV) and the demographic and health surveys (DHS). They will provide important trend data with a national coverage and will be important for measuring the VUP indicators mainly at Purpose and Goal levels.
Line ministries’ surveys and statistics
2.3 Individual ministries, departments and agencies (MDAs), in addition to commissioning national surveys by NIS, maintain their own information systems to measure the scope and standards o f service delivery. In addition they maintain the base data essential for monitoring their performance. For example, MINAGRI maintains data on agricultural production; MINEDUC captures the important educational data relating to school attendance
71
and educational achievements. Each of the key MDAs maintains complementary information systems with varying degrees of coverage.
Government’s budget, accounting and financial reporting
2.4 There i s one standard system that i s adopted Government-wide and that relates to budgeting, accounting and financial reporting. Adoption of the financial management system i s mandatory and VUP will be wholly compliant with the regulations and procedures that underpin the use of SMARTGOV for budgeting, Sage-Pascal for accounting and financial reporting and with the audit requirements, both internal and external.
MINALOC’s information systems
2.5 MINALOC i s overseeing the implementation of several programmes each with their own information systems. The key programmes relevant to VUP include Ubudehe, decentralisation and Imihigo. In addition, the Common Development Fund (CDF) maintains information on investment activities carried out across the country by Districts. Wherever possible, data will be shared across the programmes especially the household data held by Ubudehe.
W ’ s requirements
2.6 VUP has its own information requirements which are currently not available from the existing sources or processes referred to above. The most important additional need i s to capture a wide range of household economy data to enable a livelihood baseline to be established prior to the start of VUP and to track changes in the household economy over time as a result of VUP interventions.
2.7 In addition to this quantitative analysis, there will be a need.to adopt some qualitative data gathering in order to gauge changes in mindsets, attitudes and behaviours which VUP i s endeavouring to bring about through its participatory approach.
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Q
I
E Q W E L 0 Y .n E
.R
i & 3
ANNEX 12: VUP IMPLEMENTATION PROCESS FOR RWANDA’S NEW SOCIAL PROTECTION POLICIES
1. The social protection (SP) policy changes that the CLSG series supports incorporate good international practice within the Public Works (PW) and Direct Supports (DS) elements o f Rwanda’s new Vision 2020 Umurenge Program (VUP). VUP is one o f three flagship programs under Rwanda’s new five-year EDPRS.
2. Identifiina Those Eliaible. While other aspects o f EDPRS assist poor agricultural households that own land, the PW and DS elements o f VUP are directed at households that are both landless and extremely poor. In addition, for P W eligibility, a l l adults in the household who are capable o f working must lack employment opportunities. “Landless” i s defined as owning less than 0.3 hectares. “Extremely poor” households are those identified as falling within the two poorest o f six household categories that are ranked ordinally by living standards through Rwanda’s community-based decision-making process known as Ubudehe. (See Ubudehe overview in Annex 5). Potential VUP recipients will be identified through the poverty-map process, which covers al l extremely poor households in the village. Ubudehe management committees will be asked to identify which families are the poorest, to present those in poverty order, and to assign them to the particular program that would best assist them. So the Ubudehe committee will produce mutually exclusive lists o f households potentially eligible for direct support or for public works participants. These lists will serve as the gate-keeping mechanism to identify and rank eligible households in each community. Each community specifies the criteria that distinguish the characteristics o f the six household categories based on living standards. These are similar, but not identical, across the country. Local observers consider that lower-income communities tend to set more stringent standards than higher-income communities when defining poverty levels.
3 . Assistance Offered - Public Works. For eligible households, the P W element o f VUP will offer paid, intensive work under the pi lot program to one member o f the household for an initial (potentially renewable) period o f six months. Where possible, to facilitate female participation, work-sites will be kept within an hour’s walk o f the community’s center. Employment will be subject to project and funding availability and may be concentrated during slack agricultural seasons when private employment is less available. If the number o f positions available i s less than the number o f eligible household members, priority will be given to employing workers f rom the poorest categories o f households. The PW element will be managed by staff f rom the sector and cell tiers o f local government. Payment mechanisms available for cash payments for public works include direct deposit to workers’ bank accounts every two weeks, where feasible, or through cash payments by the village committee without any third-party involvement. Plans are in place for the provision o f banking services at least on a part-time basis at locations convenient to most villages. Financial controls covering transparent payment mechanisms and accounting have been formulated. The majority o f projects will be selected by the local communities through Ubudehe processes and incorporated within their sector or district plans. Technical support will be arranged by program managers under established arrangements with local governments and national ministries. Environmental and technical matters will be handled in conformity with .national policies and procedures. These have been incorporated within the VUP public works program manuals.
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4. Assistance Offered - Direct Su-pyort. The level o f each eligible household’s direct support payment will be based on the number o f adults and children in the family, using a national scale, and will reflect economies o f scale in larger families. Support available f rom other sources will be offset against this amount. Eligibility l i s ts will be updated annually. Monthly direct support will build on the payment process for public works. All cash distributions at village level will occur in an open public forum, with a representative o f the Umudugudu Committee present. A l i s t o f clients and amounts received will be posted publicly at village, cell and Umurenge levels. Direct support recipients wil l have the option o f saving a small part o f their monthly allowance. Policy incentives for such personal saving are being considered.
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N O R T H
P R O V I N C E
W E S TP R O V I N C E
S O U T H
P R O V I N C E
KIGALI CITY
E A S T
P R O V I N C E
N YA G ATA R E
G AT S I B O
K AY O N Z A
RWAMAGANA
K I R E H EN G O M A
B U G E S E R A
GASABO
KICUKIRO
B U R E R A
GICUMBI
R U L I N D OG A K E N K E
M U S A N Z A
RUBAVUN YA B I H U
NGOROREROR U T S I R O
K A R O N G I
N YA M A S H E K EN YA M A G A B E
N YA R U G U R U
R U S I Z I GISAGARA
H U Y E
N YA N Z A
R U H A N G O
MUHANGA
KAMONYI
NYARUGENGE
Bugarama
Rwumba Kitabi
Ruramba
KigembeMunini
Karama
Karaba
Gatagara
Masango
Rusatira
Shyorongi
Muhura
Kinyami
Mbogo
Kigarama
Sake
Rukara
Kiziguru
Gabiro
Gatunda
RilimaBugesera
Gikoro
Bicumbi
Gashora
Kanzi
Rwesero
Cyangugu
Bulinga
Ngaru
Mulindi
Muvumba
Kagitumba
Kirambo
Butaro
Nemba
Busogo
Muramba
Kagali
Nyondo
Kabaya
Mabanza
Murunda
GishyitaBwakira
Ngoma
Kidaho
Gikongoro
Gitarama
Butare
Kinihira
Burera
Rubavu Karago
Rutsiro
Gatsibo
Nyagatare
Kabarore
Mukarange
Kigabiro
Ndora
Gasaka
Ngoma
Kagano
RubengeraNyamabuye
Rukoma
Nyamata
Kicuro
RugengeNdera
Ruhango
Busasamana
Ngororero
MuhozaCyeru
Gakenke
Tare
Kamembe
Kibeho
Kibungo
Kirehe
Gisenyi
Mukamira
Gihingo
Nyanza
Kibuye
Rwamagana
Byumba
KIGALI
D E M . R E P .O F
C O N G O
B U R U N D I
T A N Z A N I A
U G A N D A
Lac Kivu
LacIhema
LacKivumba
LacHago
LacMikindi
LacRwanyakizinga
LacBurera
LacRuhondo
LacNasho
LacCywambwe
LacMpangaLac
Mugesera
LacRweru
LacCyohoha
Sud
Lac Muhazi
Kagera
Nyabarongo
Akany
aru
Kagi
tum
ba
Kagera
To Sake
To Rutshuru
To Kisoro
To Kabale
To Kikagati
To Kafunzo
To Bugene
To Lusahanga
To Kirundo
To Ngozi
To Kayanza
To Cibitoke
To Cibitoke
To Walangu
To Nyya-Ghezi
Virunga M
ts.
VolcanKarisimbi(4519 m)
30°00'E 31°00'E29°30'E 30°30'E
29°00'E
29°00'E
30°00'E29°30'E 30°30'E
2°00'S
2°30'S
2°00'S
1°00'S
1°30'S1°30'S
RWANDA
0 10 20 30
0 10 20 30 Miles
40 Kilometers
IBRD 33471R2
JUN
E 2008
RWANDA
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.
SELECTED CITIES AND TOWNS
AKARERE (DISTRICT) CAPITALS
INTARA (PROVINCE) CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
AKARERE (DISTRICT) BOUNDARIES
INTARA (PROVINCE) BOUNDARIES
INTERNATIONAL BOUNDARIES