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Document of The World Bank

Report No:

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING OF

HEALTH NUTRITION AND POPULATION SECTOR PROGRAM

(P074841, CR. 4052–BD) IN THE AMOUNT OF SDR 196.1 MILLION

(USD 300 MILLION EQUIVALENT) APRIL 28, 2005

(P074841, TF 056510)

IN THE AMOUNT OF USD 389 MILLION (THE SIGNED GRANT AGREEMENT)

APRIL 28, 2005

TO THE

GOVERNMENT OF THE PEOPLE’S REPUBLIC OF BANGLADESH

FEBRUARY 10, 2011

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ABBREVIATIONS AND ACRONYMS DCA Development Credit Agreement ERD Economic Relations Division FY Fiscal Year HNPSP Health, Nutrition and Population Sector Program MOHFW Ministry of Health and Family Welfare SDR Special Drawing Rights TF Trust Fund USD United States Dollar

Regional Vice President: Isabel M. Guerrero Country Director: Ellen A. Goldstein

Sector Director:Sector Manager:

Michal J. Rutkowski Julie Mclaughlin

Task Team Leader: Sameh El-Saharty

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BANGLADESH HEALTH NUTRITION AND POPULATION SECTOR PROGRAM

P074841 CONTENTS

Page

A. SUMMARY ........................................................................................................................... 4

B. PROPOSED CHANGES ...................................................................................................... 4

ANNEX 1: REALLOCATION OF PROCEEDS........................................................................ 5 ANNEX 2: LETTER FROM GOVERNMENT REQUESTING REALLOCATION……….7 ANNEX 3: MINUTES OF THE POOL FUNDERS’ MEETING……………………………..9

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HEALTH NUTRITION AND POPULATION SECTOR PROGRAM (HNPSP)

RESTRUCTURING PAPER

SUMMARY 1. This Project Paper seeks approval of the Country Director to restructure the Bangladesh Health, Nutrition and Population Sector Program (HNPSP, Cr. 4052-BD/TF 056510) to reflect two changes – reallocation of available funds between the disbursement categories (as detailed out in Annex 1) and increasing the amount of signed Grant Agreement from USD 335 million to USD 389 million. The Development Credit Agreement (DCA) and the Grant Agreement will accordingly be amended to accommodate these changes. 2. HNPSP implementation is expected to be completed by June 30, 2011. The Ministry of Health and Family Welfare (MOHFW) sent a request to the World Bank dated January 25, 2011 (attached as Annex 2) for reallocating available funds between categories in order to ensure that unspent funds are used for high priority items like vaccines, contraceptives, etc. for the remainder of the program. MOHFW has prepared a comprehensive procurement plan, which includes legal commitments and procurement in the pipeline, for the purpose of this reallocation. The DCA will be modified to reflect this reallocation and will be counter signed by the Economic Relations Division (ERD), Ministry of Finance of the Government of Bangladesh.

3. As stipulated in the Administrative Agreement Annex 2 paragraph 4.3, the need for reallocation of funds was discussed with and agreed upon by the development partners who have contributed to the multi-donor trust fund during a meeting on January 06, 2011. The minutes of the meeting is attached as Annex 3.

4. Based on the total receipts from pooling partners, the amount of the signed Grant Agreement will be increased from USD 335,000,000 to USD 387,983,352. The amended Grant Agreement will be countersigned by ERD.

PROPOSED CHANGES 5. Amend Section 2.01 of Article II of the Grant Agreement to reflect the increase in total signed amount from USD 335,000,000 to USD 387,983,352.

6. Amend Schedule 1 of the DCA and Grant Agreement as indicated in Annex 1.

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ANNEX 1: Reallocation of Proceeds

BANGLADESH HEALTH NUTRITION AND POPULATION SECTOR PROGRAM

P074841 Cr. 4052-BD/TF056510

Restructuring Paper 1. Proceeds for Bangladesh, Health Nutrition and Population Sector Program, [Cr. 4052-BD/TF 056510], P074841 will be reallocated as follows:

Table 1: Reallocation of IDA credit Category of Expenditure Allocation (IDA Credit expressed

in SDR equivalent) Current Revised Current Revised

(1) Goods, works, services, and Operating Costs under Part D of the Project

No change 20,995,541 20,995,541

(2) Services of NGO and other private and non-public providers

No change 28,956,837 18,631,509

(3) Goods (other than those covered by Category 1)

No change 121,177,948 134,236,407

(4) Works (other than those covered by Category 1)

No change 11,331,547 7,997,684

(5)(a) Consultants’ services (other than those covered by Category 1)

No change 2,044,304 2,044,304

(5)(b) Studies and Training No change 11,593,823 12,194,555 Total 196,100,000 196,100,000

Table 2: Reallocation of the multi-donor trust fund Category of Expenditure Allocation (% of MDTF) Current Revised Current Revised (1) Goods, works, services, and Operating Costs under Part D of the Project

No change 11% 11%

(2) Services of NGO and other private and non-public providers

No change 15% 14%

(3) Goods (other than those covered by Category 1)

No change 62% 65%

(4) Works (other than those covered by Category 1)

No change 6% 3%

(5)(a) Consultants’ services (other than those covered by Category 1)

No change 1% 1%

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Category of Expenditure Allocation (% of MDTF) Current Revised Current Revised (5)(b) Studies and Training No change 6% 6%

2. As noted in the last joint review of HNPSP held in July 2010, there has been good progress on the implementation of the program, particularly in the areas of service delivery, compliance with outstanding covenants, resolution of outstanding audit observations, safeguards and environmental issues, and most of the indicators are on track to achieve the end of program targets. In recognition of the accelerated reduction in child mortality, Bangladesh has been awarded the United Nations Millennium Development Goal Award 2010.

3. Service delivery is progressing well. Some of the initiatives include expansion of emergency obstetric care services, increase in the number of birth attendants, and expansion of the Integrated Management of Childhood Illness Program. Several steps have been taken to strengthen the health service delivery including training of 1137 community skilled birth attendants in 2009-10, recruitment of family welfare visitors, impasse on nurse recruitment unblocked and around 2,000 nurses are being recruited, and the process of recruitment of field level health workers initiated. However, anticipated reforms relating to contracting out of services have not been implemented and/or are progressing slowly.

4. Disbursement is impressive and the actual disbursement from IDA stands at USD 288 million, which is about 105 percent of the planned amount at this stage of the program.

5. The proposed reallocation is necessary to ensure full utilization of available funds in the remaining period of the program and that these are used for high priority items like vaccines, contraceptives, and NGO contracts for Nutrition Services and High Risk intervention packages for HIV/AIDS services.

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ANNEX 2: Letter from MOHFW requesting reallocation

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ANNEX 2 (continued)(USD million)

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ANNEX 3: Minutes of the Pool Funders’ meeting

January 06, 2011 World Bank

1.0 Update on HNPSP Financial Status The World Bank (WB) provided an update on the financial status of HNPSP with clarifications on legal commitments and available contributions. It was noted that additional US$ 5.5 million is available from investment income. All pool funders (PFs) except for the Embassy of the Kingdom of the Netherlands (EKN) have transferred committed funds to the multi-donor trust fund (MDTF). EKN informed that they would transfer their last tranche by the third week of January 2011. The WB informed that after receiving EKN’s contribution, the Grant Agreement with the Government of Bangladesh (GOB) would be amended to reflect the increase in grant amount from US$ 335 million to US$ 387.98 million.

2.0 Reallocation of available funds between disbursement categories The WB informed that there is a need to reallocate funds between categories as funds in category 3 is almost exhausted while there would remain unspent funds in other categories. A table on the financing plan was shared with the PFs which highlighted the revised financing plan, expenditure pattern and funds available for the remaining period of the program. Available funds amount to US$ 130 million, but the Ministry of Health and Family Welfare (MOHFW) has submitted a consolidated procurement plan with a cost of around US$ 150 million. The WB has requested the MOHFW to prioritize its procurement activities so that the total amount is within the available resources. The MOHFW responded positively and has taken the following initiatives:

• MOHFW will not process any further procurement of goods and equipment for Directorate General of Health Services (DGHS) due to shortage of funds, except for those contract packages which have already been awarded or signed.

• MOHFW will not process any further procurement process related to civil works, except those contract packages which are already awarded or signed. An assessment of the civil works undertaken in the last ten years is underway.

• In order to facilitate the transition from the community based nutrition services through NGOs to the mainstreamed approach, the existing NGO contracts will be ended by April 2011. This will allow the MOHFW to complete audit and take over assets at the field level.

• MOHFW will prioritize local training in order to save funds for priority procurement activities. Funds from the performance based financing category have been used for training of family welfare visitors, nurses, doctors under DGHS.

• The MOHFW will soon send a revised financing plan to the WB.

PFs agreed to reallocate funds between categories. KFW requested details of the items that would be procured with the increased allocation in the goods category. In response to that, the WB agreed to share the procurement plans received from the MOHFW with PFs. The WB will process the reallocation and amend the legal agreement both with the GOB and with PFs to reflect the necessary changes. The WB will send the amendment of the legal agreement to all PFs for their information and record.

3.0 Performance Based Financing (PBF) The WB informed that the MOHFW has sent a request to release the remaining US$ 6 million of PBF as the performance indicators have now been achieved. At the Annual Program Review

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2010, PFs agreed to release US$14 million against the achievement of some of the PBF indicators. It was agreed then that the remaining US$ 6 million would be released upon achievement of the remaining indicators.

As funds under category 3 are exhausted, PFs felt that additional funds may be utilized for priority items like pharmaceuticals, vaccines, and family planning commodities including contraceptives.

Regarding the issue of procurement and internal financial audits which were PBF indicators, PFs requested the WB to share a summary of the reports instead of the full reports. The WB agreed to provide the summary. PFs agreed to disburse the remaining US$ 6 million of PBF. The WB would communicate to the MOHFW of this decision.

4.0 Update on External Audit The WB informed that they are actively following up and closely monitoring the progress on resolution of audit issues with the MOHFW as these need to be resolved before any new program proposal can be placed before the WB Board for approval. The Secretary of MOHFW has taken this matter seriously and is following up on the progress of settlement of audit issues with the concerned staff. The Financial Management and Auditing Unit (FMAU) of MOHFW has organized several bilateral meetings with Foreign Aided Project Audit Department (FAPAD) and is able to make substantial progress on the resolution of pending audit observations.

Current status of the IDA identified audit observations is as follows: FY Identified Settled Partially

settled unsettled Status of unsettled audit

observations 2006 8 8 0 0

2007 9 5 1 3

2008 7 4 2 1

2009 6 3 2 1

20101

Total 30 20 5 5

US$ M 9.81 2.28 1.03 6.5

• MOHFW organized continuous bi lateral meeting with FAPAD to resolve pending audit observations.

• The WB team is following up the progress of settlement on a weekly basis.

• In the last meeting, MOHFW and FAPAD reached a conclusion to resolve further audit observations amounting to US$ 3.3M. The WB is waiting to receive the FAPAD notification.

1The WB received the audit report for the FY 2010 and is currently reviewing it

Attended by: CIDA –Momena Khatun DFID – Shehlina Ahmed, Liam Docherty EC – absent KFW – Bertold Liche, Habibur Rahman Sida –Ylva Sorman Nath UNFPA – Tauhid Alam WB –, Bushra Alam, Md. Raziq Hossain, Iffat Mahmud, Karar Zunaid Ahsan EKN – Theo Oltheten