The World Bank Mozambique - Integrated Growth Poles Project (P127303) REPORT NO.: RES38271 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MOZAMBIQUE - INTEGRATED GROWTH POLES PROJECT APPROVED ON APRIL 25, 2013 TO GOVERNMENT OF MOZAMBIQUE FINANCE, COMPETITIVENESS AND INNOVATION AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Mark R. Lundell Regional Director: Asad Alam Practice Manager/Manager: Douglas Pearce Task Team Leader: Francisco Moraes Leitao Campos, Michelle Gomes Souto The World Bank Mozambique - Integrated Growth Poles Project (P127303) I. BASIC DATA Product Information Project ID Financing Instrument P127303 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 25-Apr-2013 31-Oct-2019 Organizations Borrower Responsible Agency Government of Mozambique Ministry of Economy and Finance (MEF) Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to improve the performance of enterprises and smallholders in the Zambezi Valley and Nacala Corridor, focusing on identified high growth potential zones (growth poles). Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-52370 25-Apr-2013 27-May-2013 23-Aug-2013 31-Oct-2019 100.00 72.79 19.47 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Mozambique - Integrated Growth Poles Project (P127303) A. Summary The purpose of this level two restructuring is to (i) extend the project closing date by six-months (up to April 30, 2019), and to (ii) reallocate funds between project categories. This will enable the Project to finalize ongoing activities and allow the disbursement of committed amounts under the existing credit. B. Project Status The Mozambique Integrated Growth Poles Project (Cr 5237-MZ), amounting to SDR 66,100,000, was approved on April 25, 2013, became effective on August 23, 2013, and was scheduled to close on October 31, 2019. The project is supporting broad based growth in two identified high growth potential zones – the Zambezi Valley and the Nacala Corridor. The project contributes to the key strategic pillar of promoting diversified growth and enhanced productivity under the current Country Partnership Framework (CPF, FY17-21) through increased agricultural growth, an improved business environment for job creation including access to vital infrastructure services and improved access to water. In 2016, the Project was tagged as an Actual Problem Project, and was rated as a Substantial Risk Project in the Mozambique portfolio. Progress towards the achievement of Project Development Objective (PDO) and Overall Implementation Progress (IP), were rated Moderately Unsatisfactory. In response, both the World Bank and the Government of Mozambique undertook mitigation measures aimed at improving the project weak performance and low disbursement ratio, including: a. A renewed institutional set-up for the day-to-day oversight of the Project and the formal nomination of a new Project Coordinator; b. Strengthened local presence of the World Bank team to allow a closer day-to-day supervision of the Project implementation; c. A level two restructuring that served to (i) modify the Project Financing Agreement for the rehabilitation of the Nacala Porto-Nacala-a-Velha link road and bridges (R702) given the unavailability of counterpart funding (CF) from the Road Fund (FE), and to (ii) update the Project results indicators. The Project ratings improved, and have stayed as Moderately Satisfactory since early 2018. The M&E indicators are on track to be achieved once all disbursements take place. Nevertheless, with less than three months to close, the disbursement rate is at 79% and outstanding commitments are at approximately US$ 19 million. C. Rational for Change The six-month extension (up to April 30, 2019) will allow the completion of ongoing Project activities. The Project Implementation Unit (PIU) will phase out in this period with members of the PIU closing contracts from October 2019 onwards. The proposed time extension is especially relevant to ensure that the 17 signed grants under the Innovation and Demonstration Catalytic Fund (IDCF) are sustainably implemented, and the bridges rehabilitation and water distribution in Nacala District are finalized according to best practices. In addition, the Project has allocated final resources to the Idai cyclone's response. The 6-month extension is critical to allow ANE, the National Road Administration, to complete bridges in response to the emergency. Furthermore, the restructuring of the Project is needed to reallocate resources between categories, including funds not used in the Project Preparation Facility (PPF) to corresponding categories (see Reallocation between Disbursement The World Bank Mozambique - Integrated Growth Poles Project (P127303) Categories section of the Restructuring Paper). Given that most of the PPF of SDR 2 million was not originally disbursed, this amount will be formally reallocated from Category 6 (PPF) to Category 1a, which covers the main operating costs of the Project. Finally, the Project requires a reallocation of SDR 647 thousand from the category 5, which covers IDCF Grants, to Category 3, which covers the rehabilitation of roads in Tete Province. This adjustment is to cover the larger costs than initially planned of these works in Tete, due to variations in currency. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-52370 Effective 31-Oct-2019 30-Apr-2020 30-Aug-2020 REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IDA-52370- GDS,WKS,NCS,S 001 RC,TR,OP,CS excl 10,160,000.00 9,744,324.45 12,159,856.13 100.00 100.00 Currency: IDCF XDR IDCF MANAG 3,390,000.00 2,531,803.13 3,390,000.00 100.00 100.00 part 4 WKS,GDS & CS 16,190,000.00 11,921,295.78 16,190,000.00 100.00 100.00 part 2.A.1 WKS,GDS,CS 14,210,000.00 9,375,056.20 14,857,352.00 100.00 100.00 part 1.A.1 WKS,GDS & CS 4,290,000.00 3,535,216.04 4,290,000.00 100.00 100.00 2.A.2 IDCF GRANTS GDS,WKS,NCS,O 15,860,000.00 10,058,576.62 15,212,648.00 100.00 100.00 PC,CS The World Bank Mozambique - Integrated Growth Poles Project (P127303) PPF 2,000,000.00 143.87 143.87 REFINANCING Total 66,100,000.00 47,166,416.09 66,100,000.00