Document of The World Bank FOR OFFICIAL USE ONLY Report No. 74890-LS INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT FOR THE KINGDOM OF LESOTHO FOR THE PERIOD FY10 – FY14 April 14, 2013 Southern Africa Country Department 1 (AFCS1) Africa Region Sub-Saharan Africa Department, East & Southern Africa Hub (CAF) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS GOVERNMENT FISCAL YEAR (Exchange Rate Effective April 10, 2012) April 1 to March 31 Currency Unit = Lesotho Loti (LSL) WEIGHTS AND MEASURES US$1 = LSL 8.90 Metric System The World Bank Group Team IDA IFC Vice President: Makhtar Diop Vice President: Jean Philippe Prosper Country Director: Asad Alam Country Director : Oumar Seydi Task Team Leader: Macmillan Anyanwu Task Team Leader: Carla Faustino Coelho The Lesotho CAS Progress Report was prepared under the guidance of Asad Alam (Country Director). The CAS PR benefitted from contributions from the Lesotho Country Team, including: John Panzer, Ivan Velev, Sandeep Mahajan, Patrick Osewe, David Sislen, Chunlin Zhang, Gert Van de Linde, Kathrin Plangemann, Catherine O’farrell, Bartol Letica, Thomas Buckley, Christian Gonzalez, Marcus Wishart, Kanako Yamashita-Allen, Melis Guven, Cristina Isabel Panasco, Fang Xu, Ben Gericke, Frauke Jungbluth, Emma Mistiaen, Smita Kuriakose, Tuan Minh Le, Carolyn Shelton, Yoko Shimada, Carolina Biagini, Marco Scuriatti, Cassandra De Souza, Edmund Motseki, Leslie Villegas, Andrew Osei Asibey, Melanie Jaya. ACRONYMS AND ABBREVIATIONS AAA Analytic and Advisory Activities MoF Ministry of Finance AfDB Africa Development Bank MoH Ministry of Health AIDS Acquired Immune Deficiency Syndrome MoLGC Ministry of Local Government and Chieftaincy ART Anti-Retroviral Treatment MSME Micro, Small, Medium Enterprises BoS Bureau of Statistics MTEF Medium-Term Expenditure Framework CAS Country Assistance Strategy NACA National AIDS Coordinating Agency CASPR Country Assistance Strategy Progress Report NBFI Non-Bank Financial Institutions CBL Central Bank of Lesotho NER Net Enrollment Rate CCSP Community Council Support Person NGO Non-Governmental Organization CPIA Country Policy and Institutional Assessment NSDP National Strategic Development Plan CPPR Country Portfolio Performance Review NISSA National Information System for Social Assistance CSO Civil Society Organization NSP2 Second HIV/AIDS National Strategic Plan DeMPA Debt Management Performance Assessment OBFC One-stop Business Facilitation Center DPC/G Development Policy Credit/Grant OFID OPEC Fund for International Development DPCF Development Partners Consultative Forum OVC Orphans and Vulnerable Children EC European Commission PAC Public Accounts Committee/Project Appraisal Committee ECF Extended Credit Facility PBB Performance-Based Budgeting ESMF Environmental and Social Management Framework PBF Performance Based Financing ESP Essential Service Package PEFA Public Expenditure and Financial Accountability FDI Foreign Direct Investment PER Public Expenditure Review FTI Fast Track Initiative PFM Public Financial Management GDP Gross Domestic Product PFMA Public Financial Management and Accountability GER Gross Enrollment Rate PHRD Policy and Human Resources Development GF Global Fund PPAIF Public-Private Infrastructure Advisory Facility GoL Government of Lesotho PPP Public-Private Partnership GPE Global Partnership for Education PMTCT Prevention of Mother to Child Transmission GPOBA Global Partnership on Output Based Aid PRSC Poverty Reduction Support Credit HIV/AIDS Human Immunodeficiency Virus/Acquired Immune PSCED Private Sector Competitiveness and Economic Deficiency Syndrome Development Project HTAP HIV/AIDS Technical Assistance Project QMMH Queen Mamohato Memorial Hospital IA Irish Aid SACU Southern Africa Customs Union IBRD International Bank for Reconstruction and Development SACMEQ Southern and Eastern Africa Consortium for Monitoring Educational Quality IDA International Development Association SADP Smallholder Agriculture Development Project ICT Information and Communication Technologies SARS South African Revenue Services IDF Institutional Development Fund SMME Small, Micro, and Medium Enterprises IFAD International Fund for Agricultural Development SSA Sub-Saharan Africa IFC International Finance Corporation SSNR Social Safety Net Review IMF International Monetary Fund TA Technical Assistance ITP Integrated Transport Project TB Tuberculosis INDF Interim National Development Framework TF Trust Fund LCN Lesotho Council of NGOs TFF Trade Facilitation Facility LEAP Lesotho Enterprise Assistance Program TVET Technical and Vocational Education Training LHWP Lesotho Highlands Water Project UN United Nations LRA Lesotho Revenue Authority UNAIDS United Nations Joint Program on HIV/AIDS LTDC Lesotho Tourism Development Board UNDP United Nations Development Program MCC Millennium Challenge Corporation UNFPA United Nations Population Fund MDG Millennium Development Goal UNICEF United Nations Children’s Fund MDWSP Metolong Dam and Water Supply Program WASCo Water and Sewerage Company M&E Monitoring and Evaluation WBG World Bank Group MIC Middle Income Country WFP World Food Programme MIGA Multilateral Investment Guarantee Agency WSIP Water Sector Improvement Project MNH Maternal and Newborn Health TABLE OF CONTENTS I. Introduction ........................................................................................................................ 1 II. Relevance of the CAS ..................................................................................................... 2 III. Progress towards CAS Outcomes ................................................................................. 6 Pillar One: Fiscal Adjustment and Public Sector Efficiency ................................................... 6 Pillar Two: Human Development and Improved Service Delivery ........................................ 7 Pillar Three: Enhanced Competitiveness and Diversification ............................................... 12 IV. Proposed Modifications to the CAS ............................................................................ 16 V. Risks and Mitigation .................................................................................................... 20 Figures and Tables Table 1: Doing Business Indicators and Enterprise Surveys ........................................................ 12 Table 2: Gender Distribution of Beneficiaries of Skills and Enterprise Development Activities under PSCED ................................................................................................................................ 13 Table 3: Planned vs. Actual IDA Lending Program (2010-2014) ................................................ 19 Annexes Annex A1: Updated CAS Results Matrix (FY10-14) ................................................................... 21 Annex A2: Lesotho at a Glance .................................................................................................... 28 Annex A2: Lesotho at a Glance (continued)................................................................................. 29 Annex A3: Millennium Development Goals ................................................................................ 30 Annex A4: Selected Economic Indicators .................................................................................... 31 Annex A5: Fiscal Operations of the Central Government ............................................................ 31 Annex A6: Balance of Payments .................................................................................................. 33 Annex A7: Key Social Indicators ................................................................................................. 34 Annex A8: Key Exposure Indicators ............................................................................................ 35 Annex B1: Selected Indicators of Bank Portfolio Performance and Management ...................... 36 Annex B2: Summary of Non-Lending Services ........................................................................... 37 Annex B3: Operations Portfolio (IDA and Grant) ........................................................................ 38 Annex B4: Statement of IFC's Committed and Outstanding Investment Portfolio ...................... 39 Annex B5: List of Trust Fund Operations .................................................................................... 40 I. Introduction 1. This Progress Report takes stock of the implementation of the World Bank Group’s Country Assistance Strategy (CAS) for Lesotho (2010-2014) at mid-term. The CAS was prepared when Lesotho was struggling with macroeconomic and fiscal challenges due to the aftermath of the global economic crisis in 2008. The Bank’s engagement was anchored on three strategic goals: (a) fiscal adjustment and public sector efficiency; (b) human development and service delivery; and (c) enhanced competitiveness and diversification that remain relevant to the strategic objectives of the Government of Lesotho.1 The indicative allocation under IDA 16 (FY12-14) is about US$90.0 million (comprising about US$40.0 million grant and US$50.0 million credit), with about US$55 million available for programming for FY13-14. The IFC has continued to expand its advisory services across the health sector, energy and tourism and to support Government’s capacity building through technical assistance for improved contract management. The IFC will continue to explore opportunities to develop its investment lending program. 2. There were two important domestic developments in Lesotho with implications for the relevance and outcome of the CAS after the CAS approval in 2010: (a) Government’s approval of the National Strategic Development Plan (NSDP) (FY2012/13-FY2016/17) in December 2012, which replaced the Interim National Development Framework (INDF), and (b) the emergence of a new coalition government in June 2012.2 The objectives of the NSDP are to: (a) pursue economic growth that is high, shared, and employment creating; (b) develop priority infrastructure; (c) enhance the country’s skills base, technology adoption, and foundations for innovation; (d) improve health, combat HIV and AIDS, and reduce vulnerability; (d) reverse environmental degradation and adapt to climate change; and (e) promote peace and democratic governance, and build effective institutions. 3. Progress towards achieving the CAS outcomes has been mixed and uneven across the sectors. A significant number of targets for the indicators of progress under the three pillars of the CAS have been met or are well on track. The most important milestones for the enhancement of private sector and diversification have been achieved, while the biggest gap remains in the area of human development and service delivery. The detailed assessment of the progress towards achieving the agreed outcomes within the CAS period and any modification to the CAS progress indicators and targets is presented in the updated Results Matrix (see Annex 1) 4. The Bank’s program remains relevant to Lesotho’s development challenges and the Government’s priorities as articulated in the NSDP. The CAS Progress Report (CASPR) does not envisage any strategic shift in the CAS program. Given that the likelihood for an increased IDA allocation remains low due to Lesotho’s modest Country Policy and Institutional Assessment (CPIA) performance rating, the CASPR will continue to reinforce principles of selectivity and partnerships adopted in the CAS. 1 This was confirmed during the consultation with the Government of Lesotho on the CAS Progress Report. 2 Following the inability of the former ruling Lesotho Congress for Democracy to secure enough majority to form a Government. 1 II. Relevance of the CAS 5. Lesotho’s size, its unique geographic location, topography and economic structure create both opportunities for growth and vulnerabilities to risks posed by uncertainties in its internal and external environment. Lesotho is a small, mostly mountainous and largely rural country of about 2 million people completely surrounded by South Africa. It is a lower middle-income country with per capita Gross National Income (GNI) of US$1,210 and an open economy highly dependent on trade in manufactured goods (e.g. textiles), water, and diamonds.3 Lesotho’s proximity to the huge South African market, membership of Southern African Customs Union (SACU), immense water resources as a result of its high altitude, growing investments in diamond production and its preferential access to US and EU markets under African Growth and Opportunity Act (AGOA) and other trade agreements present opportunities for growth, but with significant downside risks.4 These risks include the prospect for the expiration of AGOA preferences in 2015, decline in diamond prices, depletion of its productive workforce as a result of the HIV/AIDS pandemic, loss of highly skilled workers to South Africa as a result of higher wages, declining demand for its export and the volatility of SACU revenue and remittances. Lesotho’s difficult terrain also exposes it to the harsh effects of climate change and poses a huge challenge for service delivery, particularly in the remote rural areas of the country with high concentration of poverty, poor health and education outcomes. Lesotho’s health challenges are also closely intertwined with those in South Africa, due to the large proportion of adult population that migrate backwards and forward for work. Tuberculosis (TB) in particular is thought by the GoL to be entirely imported from South Africa, mainly from the mines. Government’s appetite for reforms that could drive competitiveness and willingness to adopt innovative approaches in service delivery (e.g. Public Private Partnerships (PPPs), Performance Based Financing (PBF), Mother-Baby Pack for delivery of Anti-Retroviral drugs (ARV) and use of Information and Communication Technology (ICT) for service delivery) could help Lesotho to mitigate these risks. 6. Despite the modest economic growth, there remain widespread unemployment and high concentration of poverty in the rural areas. Lesotho achieved growth of 3.6 percent in 2009, 5.7 percent in 2010, 3.2 percent in 2011, and 4.0 percent in 2012, driven mainly by Foreign Direct Investment (FDI) flows, public spending on infrastructure and a mining sector expanding on the back of increases in demand and higher prices for diamonds. This growth level was achieved despite the global financial crisis in 2008 and the flood related damages suffered in early 2011 and the drought in 2012.5 Unemployment stood at 24 percent in 2008 and is unlikely to have changed much, even as underemployment and low productivity employment is widespread, especially in rural areas. According to preliminary Government estimates from the 2010/11 Household Budget Survey (HBS), more than half of the population of Lesotho live below the poverty line, with national poverty head count rate at 57.1 percent and the Gini 3 2011 Atlas GNI per capita. 4 Lesotho is a member of the South African Customs Union (SACU) and the Southern African Development Community (SADC), and as a member of the Common Monetary Area (CMA), its currency is pegged to the South African Rand. 5 For 2013, IMF’s growth projection for the medium term is about 3.5 percent. 2 Coefficient based on consumption at about 0.53.6 Poverty in Lesotho is concentrated in the population living in isolated rural areas, with limited income opportunities and high costs of service delivery due to the country’s difficult terrain and scattered settlements. Disaggregated HBS data show a decline in urban poverty rate from 39 percent in 2000 to 36.6 percent in 2010, while rural poverty increased from 60.9 percent in 2000 to 61.8 percent in 2010. 7. Lesotho finds itself at a crossroad, requiring new growth engines, a more streamlined role for the state, and the emergence of a dynamic private sector. The manufacturing sector’s relative contribution to Gross Domestic Product (GDP) declined from about 20 percent in 2006 to 11 percent in 2011 as a result of stagnation in the textile and apparel sector due to the global economic crisis, competition from low-cost Asian producers, and the rapid growth in other sectors, notably mining. As a result of this contraction in the textile and apparel sector, employment in the sector dropped from 46,000 in 2008 to about 38,000 in 2012.7 Diamond production is becoming an important source of Lesotho’s growth, accounting for nearly 7 percent of GDP in FY2010/11, up from 0.5 percent in the early 2000s. However, the diamond sector is capital intensive and does not contribute significantly to total employment. It currently employs around 2,000 workers.8 The high levels of public spending cannot be sustained and are unlikely to drive growth. And with the weaknesses in the business environment, private sector growth prospects are also likely to be constrained. 8. Not surprisingly then, fiscal consolidation is at the core of restoring Lesotho’s macroeconomic stability. With higher tax revenues, higher SACU transfers, and expenditure restraint, fiscal balances are projected to bounce back from a deficit of 10.3 percent in 2011/12 to a projected surplus of 5.7 percent in 2012/13. Fiscal balances deteriorated in 2010/11 largely as a result of higher public spending and lower SACU transfers. Public spending grew from 57.5 percent of GDP in FY2010/11 to 62 percent in FY2011/12 and 63.8 percent in 2012/13. The expenditure increase was driven by the countercyclical public investment program, higher outlays for flood-related damage, and the costs of local and general elections. High levels of public spending raise concerns about sustainability as well as its effectiveness.9 The volatility of SACU transfers has also made budget management more challenging. SACU transfers declined from 36 percent of GDP in FY2008/09 to 16.1 percent in 2010/11, and 15.0 percent in 2011/12, before increasing to 29.0 percent in 2012/13. 9. With the ongoing fiscal consolidation, Lesotho’s public debt is on a sustainable trajectory. In the baseline scenario, the public-debt-to-GDP is expected to remain at about 40.3 percent of GDP in FY2011/2012 and FY2012/2013 and gradually decline afterwards. The trajectory of public debt is projected to decline even under the most pessimistic alternative scenarios considered in the analysis. A Debt Management Performance Assessment (DeMPA) was conducted in 2012. The Government is working towards developing a reform plan and a medium-term debt management strategy in line with the recommendations of the DeMPA report. 6 These figures are similar to the poverty numbers obtained from the 2002/2003 HBS , with Gini Coefficient of 0.51. 7 Estimates from Lesotho National Development Corporation (LNDC) - This loss of employment is likely to have more effect on women, because they constitute about 82 percent of the workforce in the textile and apparel industry. 8 IMF Staff Report for 2012 Article IV consultations. 9 Lesotho Public Expenditure Review (2012). 3 10. However, internal and external vulnerability remain a concern. Inflation increased from 3.4 percent in FY2010/11 to 6.2 percent in FY2011/12 and was 5.6 percent in 2012/13, reflecting high international oil prices and agricultural supply shortages after a period of drought. An emerging food crisis due to unfavorable weather conditions has added to the macroeconomic pressures, necessitating large-scale cereal imports and putting upward pressure on prices. In August, 2012 the prime minister declared a food-security state of emergency and appealed to development partners for additional support. So far, the macroeconomic impact of the food- security situation has been contained; however, the social impact could be severe, as higher food prices inflict significant harm on poorer households. At the same time, international reserves fell from 5.3 months of imports in 2009/10 to 3.4 months in 2011/12 but are projected to recover slightly to 3.6 months in 2012/13. Reserves accumulation and macro stabilization are supported by a medium-term macroeconomic program under an IMF Extended Credit Facility (ECF) which is on track.10 The Government recognizes the urgency to restore and maintain macroeconomic stability as a pre-requisite for growth and poverty reduction. 11. The fight to raise growth rates and reduce poverty and inequality has been undermined by worsening health outcomes despite efforts to improve services. The country's health systems have been overwhelmed by HIV/AIDS, with an adult (15 to 49 years) prevalence rate of 23 percent (3rd highest in the world after Swaziland and Botswana).11 This is a major contributor to the high maternal and infant mortality rates and has resulted in a significant reduction of life expectancy at birth (currently 47 years), with a devastating effect on the country’s workforce. Maternal mortality is among the highest in Sub-Saharan Africa (SSA), and infant mortality has also increased in recent years. These outcomes highlight serious shortcomings in the health-care system. Resources allocated to the health sector increased from 4 percent of GDP in 2004/05 to 8 percent in 2010/11, but the Ministry of Health’s capacity to absorb the larger budget resources remains a challenge. System wide issues like low utilization of health facilities, lack of equipment, inadequate number of skilled healthcare workers and the poor referral system between health centres and hospitals persist. There is potential for more innovative approaches to the financing and management of health care service delivery to address these challenges. 12. Reduction in poverty and inequality will also require a sharper focus on secondary education outcomes and expansion of sector-specific skills through Technical and Vocational Education Training (TVET). The efficiency of the education system can be improved by correcting the distortions in education sector spending. For the past years, more than 30 percent of the education budget has been allocated to tertiary education, largely to support the bursary scheme. Although most Basotho children now have access to primary education, this is not yet the case for secondary education, particularly for the disadvantaged and children in geographically hard to reach areas. Secondary school Gross Enrolment Rate (GER) is 10 The IMF Board approved a three year ECF arrangement for SDR41.88 million (120 percent of quota), against the backdrop of a sharp fall in SACU transfers. On April 9, 2012, the Board approved an augmentation of access equal to 25 percent of quota, which has led to a total access of SDR50.6 million (145 percent of quota) in order to cushion the impact of the 2010-11 flood damage and high international commodity prices. 11 According to the UNAIDS’ Lesotho Global AIDS Response Country Progress Report for January 2010 – December 2011 (published in March 2012) gender disparity in HIV prevalence remains an issue in Lesotho. About 26.7 percent of all adult women tested positive to HIV, compared to about 18 percent of all adult men. Approximately 60 percent of all HIV-positive adults and children are women. 4 still very low - at 57 percent for the lower secondary level and 27 percent for the upper secondary level. These rates hide important disparities: only 1 to 2 percent of boys and 5 to 8 percent of girls in the poorest income quintile attend secondary education. 13. The Government could achieve a more rapid decline in poverty and inequality by more efficiently implementing existing safety-net programs. Spending on transfer programs is high at 9 percent of GDP. Social protection expenditures are spread across a range of programs, including school feeding, public-assistance grants, nutrition programs, and tertiary bursary program and old-age pensions. However, a significant share of this funding does not target the poorest segments of the population. The recent creation of the Ministry of Social Development demonstrates the growing emphasis on social programs. The Ministry’s piloting of the National Information System for Social Assistance (NISSA) presents an opportunity to scale up better targeted programs with improved efficiency and monitoring capacity. 14. New drivers of growth can emerge with a deepening of Lesotho’s investment climate reforms. Private-sector growth is still hindered by a number of factors, which include access to land, access to finance, cost of trading across border with South Africa, delays in obtaining a construction permit and starting a business. The NSDP acknowledges this “uncompetitive business environment� as one of the most binding constraints to a private sector-led growth.12 While Lesotho has relatively high and active usage of banking services, local SMEs generally lack adequate access to finance and credit. The ability of the banking sector to mobilize savings and deposits is strong: M2 as percent of GDP stood at 38 percent in 2010, which is high compared to peers. About 58 percent of the adult population has access to formal financial services and 23 percent access informal services. However, the ratio of credit to the private sector to GDP improved marginally from 20.7 percent in 2009/10 to 25.1 percent in 2010/11, far below the SSA average of 58 percent.13 15. The CAS program remains relevant to support the Government’s priorities as set out in the 2012/13–2016/17 NSDP.14 The new Government is committed to the economic development program articulated in the Vision 2020 and the NSDP.15 The strategic pillars of the CAS - supporting fiscal adjustment and increased public sector efficiency, human development and improved service delivery, and enhanced competitiveness and diversification of the economy - remain relevant to the NSDP’s focus on reducing poverty, creating jobs, inclusive growth, and private sector development. Therefore, the Bank strategy remains aligned and relevant to Government’s priorities and there is no need for any shift in the Bank’s program. 12 All quantitative measures – Global Trade Reports, Doing Business Indicators, and Enterprise Surveys – suggest that business regulations are a serious constraint to growth. 13 This is a key indicator for the strength of financial sector performance. 14 The National Strategic Development Plan (NSDP) succeeds the 2004 Poverty Reduction Strategy Paper (PRSP) and the 2009 Interim National Development Framework (INDF). 15 Prime Minister’s inaugural speech on June 11, 2012. 5 III. Progress towards CAS Outcomes 16. Progress towards achieving the CAS outcomes has been mixed and uneven across sectors. The sections below describe the key milestones reached under the three pillars of the strategy. A more detailed assessment of the likelihood of achieving the agreed outcomes within the CAS period and any modification to the CAS objectives, progress indicators and targets is presented in the updated Results Matrix in Annex 1. Pillar One: Fiscal Adjustment and Public Sector Efficiency 17. The Government’s fiscal position was enhanced by increases in non-SACU revenue and tighter expenditure controls, which helped to absorb some of the pressure on fiscal and external balances between FY2010/11 and FY2012/13. The Government implemented various measures to enhance tax and non-tax revenue collection and contain recurrent expenditure, particularly the wage bill. These measures include: (a) strengthening cooperation between South African Revenue Services (SARS) and Lesotho Revenue Authority (LRA) to facilitate cross- border trade and customs enforcement, (b) restructuring LRA and modernizing its operations, (c) introducing integrated tax system and extending the mandate of LRA to collect all Government revenues, (d) revising rates, charges and fines in line with inflation, (e) freezing creation of new positions and taking steps to eliminate redundant positions in the public service, and (f) ensuring that annual wage increases do not exceed inflation levels. The Bank supported the fiscal consolidation effort of Government through analytical work (e.g. Public Expenditure Review (PER) and the Social Safety Net Review (SSNR)), technical assistance and policy dialogue under the Poverty Reduction Support Credit (PRSC) operation and effective coordination with other development partners under the General Budget Support program. The Bank is also supporting the effort to modernize LRA by helping to streamline its management and operations using the Trade Facilitation Facility (TFF). 18. The budgetary allocation to capital expenditure and the rate of implementation of the capital budget increased significantly from 2010. The capital budget as a share of GDP grew faster than recurrent expenditure from 2010-2012.16 Capital budget implementation increased from the baseline of 70 percent in 2009 to above 80 percent in 2012, with significant variation across sectors.17 However, the increase in spending on capital investments has not been commensurate with the productivity of the investments with regards to its impact on economic growth. There is considerable scope for improvement in the quality of public investments through further institutional and procedural reforms. According to the Public Investment Efficiency Review, key areas of weaknesses include: (a) the link between capital projects and national development priorities; (b) the capacity of the Ministry of Finance and the Ministry of Development Planning to effectively monitor capital projects; and (c) the link between capital projects and recurrent costs. The project appraisal process remains weak despite the revival of the Project Appraisal Committee (PAC). 16 International Monetary Fund (2012): Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility 17 World Bank (2012): Lesotho Public Investment Management Efficiency Review Report 6 19. The effort to strengthen Public Financial Management (PFM) capacity yielded mixed results. A new Public Financial Management and Accountability (PFMA) law was passed in 2011 (the regulations are yet to be issued), an IFMIS was rolled out to all ministries (but serious operational problems persist), and efforts are being made to clear the backlog of annual financial statements. However, major challenges remain in budgeting, accounting, financial controls, reporting and auditing. With the passage of a new Audit Bill still pending, independence of the Auditor-General and its operational effectiveness remain weak. The different elements of the Medium Term Expenditure Framework (MTEF) are not sufficiently integrated and the approach to budgeting remains largely incremental. Non-compliance to rules, regulations and controls persist, and the Internal Audit function is yet to mature in its effectiveness. Payroll controls are weak and data integrity not assured. Procurement practices and institutional arrangements remain weak. In-year budget execution reports and annual financial statements are not always reliable and the statements are not prepared on time.18 The situation is likely to remain the same for the preparation and audit of the financial statements for 2009/10, 2010/11 and 2011/12. Until these issues are addressed, the PFM system will continue to fall short on aggregate fiscal discipline, strategic allocation of resources, effective service delivery and the extent and quality of support for improved accountability. 20. There are still gaps in the capacity for statistical data collection and Monitoring & Evaluation (M&E) in line Ministries.19 This is evidenced by inadequate data, poor quality of data collection, analysis and reporting. The processing and cleaning of data from the 2010/11 Lesotho Household Budget Survey (HBS) conducted by the Bureau of Statistics (BoS), is in the final stages and the survey data will be made public later in 2013. The Bank, at the request of Government, provided assistance to BoS in the calculation of the poverty line and the preparation of associated documentation. This support includes training BoS staff to build a new poverty data set that meets international standards. The Government has expressed interest in enhanced technical assistance from the Bank to support the BoS. Pillar Two: Human Development and Improved Service Delivery 21. Lesotho’s mountainous terrain is a huge barrier to effective service delivery. Many villages are remote, accessible only by foot, horse or helicopter, which presents challenges like: (a) difficulty of getting well-trained workers to staff clinics and schools in remote locations; (b) difficulty of accessing health facilities or schools by patients or students, even if they do not seem too far on a map; and (c) movement of clinical samples, drugs, medical equipment or school materials are very difficult. The quality of service delivery is also affected by issues relating to: (a) weaknesses in policy planning and implementation; (b) lack of harmonization between multi-year investment with annual budget allocation and recurrent expenditure; and (c) absence of rigorous institutional discipline and incentives in technical, financial and personnel management. 18 The most recent published annual financial statements (for 2008-2009) were submitted to the Minister of Finance on February 22, 2012. 19 There were efforts in the past by both the Bank and UNDP to help the Government to set up a government-wide M&E system, which did not materialize. UNDP helped the Government to develop a draft M&E policy. 7 22. Lesotho remains off track to meet Millennium Development Goals (MDGs) 4 (reducing child mortality) and 5 (reducing maternal mortality) by 2015, despite increases in the flow of resources to the health sector. The Health sector budget doubled from 4 percent of GDP in 2004/05 to about 8 percent of GDP in 2010/11.20 Budget execution in the sector has also been on the rise; increasing from 85 percent in 2008 to about 94.2 percent in 2012.21 Despite the upward trend in the flow of resources to the health sector, health outcomes have continued to deteriorate due to the challenges highlighted in paragraph 5 above. In 2009, Lesotho had an estimated 1,155 maternal deaths per 100,000 live births.22 Pregnancy complications are identified as the major cause of maternal morbidity and mortality in Lesotho. Under-five mortality rate decreased slightly from an average of 89 deaths per 1000 live births between 2000 and 2004 to 86 deaths per 1000 live births in 2011.23 Chronic malnutrition (stunting) remains a major challenge, with about 39 percent of children under-5 affected.24 The deterioration in health outcomes is a result of low utilization of health facilities and poor quality of services due to an inadequate number of skilled healthcare workers, lack of equipment and a poor referral system between health centers and hospitals.25 Further reform of the health system is needed to improve the effectiveness of resources and accelerate progress towards MDGs 4 and 5. 23. The Government has adopted a number of innovative approaches to maximize the use of limited resources and to improve access to and quality of health care services. With advisory support from IFC and US$6.25 million GPOBA grant resources (supervised by IDA), the Government was able to use its investment in public health infrastructure to leverage private sector management and technical expertise.26 Under this PPP project, the Government competitively selected a private sector partner to design, build and fully operate a new national referral hospital named the Queen Mamohato Memorial Hospital (QMMH) and three renovated and expanded filter clinics to cater for the healthcare needs of the residents of Maseru and the neighboring districts.27 Since the QMMH started operation in October 2011, it has helped to increase access to health care services and expand the range and quality of public health services. QMMH, its gateway clinic and the three filter clinics recorded a total of 404,400 outpatient visits from October 2011 to September 2012. This number surpasses the CAS target of 285,000. In terms of service quality, patient and family satisfaction surveys conducted over the same period indicate an average of 85 percent satisfaction level each month, against the 75 percent target. 24. Government has expanded its use of the PPP model in the health sector, with a pilot scheme for a healthcare waste management PPP that started service in December 2012 and is expected to be rolled out nationwide following a one year trial period. In addition, there will be a PPP contract for the provision of IT and facilities management services at the nation’s 20 The Government of Lesotho allocated about 11 percent of its total budget to the health sector in the 2012 financial year, still below the 15 percent Abuja target. 21 World Bank Staff Estimates 22 Lesotho Demographic and Health Survey (LDHS), 2009. The next LDHS will be conducted in 2014. 23 WHO/UNICEF/UNFPA/The World Bank (2012): Levels and Trend in Child Mortality Report 24 World Food Programme (WFP): Lesotho 2012 Facts and Figures, March 2012. 25 WHO, UNICEF and UNFPA, “Reduction of Maternal and Newborn Morbidity and Mortality� (2010) 26 The GPOBA Grant is a re-imbursement based financing mechanism to partially subsidize the cost of services at the newly constructed referral hospital and its three filter clinics. 27 Queen Mamohato Memorial Hospital (QMMH) replaced the former Queen Elizabeth II (QE II) Hospital. 8 network of rural primary care clinics, renovated under the Millennium Challenge Corporation (MCC) compact. The Government has also piloted the use of NGOs to deliver healthcare services using performance-based contracts and is in the process of introducing performance- based health financing targeting community, primary and secondary level health care. The Bank will be supporting Lesotho, Swaziland, South Africa and Mozambique to operationalize the regional TB initiative – an effort to reduce TB among mineworkers, ex-mineworkers, their families and communities. The program has three components: (a) harmonization of treatment protocols; (b) collaboration with mining companies in South Africa to provide TB services to employees, contractors, surrounding communities and labor exporting areas; (c) economic analysis of the impact of TB in the four countries. 25. The HIV/AIDS pandemic remains one of the most important development issues, ranking number one in the list of top ten causes of adult deaths.28 In 2011, HIV/AIDS was responsible for 20 percent of male deaths, 22 percent of female deaths and 8 percent of children deaths in Lesotho. The GoL and its development partners have remained committed to the implementation of the Second National Strategic Plan (NSP2), which has helped to produce significant results in the fight against the pandemic. Lesotho has managed to stabilize HIV adult (15 to 49 years) prevalence rate at about 23 percent for the past three years. The annual incidence of new HIV infection declined by 16 percent, dropping from 21,000 to 17,500. Over the same period, the number of AIDS related deaths declined by 16 percent from 12,000 to 8,500. According to the 2011 estimate, Lesotho has about 252,669 adults and 37,172 children (0 to 14 years) living with HIV.29 The number of Orphans and Vulnerable Children (OVCs) in Lesotho grew to more than 200,000 OVCs, 67 percent of which are AIDS orphans. 26. Overall, coverage of key HIV/AIDS interventions has improved, including Prevention of Mother to Child Transmission (PMTCT) and Anti-Retroviral Treatment (ART). PMTCT coverage increased from 5 percent in 2005, to 36 percent in 2008 and 81 percent in 2011. Faced with a difficult terrain and environment for service delivery, Lesotho developed an innovative way of delivering the necessary drugs to HIV-positive mothers, called “Mother-Baby Pack�.30 The number of health facilities providing ART increased from 171 in 2009 to 190 in 2010 and 197 in 2011, while the coverage of people eligible for ART increased from 36 percent in 2008 to about 61 percent in 2011. The total number of people receiving ART increased from 74,563 adults (64 percent are women) and 4,812 children (47 percent are girls) in 2010 to 77,622 adults (62 percent are women) and 5,028 children (51 percent are girls) in 2011. 27. The Bank has continued to support the effort of Government to build the capacity of Ministries, Departments and Agencies (MDAs) and CSOs to implement the NSP2 in a coordinated manner through the HIV and AIDS Technical Assistance Project (HTAP). The project has supported the Lesotho Council of NGOs (LCN) in the areas of M&E, financial management and grants management and this resulted in considerable improvement in LCN’s quarterly grant performance rating in its role as Principal Recipient of the current Global Fund 28 Annual Joint Review Report (2011/12), Health Planning and Statistics Department, Ministry of Health. 29 Lesotho Global AIDS Country Progress Report, March 26, 2012. According to this report, 60 percent of all people living with HIV in Lesotho are women. 30 It enables women to take home a pack of drugs at their first (and maybe only) antenatal care visit, ensuring that even if they do not come back to the clinic during their pregnancy, they still benefit from the treatment. 9 (GF) grant. The project also made valuable contributions in the following areas: (i) development of training materials for Auxiliary Social Workers; (ii) development of OVC adoption policy; (iii) development of the new health law to replace the outdated public health order of 1972; (iv) supported 35 positions for Community Council Support Persons (CCSPs) under the Ministry of Local Government and Chieftaincy (MOLGC); and (v) supported an Essential Service Package (ESP) Coordinator to support implementation of HIV ESP activities. The project has exceeded the target for this activity – implemented 877 HIV ESP interventions, against a target of 700. 28. The 2015 Millennium Development Goals (MDGs) for access to universal primary education and gender parity in primary Net Enrolment Rate (NER) are within reach.31 The GoL introduced free primary education in 2000 and passed the Education Act in 2010 making primary education compulsory. The principal objective of the new policy is to ensure the achievement of the MDGs, given that in spite of substantial progress, primary Net Enrollment Rate (NER) was still 83 percent in 2011. Net Cohort Survival Rate (NCSR) for primary school increased from 61.2 percent in 2010 to 65.5 percent in 2012 (with a gender parity index of about 1.47 in favor of girls).32 NER for secondary schools has also been on the rise; increasing from an average of 25.4 percent in 2005 to 29.0 percent in 2008 to 35.9 percent in 2011 (27.6 percent for boys and 44.2 percent for girls).33. Obviously, gender disparities in NCSR for primary schools and NER for secondary schools are biased against boys; particularly those who could not afford to complete their primary school education or bear the high costs (direct and opportunity cost) of secondary school education due to poverty. In some cases, the impact of HIV and AIDS on household income forced boys to drop out of school to either look after sick relatives or take up employment in the farm, small businesses or migrate to South Africa to work in the mines. 29. Despite the progress made on access to education; particularly at primary school level, the quality of education remains poor. Much remains to be done to address high repetition rates, weaknesses in teacher qualifications, access to secondary education for disadvantaged groups and infrastructure deficiencies. So far, the higher enrolment rates and effort to train more teachers has not translated into the expected improvements in learning outcomes.34 The Bank has carried out two surveys on education, skills and employability (household and employers surveys), and is finalizing a report on education, skills development and equity in the country which is informed by the results of the surveys. The report is expected to contribute to the revision of the education sector plan and thus for further reform in post-basic education. The Bank-supervised Basic Education Project has helped to train 343 teachers, revise the curriculum of early grade reading and mathematics materials, procure 4,900 textbooks, provided monetary allowances to 803 teachers as part of the teachers’ incentive scheme, supported 120 reception classes by paying salaries of 120 caregivers, and financing school feeding programs. Construction of 33 classrooms and latrines is on-going in four districts.35 31 Approximately 49 percent of primary school students are girls. 32 Aide Memoire of 5th Joint Annual Review (JAR) of General Budget Support, February 2013. 33 Government of Lesotho’s Report on Progress towards Achieving the General Budget Support (GBS) Performance Assessment Framework Targets, March 2012. 34 Data is not available for recent trends in learning outcomes in primary schools, particularly on reading and mathematics scores. 35 The project is funded by the Global Partnership for Education (GPE) (US$20 million) and co-financed by Irish Aid (US$6.8 million) 10 30. Longstanding and sustained reforms in the water sector have produced significant financial and social returns in Lesotho.36 Lesotho currently generates an average of US$20 million per year in royalties from the Lesotho Highlands Water Project (LHWP). These revenues have been central to securing poverty reduction measures and investments aimed at addressing national water supply demands. Significant investments in the expansion of services have resulted in increased access to safe drinking water. About 77 percent of Basotho households have access to improved water sources (including 7.6 percent who rely on protected wells or springs) and 72 percent are less than 30 minutes away from a water source. However, the demand for safe drinking water continues to grow, as the population in Maseru and other urban centers continue to increase. Sanitation remains a major challenge despite significant improvements over the past three decades; with 25 percent of the population having improved, non-shared facilities, 39 percent having non-improved, shared facilities, and 36 percent still remaining with no facilities. 31. The Bank has continued to support the Government’s effort through the Water Sector Improvement Project (WSIP).37 WSIP financed the following activities relating to the MDWSP: (a) completion of the ESMF, (b) the consolidated resettlement and compensation action plan which is currently under implementation for all major civil works, (c) the advance infrastructure in Teyateyaneng, and (d) the conveyance system currently under implementation. WSIP also supported the corporatization of the Water and Sewerage Authority (WASA) in 2010 to establish the Water and Sewerage Company (WASCo) and has continued to support its capacity development efforts. WASCo assumed the role of a water utility, while the formerly single-focused regulator, Lesotho Electricity Authority (which only regulated electricity), was turned into a multi sector regulator, to include regulation of water and sewerage services. These developments positioned the sector to expand affordable and sustained water service. WSIP also constructed 77 improved water points and helped to increase household water connections from 34,275 to 54,742. Since 2009, tariffs have been indexed to inflation, and cost increases have led to two separate adjustments. The tariff structure reflects an understanding of the primary importance of full cost recovery in an environment of poor infrastructure and expensive treatment options and, where possible, the need to generate funds for debt service, network improvements, and expansion. 32. The Government is also starting to look at wind energy possibilities in Lesotho. Preliminary studies indicated that Lesotho has considerable wind power potential and could become a net exporter of power based on wind power and other renewable resources. The Government has received proposals from private sector firms for the development of several wind farms in the country and the Government has signed Memorandum of Understanding (MoU) with both firms. IFC is now assisting the Government in undertaking a feasibility study for the development of three wind farms and if feasible, the investment opportunities will be offered to private sector developers through international competitive bidding. The first stage of 36 These reforms are supported by the Bank through the Water Sector Improvement Project (WSIP) with an investment of US$25.0 million and additional financing of US$13.0 million. 37 WSIP contributes US$38.0 million to the US$462.43 million Metolong Dam and Water Supply Program (MDWSP) - a multi-donor funded program geared towards contributing to the achievement of Government’s objective of sustaining socio-economic growth and development by improving water supply to the following urban centers: Maseru, Roma, Morija, Mazenod and Teyateyaneng. 11 IFC assistance involves developing a mesoscale model of the wind resources for Lesotho which would represent an important contribution to the development of wind resources in the country. As a part of this engagement, IFC is also undertaking an analysis of the gaps in the current legal, regulatory, and institutional framework in the electricity sector, with a particular focus on renewable energy. Pillar Three: Enhanced Competitiveness and Diversification 33. Though Lesotho moved 17 places up in the 2013 Doing Business ranking, it still lags behind many of its competitors as it is ranked 136th among 185 countries.38 Lesotho’s Ease of Doing Business ranking for 2013 is 136th among 185 countries, a modest improvement from its ranking of 153rd in 2012. The Bank-financed Private Sector Competitiveness and Economic Diversification Project (PSCED) supported the implementation of major reforms to improve the business environment in Lesotho. One of the major reforms was the establishment of a One Stop Business Facilitation Center (OBFC), which brings several functions under one roof. These functions include the issuance of trading enterprise licenses, industrial licenses, work permits and import permits/rebates and export visas (although a restricted list of products still require approval in the various ministries). The Trading Enterprises Regulations have been amended, approved and published since December 2011. The requirement for certificate of inspection by the Local Licensing Board has been dropped. Under this new regime, businesses that pose low risk to human health and environment are exempted from prior inspection and this helps to reduce the number of days it takes to obtain a Trader’s license by 14 days. Table 1: Doing Business Indicators and Enterprise Surveys Ease of Starting a Dealing with Registering Getting Protecting Trading Doing Business Construction Property Credit Investors Across Business Permits Borders Rank South Africa 39 53 39 79 1 10 115 Botswana 59 99 132 51 53 49 147 Namibia 87 133 56 169 40 82 142 Swaziland 123 165 41 129 53 128 141 Mozambique 146 96 135 155 129 49 134 Lesotho 136 79 140 157 154 100 144 Zimbabwe 172 143 170 85 129 128 167 Source: World Bank 2013 Doing Business Report 34. The enactment of the Companies Act, the digitization of the Companies Registry and its transfer to the OBFC, has substantially reduced the number of days it takes to start a business. The Companies Act (supported by the PSCED project) - the first since 1967 - came into force in May 2012 and has helped to streamline business registration requirements further, make provision to protect investors and strengthen the OBFC. The implementation of the 38 World Bank 2013 Doing Business Report 12 companies’ regulations will further cut down the total days to around 3 days, which would be a significant achievement. On average, it takes one day to obtain an export visa and rebate certificate and 5 days to obtain a work permit. Lesotho’s global ranking on resolving insolvency is more positive: it moved up to 71 from 73, as the recovery rate increased from 36.4% to 37.4% in the last year. Nevertheless, a number of factors that hinder private-sector growth remain at almost every business stage—accessing land, obtaining construction permits, engaging in cross- border trade with South Africa. Access to finance for MSMEs is an equally severe constraint. Credit is largely provided through micro-lenders and informal mechanisms rather than formal financial institutions. The Financial Institutions Act which provides for the regulation of the leasing industry was passed to ease access to fixed capital. The Central Bank of Lesotho (CBL) is working on the establishment of a credit bureau, to increase access to credit. Table 2: Gender Distribution of Beneficiaries of Skills and Enterprise Development Activities under PSCED Northern Region Skills Centre % Women trained 68 Men trained 32 Women trained and placed in the industry 64 Men trained and placed in the industry 36 Maseru Skills Centre % Women trained 83 Men trained 17 Women trained and placed in the industry 92 Men trained and placed in the industry 8 Gender Distribution of LEAP Beneficiaries % Small and micro enterprises owned by men 38 Small and micro enterprises owned by women 62 Medium enterprises owned by men 60 Medium enterprises owned by women 40 Large enterprises owned by men 81 Large enterprises owned by women 19 Source: Estimates from PSCED Project Implementation Unit, April 2013 35. Two skills centers supported under the project trained about 1,562 people to provide them with skills required in the local labor market and placed about 1,162 in industries e.g. textile industry. Three pilot sites for horticulture farms were supported under the project and they successfully proved that high quality stone fruits can be produced in rural Lesotho and some of the produce was exported to South Africa.39 This result will be scaled up in the follow up operation that will be delivered in FY14. The Bank and IFC also provided technical assistance to the Ministry of Tourism for the concessioning of some of its tourism assets, compilation of domestic tourism data, implementation of the proposed star grading of hotels, and tourism promotion and marketing support to the Lesotho Tourism Development Corporation (LTDC). Finally, the project supported the matching grant scheme under the 39 This is the first ever export of fruits from Lesotho. There is potential for price advantages, given that Lesotho’s harvest season is a few weeks earlier than South Africa’s. 13 Lesotho Enterprise Assistance Program (LEAP). This scheme has provided business development services to about 196 firms and associations, most of whom have reported substantial growth in sales and employment.40 36. Achieving the objective of improving access to safe all season roads and affordable transportation services for citizens across the country remains a challenge. The Bank contributed to the effort to improve accessibility to services and markets through the Integrated Transport Project (ITP) (US$38.5 million), which supported rehabilitation of both rural and urban roads, construction of two bridges on the Senqu-Senqunyane Rivers and the strengthening of institutional capacity for roads management. These interventions were expected to enhance the prospects for economic growth through the provision of an efficient and integrated transport system. Unfortunately, the targets set for improving access to all season roads have not been met; rather, a large portion of the road network suffered severe damages due to flood from heavy rains between January and April 2011. The percentage of paved roads classified as poor increased from 25 percent to 28 percent as at March 2012. However, rural beneficiaries around the Senqu- Senqunyane bridge work area have reported 46 percent improvement in access to all season roads, and 20 percent reduction in the cost of transportation. In addition, institutional capacity for roads management was strengthened by the establishment of the roads directorate; 20 road safety campaigns were held and about 100 driving school instructors and examiners were trained which helped to improve road safety awareness. Program Delivery and Portfolio Performance 37. The implementation of the program has been slower than anticipated in the CAS. As at April 14, 2013, there are 7 investment projects in the portfolio, comprising 6 IDA operations (US$111.6 million) and 1 GPE grant (US$20 million; all together amounting to a total commitment of about US$131.6 million.41 The portfolio recorded a total disbursement of about US$49.9 million (about 44.7 percent of net IDA commitment), out of which US$8.5 million was disbursed within the current fiscal year. The disbursement ratio at end of FY12 was about 9 percent.42 This low disbursement ratio reflects weak implementation capacity and lack of implementation readiness of new projects that entered the portfolio. 38. The Bank and the Government are making renewed efforts to improve disbursement. A Country Portfolio Performance Review (CPPR) meeting was organized by the Government and the Bank in November 2012. An action plan was developed and is being implemented focusing on: (i) restructuring of the problem project (Basic Education FTI Grant) in the portfolio, (ii) ensuring physical verification of civil works, (iii) strengthening the upstream 40 The LEAP beneficiaries include the following business categories: 62 percent of women owned Small and Micro Enterprises 41 Sectoral distributions are as follows: Agriculture (7.6%); Water (28.9%); Private Sector Development (6.2%); Education (15.2%); HIV/AIDS (3.8%); Health (9.0 %) and Transport (29.3%). 42 As at April 14, 2013, the disbursement ration is 14.2 percent and it is project to reach about 16 percent at the end of FY13. 14 review processes for new operations (to ensure implementation readiness and that project designs take cognizance of the low capacity environment in the country), (iv) strengthening Bank support on procurement and financial management, and (v) joint monitoring of disbursements and results. The Bank and the Government are planning to organize a series of procurement and disbursement workshops with staff from relevant Ministries and PIUs to address procurement and disbursement bottlenecks and issues related to contract management.43 39. The Bank is also looking closely at issues of governance and fiduciary safeguards in the portfolio. Important lessons have been learnt from two major incidents in the portfolio, which exposed governance and fiduciary weaknesses. These related to the: (i) Government’s discovery of financial irregularities in the FTI II education project (which closed in 2010), in which payments were made for uncompleted civil work contracts for school construction; and (ii) ineligible expenditures incurred in the Integrated Transport Project as a result of the wrongful payment of US$4.3 million to a debarred firm. The Government has taken actions to address the issues identified in both cases, and has strengthened its own internal oversight over project management. 40. The IFC will continue to act as the Government’s lead transaction advisor on the four on-going PPP projects. These mandates were signed in February and March 2012. These operations include: (a) developing a PPP project at 170 public health facilities which will address facilities management and information communication technology, including internet connectivity and telemedicine services; (b) designing and developing health care waste management PPP projects at facilities in three districts of Lesotho (Leribe, Berea and Maseru) to pilot the implementation of the Health Care Waste Management Strategic Plan prepared in 2010; (c) developing tourism PPP program aimed at the development of five tourism PPP projects, development of a PPP framework for the tourism sector in Lesotho, assistance with streamlining the tourism licensing process; and (d) undertaking a feasibility study of two wind energy sites, and if feasible, to package these as PPPs for development and financing by a private operator. 41. An active Trust Fund (TF) program complements the World Bank Group’s (WBG’s) program of lending and Analytical & Advisory Activities in Lesotho. These TFs are fully integrated with the strategy and an integral and valuable part of the Bank’s program of services, thereby enabling the Bank and IFC to deepen our assistance to the country. As of January 2013, there were 21 TF activities with a total commitment of about US$43 million and total disbursement of about US$13 million (see Annex B5).44 The bulk of these commitments come from co-financing of IDA investment operations like the ITP (US$10 million from EU) and financial intermediary funds like the GPE supporting basic education (US$20 million) and the GPOBA supporting piloting of innovative health financing using PPP (US6.5 million). The remaining TFs are small and targeted interventions (Bank or recipient executed). 43 The first session of these workshops is planned for May 2013. 44 4 new TFs became effective in FY13/Q1. 3 TFs are set to close in FY13/Q1 and a further 5 TFs will close in FY13/Q2. 15 42. The Bank and IFC are working closely with Government to strengthen partnership and donor coordination.45 Fifteen development partner agencies are active in Lesotho. Donor coordination, alignment and harmonization have improved since the formation of the Development Partners’ Consultative Forum (DPCF) in 2005.46 The Bank and the European Commission (EC) co-financed the Integrated Transport Project (ITP), and the Metolong Dam and Water Supply Program (MDWSP) with 8 other development partners.47 The Bank is participating in the General Budget Support Program (through the PRSC series) supported by EC and AfDB and the design and implementation PFM Reform Program jointly supported by the Bank, EC, AfDB and IMF. The Smallholder Agriculture Development Project (SADP) is also jointly funded by the Bank and International Fund for Agricultural Development (IFAD). The Bank mobilized FTI grant resources and partnered with Irish Aid to create the first pooled fund in the education sector.48 The IFC has mobilized about US$3.8 million from other development partners (e.g. PPAIF) to support the on-going PPP work program with the Government of Lesotho. The IFC has also partnered with a local organization – the Small, Micro and Medium Enterprise (SMME) Support Network to deliver training and advisory services to local businesses and entrepreneurs. IV. Proposed Modifications to the CAS 43. The strategic focus of the CAS remains the same. The CASPR only proposes minor adjustments to the program to reflect the priorities of the new coalition Government. The CAS is fully aligned with the NSDP. The adjustments being proposed are with respect to updating the lending and AAA program for the rest of the CAS period and revising the outcome indicators and targets to improve their alignment with the program and make them more realistic. As reflected in the results matrix (Annex 1), some indicator definitions and targets were adjusted to better capture the changes in the Government program; in a couple of results areas, where the Bank is not associated with the outcomes any longer, the indicators were dropped. 44. The CAS period of FY2010-14 covers the last two years of IDA 15 and the full three years of IDA 16. The IDA 15 allocation was approximately US$71 million (SDR44.8 million, including SDR20 million in grant and SDR24.8 million in credits) and US15 million from the Crisis Response Window (CRW). The CAS projected an IDA envelope of about US$150 million (US$60 million from IDA 15 and US$90 million from IDA 16) and US$30 million GPE grant for the period 2010-14. At the time of this CAS mid-term review, a total of US$95 million has been committed (US$63 million from IDA 15 and US$35 million from IDA 16), leaving a balance of US$55 million for the remainder of the CAS period. The GPE commitment was limited to US$20, because the Government could not meet the performance target required to access the remaining US$10 million (see Table 3 for details). 45 The Ministry of Finance leads the budget support review process with development partners 46 All resident development partners are members of the DPCF, including the World Bank. The DPCF is currently co-chaired by the UNDP and the US Embassy. 47 Including the US Millennium Challenge Corporation (MCC); the European Investment Bank; the Arab Bank for Economic Development in Africa; the OPEC Fund for International Development; the Kuwait Fund; the Saudi Fund, the Republic of South Africa; and the GoL. 48 The Bank supervises the implementation of both the FTI grant and the grant from Irish Aid under one pool. 16 45. IDA will deliver a robust program of investment projects to support the key priorities of Government.  The CAS Progress report projects an indicative IDA lending program of about US$55 million (net of the US$12 million committed to the newly approved health project) for the remainder of the CAS period (FY13-14).49 The actual allocations for this period will depend largely on the total IDA resources available, the performance of other IDA recipients, Lesotho’s CPIA rating and the performance of its IDA portfolio;  The lending program for FY13 comprises two operations with a total IDA commitment of about US$ 32 million. These include: (a) the Maternal and Newborn Health Performance Based Financing (US$12 million);50 and (b) the first in the series of programmatic Development Policy Grant (DPG) (US$20 million);51  Three lending operations will be delivered in FY14, with commitments totaling US$34.7 million. These include: (a) the second in the series of programmatic Development Policy Credit (DPC) (US$16.6 million); (b) the Private Sector Development project – a follow up operation (US$13.1 million); and (c) the Public Financial Management Technical Assistant project (US$5 million). 46. Analytical and Advisory services will continue to be the bedrock of IDA and IFC investment and policy dialogue with Government. These knowledge products cut across the three strategic pillars of the CAS and will help set the stage for developing the main themes of the next CAS.  The Public Investment technical assistance work will guide the Government in its effort to improve investment planning, implementation and monitoring;  The education and economic growth study will look at the education, training and skills development challenges that will need to be addressed to achieve the NSDP’s economic growth targets;  The private sector diversification study will look at the trends and structure of the economy of Lesotho, with a view to identifying the key challenges to economic diversification and exploring policy options for addressing the issues identified;  The Financial Sector Reform and Strengthening (FIRST) initiative will provide policy options and measures for strengthening the financial sector and contribute to a more stable, efficient and inclusive financial system;  The poverty and gender study will assess the extent and causes of poverty and inequality in Lesotho and propose a strategy to ameliorate its effects. It will also review levels and 49 The indicative allocation to Lesotho under IDA 16 (FY12-14) is about US$90 million, comprising US$40 million grant and US$50 million credit. 50 This project (Maternal and Newborn Health PBF) was approved by the Board on Thursday, April 11, 2013. 51 The Development Policy Grant (DPG) is scheduled for Board presentation on May 28, 2013. 17 changes over time and across regions in poverty indicators, assess the impact of growth and public actions on poverty and inequality, and review the adequacy of Lesotho’s poverty monitoring and evaluation arrangements; and  The IFC has completed the first pilot tender for private sector participation in health care waste management, and is working to attract PPP partners in the tourism and energy sectors. In addition, IFC continues to support Government’s need for capacity building in contract management capabilities, with a consultant working in situ throughout calendar 2013. The IFC will also explore opportunities for investment program. 47. The CAS Progress Report envisages a stable portfolio size for the remainder of the CAS period, despite the addition of new operations to the portfolio in FY13 and FY14. Three operations (two PRSCs and Lesotho New Hospital PPP GPOBA Grant) have disbursed fully and closed since the approval of the CAS in FY10. Two operations are scheduled to close in FY13 (Private Sector Competitiveness and Economic Diversification project and Basic Education FTI Grant), while two other operations will close in FY14 (HIV/AIDS Technical Assistance Project and Water Sector Improvement Project). 48. The focus of the CAS Progress Report is to scale up results from successful operations and continue to deepen engagements in sectors critical to the achievement of the CAS objectives. In this regard, the proposed lending program would include the following:  The programmatic Development Policy Grant/Credit series (US$20 million (Grant) in FY13 and US$16.6 million in FY14) will support the Government’s fiscal consolidation effort, help to improve the country’s external competitiveness with emphasis on investment climate reforms, tackle binding constraints to economic growth, help address vulnerability by improving access to service delivery and social transfers, and support the Government’s effort to undertake a diagnosis and functional review of the public service;  The Maternal and Newborn Health (MNH) Performance Based Financing (PBF) (US$12 million) will contribute to reducing maternal and child mortality by improving effectiveness of health sector spending and strengthening health systems using a performance based approach.52 The project will incentivize targeted service areas such as MNH services, address issues of human resource shortage in the health sector by focusing on maximizing the productivity and performance of existing facilities, healthcare workers, and attracting well-trained workers to health facilities in remote areas through incentive-based compensation schemes;  The Public Financial Management (PFM) TA project (US$5 million) aims to improve processes, controls and systems for budget execution (especially for payroll and procurement), accounting and reporting, and external audit; and  The Private Sector Competitiveness and Economic Diversification project (US$13.1 million) aims to remove some of the binding constraints to economic growth in Lesotho 52 The total commitment in the project is US$16 million, which include additional US$4 million from the Health Results Innovation Trust Fund. 18 by scaling up results achieved in the last operation and deepen the ongoing investment climate reforms. Table 3: Planned vs. Actual IDA Lending Program (2010-2014) CAS IDA Lending Program CAS Progress Report Lending (in US$ million) Program (in US$ million) Lending FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 HIV/AIDS TAL 5.0 5.0 PRSC II 15.0 25.0 Integrated Transport 15.0 15.0 (Additional Financing) PRSC III 15.0 18.0 Agriculture/Rural 10.0 10.0 Development Water Sector APL2 10.0 13.0 (Additional Financing) PRSC IV/DPG1 20.0 20.0 HD Project 5.0 12.0 PRSC V/DPC2 15.0 16.6 Infrastructure Development 10.0 PRSC VI 15.0 Maseru Urban Development 15.0 Project Public Financial Management Reform TA 5.0 Project Private Sector Development 13.1 and Competitiveness Project TOTAL IDA 35.0 25.0 35.0 25.0 30.0 30.0 33.0 23.0 32.0 34.7 Grants 20.0 10.0 20.0 49. Improving donor coordination, increasing complementarity of donor programs and leveraging more development partner resources will help to meet Lesotho’s increasing need for additional support. The limited size of Lesotho’s IDA envelope imposes a hard constraint on the Bank’s ability to effectively respond to Lesotho’s needs for concessionary funds, emanating mainly from its growing investments in infrastructure and disasters related to climate change. IDA’s investment in the Maternal and Newborn Health (PBF) project will complement the investments made by the US Millennium Challenge Corporation (MCC) in the renovation and equipment of health facilities in Lesotho. The Bank is partnering with the World Food Programme (WFP) to mobilize US$1 million from Global Facility for Disaster Reduction and Recovery (GFDRR) to strengthen Lesotho’s understanding of issues around future climate change and its impact on water resources and food security. It will also help strengthen early warning systems and dissemination of information on how to manage the threat and impact of climate change. 19 V. Risks and Mitigation 50. The major risks identified in the CAS remain valid. First, macroeconomic risks emanating from the continued fragility of the global economy could adversely impact upon CAS program implementation. Any decline in the country’s terms of trade, or erosion of export and fiscal revenues would challenge the country’s shock-absorption capacity, particularly in applying effective countercyclical policies and scaling up social safety nets. To reduce this risk, the Government is focusing on fiscal consolidation, addressing long standing structural weaknesses, developing alternative sources of revenue and diversifying the economy. In addition the ongoing IMF Program is supporting the rebuilding of international reserves. However, any deterioration of the macroeconomic situation, especially with respect to loss of fiscal revenues would impact adversely on the DPO program implementation and the ability of the Government to finance ongoing investment operations. Should this risk materialize, the Bank would stand ready to restructure its program to support the changing client needs. 51. Second, limited Government implementation capacity remains a major challenge to the achievement of the CAS objectives. To reduce this risk, the Bank is working with other development partners to support the Government with technical assistance to effectively implement the NSDP. In particular, the Private Sector Competitiveness and Economic Diversification project is providing technical assistance to implement key investment climate reforms; HIV/AIDS Technical Assistance Project (HTAP) is helping to build the capacity of Government and CSOs to implement the National HIV and AIDS Strategic Plan to contain and reverse the epidemic, and the on-going technical assistance to develop the National Information System for Social Assistance (NISSA) is supporting the reform of the social safety net system. The Bank and the GoL have continued to pay close attention to the performance of the portfolio through regular monitoring and periodic reviews of projects in the portfolio. 52. Third, the risk that policy reversals and weak governance could undermine development progress remains substantial. The new administration is faced with the challenge of managing a complex multi-party coalition government. This arrangement could limit the Government’s ability to build consensus around reforms that are critical for sustaining economic growth and its capacity to mobilize enough political support to implement its programs could be impaired. The new Prime Minister has re-affirmed the Government’s commitment to the strategic objectives of the NSDP and his resolve to improve communication between the Government and citizens, and implement key reforms that will help to mitigate the risks associated with weak institutions and poor governance in the country. The Bank prepared a set of policy notes that was delivered to the new Government. The Bank will continue to foster policy dialogue using its analytical works, investment operations, and coordination with other development partners. 53. And finally, the fiduciary risks to the Bank remain significant. The Bank has implemented measures to strengthen fiduciary safeguards and is currently strengthening the governance environment in all of the projects in the portfolio. The Bank is also working closely with the GoL to intensify project supervision, particularly physical verifications of civil works, and is looking into the use of information and communication technologies to enhance project monitoring and improve the mechanism for beneficiary’s feedback. 20 Lesotho Annex 1: Updated CAS Results Matrix (FY10-14) World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes PILLAR ONE: FISCAL ADJUSTMENT AND PUBLIC SECTOR EFFICIENCY Results Cluster 1: Fiscal Adjustment and Increased Public Sector Efficiency Indicator: Non-SACU revenues A wholesale revision of tax rates, charges and Targets met and activities to achieve outcome Indicator: Non-SACU balance as Ongoing Projects; including grants, increased as fines undertaken and implemented milestones are on track (see paragraph 16): Non- a share of GDP improved share of GDP SACU revenue (including grant) grew from 24.4 Baseline: Deficit of 26.8 percent percent of GDP in 2009/10 to 28.9 percent in Non-Lending Activities: Baseline: 27% in 2009 On-going reform of Lesotho Revenue in 2012/13 2010/11, 30.9 in 2011/12 and 32.5 percent in Lesotho-RSA Customs Target: 30% in 2014 Authority completed, including 53 Target: Deficit of 22.0 percent in 2012/13. Collaboration TF (Indicator is revised because Bank computerization of income tax returns, 2014/15 training of tax auditors etc. PER engagement support expenditure controls, not revenue generation.) Selected Policy Notes Indicator: Wage bill reduced as Indicator: Wage bill reduced as Measures to contain the wage bill (reducing Target on track (see paragraph 17). Wage bill share of GDP Pipeline Projects: share of GDP size of public service, eliminate vacant posts reduced from 18 percent of GDP in 2009 to 17.7 Baseline: 18% in 2009 DPG 1, DPC II etc.) developed and adopted percent in 2010/11, 16.9 percent in 2011/12, and Baseline: 18% in 2009 54 Target: 16% in 2014 PFM Project 17.4 percent in 2012/13. Target: 14% in 2014 Indicator: Capital budget Stock taken for the current portfolio of Indicator is dropped: Capital budget execution Ongoing Projects; execution investment projects, and strategy to reprogram increased from 70 percent in 2009 to 80 percent in Baseline: 70% in 2009 and improve implementation performance 2012/13. The MoF reviewed capital expenditures – developed project by project, but there is no strategy yet to Non-Lending Activities: Target: 90% in 2014 reprogram or improve performance of incomplete Public Investment 55 projects. Management Efficiency Indicator: Percentage of new Review Project appraisal Committee revived and new Indicator: Percentage of new investment projects (in number) Target revised. The Project Appraisal Committee investment projects (in number) following the new PCMP Project Cycle Management Process (PCMP) adopted (PAC) has been revived but the new PCMP is still to following the new PCMP Pipeline Projects: Baseline: 0% in 2009 be developed and adopted. Target revised to reflect Baseline: 0% in 2009 PFM Project findings from the PIM Efficiency Review report. Target: 50% in 2014 Target: 10% in 2014 53 IMF Fourth review under the three year arrangement under the ECF (December 2012). 54 IMF (December 2012). 55 Ministry of Finance budget book for 2012/13. 21 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes Results Cluster 2: Strengthen PFM, Statistics and Institutional Capacity to Deliver Better Services Indicator: PEFA P1-12 rating Sector strategies and BFPs fully costed and Target achieved. PEFA P1-12 rating improved to B Indicator: PEFA P1-12 rating Ongoing Projects; Baseline: C+ in 2009 consistent with MTEF in the 2012/13 PEFA report as Government continue Baseline: C+ in 2009 to improve on the use of multi-year perspective in Target: B in 2014 fiscal planning, expenditure policy and budgeting Target: B+ in 2014 Non-Lending Activities: Audit Bill and Public Financial Management IDF for Lesotho and Accountability (PFMA) Bill adopted Institute of Accountancy Indicator: PEFA P1-24, P1-25 PER Indicator: PEFA P1-24, P1-25 Target not met: PEFA P1-24 rating deteriorated Roll-out of the IFMIS advanced to cover all rating rating from D in 2009/10 to D+ in 2012/13 and P1-25 ministries remained a D as the quality and timeliness of in-year Baseline: D in 2009 Baseline: D in 2009 Capacity of the MoF to prepare annual budget report and annual financial statements financial statements and in-year budget continue lag. Target: C in 2014 Target: C in 2014 execution reports strengthened Capacity of the Public Accounts Committee Target not met: PEFA P1-28 rating remained Indicator: PEFA P1-28 rating Pipeline Projects: Indicator: PEFA P1-28 rating to review audit reports strengthened unchanged at D+ in 2012/13 due to weaknesses in Baseline: D+ in 2009 PFM Project Baseline: D+ in 2009 56 legislative scrutiny of external audit reports. Target: C in 2014 DPG I, DPC II Target: C in 2014 For progress on key milestones see paragraph 18 above. Indicator: Implementation of the National Strategy for the Development of Achieved. Indicator: The BoS has prepared Ongoing Projects; National Strategy for the Statistics Action Plan developed and and disseminated a six month Development of Statistics (NSDS) approved (Achieved). A new indicator is calendar for posting statistical Action Plan on track (Yes/No) added. products on the BoS website (Achieved) (Yes/No) Baseline: No calendar for posting Baseline: No NSDS Action Plan statistical products on BoS website in 2012. Non-Lending Activities: in 2009. Target: Six months for posting NISSA TA Target: NSDS Action Plan developed and under statistical products on BoS implementation in 2014. website prepared and disseminated in 2014. Pipeline Projects: DPG I, DPC II 56 Lesotho: Public Expenditure and Financial Accountability (PEFA) (Draft Report) prepared by ACE International Consultants in August 2012. 22 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes PILLAR TWO: HUMAN DEVELOPMENT AND IMPROVED SERVICE DELIVERY Results Cluster 3: Reverse Negative Trends in Health and Improve Access to Services Indicator: Annual visits made to Satisfactory progress in implementing the Target met. A total of 404,400 annual visits were Indicator: Percent of pregnant Ongoing Projects; the new national referral hospital health reform strategy, including: recorded at the Queen Mamohato Referral Hospital women delivering in health GPOBA Lesotho (including the filter clinics) (New PPP Hospital), the gateway hospital and the facilities. Hospital PPP Baseline: 164,624 in 2009 three filter clinics from October 2011 to September Baseline: 53.2 percent in 2009 Public-Private Partnership (PPP) for Queen 57 2012. Target: minimum 285,000 visits Elizabeth II Hospital in place Target: 60 percent in 2014 Non-Lending Activities: in 2014 IFC Contract Management Indicator: percent of women Performance-based contracts to NGOs piloted Data not available. Updated data will be captured in New Indicator: Average health IFC Legal Advisory using modern family planning (Dropped) the Lesotho DHS in 2014. Old indicator dropped facility quality of care score. Support to ICT and method because family planning is not directly supported by Facilities Management Number of Health facilities with Baseline: To be collected in June Baseline:35% in 2009 any Bank program. Performance-based Financing (PBF) contract 2013 under the Maternal and HRITF Impact Target: 40% in 2014 Cash incentive scheme for community health Newborn Health PBF project. Evaluation workers piloted Target: To be set after baseline Results-based financing introduced data collection Pipeline Projects: Indicator: Ministry of Health Target met. The MoH budget execution rate is Maternal and Newborn 58 (MoH) budget execution rate projected to reach 94 percent in 2012/13. Indicator Health PBF dropped because there is no Bank activity to directly PFM Project Baseline: 85% in 2008 support the capacity for budget execution in MoH Target: 90% in 2014 Indicator: Percentage of women NSP1 successfully completed and NSP2 Data not available. Indicator dropped because it is Ongoing Projects; and men aged 15-49 who received under implementation not supported and monitored by the HIV/AIDS TA HIV/AIDS TA Project HIV test in the last 12 months and project. know their result (UNGASS indicator 7) Implementation capacity to address Non-Lending Activities: HIV/AIDS epidemic in coordinated manner Baseline: 6% in 2006 improved 57 November 2012 Implementation Status and Results (ISR) report for GPOBA New Hospital PPP (P104403). 58 Interview with the Principal Secretary of the Ministry of Finance. 23 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes Target: 50% in 2014 Pipeline Projects: Indicator: Coverage of people The number of sites providing ART treatment On track but target not met. The ART coverage Indicator: Coverage of people eligible for ART increased from 171 centers in 2009 to 205 in increased from 36 percent in 2008 to 58 percent in eligible for ART Baseline: 36% in 2008 2014 2012.59 Baseline: 36 percent in 2008 Target: 60% in 2014 Target: 65 percent in 2014 Outcome: Improved access to 28 Kilometers (kms) of pipeline laid and Target achieved. People with access to piped water Indicator: Percentage of Ongoing Project clean and safe water. operational between the Metolong water supply within the program area increased from population within program target WSIP Indicator: Percentage of treatment works and Teyateyaneng (Not met 171,375 (50%) in 2009 to 273,710 (80%) in 2012. areas with piped water supply population within program target but on track – only 5.6 km of pipeline was About 77 improved water points were constructed Baseline: 50% in 2009 60 and household water connections increased from areas with piped water supply laid as at December 2012). 61 Target: 85% in 2014 34,275 to 54,742. Baseline: 50% in 2009 Target: 65% in 2014 Results Cluster 4: Build Skills for Enhanced Competitiveness and Improve Incentives Indicator: Percentage of A de-concentrated approach to school Indicator is off track and target is not met. The Indicator: Percentage of Ongoing Projects; classrooms meeting national construction that makes use of district tender percentage of classroom meeting the national classrooms meeting national Basic Education FTI quality standards increased. panels for procurement, district firms for quality standard marginally increased from 48 quality standards increased Baseline: 48% in 2008 supervision of civil works, and targeting local percent in 2008 to 49 percent by end of 2011. Baseline: 48% in 2008 small contractors introduced (Achieved) Target: 53% in 2014 Target: 53% in 2014 Indicator: Percentage of qualified Sustained operation of the Distance Teachers Data not available and old indicator not monitored Non-Lending Activities: New Indicator: Decline in primary teachers Educations Program (DTEP) and the Thaba- (Dropped) Economic and shortfall of qualified teachers at Baseline: 58% in 2008 Tseka teacher training campus (Achieved) primary level Economic Growth Target: 70% in 2014 Baseline: TBD Selected Policy Notes A three-year costed plan for education sector Target: 10 percent in 2014 PER under implementation (Achieved) Indicator: Secondary school On track. Target partially met. Secondary school Indicator revised from absolute enrollment increased Stakeholder consultation on the nature of enrollment increased from 97,900 in 2007 to numbers to percentages: Net post-basic education reform with government, 128,615 in 2011 - NER for secondary schools Enrollment Rate (NER) in Baseline: 97,900 in 2007 public and private sector conducted increased from 27 percent in 2007 to 35.8 in 2011. Secondary schools increased Target: 130,000 in 2014 (Achieved) 59 Ministry of Finance - Consolidated Aide Memoire for the Joint Annual Review of General Budget Support, April 2012 60 Minutes of Progress Meeting of December 13, 2012. 61 February 2012 ISR for Water Sector Improvement Project Phase II. 24 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes Indicator: Reform program in Preliminary policy reform program drafted Target revised to capture the NER in percentages to Baseline: 35.8 percent in 2011 post-basic education prepared and (Off track. This is expected to move forward 62 ensure consistency with Government’s reports. Target: 38 percent in 2014 new forms of funding post-basic with the preparation of a new education sector education piloted plan) Target not met; indicator dropped. The World Bank is not part of the reform program anymore. Baseline: No reform program in post-basic education in 2009 Target: Reform program in post- basic education prepared and proposals for new forms of funding the sub-sector piloted PILLAR 3: ENHANCED COMPETITIVENESS AND DIVERSIFICATION Results Cluster 5: Improve Business Environment, Trade Facilitation and Export Diversification Indicator: Time taken to register Company Bill approved and implementation Indicator is on track, but need to be revised to Indicator: Time taken to register Ongoing Projects; a business is less than 14 days. on track (Achieved) correct inconsistencies in the baseline and target. a business is less than 14 days. Private Sector Project Baseline: 40 days in 2009 Baseline: 40 days in 2009 Target: less than 14 days in 2014 Industrial Licensing Bill approved by Target: Less than 14 days in (Revised) parliament (On track) 2014 Capacity of LNDC and BEDCO in supporting Indicator: Time taken to start a Non-Lending Activities: industrial development, improving business business. environment and supporting growth of Economic Baseline: 40 days in 2012 Diversification TA MSMEs strengthened (Dropped – not monitored) Target: less than 25 days in 2014 Indicator: Time taken to get an Companies registration incorporated into On track but delayed. It takes 35 days to get Indicator: Time taken to get an Pipeline Projects: industrial license at the One Stop OBFC (Achieved) industrial licensing as at end of 2012 – no industrial license at the One Stop PSD Follow up Business Facilitation Center is less improvement from the 2009 baseline. Draft Business Facilitation Center is than 14 days Industrial Licensing Bill has been submitted to less than 14 days Baseline: 35 days in 2009 parliament for approval. Baseline: 35 days in 2009 Target: 14 days in 2014 Target: Less than 7 days in 63 2014 62 Government of Lesotho: Report on Progress towards the Performance Assessment Framework Targets, March 2012. 63 October 2012 ISR for Private Sector Competitiveness Project (P088544) 25 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes Indicator: Customs clearance Collaboration between customs authorities of Delayed, but implementation is picking up. (On Indicator: Customs clearance Ongoing Projects; through implementation of Lesotho and South Africa strengthened track). through implementation of Private Sector Project computerized single window and computerized single window and single customs clearance system single customs clearance system improved. improved. Baseline: Two customs clearance Baseline: Two customs clearance Non-Lending Activities: processes at the border in 2009 processes at the border in 2009 Lesotho-RSA Customs Target: Single customs clearance Target: Single customs clearance Collaboration process in 2014 process in 2014 Pipeline Projects: PSD Follow up DPG I, DPC II Indicator: Number of rural 10 Km of rural roads constructed (on track) Indicator revised because it was not tracked due to Indicator: Number of rural Ongoing Projects: population with access to all- wrong name of project area population with access to all- ITP season road (at project area: season road (at project area: Mantsonyane - Lesobern) 27 Km of rural roads rehabilitated (On track. Senqu-Senqunyane area) SADP (Dropped because project area is 20 Km of rural roads rehabilitated) Baseline: 0 in 2009 Senqu-Senqunyane) Target: 9370 in 2014 Baseline: 500 in 2009 Target: 15,000 in 2014 At least one private investor in the New indicator. Indicator: Number of targeted Ongoing Projects: horticulture out-grower scheme (Dropped) beneficiaries who have adopted SADP improved production technologies and/or farming practices in target Private Sector Project Agriculture investment plans implemented areas increased. Non-Lending Activities: Baseline: 234 in 2011 Economic Target: 1000 in 2014 Diversification Results Cluster 6: Reducing the Infrastructure Gap and Improving Capacity to Regulate Infrastructure Services Indicator: Quality of economic A financial and economic regulatory model Indicator dropped because it is not measurable Ongoing Projects; analysis underpinning regulatory for water and electricity sectors in place and decisions in the water and used by the operators (Achieved) electricity sectors. (Dropped) Baseline: Inadequate economic Regulatory accounting guideline in place analysis for regulatory decisions, Non-Lending Activities: (Achieved) including tariff setting, in the water and electricity sectors PPIAF Regulatory Model for Electricity Target: Regulatory decisions, 26 World Bank FY10-FY14 CAS Progress towards CAS Period Revised FY10-FY14 CAS Group Activities Milestones Outcomes and Indicators Outcomes and Milestones (FY10-FY12) Outcomes and Indicators to Achieve Outcomes including tariff setting based fully IFC – PPP Policy on strong economic rationale in the water and electricity sectors Selected Policy Notes Indicator: Mandate of Lesotho Electricity Authority (LEA) expanded to cover water regulation. Target achieved (see paragraph 27). The regulatory Pipeline Projects: authority was established. Baseline: Divided regulatory function between electricity and water. Target: Regulation by contract in the water sector and regulatory agency for electricity sector. Indicator: Quality of national User fees cover 90% of the routine and On track. 38 percent classified as good and 40 Indicator: Quality of national Ongoing Projects; road network improved periodic maintenance needs (on track – 87 64 road network improved percent classified as fair by end of 2012). ITP Baseline: 27% good and 38% fair percent of periodic and routine maintenance Baseline: 27% good and 38% fair in 2009 covered from user charges) in 2009 At April 2012, 87% of periodic and routine Non-Lending Activities: Target: 39% good and 46% fair maintenance of the national road network is funded Target: 39% good and 46% fair in 2014 Autonomous road sector management and from road user charges in 2014 Public Investment Road Maintenance Fund performing as Strengthening TA benchmarked with other African road funds PER (Dropped) Indicator: Quantity of safe, bulk 28 kms of pipeline laid and operational About 7.5 Kms of pipeline laid between Metolong Indicator: Quantity of safe, bulk Ongoing Projects; water supplied to Teyateyaneng between the Metolong and Teyateyaneng (On and Teyateyaneng as at March 31, 2013. water supplied to Teyateyaneng WSIP increased. track). increased. Baseline: 1.5 mega liters/day in Baseline: 1.5 mega liters/day in 2009 2009 Non-Lending Activities: Environmental and social safeguards program Target: 3.5 mega liters/day in for the MDWSP completed (On track) Target: 3.5 mega liters/day in Selected Policy Notes 2014 2014 64 December 2012 ISR for Lesotho Integrated Transport Project (P075566) 27 Annex A2: Lesotho at a Glance 28 Annex A2: Lesotho at a Glance (continued) 29 Lesotho Annex A3: Millennium Development Goals 30 Lesotho Annex A4: Table 1. Lesotho: Selected Selected Economic Economic Indicators Indicators, 2009/10–15/16 2009/10 2010/11 2011/12 2012/13p 2013/14p 2014/2015p 2015/16p National Income and Prices Annual Percent Change Real GDP Growth 4.7 6.8 5.4 3.6 4.4 4.2 4.0 GDP Deflator 3.9 4.6 7.5 5.5 10.7 7.5 8.7 GDP at market prices (USD Million) 1,935.5 2,317.2 2,533.1 2,434.0 2,567.4 2,730.8 2,943.4 Consumer Prices (average) 5.9 3.4 6.2 5.6 6.2 5.9 5.8 External Sector Current Account (% of GDP) (including official transfers) (3.1) (14.5) (24.2) (10.6) (14.1) (13.0) (5.3) (excluding official transfers) (37.3) (36.1) (44.0) (43.4) (43.5) (36.9) (26.5) Terms of Trade (21.3) 3.9 8.2 (6.1) 7.6 24.4 11.9 Exchange rate (Loti per U.S. dollar, average) 7.9 7.2 7.4 7.9 8.3 8.5 9.3 Foreign Direct Investment (US Million) 109.0 120.0 137.0 201.0 273.0 258.0 185.0 Gross International Reserves (US Million) 1,105 961 858 970 1,145 1,151 1,192 In months of imports 5.3 3.8 3.4 3.9 4.6 4.8 4.9 In percent of M1 176.0 144.4 138.7 159.7 171.5 167.9 169.7 Money and Credit Domestic credit to the private sector 20.7 26.9 25.1 36.2 43.8 Broad Money 11.9 1.1 5.0 16.5 12.5 Interest Rate 4.5 3.2 2.8 Savings and Investment Percent of GDP unless otherwise indicated Gross Capital Formation 29.0 28.6 34.4 38.7 39.0 34.3 30.7 Government 11.3 12.1 19.4 21.0 19.1 15.9 16.0 Private 16.6 14.9 14.7 17.4 19.5 18.0 14.4 National Savings 25.8 14.1 10.2 28.2 24.9 21.2 25.4 Government 10.3 5.0 9.9 25.0 20.8 15.2 14.1 Private 15.5 9.1 0.4 3.2 4.1 6.0 11.3 Public Sector Debt 37.0 34.4 37.8 43.1 41.3 40.8 37.9 External public debt 33.5 29.7 32.2 37.7 36.6 36.6 34.3 Domestic debt 3.4 4.7 5.7 5.4 4.7 4.2 3.7 Central Government Fiscal Operations Net lending/borrowing (3.9) (4.9) (10.3) 4.8 2.0 1.6 3.0 (excluding grants) (6.9) (12.1) (17.9) (3.5) (4.8) (0.5) 1.1 Non-SACU fiscal balance (35.0) (19.9) (22.8) (20.1) (19.3) (17.2) (15.1) Revenue 62.4 51.3 50.9 65.5 61.2 54.1 50.7 of which: grants 3.0 7.2 7.6 8.2 6.8 2.1 1.9 Expenses 55.5 44.7 45.9 45.0 44.1 40.9 38.7 Non-financial assets 10.8 11.5 15.2 15.7 15.1 11.5 9.0 Sources: IMF; Government Statistics p = projections 31 Lesotho Annex A5: Fiscal Operations of the Central Government 2009/10 2010/11 2011/12 2012/13p 2013/14p 2014/2015p 2015/16p Revenue 62.4 51.3 50.9 65.5 61.2 54.1 50.7 Tax Revenue 21.3 21.0 22.7 23.5 24.5 24.7 24.6 Taxes on income, profits and capital gains 11.9 11.7 12.7 12.8 13.2 13.2 13.1 Taxes on property 0.6 0.6 0.7 0.7 0.8 0.8 0.8 Taxes on goods and services 8.6 8.5 8.4 9.1 9.1 9.1 9.1 Taxes on international trade 0.1 0.1 0.8 1.0 1.4 1.5 1.4 Grants 3.0 7.2 7.6 8.2 6.8 2.1 1.9 Budget Support 0.0 2.2 1.5 0.9 1.3 0.4 0.4 Project grants 3.0 5.0 6.1 7.3 5.6 1.6 1.5 of which: MCC 3.4 1.8 3.0 5.4 1.6 0.0 0.0 Non-tax revenue 5.2 7.4 6.0 4.9 4.5 5.4 5.0 Property income 1.5 3.9 2.2 1.2 0.8 1.9 1.8 Sales of goods and services 3.4 3.2 3.7 3.6 3.5 3.3 3.1 Other non-tax revenue 0.4 0.3 0.2 0.0 0.2 0.1 0.1 SACU 32.9 15.8 14.6 28.9 25.4 21.9 19.2 of which: volatile component 17.9 0.8 (0.4) 13.9 10.4 6.9 4.2 Expense 55.5 44.7 45.9 45.0 44.1 40.9 38.7 Compensation of employees 21.0 19.2 19.3 19.3 19.4 18.7 17.9 Wages and salaries 17.9 17.3 16.6 16.8 16.8 16.4 15.7 Social contributions 3.1 1.9 2.7 2.4 2.6 2.4 2.2 Use of goods and services 17.1 11.5 11.5 12.8 12.5 11.0 10.2 Health care 1.9 1.7 2.7 3.8 3.5 3.3 3.3 Interest payments 0.8 0.6 0.7 0.8 1.0 0.9 0.8 Domestic 0.3 0.3 0.4 0.4 0.6 0.5 0.4 External 0.4 0.3 0.4 0.4 0.4 0.4 0.4 Subsidies 1.8 1.4 1.3 1.2 1.0 0.9 0.8 Grants 6.6 4.2 5.1 4.3 3.4 3.1 2.9 Social benefits 3.7 3.6 3.1 3.0 3.1 3.0 3.0 Other expenses 4.5 4.2 5.0 3.6 3.8 3.3 3.1 Gross operating balance 6.9 6.6 5.0 20.5 17.1 13.1 12.0 Non-Financial assets 10.8 11.5 15.2 15.7 15.1 11.5 9.0 Net lending/borrowing (3.9) (4.9) (10.3) 4.8 2.0 1.6 3.0 Transactions in financial assets and liabilities 1.2 (2.0) (7.2) 4.8 2.0 1.6 3.0 Financial Assets (1.2) (4.0) (4.6) 7.8 4.8 3.8 3.2 Domestic (1.2) (4.0) (4.6) 7.8 4.8 3.8 3.1 Deposits (1.2) (4.0) (4.6) 7.8 4.8 3.8 3.1 Central Bank (0.1) (0.1) 0.0 0.0 0.0 0.0 0.0 Commercial banks (1.1) (3.9) (4.6) 7.8 4.8 3.8 3.1 Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financial liabilities (2.4) (2.0) 2.6 3.0 2.9 2.2 0.1 Domestic (2.6) (1.5) 1.7 0.2 0.0 0.0 0.0 Foreign 0.1 (0.4) 0.9 2.8 2.9 2.2 0.1 Disbursements 1.8 0.8 2.1 4.0 4.0 3.2 1.0 Amortization (1.7) (1.2) (1.2) (1.2) (1.2) (1.0) (0.9) Statistical Discrepancy (5.1) (2.9) (3.1) 0.0 0.0 0.0 0.0 Memorandum item: Recurrent expenditure 47.7 38.3 39.6 39.0 39.0 37.4 35.4 Capital expenditure 18.6 18.0 21.5 21.7 20.2 15.1 12.3 Domestically financed 13.8 11.3 13.4 10.4 10.6 10.3 9.8 Externally financed 4.8 6.7 8.1 11.3 9.6 4.8 2.6 Non-SACU fiscal balance (including foreign capital projects) (36.8) (20.7) (24.8) (24.1) (23.4) (20.3) (16.2) Non-SACU fiscal balance (excluding foreign capital projects) (35.0) (19.9) (22.8) (20.1) (19.3) (17.2) (15.1) Core SACU fiscal balance (20.0) (4.9) (7.8) (5.1) (4.3) (2.2) (0.1) Sources: IMF; Government Statistics p = projections 32 Lesotho Annex A6: Balance of Payments 2009/10 2010/11 2011/12 2012/13p 2013/14p 2014/2015p 2015/16p Current Account (60.0) (336.0) (613.0) (258.0) (362.0) (355.0) (156.0) Trade balance (951.0) (1,062.0) (1,086.0) (1,170.0) (1,174.0) (1,043.0) (760.0) Exports fob 779.0 951.0 1,097.0 1,062.0 1,223.0 1,340.0 1,480.0 Imports fob (1,730.0) (2,013.0) (2,183.0) (2,232.0) (2,398.0) (2,383.0) (2,240.0) Services (net) (417.0) (495.0) (524.0) (466.0) (452.0) (440.0) (438.0) Income (net) 512.0 551.0 316.0 411.0 350.0 307.0 248.0 of which: interest on public debt (8.0) (7.0) (7.0) (10.0) (10.0) (10.0) (10.0) Transfers 796.0 671.0 680.0 966.0 915.0 821.0 795.0 Official transfers 652.0 501.0 504.0 802.0 752.0 651.0 618.0 Other transfers 144.0 169.0 176.0 164.0 163.0 170.0 177.0 Capital and financial account 25.0 15.0 308.0 410.0 527.0 388.0 222.0 Capital accounts 84.0 55.0 142.0 156.0 125.0 39.0 42.0 Financial account (58.0) (40.0) 165.0 254.0 402.0 350.0 180.0 Foreign direct 109.0 120.0 137.0 201.0 273.0 258.0 185.0 Portfolio investment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other investment (167.0) (159.0) 28.0 53.0 129.0 91.0 (5.0) Medium and long-term (167.0) (159.0) 28.0 53.0 129.0 91.0 (5.0) Of which: Public Sector (net) 2.0 (10.0) 22.0 69.0 73.0 60.0 3.0 Disbursements 35.0 18.0 52.0 97.0 103.0 87.0 30.0 Amortization (32.0) (28.0) (30.0) (28.0) (30.0) (27.0) (27.0) Short-term 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Errors and omissions (6.0) 70.0 333.0 0.0 0.0 0.0 0.0 Overall balance (40.0) (250.0) 28.0 152.0 165.0 33.0 66.0 Financing 40.0 250.0 (28.0) (152.0) (165.0) (33.0) (66.0) Memorandum Items: Current account (3.1) (14.5) (24.2) (10.6) (14.1) (13.0) (5.3) Trade balance (49.8) (45.8) (42.8) (47.9) (45.8) (38.3) (26.0) Capital and financial account 1.3 0.7 12.1 16.8 20.6 14.2 7.6 Overall balance (2.1) (10.8) 1.1 6.2 6.5 1.2 2.2 Gross international reserves (US millions) 1,105.0 961.0 858.0 970.0 1,145.0 1,151.0 1,192.0 (months of imports) 5.3 3.8 3.4 3.9 4.6 4.8 4.9 Sources: IMF; Government Statistics p = projections 33 Lesotho Annex A7: Key Social Indicators Latest single year Same region/income group Sub- Low er- Saharan m iddle- 1980-85 1990-95 2004-10 Africa incom e POPULATION Total population, mid-year (millions) 1.5 1.8 2.2 853.4 2,518.7 Grow th rate (% annual average for period) 2.5 1.8 1.0 2.5 1.6 Urban population (% of population) 11.8 17.0 26.9 37.4 39.4 Total fertility rate (births per w oman) 5.3 4.5 3.2 4.9 2.9 POVERTY (% of population) National headcount index .. 66.6 .. Urban headcount index .. 36.7 .. Rural headcount index .. 68.9 .. INCOME GNI per capita (US$) 440 640 1,090 1,188 1,623 Consumer price index (2005=100) 20 70 141 147 140 INCOME/CONSUMPTION DISTRIBUTION Gini index .. 63.2 .. Low est quintile (% of income or consumption) .. 1.5 .. Highest quintile (% of income or consumption) .. 66.6 .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 3.4 5.6 2.9 1.7 Education (% of GDP) 6.5 .. 13.1 5.0 4.0 Net prim ary school enrollm ent rate (% of age group) Total 70 68 73 75 85 Male 61 63 72 77 87 Female 80 74 75 73 83 Access to an im proved w ater source (% of population) Total .. 80 78 61 87 Urban .. 95 91 83 93 Rural .. 77 73 49 83 Im m unization rate (% of children ages 12-23 months) Measles 73 83 85 75 80 DPT 82 88 83 77 79 Child malnutrition (% under 5 years) .. 14 14 22 25 Life expectancy at birth (years) Total 56 57 47 54 65 Male 55 55 48 53 64 Female 58 58 47 55 67 Mortality Infant (per 1,000 live births) 82 77 65 76 50 Under 5 (per 1,000) 104 99 85 121 69 Adult (15-59) Male (per 1,000 population) .. .. 578 379 244 Female (per 1,000 population) .. .. 613 346 175 Maternal (modeled, per 100,000 live births) .. 340 530 650 300 Births attended by skilled health staff (%) .. 61 62 46 57 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 17 April 2012. 34 Lesotho Annex A8: Key Exposure Indicators 35 Lesotho Annex B1: Selected Indicators of IDA Portfolio Performance and Management As of January 15, 2013 Indicator 2010 2011 2012 201365 Portfolio Assessment Number of Projects Under Implementation a 6 7 6 6 b Average Implementation Period (years) 2.2 2.5 3.2 3.5 a, c Percent of Problem Projects by Number 16.7 14.0 33.0 14.0 Percent of Problem Projects by Amount a, c 14.0 4.0 28.0 17.0 Percent of Projects at Risk by Number a, d 16.7 14.0 33.0 14.0 a, d Percent of Projects at Risk by Amount 14.0 4.0 28.0 17.0 Disbursement Ratio (%) e 19.4 15.0 9.0 Portfolio Management CPPR during the year (yes/no) No No Yes Yes Supervision Resources (total US$) 391.0 0.0 Average Supervision (US$/project) Last Five Memorandum Item Since FY 80 FYs Proj Eval by OED by Number 29 3 Proj Eval by OED by Amt (US$ millions) 375.0 72.8 % of OED Projects Rated U or HU by Number 34.5 33.3 % of OED Projects Rated U or HU by Amt 23.7 31.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 65 As at January 15, 2013 36 Annex B2: Summary of Non-Lending Services As of January 2013 Product Completion FY Cost (US$000) Audiencea Objectiveb Recent Completions Country Assistance Strategy FY09 200 G, D, B KG, PD PPIAF Regulatory Model for Electricity FY10 287 G, D, P KG, PS Health Sector Review FY10 71 G, D, P KG, PD Policy Notes FY10 200 G, D, B KG, PS Accounting and Auditing ROSC FY11 70 G, B, B KG, PD Public Investment Management Efficiency Review FY12 150 G, D, B KG, PS IFC-PPP Policy FY12 G, D, B, KG, PD Public Expenditure Review FY13 150 G, D, P KG,PD, PS Lesotho PRSP Joint Staff Advisory Note FY13 45 B KG Selected Policy Notes FY13 100 G, D, B KG, PS IFC - Review of Government Fleet FY13 50 G PS Underway Social Safety Net Review FY13 160 G, D, P KG,PD, PS Education and Economic Growth FY13 167 G, D, P KG, PD Economic Diversification FY13 200 G, B, D, P KG, PD Developing National Information System for Social Assistance (NISSA) FY13 100 G, B, D, P KG, PS Planned Review of National Information System for Social Assistance (NISSA) FY14 50 G, B, D, P KG, PS Public Investment Strengthening TA FY14 50 G, B PS Financial Sector Development Strategy - FIRST FY14 250 G, B, D, P KG, PS, PD Poverty and Gender Assessment FY14 150 G, B, D, P KG, PD a. Government, Donor, Bank, Public Dissemination b. Knowledge Generation, Public Debate, Problem-solving 37 Lesotho Annex B3: Operations Portfolio (IDA and Grant) As Of December 31, 2012 Closed Projects 31 IDA* Total Disbursed (Active) 44.4 of which has been repaid 0.0 Total Disbursed (Closed) 472.5 of which has been repaid 175.7 Total Disbursed (Active + Closed) 516.9 of which has been repaid 175.7 Total Undisbursed (Active) 56.9 Total Undisbursed (Closed) 0.0 Total Undisbursed (Active +Closed 56.9 Active Projects Difference Between Expected and Last ISR Original Amount in US$ Actual Supervision Rating Millions Disbursements Project Project name Dev. Imp. Fiscal IBRD IDA Grant Cancel Undisb. Org Frm ID Obj. Progress Year rev’d LS-Integrated Transport P119443 MS S 2007 0.0 38.5 0.0 14.2 0.0 0.0 Project (FY07) LS-Private Sector Competitiveness & P088544 MS MS 2007 0.0 8.1 2.0 0.0 Economic Diversification Project (FY07) LS-Water Sector P108143 Improvement Project (2nd MS S 2009 0.0 25.0 13.0 29.4 0.0 Phase) (FY09) LS-HIV/AIDS Technical P107375 MS MS 2010 5.0 0.0 2.7 0.0 Assistance Project (FY10) LS-Basic Education FTI P116426 MU MU 2010 0.0 20.0 3.4 0.0 Grant (FY10) LS-Smallholder Agriculture P119432 MS MS 2012 10.0 0.0 8.6 0.0 Development Project (FY12) Overall Result 0.0 86.6 33.0 60.3 0.0 0.0 38 Lesotho Annex B4: Statement of IFC's Committed and Outstanding Investment Portfolio As of December 2012 (In US Dollar Millions) Committed Disbursed Outstanding FY **Quasi Partici **Quasi Partici Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant Total Portfolio: 0.00 0.00 0.00 0 0 0.00 0.00 0 0 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 39 Lesotho Annex B5: List of Trust Fund Operations As at January 25, 2013 (US$ ‘000) Gran t Effe cti ve Ne t Gran t Fu n ds Di sb. Tru st Fu n d # Proje ct # C l osi n g FY/Q C l osi n g FY Di sb. Tru st Fu n d Name Date Amou n t to Date Date LESOT HO INST IT UT E OF ACCOUNT ANT S- CAP ACIT Y T F094055 P 109882 DEVELOP MENT 6/1/2009 5/15/2012 Already closed 435.50 435.50 - Lesot ho: #10030 P ensions Legal and T F097951 P 124474 Regulat ory Framework 10/4/2010 7/30/2012 FY13/Q1 98.50 77.10 0.38 Lesot ho HRBF Design - T F011925 P 114859 Bank Execut ed 1/24/2012 9/30/2012 FY13/Q1 250.00 98.90 49.91 FIRST # 8006: LESOT HO - DEVELOP ING NBFI REGULAT ION AND T F093301 P 114316 SUP ERVISION (DNRS) 11/10/2008 9/28/2012 FY13/Q1 376.00 352.76 1.16 Lesot ho Social Safet y T F011136 P 129491 Net Review 11/11/2011 12/31/2012 FY13/Q2 140.70 74.08 24.14 Est imat ing t he impact of economic crisis on educat ion and skills T F096648 P 118951 development 4/15/2010 12/27/2012 FY13/Q2 230.00 229.44 - LESOT HO: Legal Advisory Support t o ICT and Facilit ies T F011909 IFC-00585527 Management 2/13/2012 12/31/2012 FY13/Q2 301.16 91.57 91.57 LESOT HO INT EGRAT ED T F090728 P 075566 T RANSP ORT P ROJECT 3/12/2008 12/31/2012 FY13/Q2 9,929.74 7,516.83 - GP OBA W3 - LESOT HO NEW HOSP IT AL P P P T F091156 P 104403 P ROJECT 9/23/2009 12/31/2012 FY13/Q2 6,250.00 1,014.53 - P P IAF LESOT HO: Renewable Energy Sect or T F012861 IFC-00585328 Gap Analysis 7/27/2012 1/31/2013 FY13/Q3 120.00 - - Lesot ho Basic Educat ion P roject EFA FT I T F097043 P 116426 Cat alyt ic Fund III 11/1/2010 5/31/2013 FY13/Q4 20,000.00 1,425.87 - GP OBA: Lesot ho Healt h T F095756 P 104403 W3 (Supervision) 11/24/2009 6/30/2013 FY13/Q4 331.63 261.44 30.29 Cust oms collaborat ion bet ween t he Lesot ho Revenue Aut horit y and t he Sout h African Revenue Aut horit y T F096070 P 125780 P hase One 1/15/2010 6/30/2013 FY13/Q4 200.00 127.24 3.51 Lesot ho-RSA Cust oms T F099906 P 125780 Collaborat ion 7/28/2011 6/30/2013 FY13/Q4 878.00 238.76 - P HRD ST AFF GRANT SUP P ORT FOR YOKO SHIMADA - 2ND YEAR T F013240 P 114859 ET C 9/1/2012 8/31/2013 FY14/Q1 99.03 - - T F011387 Lesot ho P P P Lesot ho - EFA FT I 12/5/2011 10/31/2013 FY14/Q2 1,040.00 211.37 74.94 Cat alyt ic Fund T F097905 P 116426 Supervision Grant II 9/27/2010 11/30/2013 FY14/Q2 239.79 220.32 3.19 P reparat ion of P roposed Mat ernal and Newborn Healt h P erformance- T F011924 P 114859 Based Financing 4/17/2012 3/31/2014 FY14/Q3 400.00 100.00 - T F012709 IFC-00591907 Lesot ho T ourism P P P s 6/12/2012 8/31/2015 FY16/Q1 200.00 - - T F012778 IFC-00591907 Lesot ho T ourism P P P s 7/6/2012 12/31/2016 FY17/Q2 324.00 - - Lesot ho-HRIT F Impact T F013235 P 132126 Evaluat ion 9/3/2012 12/31/2017 FY17/Q2 1,500.00 - - Total 43,344.05 12,475.71 279.09 40