Document of The World Bank FOR OFFICIAL USE ONLY Report No. 75251-RW INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A PROPOSED GRANT IN THE AMOUNT OF SDR 32.5 MILLION (US$50 MILLION EQUIVALENT) TO THE REPUBLIC OF RWANDA FOR A SECOND SUPPORT TO THE SOCIAL PROTECTION SYSTEM (SSPS-2) February 19, 2013 Human Development Department Eastern Africa Country Cluster 2 Africa Region 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. Government Fiscal Year July 1 – June 30 CURRENCY EQUIVALENTS (Exchange Rate Effective as of January 31, 2013) Currency Unit = Rwandan Franc US$1.00 = RwF 632.24 1 US$1.00 = SDR 0.64878612 Weights and Measures Metric System ABBREVIATION AND ACRONYMS AfDB African Development Bank MSC Metrological Services Center BNR Banque Nationale du Rwanda (National MTEF Medium-term Expenditure Framework Bank of Rwanda) CAS Country Assistance Strategy NGO Non-governmental Organization CET Common External Tariff NIC National Identification Card CFSVA Comprehensive Food Security and NISR National Institute of Statistics of Vulnerability Analysis Rwanda CG Central Government NSPS National Social Protection Strategy ClimDev Climate for Development in Africa NSPS-IP National Social Protection Strategy Program Implementation Plan CLSG/C Community Living Standards ODA Oversees Development Assistance Grant/Credit CPAF Common Performance Assessment PBE Post-Basic Education Framework CPI Consumer Price Index PDO Program Development Objective DFID Department for International PEFA Public Expenditure Framework Development (UK) Assessment DHS Demographic and Health Survey PER Public Expenditure Review DoL Division of Labor PFM Public Financial Management DPAF Donor Performance Assessment PFMRS Public Financial Management Reform Framework Strategy DPO Development Policy Operation PIP Public Investment Program DRC Democratic Republic of Congo PRSF Poverty Reduction Support Financing DSA Debt Sustainability Analysis PRSG Poverty Reduction Support Grant EAC East African Community PRSP Poverty Reduction Strategy Paper EC European Commission PSI Policy Support Instrument EDPRS Economic Development and Poverty RCIP Regional Communication Infrastructure Reduction Strategy Project EIA Environmental Impact Assessment RDB Rwanda Development Board EICV Include original French text in full RDRC Rwanda Demobilization and (Integrated Household Living Conditions Reintegration Commission Survey) EWS Early Warning System REMA Rwanda Environment Management Authority FAO Food and Agriculture Organization RLDSF Rwanda Local Development Support 1 Average exchange rate as of January 31, 2013. Source: National Bank of Rwanda: http://www.bnr.rw/index.php?id=204 ii Fund FARG Include original French text in full RMF Rwanda Metrological Services (Genocide Survivors Assistance Fund) FDI Foreign Direct Investment RURA Rwanda Utility Regulation Authority SDR Special Drawing Rights FY Fiscal Year SFR Statistics for Results GDP Gross Domestic Product SIDA Swedish International Development Agency GNP Gross National Product SN Sub-National HIPC Heavily Indebted Poor Countries SP Social Protection IBRD International Bank for Reconstruction and SPS Social Protection System Development ICT Information and Communication SSA Sub-Saharan Africa Technology IDA International Development Association SSN Social Safety Net IFC International Finance Corporation SSPS Support to Social Protection System IFMIS Integrated Financial Management SWAp Sector Wide Approach information system ILO International Labour Organization SWG Sector Working Group IMF International Monetary Fund SPWG Social Protection Working Group JBSR Joint Budget Support Review TFESSD Trust Fund for Environmentally & Socially Sustainable Development JSR Joint Sector Review UN United Nations LDP Letter of Development Policy UNCDF United Nations Capital Development Fund LIC Low-income Country UNDP United Nations Development Program LWH Land Husbandry, Water Harvesting, and UNECA United Nations Economic Commission Hillside Irrigation for Africa M&E Monitoring and Evaluation UNEP United Nations Environment Program MDGs Millennium Development Goals UNESCO United Nations Educational, Scientific and Cultural Organization MIDIMAR Ministry of Disaster Management and UNFPA United Nations Population Fund Refugee Affairs MINAGRI Ministry of Agriculture and Animal UNHCR United Nations High Commissioner for Resources Refugees MINALOC Ministry of Local Government UNICEF United Nations Children's Fund MINECOFIN Ministry of Finance and Economic VUP Vision 2020 Umurenge Program Planning MININFRA Ministry of Infrastructure WDI World Development Indicator MINISANTE Ministry of Health WFP World Food Program MIS Management Information System WHO World Health Organization MOU Memorandum of Understanding Vice President: Makthar Diop Country Director: Johannes Zutt Country Manager: Carolyn Turk Sector Director: Ritva S. Reinikka Sector Manager: Lynne Sherburne-Benz Task Team Leader: Alex Kamurase iii REPUBLIC OF RWANDA SECOND SUPPORT TO THE SOCIAL PROTECTION SYSTEM (SSPS-2) TABLE OF CONTENTS OPERATION AND PROGRAM SUMMARY ........................................................................................ 1 I. INTRODUCTION .............................................................................................................................. 3 II. COUNTRY CONTEXT AND PROGRESS ACHIEVED .............................................................. 5 COUNTRY CONTEXT ........................................................................................................................... 5 ECONOMIC PERFORMANCE TILL MID-2012 ................................................................................... 6 ECONOMIC PERFORMANCE SINCE MID-2012 ................................................................................ 8 MONETARY POLICY, EXCHANGE RATE AND INTEREST RATE DEVELOPMENTS................. 9 MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY .................................................. 10 POVERTY PROFILE AND MDG ACHIEVEMENTS ......................................................................... 11 III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES .................. 14 SECTOR EVOLUTION AND LINKS WITH THE NATIONAL POLICY FRAMEWORK ................ 14 PUBLIC EXPENDITURE IN THE SOCIAL PROTECTION SECTOR ............................................... 17 MAIN SOCIAL PROTECTION PROGRAMS ...................................................................................... 18 IV. LESSONS LEARNED ................................................................................................................. 20 V. BANK SUPPORT FOR THE GOVERNMENT’S STRATEGY ................................................. 22 LINK TO THE COUNTRY ASSISTACE STRATEGY ........................................................................ 22 COLLABORATION WITH THE INTERNATIONAL MONETARY FUND AND OTHER DONORS ................................................................................................................................................................ 23 RELATIONSHIP WITH OTHER WORLD BANK OPERATIONS ..................................................... 24 ANALYTICAL UNDERPINNINGS ..................................................................................................... 25 VI. PROPOSED SUPPORT FOR THE SOCIAL PROTECTION SYSTEM .............................. 26 DESCRIPTION ...................................................................................................................................... 26 POLICY AREAS .................................................................................................................................... 27 Theme 1: Strengthening the Policy Development and Management Capacity of the SP Sector........ 30 Theme 2: Integrating management information systems (MIS) for the main SP programs. .............. 30 Theme 3: Links with Early Warning Systems (EWS) ......................................................................... 32 Theme 4: Expanding Coverage and Enhancing Harmonization of SP Interventions in the Country 32 VII. OPERATION IMPLEMENTATION ........................................................................................ 34 POVERTY AND SOCIAL IMPACT ..................................................................................................... 34 ENVIRONMENTAL ASPECTS ............................................................................................................ 35 IMPLEMENTATION, MONITORING, AND EVALUATION (M&E) ............................................... 36 FIDUCIARY ASPECTS......................................................................................................................... 38 DISBURSEMENT AND AUDITING .................................................................................................... 39 RISKS AND RISKS MITIGATION....................................................................................................... 40 ANNEX 1:LETTER OF DEVELOPMENT POLICY........................................................................... 43 ANNEX 2: POLICY MATRIX AND RESULTS FRAMEWORK ...................................................... 47 ANNEX 3: IMF RELATIONS NOTE .................................................................................................... 51 iv ANNEX 4: RWANDA LOCAL DEVELOPMENT SUPPORT FUND ORGANIZATIONAL STRUCTURE ............................................................................................................................................ 52 ANNEX 5: OUTCOME INDICATOR EXPLANATORY NOTE OF MEASUREMENT ................ 53 ANNEX 6: DESCRIPTION OF THE NATIONAL SOCIAL PROTECTION STRATEGY AND THE MAIN PROGRAMS ........................................................................................................................ 57 ANNEX 7: ANALYTICAL UNDERPINNINGS OF THE SSPS OPERATION ................................ 65 ANNEX 8: COUNTRY AT A GLANCE ................................................................................................ 66 ANNEX 9: COUNTRY MAP ................................................................................................................... 69 List of Boxes Box 1: How the SSPS Reflects Good Practice Principles on Conditionality.............................................. 22 List of Figures Figure 1: GDP Growth and Contribution by Sector (%).............................................................................. 7 Figure 2: Interest rates Trends ...................................................................................................................... 9 Figure 3: The Rwandan Franc depreciated quickly in the second half of 2012 ............................................ 9 Figure 4: Inflation Trends (Year-on-Year) ................................................................................................. 10 Figure 5: Poverty Headcount Trends .......................................................................................................... 11 Figure 6: Mean time to access services in VUP and non-VUP sectors (minutes) ...................................... 16 Figure 7: VUP participating & non-participating households in VUP sectors by quintile. ........................ 16 Figure 8: Spending on SP (excluding basic health and education), real 2010/11 RwF million.................. 17 List of Tables Table 1: Public Finance (% GDP)................................................................................................................. 7 Table 2: Donor budget supports to Rwanda in 2012/13 ............................................................................... 8 Table 3: Households’ Access to Services (%) ............................................................................................ 12 Table 4: Progress towards the Millennium Development Goals ................................................................ 13 Table 5: Comparing Government Financing of the main SP Programs and Bank Budget Support for Social Protection ................................................................................................................................. 18 Table 6: Evolution of Policy & Institutional Actions for the SSPS Series of Operations as of January 30, 2013 and Status of the SSPS-2 Prior Actions. .................................................................................... 28 Table 7: Key SSPS Outcome Indicators .................................................................................................... 37 The Rwanda Second Support to the Social Protection System (SSPS-2) was prepared by a World Bank team led by Alex Kamurase and included Andrea Vermehren; Muderis Abdulahi Mohammed; Ida Manjolo; Annika Kjellgren; Birgit Hansl; Peace Niyibizi; Stephen Mukaindo; Hassine Hedda; Toni Koleva; Peter Pojarsky; Peter Isabirye; Yoichiro Ishihara, Winston Percy Onipede Cole, and Hope Nanshemeza. The peer reviewers were Theresa Jones, Afrah Alawi Al-Ahmadi and Muhammad Iftikhar Malik. v OPERATION AND PROGRAM SUMMARY REPUBLIC OF RWANDA Second Support to the Social Protection System (SSPS-2) Borrower Republic of Rwanda Implementing Agency Ministry of Finance and Economic Planning (MINECOFIN), Ministry of Local Government (MINALOC) Financing Data Grant amount of SDR 32.5 million (US$50 million equivalent). Operation Type Three years programmatic development policy operation; single-tranche. Main Policy Areas The main themes of support are: (i) strengthening policy development and management capacity of the social protection (SP) sector; (ii) integrating management information systems (MIS) for the main SP programs; (iii) establishing operational links between SP and early warning systems, with the ultimate objective of climate-proofing SP programs; and (iv) expanding the coverage and enhancing the harmonization of SP interventions in the country. Key Outcome (i) Number of SP staff within MINALOC recruited as a percentage of total SP staff Indicators needed to implement the NSPS as stipulated by law (ii) Percentage of SP staff at central level with satisfactory performance who get (a) 60% or more and (b) 80% or more [new] in their annual performance evaluation [edited] (iii) Timeliness of the VUP (a) direct support and (b) public works payments 2 [new] (iv) Percentage of identified beneficiaries who are captured in MIS-generated reports in the pilot sectors 3 (v) Percentage of primary appeals that have been resolved at first instance at the sector levels in two weeks in the VUP pilot sectors (vi) In the event of a crisis, percentage of times that districts mobilize resources in a timely fashion [within established policy parameters] to respond to the crisis (vii) Percentage of sectors covered by harmonized direct support (viii) Number of direct support beneficiary households under the VUP (ix) Number of sectors covered by direct support (x) Number of PW beneficiary households under the VUP (xi) Number of sectors covered by public works (xii) Percentage of eligible households employed on VUP public works [new] Program Development The Program Development Objective (PDO) is to support the efforts of the Government of Objective(s) and Rwanda (GoR) to enhance the effectiveness and expand the coverage of its SP system. The Contribution to the proposed operation contributes to the second strategic theme of the Bank’s Country Country Assistance Assistance Strategy (CAS) to reduce social vulnerability and build a more stable society by Strategy (CAS) ensuring that vulnerable Rwandans benefit from growth. Policies supported by the proposed SSPS-2 draw from the National Social Protection Strategy that was approved by the Cabinet in January 2011 and its Implementation Plan that was validated by the Social Protection Working Group (SPWG) in August 2011. The policies are consistent with 2012 updated sector priorities to inform the Second Economic Development and Poverty Reduction Strategy (EDPRS-2). The operation complements the Bank’s Poverty Reduction Support Financing (PRSF) series which supports the policy and institutional actions that are focused on promoting inclusive growth, economic transformation and good governance. Risks and Risk Key risks that could jeopardize the expected program’s outcomes and benefits are: (i) Mitigation vulnerability to external the environment; (ii) dependence on external foreign assistance, (iii) 2 Measured by average number of days after due date that payments are effected into beneficiary bank accounts 3 Sector when used with regard to social protection programs’ coverage (mainly the Vision 2020 Umurenge Program) means geographical subnational administrative units below the District. When used otherwise, the word means economic sectors and this will be clarified with mentioning which economic sector is referred to. 1 the challenge of intergovernmental coordination between agencies under the Ministry of Local Government (MINALOC) and between MINALOC and other agencies, and (iii) program-specific risks. Rwanda’s short- to medium-term outlook is vulnerable to external shocks as large trade imbalances persist. The Government recently developed a National Export Strategy to address its trade imbalances and has adopted measures to increase its revenue mobilization efforts. However, it appears that heightened uncertainty in the global economy, including volatile commodity prices and export demand, and the potential adverse impact of the sovereign debt crises in Europe will persist. In the context of the Low-Income Country (LIC) Debt Sustainability Analysis (DSA) framework, the Bank will continue to monitor the evolution of Rwanda’s debt indicators, which are currently below the thresholds. Approximately 40 percent of the Government budget is financed by external foreign assistance. In recent months, some budget and project financing has been suspended (including in the social protection sector) and the Government has experienced an unforeseen drop in revenues. The Government has been financing this shortfall through a combination of increased domestic borrowing and expenditure cuts and has presented a revised budget to parliament to accommodate the shortfall to date. They have also identified expenditures totaling approximately US$175m which remain contingent on approval of outstanding budget support from the multilateral development banks. The challenge of intergovernmental coordination between agencies under MINALOC as well as between MINALOC and other agencies though improved over the last five years remains a source of possible risks to maximizing effectiveness of programs. The SP sector already has an established SWG that is operational since 2008. The SWG will however need to be more effective in terms of mobilizing all stakeholders to operate in a coordinated manner. In addition, the SWG secretariat will need enhanced capacity to ensure its sustainability. Program-specific risks include: (i) the country’s limited capacity for implementing social protection interventions; (ii) the possibility for the program’s benefits to be received by non- eligible recipients as the program expands; (iii) a lack of impact data on the program and funding for a robust impact evaluation to inform future policy development; (iv) unpredictable financing, especially from external sources that could affect the expansion of the VUP; and (v) the unfinished agenda of ongoing improvements on the inter-agency coordination and harmonization. To mitigate these risks, MINALOC is taking multiple steps, some supported under the SSPS- 2 reform program and by other development partners. These steps are: (i) the development of a strategy to build capacity at all levels, including staffing and skills development among staff; (ii) the design of an integrated MIS for the main SP programs, which is an integral part of the NSPS to underpin and strengthen monitoring and evaluation (M&E) and facilitate targeting; (iii) the development of a communication strategy to disseminate information about the program to policymakers, implementers, and beneficiaries and to strengthen communication of results both locally and internationally; (iv) the revision of guidelines for both geographical and household targeting to reach the poor more effectively, and the definition of broad parameters for an envisaged impact evaluation for a selected number of SP programs; (v) the finalizing of a long-term financing strategy for the sector that will include a rolling medium-term expenditure framework to be updated annually during the period of the EDPRS-2, which will minimize the risk of unpredictable financial commitments for the sector in the medium term. The MINALOC has also developed a harmonization policy framework that provides medium term guidance for harmonizing some of the interventions in the sector. Operation ID P131666 Note: * World Bank “Rwanda Country Assistance Strategy (2008-12),� page 18 2 REPUBLIC OF RWANDA SECOND SUPPORT TO THE SOCIAL PROTECTION SYSTEM (SSPS-2) I. INTRODUCTION POVERTY AND VULNERABILITY 1. The social protection (SP) sector in Rwanda has evolved in recent years, with the Vision 2020 Umurenge Program (VUP) being one of the three flagship programs under the Government’s Economic Development and Poverty Reduction Strategy (EDPRS-1, 2008-2012). During the implementation of the EDPRS-1, the Government increased its commitment to pro-poor reforms - supported by the increased involvement of the development partners in the sector. The updated strategy (EDPRS-2, 2013-2017), which is being finalized, continues to emphasize SP, particularly contributing to EDPRS-2 targets under the rural development pillar. The strategy also regards the sector as an important vehicle for sustaining the positive human development outcomes achieved under the previous strategies. 2. While Rwanda has made great strides toward addressing its development challenges by significantly reducing poverty with a notable acceleration over the last five years, 44.9 percent of the population remains below the poverty line. Over the last five years, poverty decreased by 11.8 percentage points and extreme poverty by 11.7 percentage points. The provision of social services and public goods is steadily increasing, consistent with the desired Millennium Development Goal (MDG) targets, e.g., the delivery of health and education services. However, poverty remains high among households with many children, and child malnutrition continues to affect a significant number of Rwandans. Households that rely on farm wage labor continue to be among the poorest and have largely missed out on the benefits arising from the poverty reduction trend over the last 10 years. In addition, climate-related risks exacerbate the problems faced by the extreme poor who rely primarily on rain-fed agriculture for their subsistence. Many households also face considerable health risks despite the fact that mutual health insurance covered over 68 percent of the population in 2010/11. SOCIAL PROTECTION POLICY/STRATEGIC CONTEXT 3. In January 2011, the Government approved a National Social Protection Strategy (NSPS) that aims to establish a comprehensive and integrated SP system. The overall objective of the NSPS is to “build a social protection system that tackles poverty and inequality, enables the poor to move out of poverty, helps reduce vulnerability and protect people from shocks, helps improve health and education among all Rwandans, and contributes to economic growth.� A comprehensive NSPS Implementation Plan (NSPS-IP) developed in broad consultation with all stakeholders guides the ongoing implementation of the NSPS. Annex 6 provides more information on the NSPS and its main programs. 4. The NSPS draws on lessons from the VUP and the Ubudehe community-based programs. It seeks to expand the social assistance and social insurance programs under the VUP and other programs to cover the whole country and to explore the feasibility of incorporating similar components of other programs such as the Genocide Survivors Fund (FARG) and the Demobilization and Reintegration Program (RDRP) into the VUP in the medium term. In addition to the categorically targeted survivors’ and ex-combatants programs that operate country-wide, the VUP, which is targeted to poor households, has gradually been scaled up to 43 percent and 36 percent for direct support and public works plus micro credits respectively, and the three programs currently reach an estimated 0.5 million people among the extremely poor Rwandans. 3 5. SP spending adjusted for inflation increased by more than 13 times in real terms between 2004 and 2010/12, and spending on cash transfers alone has expanded by more than 14 times, which is a reflection of the higher priority that the sector is now given in Government spending. 4 Total public expenditure on the SP sector reached 2.8 percent (social safety nets) and 8 percent (broader social protection programs) of total expenditure in the 2009-10 budget. 5 The Government remains committed to the sector and has developed a financing strategy that includes a medium-term expenditure framework (MTEF). 6. There is now a clear definition of the SP sector, a national strategy, and programs that have been successfully expanded over the last five years - but resolving a number of second generation issues will be critical for the sector’s continued evolution and sustained success. First, some fragmentation remains among different agencies in terms of target groups, targeting criteria, benefit levels, and delivery mechanisms. Second, current targeting can be improved so as to reach a larger number of poor and vulnerable segments of the population more effectively, generally reducing inclusion and exclusion errors. Third, there is urgent need for information on the impact of SP programs to be used to inform decision-making, which calls for a strong monitoring and evaluation framework underpinned by a credible management information system. Finally, there is need to cushion the poor against disaster- related risks, which tend to worsen their vulnerability. WORLD BANK SUPPORT 7. The proposed Second Support to the Social Protection System (SSPS-2) will help the Government of Rwanda (GoR) implement its NSPS, building on the Bank’s support to the SP sector in Rwanda over the last six years that started with the Decentralization and Community Development Project (DCDP) and the Community Living Standards Grant/Credit (CLSG/C). The DCDP supported the implementation of the Government’s decentralization (second phase) and community development policies. Building on the DCDP, the CLSG/C supported the introduction of international good-practice policy reforms in the health and social protection sectors focusing on community health and the VUP respectively. 6 8. This operation further builds on the policy and institutional reforms started under the First Support to the Social Protection System (SSPS-1) that was implemented in financial year 2011/2012. As a result of the reforms, the VUP sustained its gradual expansion to cover new areas and more households, an institutional establishment to house the VUP was approved by the Cabinet, and stronger institutional coordination arrangements were put in place. In addition, the MINALOC made high-level decisions to establish an integrated MIS, to link SP programs with early warning systems, and to roll out the VUP grievances mechanism to all VUP participating sectors to further strengthen program effectiveness, governance and transparency. The Bank support has triggered strong and growing Government responsiveness toward targeting the extremely poor segments of the population. The SSPS-2 takes forward these reforms, deepening the focus on sustaining expansion and enhancing effectiveness of the SP system in the country. 9. The revised Program Development Objective (PDO) of the proposed operation is to support the efforts of the Government of Rwanda (GoR) to enhance the effectiveness and expand the coverage of its SP system. The PDO has been simplified from the original objective proposed in SSPS-1, 4 Government of Rwanda and the World Bank (2012). Social Safety Net Assessment. 5 Government of Rwanda (2010). Social Protection Public Expenditure Review. Kigali: MINECOFIN. 6 The VUP has gradually scaled up. Until July 2011, it added 30 next poorest Sectors each picked from 30 districts every financial year. Starting in July 2012, 60 sectors will be added each year under direct support to stay on track with its rapid scale- up plan (though there will be no change in the expansion plan for the public works/financial services element). Thus, the number of sectors covered in each district will no longer be uniform but will depend on district’s poverty ranking according to data from the Third Household Survey (February 2012). Total coverage for the direct support and for the public works/financial services elements was therefore 180 and 150 sectors respectively as of July 2012. 4 “… to support the Government of Rwanda’s efforts to consolidate, enhance efficiency and effectiveness, and expand coverage of its SP system�. 10. The SSPS operations support four main thematic policy areas in the SP sector: (i) strengthening policy development and management capacity; (ii) integrating the management information systems (MIS) of the main SP programs; (iii) establishing operational links between the sector and early warning systems, with the ultimate objective of climate-proofing SP programs; and (iv) expanding the coverage and enhancing the harmonization of interventions in the country. The operations support more equitable and efficient sharing of resources among the population and different programs respectively, and seek to reduce the number of shocks experienced by the poor. Additionally, it seeks to enhance poor people’s capacity to cope with shocks when they occur and aims to deal preemptively with the effects of climate change by strengthening public agencies and establishing links with disaster risk management. 11. The proposed SSPS policy support is fully aligned with the World Bank’s Africa Strategy 7 (supporting its second pillar on vulnerability and resilience) and with its global 8 and Africa Social Protection Strategies. 9 Consistent with the two latter strategies, the SSPS series aims to consolidate policy reforms and enhance the performance of the SP programs in Rwanda in line with the three main principles of prevention, protection, and promotion. RISKS 12. The key risks that could jeopardize the expected program’s outcomes and benefits are: (i) vulnerability to external the environment; (ii) dependence on external foreign assistance, (iii) the challenge of intergovernmental coordination between agencies under the Ministry of Local Government (MINALOC) and between MINALOC and other agencies, and (iii) program-specific risks. II. COUNTRY CONTEXT AND PROGRESS ACHIEVED COUNTRY CONTEXT 13. Rwanda is one of Africa’s most densely-populated countries, with an estimated population of 10.5 million10 in a relatively small landmass, but it has nevertheless managed to achieve remarkable reductions in poverty in the last ten years. Poverty fell from 58.9 percent in 2000/01 to 44.9 percent in 2010/11, while extreme poverty fell from 35.8 percent to 24.1 percent in the same period. 11 Public transfers are among the four main factors that have driven this poverty reduction over the last five years. However, analysis of the EICV3 data has shown that addressing poverty in larger households with children remains a significant challenge. And generally, there remains a lot to do in terms of extending the coverage of SP programs to poor households to maximize efficiency of poverty reduction. 12 7 World Bank. March 2011. Africa’s Future and the World Bank’s Support to It. Washington DC: World Bank. 8 World Bank. 2010. Building Resilience and Opportunity: Better Livelihoods for the 21st Century, Emerging Ideas for the World Bank’s 2012-2022 Social Protection and Labor Strategy. Mimeo. 9 World Bank. July 2011. Africa Social Protection Strategy 2012-22; Managing Risk, Promoting Growth: Developing Systems for Social Protection in Africa. Mimeo. 10 The population density was estimated in mid-2008 at 364 people per square kilometer, the highest in the Africa region with the exception of one island in the Comoros (World Bank. June 2009. Demographic Growth and Development Prospects in Rwanda: Implications for the World Bank). 11 Enquête Intégrale sur les Conditions de Vie des ménages (EICV-II). February 2012. 12 Government of Rwanda and Oxford Policy Management. EICV3 Thematic Report: Social Protection. August 2012. 5 14. Rwanda is unique in the region, and among developing countries, for its level of political and financial commitment to the SP sector, for the high level of sophistication of policy dialogue, and for the capacity in the line ministries to lead the sector dialogue effectively. The SP sector is increasingly owned and funded by the Government and its sector programming is becoming more coherent and designed with the aim of building an efficient and effective SP system. This is remarkable progress from five years ago, when the sector was fragmented, uncoordinated, and largely consisted of off-budget donor programs. 13 However, as one of the pioneers in building an integrated SP system in a low-income environment, Rwanda faces a relatively new set of policy and implementation challenges. 14 15. In spite of these achievements and strong political commitment, Rwanda remains among the world’s poorest countries where more than 90 percent of the poor live in rural areas and poverty remains deep and pervasive. Progress towards achieving the Millennium Development Goals (MDGs) is uneven, and the sheer magnitude of poverty in the country over the last decade means that many Rwandans still live in extreme deprivation. Households that rely on farm wage labor continue to predominate among the very poor, having largely failed to benefit from the overall trend in poverty reduction. Many more are vulnerable to falling into poverty as a result of shocks to their production and/or consumption. The vast majority of the population relies primarily on rain-fed agriculture for subsistence, making them vulnerable to weather-related risks and the effects of climate change. Although community-based health insurance covers the majority of the population, health risks remain a concern for many. 15 In particular, malnutrition among children remains high. ECONOMIC PERFORMANCE 16. Rwanda has a good track-record of macroeconomic management, which has resulted in strong economic performance. However, since the second half of 2012, a substantial decline in foreign assistance inflows has been creating macroeconomic and policy uncertainties. The economy has recently started to feel the impact of these decreased inflows. The main current challenge for the Government is financing the budget and mitigating an adverse impact on the economy. Over the five years until 2011, the economy grew by about eight percent per annum - one of the highest growth rates in the world. Prudent macroeconomic management through fiscal and monetary policies and including the use of aid has been the main driver of the strong economic performance. In recent years, Rwanda’s development partners have provided resources for development amounting to about 40 percent of the budget. However, since mid-2012, substantial amounts of budget support have been suspended and the Government has experienced an estimated shortfall of US$232 million out of an expected US$380 million in development-partner support (by end December 2012). The economy has started to feel the adverse fiscal impact of the suspension. An increase in domestic borrowing has led to a sharp increase in interest rates. The exchange rate has been depreciating despite an intervention by the Central Bank. To date, the Government has tried to respond to the fiscal challenges with a combination of expenditures and increased domestic borrowing. ECONOMIC PERFORMANCE UNTIL MID-2012 The Real Sector 17. The economy continued to grow in the first half of 2012. The growth rate accelerated to 8.7 percent (year-on-year) in the first half of 2012. The service sector contributed 6.6 percent to the overall growth rate, followed by agriculture (1.2 percent) and industry (0.7 percent). In the service sector, 13 Government of Rwanda and the World Bank (2012). Social Safety Net Assessment. 14 Government of Rwanda and the World Bank (2012). Social Safety Net Assessment. 15 Government of Rwanda and the World Bank (2012). Social Safety Net Assessment. 6 telecommunications, trade and public expenditure-led services together contributed almost 80 percent to the growth in the sector. 18. The economy grew by 8.1 percent annually over the period 2006 through 2011, and successfully weathered the impact of the global financial crisis (Figure 1). The growth rate decelerated from 11.2 percent in 2008 to 6.2 percent in 2009 due to the global financial crisis Figure 1: GDP Growth and Contribution but picked up to 7.2 percent in 2010 and 8.3 by Sector (%) percent in 2011. The services sector contributed 20.0 Agriculture Industry Services GDP 4.4 percent to the overall GDP growth rate followed by the agriculture sector (1.9 percent) and the industry sector (1.4 percent). 16 The high 15.0 growth in services (especially education, health 11.2 and public services) and industry (especially construction) was largely the result of the 10.0 8.7 8.3 expansionary fiscal policy that the Government 7.2 6.2 followed since 2006. The high growth rate of the 5.0 industry sector (10 percent per annum) was mostly led by construction, whereas manufacturing growth averaged a much lower 5 percent and its 6.415.013.8 7.7 1.3 6.2 5.0 8.4 9.0 4.717.68.9 3.6 5.014.1 0.0 GDP share accounted for only 6 percent (an 2008 2009 2010 2011 H1-2012 average of 2009-11). Source: National Institute of Statistics of Rwanda (NISR) Fiscal Development 19. The Government started in 2011/12 a fiscal consolidation and achieved a reduction in Table 1: Public Finance (% GDP) the fiscal deficit (including grants) to 1.5 percent 2009/10 2010/11 2011/12 2012/13 budget Actual Actual Actual Original Revised of GDP in 2011/12, from 3.7 percent in 2010/11 25.6 24.3 25.4 25.5 24.1 Revenue and grants (Table 1). 17 The 2010/11 fiscal deficit had increased Domestic revenue 12.5 13.6 14.3 15.2 14.8 to record levels (from 0.5 percent of GDP in Tax revenue 12.0 13.1 13.5 13.4 13.4 2009/10) as a result of the Government’s Non-tax revenue 0.5 0.6 0.8 1.7 1.4 Grants 13.1 10.7 11.1 10.4 9.2 countercyclical fiscal policies, which were introduced Budgetary grants 9.0 6.1 6.4 5.3 4.1 in response to the recent global financial crisis. In Capital grants 4.0 4.6 4.6 5.1 5.1 2011/12, total expenditures declined from 27.7 Total expenditure and net lending 25.7 27.7 26.6 28.0 31.6 percent in 2010/11 to 26.6 percent of GDP. Recurrent Current expenditure 14.7 14.8 14.9 14.3 13.1 Capital expenditure 10.1 12.3 11.7 13.5 13.2 expenditures remained at almost the same level, Domestic 5.1 6.2 5.6 5.7 5.4 while capital expenditures fell from 12.3 percent in 5.0 6.2 6.1 7.8 7.8 Foreign 2010/11 to 11.7 percent in 2011/12. Total revenue Net lending 0.9 0.5 0.0 0.2 5.3 collection rose by 0.7 percent of GDP. Grants Change in arrears (net reduction) -0.4 -0.3 -0.3 -0.2 -0.2 increased slightly to 11.1 percent of GDP in 2011/12. Overall deficit Excluding grants -13.5 -14.4 -12.6 -13.0 -17.0 Including grants -0.5 -3.7 -1.5 -2.7 -7.8 Deficit financing 0.5 3.7 1.5 2.7 7.8 Foreign financing 0.8 1.9 2.3 2.5 7.6 Domestic financing -0.4 1.8 -0.8 0.3 0.2 Source: MINECOFIN and World Bank staff estimates 16 The remaining four percent is due to adjustment. 17 Higher revenues were offset by higher than projected expenditures in all categories except externally financed capital expenditures. 7 ECONOMIC PERFORMANCE SINCE MID-2012 The Real Sector 20. The economy continued to grow in the third quarter of 2012, though there was a slight deceleration to 7.3 percent on a year-on-year basis. Gross fixed capital formation (i.e., public and private investment) grew by 24.5 percent (year-on-year), the highest growth rate since the first quarter of 2009. Fiscal Development 21. Foreign assistance inflows have declined substantially since mid-2012 (Table 2). Table 2: Donor budget supports to Rwanda in Less than 40 percent of committed amounts were 2012/13 actually disbursed in the first half of FY2012/13. Original July-December 2012 Revised Since July 2012, following the publication of a budget Excepted Disbursed budget UN report alleging the Government of Rwanda’s General budget support 280.3 280.3 70.8 235.7 involvement in the Democratic Republic of Agriculture 37.9 37.9 25.9 25.9 Congo (DRC), development partners have Education 34.0 34.0 34.0 34.0 suspended or delayed their planned budget Social Protection 21.6 11.6 11.6 11.6 support to Rwanda Moreover, significant Health 8.1 6.1 - - multilateral general budget support grants planned Justice 14.9 14.9 4.1 10.9 for the first half of FY2012/13 are still pending. Total 396.9 384.9 146.4 318.1 As a result, the gap between expected and actual O/w bilateral aid (%) 46.5 47.4 74.5 34.3 budget support reached US$239 million, or 10 Percent of GDP 5.4 5.2 2.0 4.3 percent of the budget by the end of December. Percent of Revised Budget 16.6 16.1 6.1 13.3 22. To respond to the fiscal pressures arising from the delays in budget support, the Source: World Bank staff estimates based on information from the Ministry of Finance and media FY2012/13 budget was revised in February 2013. The Government identified expenditure cuts of about one percent of GDP related to uncertainties about bilateral budget support. Furthermore, the revised budget includes contingent expenditures of Rwf 107.6 billion (2.2 percent of GDP) whose implementation would be subject to the disbursement of budget support from the World Bank and the African Development Bank. 23. The Government postponed some capital projects in the first quarter of FY2012/13 to the third and fourth quarters, but ensured the execution of non-discretionary expenditures such as salaries and wages, interest payment, transfers and expenditures. As a result, the overall budget execution rate in the first half of the fiscal year was 90 percent. On the financing side, the Government increased domestic borrowing (through the issuance of T-bills and accumulation of arrears). 8 MONETARY POLICY, EXCHANGE RATE AND INTEREST RATE DEVELOPMENTS 24. In response to the increase in domestic borrowing, interest rates kept rising in the second half of 2012 despite an unchanged policy interest rate. Although the Central Bank kept its policy Figure 2: Interest rates Trends interest rate (repo rate) unchanged throughout the 13.0 T-Bill, Weighted Average Rate second half of 2012 at 7.5 percent, market interest Deposit rate rates continued to rise (Figure 2). Treasury bill rates 11.0 Interbank rate rose by 310 basis points, from 9.3 percent in June Key Repo Rate 2012 to 12.4 percent at the end of 2012, as a result of 9.0 the domestic borrowing to fill the financing gap of the budget. Treasury bills worth Rwf 262.5 billion – twice the size of the same period in 2011 – were 7.0 7.5 7.0 issued in the second half of 2012. Deposit rates also 6.5 6.0 increased by 324 basis points, reflecting a decelerated 5.0 growth of bank deposit relative to credit growth, Apr-11 Nov-11 Apr-12 Nov-12 May-11 Jul-11 Aug-11 Oct-11 May-12 Jul-12 Oct-12 Jan-11 Feb-11 Mar-11 Jun-11 Sep-11 Dec-11 Feb-12 Mar-12 Jun-12 Aug-12 Jan-12 Sep-12 Dec-12 while deposit outstanding as of November 2012 fell by 2.1 percent since June 2012. As credit Source: Central Bank of Rwanda outstanding kept increasing, the Loan-to-Deposit ratio increased from 75 percent at end-2011 to 90 percent in November 2012. 25. The Rwandan Franc (Rwf) has depreciated more rapidly since mid-2012, despite the Central Bank’s interventions in the foreign exchange market (Figure 3). The exchange rate Figure 3: The Rwandan Franc depreciated depreciated by 3.1 percent in the second half of 2012, quickly in the second half of 2012 a much faster pace than the 1.6 percent depreciation Rwf against US dollar observed in 2011 and the 1.4 percent depreciation 640.0 over the first half of 2012,. The Central Bank sold US$227 million in the second half of 2012, 630.0 Depreciation squeezing the level of gross international reserves by of 1.4 % in H1-2012 20 percent to US$840 million between December 620.0 Depreciation of 1.6 % in 2011 and December 2012. As a result, gross 2011 610.0 international reserves as months of imports fell from Depreciation 5.1 months to 3.7 months during the period. 600.0 of 3.1 % in H2-2012 26. Inflation rates improved, but import 590.0 prices started to rise (Figure 4). Both headline and core inflation rates decreased in the second Daily rate Annual average half of 2012. The headline inflation rate fell to 3.9 percent (year-on-year) by December 2012, and core Source: Central Bank of Rwanda inflation fell to 2.5 percent. The food inflation rate, accounting for 35 percent of the price basket, remained high at eight percent. While headline and core inflation rates remained low in the second half of 2012, the weakening currency has started to affect import prices, which account for 20 percent of price basket. Starting in October 2010, import prices, especially international transportation prices, started to increase and reached 3.2 percent in December 2012. 9 External Sector Development Figure 4: Inflation Trends (Year-on-Year) 18.0 27. The impact of the fiscal pressures is likely 16.0 Food to be reflected in the 2012 Balance of Payments 14.0 (BoP). The 2012 BoP outcome remains to be 12.0 confirmed, but in a scenario where grants decline 10.0 while other components of the BoP (exports, and 8.0 Percent imports of goods and services) continue the trend of 6.0 Headline the last three years, the current account deficit would 4.0 Core widen. 2.0 Import prices 0.0 MACROECONOMIC OUTLOOK AND DEBT -2.0 SUSTAINABILITY -4.0 28. The most substantial risk for Rwanda is Source: Central Bank of Rwanda its heavy reliance on aid, especially grant financing. Rwanda has managed aid flows effectively and has used them for productive public investment and public services. However, given high reliance on aid (40 percent of the budget) and the importance of the budget in the economy, vulnerability to sudden shifts in aid disbursements is significant. 29. Inflationary pressure from various sources will be observed. The inflation rate could rise from domestic borrowing to finance the budget for FY2012/13 and from a rise in international fuel prices, given that there is limited room for a fiscal policy response, such as further fuel tax reductions, as happened in the previous budget. 18 Further currency weakening could also affect inflation through import prices. Food inflation will need to be carefully monitored, given that it has been in double digits over the first 10 months of 2012. 30. The Central Bank is expected to implement policies to minimize risks of monetary inflation while supporting the Government economic growth objective. To improve the monetary projection, the Central Bank plans to move to a more flexible monetary targeting framework by introducing a reserve money band of ±2 percent around the central reserve money target. This framework will attempt to guide banking liquidity and short-term interest rates to move in line with the targeted monetary policy stance. 31. The current account is expected to remain in deficit over the medium term, but deficits are expected to narrow as some of the large strategic investment projects come to completion. Exports continue to be vulnerable to fluctuations in international commodity prices, intensified by the narrow export base. The Government expects that the implementation of the recently-approved National Export Strategy, which provides a framework for increasing exports, will yield early results in terms of the diversification of exports. The import bill is expected to decline in coming years due to the declining need for capital goods, because many of the large strategic investment projects have been, or soon will be, completed. The current account deficit is projected to reduce to about 10 percent of GDP in 2013 and further decline in the medium term or in the case of further delays or suspension in donor support. 32. Rwanda’s debt outlook improved slightly because of improvements in institutional capacity. According to the IMF country report in November 2012, the conclusion of the most recent Debt Sustainability Analysis (DSA) update of May 2012 has been unchanged: Rwanda’s debt dynamics are sustainable. Rwanda’s risk of debt distress is rated as moderate rather than low on account of the vulnerabilities associated with the country’s limited export base. Rwanda’s debt indicators are not unduly 18 In the 2011/12 budget, Government introduced a reduction in excise tax on fuel, which was implemented in two phases: a Rwf50 reduction effective from July 2011 and a second Rwf50 reduction in January 2012. This helped alleviate the effect of higher international fuel prices on the rest of economy and aligned Rwanda’s fuel taxes with the rest of the region. 10 burdened by the increase in the now untied non-concessional borrowing ceiling under the IMF Policy Support Instrument (PSI) program through 2013 from US$240 million to US$255 million. Rwanda’s capacity for macroeconomic and public financial management has been upgraded from low to high. 33. Rwanda’s track record of prudent macroeconomic policies is justified by the transition to PSI-based IMF support in 2010. Rwanda successfully completed the fifth review of the PSI in November 2012. While the recent aid shortfall has brought increasing macroeconomic management challenges and uncertainties for the macroeconomic outlook, the Bank considers the country’s macroeconomic framework appropriate for development policy lending. POVERTY PROFILE AND MDG ACHIEVEMENTS 34. Poverty has significantly declined in Rwanda over the past decade. According to preliminary numbers from the most recent national household survey (EICV3) carried out in 2010/11, the poverty headcount (the national poverty line 19) decreased from 58.9 percent in 2000/01 to 44.9 percent in 2010/11. 20 Poverty is reported to have declined considerably in rural areas from 61.9 percent in 2005/06 to 48.7 percent in 2010/11. Extreme poverty is reported to have declined from 35.8 percent in 2005/06 to 24.1 percent in 2010/11. 21 The Gini coefficient also decreased slightly, from 0.52 in 2005/06 to 0.49 percent in 2010/11. The decline in poverty between 2005/06 and 2010/11 occurred during a period of high growth rates in Rwanda but also during intermittent periods of food price inflation. 35. Despite the drop in poverty, Rwanda is unlikely to achieve the 2015 MDG-1 target for poverty and hunger eradication. 22 The 2009 CFSVA and Nutrition Survey showed that Rwanda has made Figure 5: Poverty Headcount Trends 70 progress in terms of increasing food security but indicated that more investments are needed to sustain this progress. 60 58.9 56.7 It is notable that the observed decline in poverty between 50 44.9 2005/06 and 2010/11 was accompanied by a decline in Percent the proportion of female-headed households among the 40 poorest income quintiles. This appears to show that 30 female-headed households are becoming less vulnerable, which corroborates the excellent performance of Rwanda 20 with regard to the achievement of MDG-3 on gender 10 equality. 23 With regard to MDG-7 on environmental 2000/01 2005/06 2010/11 Urban Rural Rwanda sustainability, Rwanda’s natural resources are under pressure from the growing population, which is most Source: NISR evident in land degradation, soil erosion, declines in soil fertility, deforestation, wetland degradation, and a loss of biodiversity. Further economic development will increase environmental pressures by increasing energy consumption, pollution, and urbanization. Progress in increasing the proportion of population that has access to safe drinking water and improved sanitation facilities is still too slow to reach the set targets. 19 Rwf64,000 per year at constant January 2001 prices, equivalent to Rwf118,000 at 2011 prices. 20 NISR (2012), The Third Integrated household Living Conditions Survey (EICV3) available at http://statistics.gov.rw/images/PDF/Main%20EICV3%20report.pdf 21 The extreme poverty line represents the level of expenditure needed to provide the minimum food requirement of 2,100 Kcal per adult per day. The national extreme poverty threshold is Rwf45,000 (at constant January 2001 prices). 22 The 2010 MDG country report set the goals to be met by 2015 in accordance with national priorities and through the implementation of the EDPRS. 23 Within education, gender parity in literacy rates and gender enrollment parity at the primary level have been achieved. Within the public arena, the number of woman in politics, parliament, and all decision-making bodies has sharply increased over the last decade, supported by the government’s target of 30 percent female representation. For example, to date, women hold 56 percent of the seats in Rwanda's Parliament, the highest percentage of female lawmakers in the world. 11 36. Access to services is reported to have improved but remains uneven. Electrification seems to Table 3: Households’ Access to Services (%) have mostly benefitted the wealthiest households (with Safe Drinking Improved Health the proportion of wealthy families with access to Access to Electricity Water Sanitation Insurance Services electricity rising from 17.8 percent in 2005/06 to 38.8 2005/06 2010/11 2005/06 2010/11 2005/06 2010/11 2005/06 2010/11 percent in 2010/11). The proportion of households with Rwanda 4.3 10.8 70.3 74.2 58.5 74.5 43.3 68.8 access to improved water sources is reported to have Q1 0.0 0.4 66.6 68.4 42.4 64.7 33.2 52.9 increased in all consumption quintiles but the higher income quintiles seem to have benefitted more than the Q2 0.2 0.8 66.7 71.4 51.1 72.1 37.6 61.4 poorest households. The proportion of households using Q3 0.1 2.1 67.2 71.5 55.6 71.9 45.5 69.3 improved sanitation methods is reported to have Q4 0.6 5.6 68.9 73.2 60.9 74.7 47.7 74.5 increased across all consumption quintiles, with Q5 17.8 38.8 79.6 84.0 76.6 85.6 51.5 84.5 considerable increases in access by the poorest households. The proportion of the population with access Source: NISR to health insurance increased from 43.3 percent in 2005/06 to 68.8 percent in 2010/11. The increase was slightly more pronounced for females, for whom it increased from 43.5 to 69.7 percent. 12 Table 4: Progress towards the Millennium Development Goals Latest 2015 Goals Indicators 2000 2005 2008 data Target Goal 1a: Eradicate extreme poverty Proportion of population and hunger: Reduce by half the 44.9 below the national poverty 58.9 56.7 -- 23.8 proportion of people living on less than a (2011) line dollar a day Prevalence of underweight 11.4 children under 5 years old 20.3 18.0 15.8 14.5 Goal 1b: Eradicate extreme hunger: (2010) (%) Reduce by half the proportion of people Proportion of the population who suffer from hunger 37.0 below minimum level of -- -- -- 17 (2008) dietary energy (%) Net enrollment ratio in 91.7 -- 84.0 94.2 100 Goal 2: Universal primary education: primary education (2010/11) Ensure that all boys and girls complete a Primary completion rate, 79 full course of primary schooling total (% of relevant age -- 49.2 74.5 100 (2010/11) group) Goal 3: Promote gender equality and Ratio of girls to boys in 101.1 empower women: Eliminate gender primary and secondary 96.0 100.2 -- (2008) disparity in primary and secondary education (%) education preferably by 2005 and at all Seats occupied by females 56.3 17.0 48.8 56.3 levels by 2015 in Parliament (%) (2011) Mortality rate, under-5 (per 76 Goal 4: Reduce child mortality: Reduce 176.7 152.0 103.0 47 1,000) (2010) by two-thirds the mortality rate among Mortality rate, infant (per 50 children under 5 between 1990 and 2015 105.7 86.0 62.0 28 1,000 live births) (2010) Maternal mortality ratio 487 Goal 5: Improve maternal health: (modeled estimate, per 1071.0 720.0 540.0 325 (2010) Reduce by three-quarters the maternal 100,000 live births) mortality ratio Births attended by skilled 69 31.3 38.6 52.1 personnel (% of births) (2010) Goal 6: Combat HIV/AIDS, malaria, and other diseases: a) Halt and begin to reverse the spread of HIV/AIDS and b) HIV prevalence 3.8 3.1 -- 3 (2010) halt and begin to reverse the incidence of malaria and other major diseases Proportion of land covered 17.6 13.9 15.6 -- 25 Goal 7: Ensure environmental by forest (%) (2010) sustainability: a) Integrate the principles Improved water source (% 74.2 67.0 66.0 65.0 82 of sustainable development into country of population with access) (2011) policies and programs and b) reverse Improved sanitation 74.5 loss of environmental resources. facilities (% of population 40.0 49.0 54.0 (2011) with access) Sources: Millennium Development Goals Progress Report, Rwanda Country Report 2010, DHS2010, EICV3, WDI, CPAF Matrix 37. The 2010 Rwanda Demographic and Health Survey (DHS) and the EICV3 found that there has been notable progress in a wide range of health and education indicators. Maternal and children health has improved dramatically, and HIV prevalence has been contained at 3 percent since 2005. Progress in health indicators was mainly sustained by increased access to health care, largely due to the increased proximity of health centers to residential areas as corroborated by the Government report on the EICV3. However, more progress still needs to be made with respect to nutrition given that malnutrition and stunting remain among the most serious health problems in Rwanda. Nationwide, 44 percent of children under the age of 5 are stunted, and 17 percent are severely stunted. Rwanda has made progress in expanding access to education, with primary school enrollment having increased from 86.6 percent in 2005/06 to 91.7 percent in 2010/11. Also, the primary school completion rate increased from 52 percent in 2006 to 79 percent in 2010/11. If this progress continues, then there is a possibility of the related MDG target being achieved by 2015. However, indicators for secondary and tertiary education are still lagging behind. 13 III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES SECTOR EVOLUTION AND LINKS WITH THE NATIONAL POLICY FRAMEWORK 38. Rwanda’s Social Protection sector has evolved from various uncoordinated programs and projects that were mainly off-plan and off-budget until about five years ago to an increasingly coordinated sector under an integrated National Social Protection Strategy (NSPS). The strategy provides a single sector framework around which the Government, development partners, and civil society organizations align their support, and is fully consistent with the National Policy Framework. 39. The first comprehensive National Social Protection Strategy (NSPS) was developed through a consultative and participatory process involving the Government, civil society, and development partners and was adopted by the Cabinet in January 2011. The NSPS aims to consolidate the various SP programs into a system and increasingly harmonize their implementation through the Rwanda Local Development Support Fund (RLDSF). The RLDSF was established in November 2010 with a mandate to coordinate the implementation of local Government support activities in the areas of local economic development and social protection. In addition, the strategy intends to expand the coverage of SP programs and enhance their efficiency and effectiveness supported by the SSPS series of operations. 40. A detailed NSPS Implementation Plan (NSPS-IP) was developed and approved in August 2011, reflecting the Government’s strong leadership and stakeholder commitment to achieving the desired results. The IP outlines policies related to seven key outcomes: (i) leadership, coordination, and capacity on SP across the Government; (ii) evidence-based SP policies; (iii) expansion of the coverage of gender-sensitive SP programs to ensure a minimum income for poor families; (iv) strengthening systems for delivering and monitoring of SP programs, including linking them to early warning systems; (v) sector-wide financial systems to support the delivery of SP programs; (vi) social development support to poor families and communities to rise out of poverty; and (vii) dissemination of lessons learned. 41. Significant progress has been made in implementing the NSPS, resulting in expanded coverage of SP programs and progress in addressing the main challenges in the sector, though some of them will only be solvable in the medium term. The NSPS draws on lessons from the implementation of the VUP and the Ubudehe community-based program, mainly regarding aspects of the cash transfers, labor-intensive public works, micro-credits, and participatory community development initiatives. It seeks to expand the social assistance and social insurance programs nationwide and to explore the feasibility of integrating similar components in other programs (such as the Genocide Survivors Fund and the Demobilization and Reintegration Program) into the VUP in the medium term. 42. Despite the good progress with policy/strategy development and a plan to cover more poor and vulnerable populations, resolving a number of second-generation challenges will be critical for the sector’s continued evolution and sustained success. The main challenges are (i) to further strengthen and sustain coordination within the sector; (ii) to increase the effectiveness of targeting to reach as many poor households as possible as programs are expanded; (iii) to undertake robust impact evaluation of the main SP programs to provide information for future policy making; and (iv) to increase capacity for policy development and for the implementation of programs. These challenges are further elaborated below. More program-specific details are provided in the sub-section on the main social protection programs later in this section. (i) Enhancing coordination within the social protection lead ministry (MINALOC) and its affiliated agencies and between different ministries. Coordination of SP programs has improved since the creation of the Sector Working Group (SWG) by MINALOC. This group consists of representatives of all of MINALOC’s affiliated agencies and some line ministries that oversee SP programs and it meets regularly. This coordination effort has yielded good results so far. The culmination has been six monthly Joint Sector Reviews (JSRs) that take stock of progress in implementing the NSPS as well as 14 progress in the EDPRS commitments. The SWG process is a crucial ingredient for the increased coordination and effectiveness of the sector. To sustain and enhance this progress, there is a need further to strengthen coordination between MINALOC and its affiliated agencies, and to enhance links with more ministries and institutions outside of MINALOC. These two actions are critical to completing the unfinished coordination agenda – which includes the establishment of a common and consistent reporting framework, the harmonization of similar program elements where feasible and appropriate to increase efficiency and effectiveness, and extending the social protection dialogue to the district-level Joint Action Development Forums (JADF - coordination forums that bring together state and non-state actors in development at the district level to discuss all matters pertaining to district development and poverty reduction programs) to encourage dialogue and coordination at the local level. (ii) Increasing targeting effectiveness of the VUP. Of the three main SP programs overseen by MINALOC, the VUP (introduced in 2008) is the main Government program, with which the rest of Rwanda’s safety net programs are expected to be integrated in the medium term as it is gradually expanded to cover the whole country. Therefore, the effectiveness of the VUP’s targeting is a crucial element in the sector for the foreseeable future. The VUP uses the Ubudehe community-based targeting methodology, which uses community social maps to allocate each household to one of six income and poverty-related categories differentiated by qualitative criteria. Each year village-level communities identify the poorest households and classify them within the six categories in terms of levels of need of income support and subsidies for health insurance. VUP beneficiaries for direct support and public works are picked from the Ubudehe categories 1 and 2, which contain the extremely poor households. The Government recognizes the need to ensure the accuracy and fairness of the VUP targeting methodology over time. In 2009, MINALOC introduced a VUP targeting list form to improve and facilitate the use of the Ubudehe methodology, accompanied by a series of training programs on the form and its application for trainers and implementers in the field. In July 2009, the first targeting survey in 90 VUP sectors was conducted, and feedback from the survey revealed that training in the consistent application of the targeting criteria was a significant step in reducing the scope for debate about eligibility of households. Based on the July 2009 targeting list, a household poverty survey was implemented in a sample of 2,790 households, which provided preliminary feedback on the effectiveness of Ubudehe targeting. The data showed that the VUP targeting system was then reaching a population that was objectively extremely poor: for example, almost 80 percent (78.9 percent) of the Ubudehe 1 and 2 populations was found to be extremely poor, either in terms of income or human poverty. In addition, analyses of the 2009 targeting listings and household poverty survey revealed that there were several ways in which the targeting could be further improved. For example, the use of land ownership as a criterion for eligibility was dropped because this variable was largely irrelevant in urban areas as it did not take into account the ability by the owner to use the land, and it yielded no meaningful insights on the productivity of land, which varies from place to place. The need to strengthen the targeting system has become even more relevant as the Government began to implement an ambitious expansion plan of social protection programs over the last three years. The EICV3 results as reported in the Thematic Report on Social Protection (August 2012) found that under the VUP, districts are most successful in identifying sectors where distance to some amenities, especially the health facilities, is greater. The report notes that households in VUP sectors are further away from health facilities and markets than those in non-VUP sectors across the country (see Figure 6 below). In addition, EICV-3 results indicate that the VUP, by some consumption measures, was reasonably effective in identifying the poorest households within targeted geographical areas (sectors) (see Figure 7). 15 Figure 6: Mean time to access services in VUP and Figure 7: VUP participating & non-participating non-VUP sectors (minutes) households in VUP sectors by quintile. Source: EICV3 Thematic Report – Social Protection, 2012 Source: EICV3 Thematic Report – Social Protection, 2012 Nonetheless, the report also revealed that some 25 percent of the VUP beneficiaries were in the two better-off quintiles. This result highlights a need to further review and strengthen the targeting system. However, the likely actual magnitude of the challenge needs to be considered together with other factors such as (i) the fact that some among the 25 percent beneficiaries are households benefitting from the financial services component, who do not have to be under categories 1 and 2 and are often in categories 3-5, (ii) some of the public works beneficiaries who are eligible do not actually effectively benefit due to the limited number of jobs on public works projects, and (iii) the land criteria that was dropped in the third year of implementation previously lowered eligible households number in categories 1 and 2. (iii) Strengthening Monitoring and Evaluation through systems and impact surveys. The main social protection programs in Rwanda regularly monitor their implementation and produce annual reports on their deliverables compared with their commitments at the start of each year. The Government has already established a framework for a sector-wide Management Information System (MIS) and has decided on its broad parameters, constitution, and location. An assessment of the requirements for establishing the MIS has been conducted, and its design is now completed. The MIS will be an essential tool for storing and sharing data throughout the SP sector, thus strengthening the M&E framework overall. In addition, there have been attempts to measure program impacts on the welfare of their beneficiaries yielding evidence that the main SP programs are succeeding in delivering benefits to the poor. However, no robust impact assessments have been carried out to assess the effectiveness of the programs to inform SP policymakers – both in Rwanda and internationally for future decision making. Therefore, as the SP system evolves, it must be accompanied by robust impact evaluations to ensure that reliable information is collected on their results. (iv) Increasing capacity for SP policymaking and implementation at the ministry, agency, and local Government levels. Lessons learned from the implementation of the VUP over the last four years indicate that there is still a need to strengthen capacity throughout the SP sector, particularly as the expansion of SP has involved new skill requirements, and also because the sector suffers from high levels of staff turnover. The decentralized way in which SP programs are implemented will require sustained investments in capacity building and communication at the central, agency, and local government levels. 16 43. The Government is currently developing the second Economic Development and Poverty Reduction Strategy (EDPRS-2, 2013-2017). This strategy builds on the achievements of the first PRSP (2002-2005) and EDPRS-1 (2008-2012) and is intended to further accelerate both inclusive growth and poverty reduction. It aims to build on and sustain achievements in foundational human development sectors while making significant investments in the key policy areas namely: (i) economic growth; (ii) rural development; (iii) productivity and youth employment; and (iv) accountable governance. The SP sector is one of the priority sectors that will contribute to achievement of EDPRS-2 targets and the latter seeks to expand coverage of the SP system among the poor while encouraging sustainable graduation. PUBLIC EXPENDITURE IN THE SOCIAL PROTECTION SECTOR 44. Spending on social protection has increased significantly in aggregate terms over the last eight years. An aggregated analysis in the Rwanda Social Safety Net Assessment (June, 2012) indicates that between 2004 and 2010/11 spending across all areas of social protection has increased by more than 13 times in real terms, by over 14 times for cash transfers alone, and almost 17 times for basic health and education. 24 Figure 8: Spending on Social Protection (excluding basic health and education), real 2010/11 RwF million Source: Rwanda Social Safety Net Assessment (2012) 45. The Government has shown sustained commitment to financing the expanding social protection agenda over the last five years and in the medium-term framework. This has been particularly evident in its financing of the gradual expansion of the VUP to cover more geographical areas and more beneficiary households. It is further reflected in its medium-term commitments - financing the VUP requirements, maintaining financing for the main categorically targeted programs, and harmonizing elements from some programs to reduce waste and duplication. 46. Total Government financing of the main social protection programs under MINALOC with IDA’s SP development policy lending during the same period are compared in Table 5. The table illustrates the Government’s considerable commitment in terms of the ownership and financing of its SP programs. As noted, the IDA support under the CLSG-2/3 contributed about 12 percent of the total Government spending in the SP sector during FY2009/10 and FY2010/11. The SSPS three-year operation of a total of US$100 million contributed to 63 percent of the total Government SP spending in FY2011/12 and is expected to contribute 61 percent and 11 percent of total SP spending for FY 2012/13 and FY 2013/14, respectively. The higher financing in FY2011/12 reflected the desire for a frontloading 24 The 2009 mini budget has not been annualized. The data presented here include on-budget donor spending on the VUP but excludes any off-budget donor spending on other areas. 17 arrangement by the Government. What is evident is that over time, as IDA funding has increased, the Government’s own resources to the sector have increased as well. Table 5: Comparing Government Financing of the main SP Programs and Bank Budget Support for Social Protection SOCIAL PROTECTION GOVERNMENT FINANCING Government SP Financing 2009/10 (actual) 2010/11 (actual) 2011/12 (actual) 2012/13 (budget)  2013/14 (budget) Main SP Programs in US$ in US$ in US$ in US$ in US$ 1. VUP 16,541,353 18,045,113 22,957,625 33,634,311 38,174,943 2. FARG 23,934,371 28,360,922 31,811,598 33,160,878 36,821,401 3. RDRC 5,559,783 2,869,209 5,975,555 6,014,760 7,915,776 4. MINALOC Decentralized  [vulnerable groups] 2,264,054 1,808,370 2,649,560 8,912,743 9,699,492 Total Government Financing 48,299,561 51,083,614 63,394,338 81,722,692 92,611,613 IDA Support CLSG-2 CLSG-3 SSPS-1 SSPS-2 SSPS-3 In US$ 6,000,000 6,000,000 40,000,000 50,000,000 10,000,000 IDA as % of total Sector Financing 12% 12% 63% 61% 11% Note: Exchange rate (as of November 27, 2012)665 Source: Ministry of Finance 2012 MAIN SOCIAL PROTECTION PROGRAMS 47. There are currently four main programs in the SP sector administered by MINALOC, namely the VUP (Vision 2020 Umurenge), FARG (the Genocide Survivors Assistance Fund), the RDRP (Rwanda Demobilization and Reintegration Program), and the MINALOC Decentralized Funding Program. These programs are summarized below. Annex 6 provides more details on the NSPS and the programs that constitute the strategy. The Vision 2020 Umurenge Program (VUP) 48. This program promotes economic growth that is increasingly pro-poor and inclusive. It is composed of four components, namely: (i) labor-intensive public works that provide support to extremely poor families with under-employed adults through creation of employment opportunities and encouraging households to save and to invest in productive activities; (ii) direct support to the poorest households unable to supply labor; (iii) financial services initiatives intended to help poor households to access subsidized credit to invest in income-generation and entrepreneurial activities; and (iv) sensitization (community awareness programs on other Government programs) and skills development. 49. Institutional Arrangements. The VUP is currently the main SP program under the Rwanda Local Development Support Fund (RLDSF), a semi-autonomous agency under MINALOC. The creation of the RLDSF involved consolidating the activities that were earlier implemented under the Common Development Fund (CDF), the VUP, and the Ubudehe Program. The agency has already been staffed at the leadership and technical levels and is expected to coordinate other cash transfer programs in the medium term. A task force undertook an investigation of issues and options for merging the cash transfer components of the three main programs (the VUP, FARG, and the RDRC), including the feasibility of harmonizing their targeting and delivery mechanisms. The VUP is implemented through decentralized administrative structures (districts and sectors) that were introduced in 2000 and further reformed in 2005-2006 and for which a strong consolidation agenda was launched in early 2011. Consistent with the Government’s decentralization policy, the implementation of the VUP is being planned and coordinated by the sector administrations with strong community participation at the local level while district authorities provide oversight, technical support, and supervision. 50. Coverage and Targeting. The gradual scale-up plan launched at the program’s inception was revised in 2011 to make it more ambitious and this has been sustained through 2012. Out of a total of 416 sectors country-wide, the VUP has been implemented in 180 sectors (direct support) and 150 sectors 18 (public works and financial services) since July 2012. The program covers 122,028 households (direct support and public works) as of June 2012, with an estimated 500,000 household members, while the financial services component was reaching over 55,000 people as of June 2012. The VUP uses the Ubudehe community-based methodology to target eligible beneficiaries based on predetermined benefit criteria. Specifically the Ubudehe targeting method uses poverty maps (which pre-dated the VUP) to allocate each household to one of six income and poverty-related categories differentiated by well-defined qualitative criteria. Each year village-level communities identify the poorest households that are most in need of income support from local and donor sources and subsidies for health insurance. A country-wide electronic Ubudehe database has been developed and has undergone a validation process to ensure that it is credible for use not only in SP targeting but also for other social programs that are increasingly seeking to use the data to identify eligible beneficiaries. 51. Transfers and Graduation. Households, rather than individuals, receive transfers. It is envisaged that households should graduate from direct support and move to the public works component and then to the financial services support. However, in practice, households eligible for direct support are likely to continue to require this help over time, as those households lack any members who are physically fit enough to work. New guidelines are being developed by the RLDSF to guide the VUP on targeting, exit, and graduation. The guidelines will also clarify between when households exit or graduate from the program as well as when they can move from one category to another or out of the program altogether. The Genocide Survivors Support Fund (FARG) 52. The Genocide Survivors Support Fund (FARG) was established in 1998 to provide assistance to needy genocide survivors in five main areas: health, education, direct income support, shelter, and income-generating activities. Recent assessments have revealed that some of the FARG programs (for example, the education support program) will be shut down in the medium term as all eligible beneficiaries will have graduated by then. The assessments have also informed the development of a forward-looking strategy for continued relevance or for mainstreaming some programs based on achievements so far and other developments in the SP sector, like the VUP expansion. 53. Institutional Arrangements, Coverage, Benefits and Targeting. FARG is established as an executive agency under MINALOC. It is semi-autonomous but is overseen by a Board of Directors that is selected by the Cabinet from different institutions that have different relationships with the agency. Beneficiaries are identified and selected at the community level, facilitated by the sector’s Executive Secretary. A list is drawn up of “needy� genocide survivors who fit a certain set of criteria. 25 This list is then validated by the Sector’s FARG Committee and then by the district. The number of beneficiaries fluctuates from year to year, driven mainly by the demographic profile of beneficiaries. It is expected that the total number of eligible direct support beneficiaries, which was at 23,000 in 2010, will continue to decrease. Unlike the VUP transfers, transfers are made to individuals. The amount previously at RwF5,000 per month has been harmonized with that of the VUP (RwF7,500 per month per individual). In addition to the direct support beneficiaries, the program also supports other interventions in the areas of shelter provision, income generation activities and education programs. The Rwanda Demobilization and Reintegration Program (RDRP) 54. The RDRP was established in 1997 to provide social protection interventions to eligible ex- combatants. The Rwanda Demobilization and Reintegration Commission (RDRC) oversees the planning 25 These criteria are as follows: (i) orphans under 21 adopted by a family with no property to provide an income; (ii) double orphans who are currently attending school with no place to stay during the school holidays or who are staying with poor family members unable to meet their basic needs; (iii) elderly survivors unable to work; or (iv) genocide survivors with physical disabilities or chronic diseases unable to work and/or with no income. 19 and implementation of the RDRP. The overarching goal of the RDRP is to contribute to the consolidation of peace in the Great Lakes Region of east and central Africa and to foster unity and reconciliation within Rwanda. This involves providing beneficiaries with initial income support for a pre-determined period plus longer-term cash transfers based on the severity of the recipient’s disability. The RDRP also provides support in the areas of health, education, shelter, and income-generating activities. 55. Institutional Arrangements. The RDRP is overseen by a permanent commission (the RDRC) that is appointed by the Government and is headed by a Chairman and composed of a number of other members called commissioners who are selected based on merit and their suitability for performing the functions of the commission. The RDRC is a semi-autonomous institution under MINALOC. 56. Eligibility, Beneficiaries, Data Management and Transfers. Eligibility for transfers is based on the level of vulnerability of disabled former combatants in addition to a medical screening every two years. Vulnerability is determined by the sector Executive Secretaries in charge of Social Affairs, guided by a set of specific guidelines. The subsistence allowances are significantly higher in value (ranging from RwF 20,000 to RwF 50,000) than the direct support provided by FARG or the VUP, while the total number of beneficiaries is small at 2,534 (as of 2010). The RDRP database consists of a register of demobilized combatants (ex-FAR, ex-armed groups and regular army). It also maintains a record of allowances (for example, basic needs kit, recognition of service allowance, reintegration grants, and monthly allowances to the disabled and chronically ill). The register of ex-combatants is currently maintained in the Excel format. 26 The MINALOC Decentralized Funding Program 57. The MINALOC Decentralized Funding Program provides small earmarked transfers to districts for the purposes of social protection. While this program did not operate according to pre- determined criteria and relied on instructions from the central ministry in earlier years, the program is now operating in non-VUP sectors and targeting category 1 and 2 beneficiaries based on the submission of project requests. The program can finance a range of different activities but tends to focus on income- generating activities. There is some monitoring consistent with guidelines provided about two years ago. More efforts need to be put into strengthening systematic monitoring at the district level and ensuring effective consolidation at the central level. In addition, options could be explored to harmonize the program with other SP interventions to enhanced efficiency and reduce duplications, if any. IV. LESSONS LEARNED 58. This section builds on lessons learned under the SSPS-1 program document (pages 25-27). Additional emerging lessons can be classified in four main areas namely: sector strategy and its implications, capacity and technical assistance, measuring and communicating impact and targeting effectiveness. 59. Sector strategy and implications for the sector. Existence of the sector strategy has played an important role in encouraging harmonization and alignment. Given that the strategy and its implementation plan were done through a highly consultative way, the core development partners in the sector have responded positively by supporting Government priorities as outlined in the strategy. The sector has thus become increasingly harmonized and coordinated in regular dialogue with development partners, and in implementation and joint evaluations. 26 A desktop application using a relational database – developed using SQL Server 2005 and Visual Studio 2008 – is currently under development. The modules that have been developed include ex-combatant register and payroll. A new high-capacity server has been procured and is being set up to host database. 20 60. Capacity and technical assistance. There remain capacity gaps at the central and local levels of Government to realize full implementation of the strategy and achieve desired progress toward building a sustainable SP system. While existing decentralized government and management structures facilitate the implementation of community-targeted social protection interventions and help to identify implementation challenges, it has also become evident that technical assistance needs to be sustained in the medium term if program management and implementation needs to continue uninterrupted. Government should strengthen arrangements for capacity and skills transfer and hasten capacity development efforts to nurture national capacity as part of the capacity building plan that is being implemented from this year. An additional recurrence has been continued delays in procurement of highly desired international technical assistance even when funding was available. This signals the fact that availability of TA funding is not sufficient if desired TA is not procured timely. Yet, even when procured, TA management is important to ensure capacity building and skills transfer for Government staff. 61. Measuring and communicating impact. Over the last five years, the sector has made several achievements on policy development and coverage of the poor. The sector has established itself as an important contributor to the inclusive growth agenda. But what has probably come out as a critical missing element has been the capacity of the sector to measure impact of its programs and communicate it both internally and externally. This aspect is being addressed by prioritizing impact evaluation effective this year. This operation has also identified a number of benchmarks to closely monitor progress in impact evaluation efforts. Linked to this, the introduction of the MIS, once operational, will play an important role in providing credible data for a robust impact evaluation. 62. Targeting effectiveness. Targeting remains one of the key aspects that need sustained monitoring. Previous evidence from quick targeting assessments showed that Rwanda’s community-based Ubudehe system is fairly successful in identifying poor households. On the other hand, recent analysis of data from the EICV3 suggests that about 25 percent of the VUP beneficiaries are from the two highest income quintiles of the population. There is clearly room to increase the effectiveness of the current community-based targeting method. The SSPS-2 supports introduction of poverty raking for districts to allocate scores in determining how many geographical sectors are picked each year from each district. The number of sectors picked will now vary from each district based on levels of poverty in districts. 63. Strong cross-sectoral coordination and collaboration between MINALOC and MIDIMAR will be essential for establishing links between SP programs and early warning systems. MIDIMAR is a relatively new ministry and has recently developed a National Disaster Management Policy (NDMP). This policy calls for proactivity by other institutions concerned to coordinate and ensure links between disaster risk management (DRM) and social protection during the evolution and implementation of both Rwanda’s DRM strategy and the NSPS. It is also essential that MIDIMAR provides regular technical assistance and guidance in the preparation and implementation of DRM-related components of SP programs. This operation supports the development of SP policy guidelines as a contribution to MIDIMAR’s disaster management policy. 64. To ensure that the operation is successful and that there is strong ownership of the agreed policy actions, the operation is applying good practice principles on conditionality as outlined in Box 1. 21 Box 1 : How the SSPS Reflects Good Practice Principles on Conditionality Principle 1: Reinforce ownership. The Government of Rwanda has a strong track record of committing to and implementing reforms. The SSPS-2 supports the government’s National Social Protection Strategy (NSPS) whose development was led by the government and benefitted from inputs and contributions from all development partners active in the SP sector. The SSPS-2 further supports the VUP, which was also developed in a participatory manner involving extensive consultation with a wide range of stakeholders (including civil society, farmers’ organizations, and NGOs). The government’s coordination with development partners and its preferred modality for donor funding is defined in the Aid Policy, which articulates the government’s vision for improving its aid management and policies. Principle 2: Agreement upfront between the government and other financial partners on a coordinated accountability framework. Under the government’s leadership and in close collaboration with development partners, a Common Performance Assessment Framework (CPAF) was adopted in 2008. The CPAF is based on the policy matrix of the EDPRS and represents a time-bound and monitorable action plan. The CPAF matrix is used to monitor the progress of the reform program supported by the SSPS. In addition, the government and the budget support donors have agreed to use the Public Expenditure Framework Assessment (PEFA) to evaluate progress in public financial management. However, the prior actions in the SSPS-2 are derived from the NSPS menu of policy and institutional actions and its implementation plan, which are a more up-to-date agreement between the government and its development partners to ensure that the operation supports the latest overall strategic direction in the sector. In addition, the SSPS-2 supports policy areas and actions that are key to advancing the move towards a SWAp, which was agreed between the government and its development partners in the NSPS and implementation plan. Principle 3: Customize Bank support to Rwanda’s specific circumstances. The SSPS-2 is fully aligned with the priority areas of the government’s EDPRS. It has benefitted from the extensive consultations that the government held in order to identify these priority areas. The SSPS-2 was also prepared after extensive consultations with the SP sector working group and with local governments. Each key sector covered by the EDPRS coordinates its sector policies through a sector working group that includes both governmental and non-governmental representation. Because the government has established a track record in budget support and project implementation, the Bank regards budget support as a good instrument to address a broad range of issues while strengthening government systems. Principle 4: Choose actions that are critical for achieving results as conditions for disbursement. The SSPS-2 includes prior actions that represent critical initial steps for ensuring successful implementation of the NSPS. V. BANK SUPPORT FOR THE GOVERNMENT’S STRATEGY LINK TO THE COUNTRY ASSISTANT STRATEGY 65. The proposed operation is in alignment with the Bank’s Country Assistance Strategy (CAS) for Rwanda as discussed by the Board in August 2008 and supports the Government’s vision of Rwanda becoming a middle-income economy by 2020. The CAS is framed around two strategic pillars: (i) promoting economic transformation and growth and (ii) reducing social vulnerability. It is closely aligned with the Government’s Economic Development and Poverty Reduction Strategy (EDPRS) and follows the Government’s preferences for engaging with the Bank in coordination with other donors. 66. The CAS Progress Report (February 2011) confirmed that Rwanda’s progress towards achieving the CAS outcomes has been largely positive although important challenges remained. While a new CAS (FY13-16) is expected to be completed in the first half of FY14, it appears that the pillar which the SSPS series supports ‒ reducing social vulnerability ‒ remains relevant to Rwanda and the portfolio. 67. The SSPS series focuses on the second CAS strategic theme, promoting a reduction in social vulnerability by ensuring that the most vulnerable Rwandans benefit from growth and by helping 22 Rwanda to make further progress in building a more stable society. 27 This complements the Bank’s Poverty Reduction Support Financing (PRSF) series that focuses on the first strategic pillar of the CAS, promoting economic growth through: (i) sustainable growth and private sector development supported by science, technology, and innovation and (ii) improvements in service delivery with a focus on economic and infrastructure services and on increasing the availability of skilled labor. COLLABORATION WITH THE INTERNATIONAL MONETARY FUND AND OTHER DONORS 68. The World Bank and the IMF continue to work closely to ensure coordination and consistency in their macroeconomic and structural policy programs. While the IMF advises the Government on the size of the spending envelope in its budget discussions, the Bank focuses its attention on the composition of spending and its alignment with the EDPRS. A parallel Bank series of development policy operations supports a subset of the Government’s reform program, which in turn complements the IMF’s Policy Support Instrument (PSI). In June 2010, the IMF approved a three-year Policy Support Instrument (PSI) for Rwanda. It aims to consolidate macroeconomic stability while reducing Rwanda’s aid dependency by: (i) maintaining a sustainable fiscal position through increased revenue mobilization; (ii) strengthening monetary and exchange rate policies to ensure low and stable inflation; (iii) reducing the vulnerability of the financial sector by strengthening banking supervision and deepening the financial sector by enhancing access to credit; and (iv) diversifying the export base and improving the business environment. Rwanda’s fifth PSI review was completed successfully in June 2012. The macroeconomic framework presented in this document is consistent with the one used for the recent joint Bank-Fund Debt Sustainability Analysis (DSA) and the fifth PSI review. 69. Since 1970, IDA has committed a total of US$2.1 billion to Rwanda, of which 37 percent has been in grants and 63 percent in credits. 28 Forty-five investment projects and 10 development policy operations have been implemented to date. IDA’s current active portfolio comprises 8 projects/programs with a net commitment of US$312.3 million, of which approximately US$107 million (33 percent) had been disbursed as of January 30, 2013. 70. Rwanda has a high level of donor engagement, and the Government puts a high priority on aid coordination and effectiveness. Rwanda uses financial assistance effectively and therefore continues to attract many donors. There are currently 12 bilateral, 3 multilateral (the African Development Bank, the European Commission, and the World Bank), and about 16 UN organizations active in Rwanda. In addition, a vast number of NGOs and vertical funds (including the Global Fund) are funding major activities. A considerable amount of aid is still bypassing the budget. The Government has been proactive in initiating better donor coordination and is supporting a number of donor coordination forums. 71. The Government, in collaboration with development partners, has set up a Development Partners’ Performance Assessment Framework (DPAF) to review the performance of bilateral and multilateral donors against a set of indicators of the quality and volume of development assistance to Rwanda. In the last DPAF review for FY11/12, Rwanda’s total overseas development assistance came to US$938 million from 15 donors, with 29 percent of this provided in budget support. The DPAF exercise is based on donors reporting data on their aid data and programs providing information on the DPAF indicators, all of which is gathered in a development assistance database. The results of the DPAF FY11/12 in comparison with the previous year demonstrate that there remains a considerable challenge in the way aid is provided, particularly through the project modality. Efforts are needed to ensure that project support, even if budget support is Government’s preferred aid modality, is provided in line with the global commitments made in Paris and Accra. This requires increased policy and procedure changes on part of Development Partners as well as the Government. 27 World Bank. 2008. Rwanda Country Assistance Strategy, 2009-12. Washington DC: World Bank, p. 18. 28 World Bank Client Connections as of December 2012 23 72. In the SP sector, the Bank has been active in the sector working group, which is the main mechanism within which SP policy and implementation issues are discussed between the Government and active donors in the sector. The sector working group was heavily involved in the development of the NSPS as well as the implementation plan for the strategy. The sector working group usually conducts two annual reviews, one that reviews progress made towards the goals and targets of the strategy the year before and the other that looks forward. The Bank actively participates in these reviews, and the design of the SSPS program and the areas it supports are derived from this exercise. 73. The SSPS team has also ensured regular consultations are made with the SP core development partners on every mission and whenever there are emerging issues for discussion that requires views from other development partners. In particular, the team has ensured consistent briefing and sought views of DFID, EC, SIDA, UNICEF (on behalf of ONE UN) and ILO during the processing of the SSPS-2 as an integral country-level coordination and information sharing mechanism. 74. The Government recently started developing a Strategic Capacity-Building Plan with support from the Tony Blair Africa Governance Initiative and the World Bank. The Government recognizes that building the capacity of its institutions, organizations, and people is essential for delivering its long-term vision of development. The initiative will focus on the Government’s own delivery priorities and plans to combine delivery and capacity building at the same time. Through the proposed SSPS operation, the Bank will complement this work in the social protection area by building on its previous capacity building assistance provided through the recently closed Decentralization and Community Development Program (DCDP) and the earlier CLSG/C series. The Bank complementary support will include supporting development of a sector capacity building strategy for the sector which adheres to the overall overarching capacity building agenda. RELATIONSHIP WITH OTHER WORLD BANK OPERATIONS 75. The SSPS complements and draws from a number of other operations in the Bank’s Rwanda portfolio in the areas of human development (health and education), poverty reduction and economic management, and agriculture and rural development. Of these operations, the main ones include: the PRSF8-10 series launched in FY12; the Land Husbandry, Water Harvesting, and Hillside Irrigation (LWH) Project; and the Statistics for Results (SFR) Project. The SSPS series builds on the Bank’s previous Community Living Standards Grant (CLSG) series and complements the ongoing PRSF series, which has a strong emphasis on increased agriculture production and on infrastructure and investments. The SSPS, by focusing on the targeting of extremely poor households in the pro-poor components of the Government’s VUP program, will contribute to the Government’s goal of reducing poverty and will complement similar efforts under the PRSF series in agriculture and investments. 76. The proposed operation will continue to be implemented in parallel with the LWH, particularly its labor-intensive public works component, which provides both employment and earning opportunities for the poor and at the same time, creates and maintains community assets. Because the VUP was introduced earlier than the LWH, its implementation generated information useful to the LWH, particularly on setting and re-setting wage rates and eligibility criteria for the participants in the public works program. Moving forward, the SP team will seek to strengthen collaboration with the Agriculture and Rural Development teams on the LWH to share lessons learned and to advise the Government on how best to enhance the impact of public works on the ground. MINALOC is also eager to lobby for the adoption of the labor-intensive public works approach in other sectors and views the example of these interventions in agriculture and rural development as key to achieving both social protection and the other sectors’ objectives. 77. This proposed operation also complements the Statistics For Results (SFR) project, which aims to improve the quality and increase the timeliness of statistical information, and to make it 24 more accessible to users, by assisting Rwanda in improving its management information system (MIS) for social protection programs. As part of the NSPS, fundamental work will begin on developing an integrated MIS with a unified beneficiary registry, which will be a major step forward towards harmonization and alignment in the sector. This work will be closely coordinated within MINALOC and other agencies, such as the National Institute for Statistics of Rwanda (NISR) and the Rwanda Development Board (the ICT division). This function builds on the CLSG/C series that helped to develop a social protection module specifically for the VUP program to be included in the NISR’s household survey (EICV-3). 78. The SSPS series will also be coordinated with the Bank’s Rwanda Feeder Roads Development Project (FRDP) both during its preparation and implementation. The FRDP is expected to go to the Board in early FY14. Most of the feeder roads that will be financed will be in rural areas. The implementation of this project will be timely for the envisaged focus of the EDPRS-2 on rural development, an area to which the updated SP strategy will contribute. In particular, there will be close collaboration on promoting the VUP public works approach within the rural roads subsector to increase the number of poor households with able-bodied members that can benefit from the labor-intensive public works elements of the project. 79. Finally, the SSPS series will be coordinated with the Demobilization and Reintegration Program. The program is now part of the social protection sector and its oversight commission actively participates in the SP SWG. The RDRP is one of the programs under the sector whose systems and processes are expected to be increasingly coordinated and as much as possible harmonized within the SP system. The SSPS operations will thus be coordinated with both the Bank support project as well as the overall Government program. ANALYTICAL UNDERPINNINGS 80. The SSPS-2 is anchored in past and ongoing analytical and technical assistance work. In addition to the analytical work that was explained in the SSPS-1 PD (page 33, table 5) and presented in Annex 7, recent work includes the following: (i) the Third Household and Living Conditions Survey (EICV-3 February 2012), which provided Rwanda’s latest poverty and vulnerability profile; (ii) the EICV-3 Thematic Report on Social Protection (August 2012), one of the several thematic reports that provided detailed implications of the EICV-3 poverty report from a sectoral perspective and provided indicative insights on performance of the VUP; (iii) the World Bank’s Africa Social Protection Strategy (2012-2022), on managing risk and promoting growth through developing systems for SP in Africa; and (iv) the Rwanda Social Safety Net Assessment final report (June, 2012) which provided detailed information on the landscape of safety net programs in the country. 81. The operation further draws from: (v) EDPRS-2 thematic background notes (2012); and (vi) the EDPRS-2 Priorities Paper on SP, both of which provided preliminary policy and strategic options on the SP sector, among others, and on whose basis the SP Strategy update and the EDPRS-2 will be developed. Finally, (vii) the June 2012 Rwanda Economic Update was a useful ingredient to the economic outlook that has informed the macroeconomic section in this DPO. 25 VI. PROPOSED SUPPORT FOR THE SOCIAL PROTECTION SYSTEM DESCRIPTION 82. The SSPS series is closely related to the National Social Protection Strategy (NSPS 2011). It supports the policies that the Government considers as important for the implementation of the strategy. The SSSP series supports the objectives of the EDPRS by: (i) helping poor and vulnerable households to benefit from economic growth through participation in productive activities by increasing their consumption, market activity, and access to financial systems; (ii) contributing to slowing down population growth by increasing household income security; (iii) directly tackling extreme poverty by providing cash transfers to poor households with limited labor capacity, supporting their economic empowerment, and improving their nutrition and increasing their access to health and education services; and (iv) increasing efficiency in tracking poverty reduction through the development of a national, consolidated MIS. 83. The proposed SSPS-2 operation builds on the previous CLSG/C series and the SSPS-1 reforms. It also draws on good practice design features of the VUP program under the EDPRS, which were supported by the Bank’s CLSG/C series. In SP, this support focused on introducing global good practices in the design of policies and operations into the VUP, which included the provision of public works opportunities, cash transfers (direct support), and financial services to poor citizens in pilot poorest areas of the country. In the health sector, the CLSG/C supported policies and strategies that expanded poor households’ access to selected reproductive, maternal, and child health interventions at the community level. 84. The SSPS-1 supported the Government in: (i) strengthening the policy development and management capacity of the recently-established RLDSF to better facilitate implementation of the NSPS; (ii) advancing the policy underpinning the two-tier SP Working Groups; (iii) advancing the overall policy framework for institutionalizing an integrated national MIS for the main SP programs; (iv) rolling out of the VUP complaints and appeals mechanism in all the VUP participating sectors after being piloted in the program start sectors; (v) developing a policy implementation plan and an estimated budget for the full coverage of the VUP direct support and public works components and identifying the next 60 sectors to be covered in 2012; (vi) and establishing an institutional framework for data sharing, dialogue, and implementation of early warning systems in SP programs. 85. The above policy and institutional reforms have translated into strong results on the ground. The establishment of the Rwanda Local Development Support Fund (RLDSF) has rendered systems stronger and increased capacity for implementation of the VUP including revised implementation manuals and guidelines, strengthened monitoring and reporting frameworks and streamlined targeting and beneficiary identification processes. The RLDSF currently has a team of experts in cash transfers, public works and other cross cutting functional areas with a clear policy and procedures for managing its human resources pool including replacements resulting from staff movements for different reasons. 86. Coordination in the sector has also further been strengthened. Under the existing SWG coordination framework, thematic subcommittees have been operationalized over the last year creating space for joint analysis of policy, financing and systems issues to generate recommendations, many of which have been implemented. In addition, the framework for creating links with disaster risk management has been established and has culminated in the joint development of policy guidelines to provide guidance for social protection programs’ response to disasters and other shocks-induced vulnerabilities. 26 POLICY AREAS 87. This section presents the policy reform supported by the SSPS series, including changes introduced to the design of the operation during preparation of the SSPS-2. The revised Program Development Objective (PDO) of the proposed operation is to support the efforts of the Government of Rwanda (GoR) to enhance the effectiveness and expand the coverage of its SP system. The PDO has been revised following internal Bank reviews from the original objective proposed in SSPS-1, “… to support the Government of Rwanda’s efforts to consolidate, enhance efficiency and effectiveness, and expand coverage of its SP system�. Internal management reviews recommended simplification of the PDO to focus it on elements of the SP system that are measurable and to which the policy reforms critically contribute. In addition, efficiency was deemed a more long-term objective to which effectiveness contributes while consolidation is an integral part of the effectiveness agenda. 88. The proposed SSPS operation will support four main policy areas in the SP sector: (i) strengthening the policy development and management capacity of the SP sector; (ii) integrating the management information systems (MIS) for the main SP programs; (iii) establishing operational links between SP and early warning systems, with the ultimate objective of climate-proofing the SP programs; and (iv) expanding the coverage and enhancing the harmonization of SP interventions in the country. 89. All the triggers agreed with the Government for the SSPS-2 DPO were retained as prior actions and a new prior action on VUP targeting was introduced to leverage Government efforts to increase program effectiveness in reaching extremely poor areas, based on the latest household and living conditions survey results. The new prior action required MINALOC to introduce EICV-3 district poverty ranking to select the number of sectors in each district for VUP scale-up. There were some minor wording adjustments to firm up the meaning of policy actions with respect to the current realities in the sector. 90. The policy action on “development of an updated social protection policy� was dropped from the SSPS-3. The main reason for this change is that, following the development of the NSPS and its IP in 2011 as well as the strategy update in 2012/13 for the EDPRS-2, it was deemed appropriate that a new policy would serve usefully if developed with substantive implementation of the NSPS and evidence of impact to provide lessons for new policy directions. 91. In addition, four triggers have been introduced under the SSPS-3 as follows: (i) MINALOC to introduce and start implementation of learning, training and mentoring objectives in performance contracts of all social protection staff – to sustain efforts to strengthen institutional and staff capacity in line with implementation of the capacity-building strategic plan; (ii) MINALOC to conduct a detailed review of the Ubudehe poverty categorizations and decide on a more objective definition for the categories to increase targeting effectiveness at household level – consistent with the desire to strengthen VUP targeting effectiveness at the household level; (iii) MINALOC to determine common indicators for the main social protection programs and collect information on them in six-monthly Joint Sector Reviews – to allow practical assessment of implementation of a systems approach in the sector, and (iv) MINALOC to introduce a web-based and/or telephone complaints and appeals mechanism - to broaden and enhance options for raising grievances among both beneficiaries and non-beneficiaries within communities and sustain transparency and accountability mechanisms that were started under the CLSG. Lastly, a benchmark has been introduced on impact evaluation to deepen dialogue in the area and contribute to the need to hasten efforts for generation of impact data. 92. Table 6 provides an evolution of the policy and institutional actions to date over the SSPS series of operations. Full details are provided in the Policy Matrix in Annex 2. 27 Table 6: Evolution of Policy & Institutional Actions for the SSPS Series of Operations as of January 30, 2013 and Status of the SSPS-2 Prior Actions. SSPS-2 Prior Actions Medium Term SSPS-1 Prior Actions SSPS-3 Triggers SSPS-3 Triggers SSPS-2 Triggers Proposed [Pre-appraisal] and Status [Prior Objectives (Completed) Under SSPS-1 Under SSPS-2 under SSPS-1 Actions are bold] Enhancing Effectiveness Theme 1: Within the framework of the MINALOC to develop and 1.1 MINALOC to develop and MINALOC to adopt MINALOC to introduce in its Strengthening the approved NSPS, Cabinet to adopt a strategy for adopt a strategic plan for policy guidelines for performance contracts and start policy establish and MINALOC to strengthening capacity strengthening capacity at central districts on how to implementation of learning, development and operationalize the Rwanda building at central and local and local government levels to monitor and oversee training and mentoring management Local Development Support government levels. improve policy development, key SP projects in line objectives of all social protection capacity of the SP Fund (RLDSF). program design and with the overall NSPS. staff - new. Sector implementation of social protection interventions. [Completed] Within the framework of the MINALOC to finalize 1.2 MINALOC to develop and MINALOC to finalize Trigger was dropped as explained approved NSPS, MINALOC policy guidelines to adopt policy guidelines to and Cabinet to validate in paragraphs 88-90. to finalize policy guidelines operationalize district mainstream social protection into and approve a revised for the two-tier Social SPWGs. broader development dialogue National Social Protection Sector Working through Joint Action Protection Policy. Groups. Development Forums (JADF)* at districts - to enhance management capacity at districts and sectors levels and facilitate more effective implementation. [Completed] 1.3. MINALOC to introduce Trigger was added MINALOC to conduct a detailed EICV-3 district poverty ranking under SSPS-2 as review of the Ubudehe poverty to select the number of sectors in explained in categorizations and decide on a each district for VUP scale-up to paragraphs 88-90. more objective definition for the strengthen effectiveness in categories to increase targeting reaching extremely poor effectiveness at household level - geographical areas (new). new. [Completed] Theme 2: MINALOC to decide on a MINALOC to approve the 2.1 MINALOC to conduct a MINALOC to install MINALOC to install and pilot Integrating policy framework for design of the electronic detailed MIS requirements and pilot the Social the Social Protection MIS in a management institutionalizing MIS, platform of the Social assessment, develop and approve Protection MIS in a selected number of Sectors. information including policy discussion Protection MIS that will the MIS electronic platform selected number of systems (MIS) for on (i) the institution that will facilitate monitoring, design to facilitate monitoring and Sectors. the main SP have the mandate to host the evaluation and impact evaluation of the main social programs national Social Protection assessment. protection programs. [Completed] MIS and (ii) the structure of the cross-government team that will oversee the development of the SP MIS. 28 MINALOC to define and approve Benchmark was added MINALOC to finalize the baseline broad parameters for the design of a under SSPS-2 as survey of the impact evaluation - robust impact evaluation of selected explained in paragraph new. SP programs to inform policy 88-90. development and dialogue within government and with development partners (new). [In draft] MINALOC to roll-out the MINALOC to develop and 2.2. MINALOC to revise and MINALOC to approve MINALOC to introduce a web- VUP appeals and complaints approve a policy that extends approve the VUP appeals and the national roll-out of based and/or telephone mechanism to all operational the VUP appeals and complaints mechanism and extend an appeals and complaints and appeals sectors. complaints mechanism to their implementation to the FARG complaints mechanism mechanism - new. other key social protection and RDRC social protection for key social protection programs and decision on programs to enhance their programs. need for pilot testing. effectiveness and governance. [Completed] Theme 3: MINALOC to establish an MINALOC to develop and 3.1. MINALOC to develop policy MINALOC to develop Development of detailed Establishing institutional framework for approve a risk financing guidelines on how social and adopt the policy contingency plan for social operational links sharing of data, dialogue and policy to provide guidance protection programs should guidelines for social protection programs to be able to between SP and implementation of linking on social protection respond to disaster risks in the protection programs scale up support for selected early warning early warning systems to the programs response to context of the National Disaster under disaster and beneficiaries in program areas systems SP programs. emergencies and disasters. Management System. [Completed] emergency situations during disaster. clearly outlining roles of other institutions involve in disaster and emergency response. Expanding Coverage Theme 4: MINALOC to approve a MINALOC to develop and 4.1. MINALOC to approve policy Start implementation of MINALOC to determine Expanding the policy implementation plan approve a policy to align guidelines to harmonize cash the harmonized direct common indicators for the main Coverage and and estimated budget for the cash transfer components of transfer social protection support policy. social protection programs and Enhancing the full coverage of the VUP the RLDSF, FARG and interventions of the RLDSF, collect information on them in Harmonization of Direct Supports component RDRC. FARG, and the RDRC to promote six monthly Joint Sector Reviews SP Interventions and identify the next 60 efficiency and coherence in the - new. in the Country Sectors to be covered in sector. [Completed] 2012. MINALOC to approve a MINALOC to develop and 4.2. MINALOC to approve a MINALOC to decide to MINALOC to extend formal policy implementation plan validate a revised national revised labor-intensive public introduce (Yes or No) operationalization of the labor- and estimated budget for the labor intensive public works works strategy that will increase an employment intensive public works approach expansion of the VUP Public policy framework, drawing uptake of beneficiaries by guarantee policy for the into at least two other economic Works component and on experience from VUP and widening the scope of PW Public Works sectors e.g. agriculture and rural identify the next 30 sectors other PW programs. coverage and introducing flexible component of the VUP. roads. to be covered in 2012. gender sensitive work opportunities. [Completed] Note: * This will in actual sense strengthen social protection implementation as the JADF coordination and dialogue on social protection will decentralize the sector working group to the district level near the point of service delivery. 29 Theme 1: Strengthening the Policy Development and Management Capacity of the SP Sector 93. The successful and effective implementation of the NSPS depends on the capacity of MINALOC, the RLDSF, local governments and other implementation agencies and stakeholders. Consistent with the SSPS supported reform agenda, a key objective under the SSPS-1 was to ensure that the RLDSF was established and made operational. Following establishment of the RLDSF, the Government appointed its management staff through a competitive process. To strengthen social protection dialogue and sector program implementation support, a two-tier SP sector working group was established at both the policy and technical levels. 94. The above policy and institutional actions have resulted in a number of achievements over the period 2011/12. The RLDSF has been fully operationalized, taking on its mandate for implementation, monitoring and coordination of the VUP, resulting in a sustained and accelerated program scale-up to new sectors and households (see section III on sector evolution for more details). In addition, dialogue in the sector that is focused on the specific policy and implementation areas has been advanced providing room for just-in-time technical assistance on a continuous basis, drawing from development partners’ support. The dialogue has enabled more space for discussion of the social protection issues, the substance of the discussions has become more sophisticated and now draws on many regional and international experiences. 95. Based on this progress, the SSPS-2 continues to support capacity enhancement in the SP through practices that ensure adequate and satisfactory levels of staffing, professional development, and regular training activities. These practices are expected to contribute to creating an environment within which staff can achieve satisfactory performance outcomes and to ensure that the required orientation and mentoring programs for newly recruited staff are assured. Specifically, the proposed SSPS-2 policy actions are (1.1) MINALOC to develop and adopt a strategic plan for strengthening capacity at the central and local government levels in line with NSPS-IP outcomes 1.4 and 1.3, (1.2) MINALOC to develop and adopt policy guidelines to mainstream social protection into broader development dialogue through Joint Action Development Forums (JADF) at districts - to enhance management capacity at districts and sectors levels and facilitate more effective implementation and (1.3) MINALOC to introduce a district poverty ranking in selecting the number of sectors in each district for VUP scale-up from FY12/13 based on the latest household and living conditions survey (EICV-3) to strengthen effectiveness in reaching extremely poor geographical areas, all in line with NSPS-IP outcomes 2.6, 4.6, and 4.4. 96. In the next year, SSPS-3 policy development will focus on introduction and implementation of learning, training and mentoring objectives in performance contracts of all social protection staff at central and local government levels in an effort to sustain capacity enhancement and encourage staff retention for continued policy development and management capacity in the sector. 97. Overall expected outcome: The policy reforms are expected to lead to a strengthened policy environment for co-ordination and capacity building for the SP sector at all levels of Government. Theme 2: Integrating management information systems (MIS) for the main SP programs. 98. The establishment of an integrated national SP MIS underpins the Government’s vision of building an integrated SP system. The establishment of a SP MIS will support the NSPS’s objective of strengthening arrangements for monitoring, evaluation, and assessing the impact of SP programs. It will also support the objective of developing a comprehensive electronic unified registry of beneficiaries for SP programs linked to the Ubudehe and National Identity Card (NIC) databases. A system of electronic cash transfers is also envisaged using advanced technologies. The introduction and use of information 30 technology will be closely coordinated with initiatives to extend financial services to rural communities under the VUP’s third component - the financial services. 99. The SSPS-1 supported the introduction of the MIS by establishing a policy framework for the institutionalization of an integrated MIS for the main SP programs. This has set the path for the development of an integrated MIS. The Ministry appointed a permanent technical committee that has guided and overseen the design of a detailed requirements assessment and subsequently, the design of the system which has been a key achievement of the SSPS-2 supported reforms. 100. The establishment of an integrated MIS that includes a unified registry of beneficiaries, once developed and implemented under SSPS-3 will facilitate the harmonization agenda. MINALOC will manage the centrally web-based database and applications of the MIS. The main agencies that are implementing SP programs (namely FARG, the RDRC, and the RLDSF) will be able to access the SP MIS through a web link. Profiles will be created for users at different levels of MINALOC and implementation agencies. The MIS reports will be designed to meet information requirements at both the policy and implementation levels. 101. Complementary to the comprehensive MIS once launched, a robust impact evaluation (IE) is envisaged that will give reliable information about the impacts of the sector and ways in which the social protection programs could be enhanced to maximize their impact for the poor. The IE is expected to include the VUP and the One Cow per Poor Family (Girinka) programs, and evaluate their impact, inter alia, on beneficiary households’ income and consumption levels, employment and activity choices, human development and social cohesion. The baseline survey for the IE is expected to be fielded in the last half of FY13 and the follow-up survey would be started a year later. 102. Additionally, an integrated appeals and complaints mechanism for FARG and mutuelle de santé will be aligned with the VUP appeals and complaints procedures. This seeks to ensure enhanced transparency and accountability across programs, aligned with the integrated MIS and drawing on lessons from the VUP appeals and complaints mechanism already operating across all VUP Sectors. Such mechanism is also fully aligned with the harmonization agenda under Theme 3. 103. The proposed SSPS-2 policy actions will support the Government in developing the comprehensive MIS for social protection. Specifically, the proposed operation will help the Government: (2.1) to conduct detailed MIS requirements assessment, develop and approve the MIS electronic platform design to facilitate monitoring and evaluation of the main social protection programs and (2.2) revise the VUP appeals and complaints mechanism and extend its implementation to the FARG and RDRC social protection programs to enhance their effectiveness and governance, in line with the NSPS-IP outcomes 4.1, 2.7 and 4.7 respectively. To ensure sustained dialogue on impact evaluation, an important function to inform future policy development and options, the Bank team will also sustain possible technical assistance and policy advice required to define and approve broad parameters for the design of a robust impact evaluation of selected SP programs to inform policy development and dialogue within Government and with development partners. 104. In 2013/2014, SSPS-3 will support the installation and piloting of the social protection MIS in a selected number of sectors. The MIS will play an important role to facilitate the baseline survey for the impact evaluation for the main SP programs. 105. Expected outcomes: It is expected that these actions will: (i) ensure that the MIS captures, processes, and reports adequate program information to improve the delivery and monitoring of social protection programs and to inform policymaking (NSPS-IP outcome 4 modified); (ii) establish the foundation of a robust impact evaluation system (NSPS-IP: outcome 2 modified); and (iii) put in place effective appeals and complaint mechanisms in key social protection programs to ensure that grievances are addressed in an increasingly transparent and satisfactory manner. 31 Theme 3: Links with Early Warning Systems (EWS) 106. MINALOC has recently started an initiative to facilitate the use of early warning information by the existing SP programs (such as the VUP’s direct support and public works components) that would enable them to be scaled-up when needed to meet additional temporary needs after the occurrence of shocks. The initiative is also intended to gradually climate-proof the main SP programs during their programming and design. Disasters are increasingly caused by climate-related factors, and increased climate variability and climate change exacerbate these events. It is therefore important that the social protection system is ready and able to respond to such events, while being complemented and strengthened by risk mitigation and rapid response systems. 107. The Ministry of Disaster Management and Refugee Affairs (MIDIMAR), established in April 2010, is responsible for coordinating disaster management and humanitarian responses to crises. It has recently developed a National Policy on Disaster Management, which is currently being discussed in Parliament. Additionally, the semi-autonomous Rwanda Metrological Service (RMS) has been tasked with providing better and more adequate data in the future, and the VUP and other SP programs could benefit from this advance weather information. The Government has created a Disaster Management Task Force to establish systems for disaster management. It is co- chaired by representatives of MIDIMAR and the United Nations High Commissioner for Refugees (UNHCR). MINALOC participates in this task force to explore any synergies and complementarities with SP programming and implementation. 108. The SSPS series has been supporting the establishment of an institutional framework for linking existing and future early warning systems and SP programs. A technical working group was established in 2011 to facilitate dialogue and information exchange on this subject. The working group has met several times over the last year to agree on terms of reference and to develop a set of action points during this year. 109. In this context, the SSPS-2 policy action is supporting MINALOC to: (3.1) develop policy guidelines on how social protection programs should respond to disaster risks in the context of the National Disaster Management System in line with NSPS-IP outcome 4.10. The policy guidelines will prescribe the interventions that the sector will apply in response to disaster risks in terms of identifying those who need support and the nature of support to which they will be entitled. 110. In 2013/2014, the SSPS-3 operation will support the Government in developing a detailed contingency plan for social protection programs to be able to scale up their support for selected beneficiaries in program areas during disasters, also in line with NSPS-IP outcome 4.10. 111. Expected outcome: The information flows and sharing of data between various levels of governments and the SP system will enable these programs to respond adequately to emerging crises, thus supporting the NSPS-IP outcome 4. Theme 4: Expanding Coverage and Enhancing Harmonization of SP Interventions in the Country 112. To expand the coverage of SP interventions both geographically and among extremely poor households including those that are vulnerable due to household size, the NSPS has committed to (i) rapidly expand direct support to extremely poor households with no adult labor capacity to the whole country in five years and (ii) gradually introduce an expanded public works program. The expanded grant to extremely poor households, in line with guidelines in the VUP Direct Support Manual of Procedures, will draw on the lessons learned from the VUP implementation (refer to chapter IV on lessons learned). Meanwhile, the Government has decided to introducing several more initiatives under the public works component, including: (i) providing participants with basic skills development by offering different types of public works where some basic skills are needed; (ii) extending public works to 32 other economic sectors; and (iii) expanding the menu of public works to include activities suitable for women. 113. Resulting from the SSPS-1 supported actions, a key achievement following the development and adoption of a roadmap for expansion of the direct support and public works components of the VUP has been an increase in the VUP scale-up from 120 in 2011/12 sectors to 180 (direct support) and 150 (public works) in 2012/13. This progress has enabled the VUP geographical sector coverage to reach about 40 percent from 7 percent of the 416 geographical sectors country-wide when it was launched. At the same time, household coverage has increased from less than 10,000 beneficiaries to about 500,000 beneficiaries among the extremely poor (more details on implementation progress under section III). 114. To enhance the harmonization of SP interventions, the NSPS seeks to align the cash transfer components of the key SP programs, namely the VUP, FARG, and the RDRC as well as other possible elements of social protection. Options for integrating support for specific vulnerable groups (orphans, refugees, survivors, etc.) into the VUP direct support component and funding streams are also being explored. 115. MINALOC together with other stakeholders has undertaken a review of the main targeting system that uses the Ubudehe methodology. This review has found that the Ubudehe method, while successful in reaching the poor, is prone to inclusion errors, which means that there is room for improvement given international standards. The Government is therefore in the process of revising the system, starting with improving the geographical targeting based on the EICV-3 data. Based on the analysis from reviews and subsequent discussions, MINALOC is developing revised targeting guidelines that will address these weaknesses. MINALOC is also open to carrying out further reviews as the guidelines are implemented to maximize the opportunity to ensure that the poor are targeted with the greatest possible effectiveness and accuracy. 116. Accordingly, under the proposed SSPS-2 policy actions, the Government will (4.1) approve and start implementation of policy guidelines to harmonize cash transfer interventions of the RLDSF, FARG, and the RDRC to promote efficiency and coherence in the sector and (4.2) approve a revised labor-intensive public works strategy that will increase uptake of beneficiaries by widening the scope of PW coverage and introducing flexible work opportunities for women. 117. In the next year, the SSPS-3 will support: (i) collection of aggregated data on a set of predetermined common indicators for the main social protection programs, (ii) the extension of the labor-intensive public works approach into at least two other economic sectors (e.g. agriculture and rural roads), and (iii) the completion of a detailed review of the Ubudehe poverty categorization, with a view to determining a more objective definition for the categories to increase targeting effectiveness at household levels, in line with the NSPS-IP outcomes 3.1 and 4.4. 118. Expected outcomes: It is expected that these actions will increase the percentage of sectors covered by a comprehensive system of cash transfers, increase the number of households covered by direct support and public works programs, and enhance effectiveness in the targeting of eligible beneficiaries in the direct support and public works components of the VUP and other main SP programs, supporting NSPS outcome 3. 33 VII. OPERATION IMPLEMENTATION POVERTY AND SOCIAL IMPACT 119. The proposed policy reforms are expected to contribute to the overall objective of the NSPS to reduce poverty, vulnerability, and severity of shocks. They will do so by supporting the Government’s efforts to build SP systems that will allow delivery of transfers to the extremely poor segments of its population in an effective, predictable and sustainable manner while contributing to equitable growth and a reduction in extreme poverty. The proposed policy reforms also build on the existing Government commitment under the VUP “to eradicate extreme poverty by 2020 through acceleration of poverty reduction.� 120. The EICV3 Thematic Report on Social Protection 29 affirmed that the Ubudehe community targeting mechanism is effective in reaching poor households in the VUP participating sectors, although there is still room for improvement. Field visits by the Bank missions have also confirmed that the Ubudehe is regarded as credible by local citizens. While the EICV3 data collection took place two years after the VUP had started, thus making it difficult to gauge the program’s impact with certainty, the impact of the program on the population seems to be positive, with strong results being visible at the grass roots level. A monitoring and evaluation survey conducted during October-December 2009 in 90 sectors (30 sectors from each cohort of VUP sectors) indicated that the Ubudehe system is identifying poor households well and is better than many other countries’ community-based systems. However, there is scope for strengthening the system to avoid any potential exclusion and inclusion errors. 121. Analysis of the 2009 VUP survey data showed that extreme income poverty had fallen by 3.9 percent since 2006 from 39.0 percent to 35.1 percent across all VUP sectors. This reduction was much greater in the more dynamic first cohort of pilot sectors, for which the extreme poverty rate fell from 35.7 to 25.6 percent. This reduction of 10.1 percent was twice the reduction in the two other cohort sectors. 122. Further analysis of the data revealed that direct support is having a significant and pronounced impact in increasing the food consumption of poor households, which may also be having positive effects on the nutritional status of beneficiary households. On the other hand, public works are not having the same significant impact on the food consumption of beneficiary households. While there is no clear explanation of why this is happening, it might be due to the limited coverage of the public works program and/or the few days of work provided due to the relatively low labor-intensity of some projects. 123. A 2010 qualitative assessment conducted by UNICEF revealed that the perception of the VUP program is consistently positive among beneficiaries. UNICEF found that the VUP had helped households to become eligible for other Government programs, such as the Savings and Credit Cooperative (SACCO) and the health scheme. Fifty-five percent of households reported saving a portion of their VUP benefit; the average amount saved is RwF11,272.70. Fifty-four percent of VUP beneficiaries reported spending their benefit (or their intention to spend it) on food commodities. Beneficiaries also reported using these funds to purchase productive assets such as livestock (24.5 percent), health products (19.9 percent), farm inputs (18.3 percent), and education (13.1 percent). 124. The establishment of an integrated national MIS will accelerate the harmonization, alignment, and consolidation of separate MISs and will establish a strong evidence base for regular M&E. This MIS will also be the underpinning for the impact evaluations that are now envisioned to be conducted regularly while also facilitating the creation of links between SP programs and early warning 29 Oxford Policy Management. EICV3 Thematic Report on Social Protection. August, 2012. 34 systems, enhancing timely responses to social and disaster risks and climate change adaptation, and enabling better management of shock-induced and poverty-related vulnerability. 125. Moving forward, the program poverty and social impact will even be better determined through regular VUP surveys, sector evaluations and a module is planned to be included into feature EICV surveys which are now planned to take place every three years. ENVIRONMENTAL ASPECTS 126. Following the Bank’s policy requirements, specific policies supported by the SSPS are not likely to have any significant effects on Rwanda's environment, forests, and other natural resources if adequately managed. 30 On the contrary, any likely adverse effects are expected to be minor and manageable through the existing Bank and Government framework that is in place for the SSPS areas of support. 127. Furthermore, Rwanda has improved its institutional environmental management framework. In 2006, the Government established the Rwanda Environment Management Authority (REMA) to enforce environmental standards and audit functions. In 2009, REMA published a Rwanda State of Environment Outlook Report 31 to support the Government’s commitment under the EDPRS to finding a balanced approach between environmental conservation and the need for increased agriculture productivity. 32 Additionally, the Environmental Impact Assessment (EIA) is within the Environment Compliance Unit in the Rwanda Development Board (RDB). 33 Additionally, the United Nations Environment Program supports small grants to build capacity in key ministries to carry out environmental assessments. Moreover, the Global Environment Facility projects are also supporting institutional capacity development on environmental management in Rwanda, particularly on ecosystem and watershed management in both the central and district levels. 128. While the Government’s social protection policies relating to the SSPS operation are, in themselves, not likely to have any significant effects on the country’s environment, forests, or natural resources, MINALOC has incorporated the Government's environmental guidelines in the operational manual for its VUP public works program. Additionally, in 2010, REMA assigned an environmental expert to MINALOC, who works closely with the VUP team to ensure full compliance as the VUP evolves. This is part of the Government’s efforts to strengthen the environmental framework within its own structure. Environmental challenges are also being addressed through the Government’s Strategic Plan for Agricultural Transformation for marshland development. 129. Additionally, the SSPS relies on: (i) an extensive Environmental Assessment and Social Analysis that was undertaken during PRSG-1 and remains relevant; (ii) continued strengthening of environmental management in Rwanda; and (iii) environmental management assessments undertaken in the context of other Bank projects to address potential environmental concerns. This includes policy discussions to: (a) strengthen the Government’s capacity in the key environmental management agencies; 30 Under Operational Policy 8.60, on Development Policy Lending, the Bank is required to determine whether specific country policies supported under the operation are likely to cause significant effects on the country’s environment, and, in the event of such likely effects, assess country systems for reducing any such adverse effects and enhancing such positive effects. In the event of significant gaps in the analysis, or shortcomings in the country systems, the Bank is required to identify how such gaps or shortcomings would be addressed before or during program implementation, as appropriate. 31 http://www.rema.gov.rw/soe/index.php 32 Various pilot activities are being undertaken to test different approaches by the REMA and MINAGRI, including through the Bank and Global Environment Facility (GEF)-supported Integrated Management of Critical Ecosystems Project (recently closed) and Lake Victoria Environmental Management Project-II (being initiated). A new GEF project, supporting Rwanda’s forest and landscape restoration initiative, is proposed to address the forestry and agriculture nexus, in addition to biodiversity, land degradation, and climate change issues. 33 RDB is the one-stop center for business registration, incorporating the EIA clearance process, and has helped to minimize clearance procedures for businesses. 35 (b) address the lack of adequate staffing with relevant skills training both at the central and district level; and (c) strengthen environmental monitoring and analysis. 130. The Government has recognized the impact that climate risks can have on livelihoods and the production sectors, particularly on agriculture production. Stronger coordination is needed across various sectors and agencies in developing and implementing a comprehensive approach to climate risk management that incorporates adaptation to historical climate variability and projected climate change and effectively uses new climate-related financing. The Bank is supporting REMA with technical assistance to take account of climate risks and opportunities and with land policy technical assistance to review sustainable land management practices. The Bank is also in the early stages of exploring an additional operation in Rwanda (funded from a Trust Fund) that would, in coordination with other development partners, help the Ministry of Natural Resources, the Ministry of Disaster Management and Refugee Affairs, and the Rwanda Meteorological Service to improve integrated water resources management and systems to increase climate resilience. The Government is also initiating a new Environment and Climate Fund called FONERWA to support activities that enhance conservation and sustainable natural resources management, research and development and technology transfer and implementation, environment and climate change mainstreaming, and related EIA monitoring and enforcement. 131. The proposed operation is expected to have no significant adverse effects on the environment. Country systems are functioning, and appropriate arrangements have been made to address any such minor effects that might arise. The operation therefore complies fully with the requirements of OP 8.60. IMPLEMENTATION, MONITORING, AND EVALUATION (M&E) 132. The Memorandum of Understanding (MoU) signed in September 2008 by the Government of Rwanda and all budget support donors, remains in effect and governs the provision of direct budget support for the implementation of the EDPRS. The MoU, which replaced the 2003 Partnership Framework, outlines responsibilities and guidelines for monitoring and performance management. 133. There is an established framework for M&E in the sector. The SWG is the overarching framework and monitoring is enshrined in the six monthly joint sectors review that provide sector performance on policy, outputs and outcomes and makes recommendations for the next six months. The main program, the VUP also is closely monitored through a division within the RLDSF that is primarily focused on M&E. Both the RLDSF and other programs are the main providers of monitoring and evaluation information for the SWG JSR evaluations. 134. The Policy Matrix for the proposed operation provides a results framework with indicators to measure progress during the annual operations (see Annex 2). It also identifies the agencies accountable for reporting on these indicators and results. Given that there are no directly relevant prior actions and indictors in the CPAF, 34 the SSPS is aligned primarily with the NSPS and the NSPS-IP. The SSPS outcome indicators and their established baseline values and determined targets are summarized in Table 7. 34 The integrated results framework for monitoring the EDPRS consists of three components: (i) a National Results and Policy Matrix, (ii) the Common Performance Assessment Framework (CPAF), and (iii) the Development Partner Assessment Framework (DPAF). MINECOFIN’s National Development Planning and Research Unit is responsible for the overall monitoring of the EDPRS. 36 Table 7: Key SSPS Outcome Indicators Outcome Indicator Baseline Actual Actual Target Target End ICR (Sept 011) SSPS-1 SSPS-2 SSPS-2 SSPS-3 (June, 2015) (Dec 2011) (Dec 2012) (Dec 2012) (Dec 2013) Strengthening the policy development and management capacity of the SP Sector (i) Number of SP staff within 95% 98% 99% 99% 100% 100% MINALOC recruited as a % of total SP Staff needed to implement NSPS, as stipulated by law. /a (ii) % of SP staff at central (a)100% (a)100% (a)100% (a)100% (a)100% (a)100% level with satisfactory performance who get (a) 60%+ and (b) 80%+ in their n/a n/a (b) 73% (b) 70% (b) 80% (b) 90% annual performance evaluation. / b (iii) Timeliness of the VUP n/a n/a (a) TBD (a) TBD (a) TBD (a) TBD (a) direct support and (b) public works payments in 5 n/a n/a (b) TBD (b) TBD (b) TBD (b) TBD selected sectors one from each province [new]/c Consolidation of SP Management Information Systems (MIS) (iv) % of identified 0% 0% 0% 0% 90% 90% beneficiaries who are captured in MIS generated reports in pilot Sectors. /d (v) % of primary appeals that 80%c/ ≥80% 76% ≥80% ≥80% ≥80% have been resolved at first instance at Sector levels in 2 weeks b/ in VUP pilot Sectors e/ Establishing operational linkages between SP and early warning systems. (vi) In the event of a crisis, 0% 0% 0% 0% 80% 80% % of times District mobilized resources in a timely fashion [within established policy parameters] to respond to crisis. f/ Expanding Coverage and Enhancing Harmonization of SP Interventions in the Country (vii) % of Sectors under 0% 0% 0% 0% 25% d/ 40% e/ harmonized DS coverage./g (viii) Number of DS 19,583/m 19,583/n 27,631/o/ ≥25,500 ≥30,000 ≥30,000 beneficiary households under VUP. /h (ix) Number of Sectors under 120 120 180/p 180 240 300 DS Coverage /i (x) Number of PW 66,858/q 66,858/r 94,397/s 70,000 85,000 85,000+ beneficiary households under VUP./j (xi) Number of Sectors under 120 120 150/t 150 180 210 PW Coverage /k (xii) % of eligible n/a n/a 66 35% 71% 76% 81% households employed on VUP public works [new]/l Notes: a/ See Annex 5, explanatory note. b/ See Annex 5, explanatory note. c/ New. See Annex 5, explanatory note. d/ See Annex 5, explanatory note. e/ Baseline derived from the VUP Complaints and Appeals Pilot Assessment, 2010. See Annex 5, explanatory note. f/ -k/ See Annex 5, explanatory note. l/New. See Annex 5 explanatory note. m/ VUP Progress reports as of June 30, 2011. See Annex 5, explanatory note. n/ VUP Progress reports as of June 30, 2011. See Annex 5, explanatory note. o/ VUP Direct Support Component [Excel] Administrative report as of June 2012. p/ As of July 2012, fiscal year 2011/2012. q/ VUP Progress reports as of June 30, 2011. See Annex 5, explanatory note. r/ VUP progress reports as of June 30, 2011. See Annex 5, explanatory note. s/ VUP Public Works Component [Excel] Administrative report as of June 2012. t/ As of July 2012, fiscal year 2011/2012. 35 Final VUP Excel Reports on Beneficiary Data for FY 2011/12, December 2012 37 135. Monitoring of the VUP program and policy actions under the SSPS will continue to draw on data and findings from a range of sources. The VUP monitoring system for data is now improved and under implementation. A comprehensive set of monitoring templates has been developed and is being used by sector VUP staff. The templates are comprehensive and provide information on beneficiaries, funding, and public works projects. Sector staff has been trained on how to use these new templates, and the templates are now in use. Guidelines for the introduction of district SWGs, underpinned by the Joint Action Development Forum (JADF), will further help to ensure that local governments increase both their capacity and their understanding of SP-related implementation requirements, including proper monitoring. However, further work is needed to ensure that the necessary data are consistently reported over time and that the key findings of the analysis of these data are reported in a timely and useful fashion to relevant stakeholders such as the SWG. Once the MIS is implemented, it will also help to bring coherence to the various programs that contribute to social protection. 136. The SWG is now making the introduction of a comprehensive impact evaluation a high priority, and this is also being emphasized in the SSPS series. Under the SSPS-2 reform program, the Bank is working closely with MINALOC and development partners to lay a foundation for a credible and well-designed impact evaluation to provide information on the performance of the SP system going forward. 137. The sector and the program will also benefit from the ongoing quality and institutional capacity building by the Statistics for Results Project to improve the monitoring of the EDPRS. This project supports the National Institute of Statistics. Increasing Rwanda’s statistical capacity will increase monitoring capacity in all ministries and programs, including MINALOC and the VUP. FIDUCIARY ASPECTS 138. The Government is in its third year of implementing its ambitious Public Financial Management Reform Strategy (PFMRS) and the second PFMRS to accompany the EDPRS-2 over the period 2013-2018 is currently being finalized. The ultimate goal of the PFMRS is to ensure efficient, effective, and accountable use of public resources as a basis for economic development and poverty eradication through improved service delivery. The PFMRS and associated Annual Action Plans have been endorsed by key donors engaged in supporting the government’s reform agenda in this area, including the Bank. A PFM Reform Steering Committee, comprising representatives of the implementing agencies and development partners, oversees the implementation of the PFMRS. The Steering Committee is supported by a PFM Reform Technical Committee, which is in turn supported by various component working groups. The day-to-day coordination of the PFMRS implementation is carried out by a PFM Reform Secretariat, which is based in MINECOFIN. Progress in implementing the PFMRS is primarily measured through the common approved performance indicators as established in the CPAF of the EDPRS and in the PFM Key Results Matrix described in the PFM Reform Strategy (2008/09-2012/13). 139. A November 2012 independent evaluation report on the implementation of the PFM Reform Strategy (2008/09-2012/13) noted the need to expand the scope of the PFM Reform Secretariat beyond the activities funded by the basket fund. In doing so, the PFM Sector Strategic Plan should cover the whole PFM arena and establish a clear sequencing and prioritization of reform measures. Despite the fact that most Central and Local Government employees are now included in the Integrated Payroll and Personnel System (IPPS), apparent failure to respond openly to a critical technical report casts considerable doubt over the IPPS component. The report recommended that a systems audit program should be prepared to enable audit staff to test: (i) the accuracy of data entry at those decentralized organizations that have responsibility for payroll data entry; and (ii) the efficiency of the software in produced the right pay and deduction calculations for the employees on the payroll. 140. With regards to designing the next phase of PFM reforms, the report made the following observations and recommendations (i) extent of unreported budget operations remains a 38 weak area and would require further attention not only in respect to donor funds but also internally generated funds and funds of public enterprises; (ii) progress needed on accounting for fixed assets; (iii) treasury management should liaise with budget management to see if clearer “cash flow budget limits� can be set by MINECOFIN to ease the burden on individual MDAs; and (iv) the adequacy of staffing levels in Districts for Procurement services may need to be reviewed. 141. The PFM system and the associated reforms are adequate for supporting the Bank’s SSPS series of Development Policy Operations. Assessments of the fiduciary aspects are largely based on results from the 2007 and 2010 PEFA. They indicated that Rwanda’s PFM and procurement systems have been improving steadily in line with the government’s commitment to reform (as outlined in its Financial Accountability Review and Action Plan) and with the dialogue between the government and donors. This fiduciary assessment is also based on results from recently completed PERs, the 2004 HIPC Assessment and Country Procurement Assessment Report, and the 2005 Country Financial Accountability Assessment. 142. The most recent safeguards assessment of the BNR was completed by the IMF in the context of the PRGF arrangement approved on June 12, 2006. The updated assessment was completed on January 26, 2007, and it made several recommendations to address continuing vulnerabilities in the external audit and financial reporting areas. The implementation of these measures is being monitored under the Fund program, but there has been no separate follow-up since 2007. The Central Bank has been regularly audited, and its audited financial statements are publicly disclosed accompanied by internal control reports..36 The audit opinion issued is unqualified (clean) and in compliance with international financial reporting standards. 143. Progress in implementing the PFMRS is primarily measured through the common approved performance indicators as established in the CPAF of the EDPRS and in the PFM Key Results Matrix described in the PFM Reform Strategy (2008/09-2012/13). Implementation of the first PFMRS has had positive results: the basic PFM principles were introduced in all central level institutions, a comprehensive, coordinated and integrated framework for PFM was established and is currently operational and the culture of the PFM has been strengthened in all the institutions. Following the successful establishment of the foundations for the PFM framework, the second phase will focus on consolidation of the reforms and deepening their application to the Local Governments and the periphery. Another important focus of the second PFMRS will be to continue and enhance ongoing efforts to enable sectors become more PFM compliant. The SP sector will be integral to these efforts. In particular, the MINALOC, RLDSF, Districts, and Sectors will be among the key beneficiaries of the second PFMRS. Expected benefits for the SP sector will include enhanced linkages of the SP system with the FMIS, continued and deepened technical assistance to the sector on budgetary planning and implementation and a strong focus on fiscal decentralization, given that most of the SP programs depend on decentralized governance and management for their daily implementation. 144. The current Annual Budget was presented to the parliament and approved on June 18, 2012. The budget was also published on the web-page of the MINECOFIN in a timely manner during the week of July 2, 2012. DISBURSEMENT AND AUDITING 145. Amount, Beneficiary, Terms, and Tranching: The Recipient is the Republic of Rwanda, represented by MINECOFIN. A single-tranche development policy grant consisting of a Grant of SDR32.5 million (US$50 million equivalent) will be made available following approval and notification by IDA of financing effectiveness. 36 Audits of the Central Bank are annual and published in the annual reports, which can be found under publications at http://www.bnr.rw. The most recent audit report is part of the annual report for December 2010.Audit reports are accompanied by internal control reports (not included in the published report). The exercise dates back to audits of 1997, conducted in 2002. 39 146. Disbursements: The proposed Grant will follow the Bank’s disbursement procedures for development policy operations. The Grant proceeds will be disbursed against satisfactory implementation of the development policy program and the maintenance of a satisfactory macroeconomic framework. Upon notification by IDA of Grant effectiveness, and with the submission by the Recipient of a withdrawal application, the proceeds of the Grant will be deposited into an account designated by the Recipient that forms a part of the country’s foreign exchange reserves at the BNR. Within two business days, BNR will credit the Rwanda Franc equivalent of the Grant proceeds to the consolidated account maintained on behalf of Government which finances budgeted expenditures. Disbursements will not be linked to specific purchases and no procurement requirements will be necessary. However, the proceeds of the Grant cannot be used for ineligible expenditures (i.e. to finance goods and services from the IDA’s standard negative list as reflected in the Financing Agreement). If the Association determines at any time that an amount of the Financing was used to make a payment for an Excluded Expenditure, the Recipient shall, promptly upon notice from the Association, refund an amount equal to the amount of such payment to the Association. Amounts refunded to the Association upon such request shall be cancelled. 147. Reporting, Accounting, and Auditing: The Recipient will report to IDA on the amounts deposited in the Foreign Currency Account and credited in local currency to the budget management system with an indication of the exchange rate applied. The Director of Treasury will be notified accordingly. The BNR will not impose any charges or commissions on Government for these transactions. The conversion from US dollar to Rwanda Franc will be based on the prevailing exchange rate on the date that the funds are credited to the consolidated account. Government, through the Ministry of Finance and Economic Planning, will: (i) provide written confirmation within 30 days to the Bank that an amount equivalent to the Grant proceeds from the Bank has been credited to the consolidated account, with an indication of the exchange rate applied; (ii) provide evidence that the Rwanda Franc equivalent of the Grant proceeds was recorded as financing for Government budget; and (iii) ensure that the Rwanda Franc equivalent of the Grant proceeds are subject to controls to ensure its use for eligible budgeted public expenditures only. The Financing Agreement gives IDA the right to require the Recipient to audit the Foreign Currency Deposit Account through agreed terms of reference. 148. Closing Date: The expected closing date of the Financing will be June 30, 2014. RISKS AND RISKS MITIGATION 149. The key risks that could jeopardize the expected program’s outcomes and benefits are: (i) vulnerability to external the environment; (ii) dependence on external foreign assistance, (iii) the challenge of intergovernmental coordination between agencies under the Ministry of Local Government (MINALOC) and between MINALOC and other agencies, and (iii) program-specific risks. 150. Rwanda’s medium-term outlook is vulnerable to external shocks due to its large trade imbalances. It appears that heightened uncertainty in the global economy, including volatile commodity prices and export demand and the potential adverse impact of the sovereign debt crises in Europe, will prevail in the short to medium term. This will require the Government to carefully monitor the effects of these factors on the level of donor financing and to adopt a cautious fiscal stance. In order to mitigate fiscal risk, the Government will continue to protect priority spending from any potential reductions in overall spending and will redouble its efforts to expand and increase the efficiency of the tax system. There remains a need for the Government to take on some non-concessional loans, on a selective basis, to finance its ambitious strategic investment agenda. The Bank and the IMF will continue to support the Government in managing macroeconomic reform. Overall the Government’s record on macroeconomic management is satisfactory as evidenced by the satisfactory completion of the fifth review under the IMF PSI in June 2012. In the context of the LIC DSA framework, the Bank and IMF will continue to monitor the evolution in Rwanda’s debt indicators. 151. Fiduciary risk is deemed low to negligible. Overall, the Government has shown great reform leadership in the past and has established a very good track record of reforms. This is evidenced by the 40 successful implementation of the Bank’s CLSG I-III Series and the SSPS-1. It is affirmed by the fact that the financial management systems for the RLDSF and other programs are currently integrated with the MINECOFIN financial management systems. The sector has developed a capacity building plan for both central and local levels and there are increased efforts on ongoing collaboration between the MINALOC and RLDSF with the Auditor General’s Office to undertake value for money audits and regular financial audits to pre-empty and address any such potential errors, fraud and/or corruption. Improvements in fiduciary standards and budget implementation were reported in the recent PEFA assessment. The Bank’s PRSF series is supporting measures to reduce fiduciary risk by increasing transparency and accountability in the management of public finances. 152. Dependence on external foreign assistance. Approximately 40 percent of the Government budget is financed by external foreign assistance. In recent months, some budget and project financing has been suspended (including in the social protection sector) and the Government has experienced an unforeseen drop in revenues. The Government has been financing this shortfall through a combination of increased domestic borrowing and expenditure cuts and has identified contingent expenditures in the event budget support from the multilateral development banks does not eventuate during this fiscal year. These contingent expenditures are close to 10 percent of the budget. 153. The challenge of intergovernmental coordination between agencies under MINALOC as well as between MINALOC and other agencies though improved over the last five years remains a source of possible risks to maximizing effectiveness of SP programs. The SP sector already has an established SWG that is operational since 2008. The SWG has been successful in establishing an operational coordination framework for policy and implementation dialogue. The SWG will however need to be more effective in terms of mobilizing all stakeholders to operate in a coordinated manner. In addition, the SWG secretariat will need enhanced capacity to ensure its sustainability. 154. The Government is making progress in addressing several program-specific risks that were identified during SSPS-1. However, some key risks remain namely: (i) the country’s limited capacity for implementing social protection interventions; (ii) the possibility for the program’s benefits to be received by non-eligible recipients as the program expands; (iii) a lack of impact data on the program and funding for a robust impact evaluation to inform future policy development; (iv) unpredictable financing, especially from external sources that could affect the expansion of the VUP. (i) The country’s limited capacity for implementing social protection interventions. While the RLDSF under MINALOC is now operational with the scale-up of the VUP program on track, capacity at both the local and central levels to implement social protection interventions remains a key challenge. To mitigate the risk, MINALOC has developed a capacity-building strategy. This is supported by the UK DFID and by SSPS-2. The DFID has also committed to providing international technical assistance for the VUP program. However, procurement processes have not progressed as envisaged, and the absence of international technical assistance has limited the desired coaching of the RLDSF/VUP. While MINALOC and donors are working to address these capacity constraints, this remains one of the key risks to the implementation of the relevant SP programs. (ii) The risks of exclusion and inclusion of errors in targeting. There is a risk that as the program expands; there will be possibility for the program’s benefits to be received by non-eligible recipients. Yet, there is also a high risk that some eligible beneficiaries will also continue to miss out on the benefits due to targeting challenges. (iii) The continues to be a lack of impact data on the program and funding for a robust impact evaluation to inform future policy development. Previous evaluation efforts were not robust and did not amount to an impact evaluation. Development partners and Government are eager to revive the impact evaluation efforts but the actual achievement of this will depend on availability of funding and technical assistance to undertake the work. Yet, this is an important agenda to inform future policy work. 41 (iv) There is potential for unpredictable external funding of the SP sector in the medium term given the recent global economic crisis and uncertainty about donor aid. The Government has taken key steps in the last year to develop a sector MTEF. MINALOC has developed a financing strategy with financial support from the EU. Additionally, a Finance Sub-Committee under the SPWG was recently created as well as a Social Protection Sector Funding Mechanism, in line with the NSPS. The Finance Sub-Committee is now the forum charged with developing the MTEF to ensure proper medium-term financing of the sector. The Social Protection Sector Funding Mechanism will encourage development partners to contribute funding to the sector as a whole – as budget support earmarked for social protection – rather than tying their support to a specific project within the sector. Given that some bilateral donors have recently curtailed their development assistance in response to perceived governance failures, these recent developments are key to ensuring that the rapid scale-up of the VUP and ongoing harmonization of SP programs are well funded. 155. In addition to the above, the Bank will remain engaged in dialogue on areas commensurate with its mandate aimed at enhancing risks related to governance – including transparency and accountability. Lessons from the appeals and complaints mechanism confirm that the mechanism plays an important role for reducing inclusion and exclusion. It is also observed that when appeals and complaints are filed, the local authority are responsive to citizenry demands by convening the forums concerned to resolve more than 75% of grievances on time. It is anticipated that implementation of the communications strategy from this year onwards will further strengthen transparency and accountability and motivate even better levels of grievances redressal. 156. The Bank’s engagement will also be guided by its Governance and Anti-corruption Strategy (March, 2012) and conducted within the ongoing governance dialogue through the Joint Governance Assessment Forum that was initiated in 2008 and culminates into Government-Donor Joint Governance Reviews. The main social protection programs are implemented through a Decentralized Governance and Management framework whose third phase was approved by the cabinet in February 2013. The reform seeks to enhance transparency, citizens’ participation and application of ICTs into interventions at the local levels consistent with the SSPS series objectives. The SSPS-2 will thus benefit from the reforms through linkages with the appeals and complaints mechanisms, the establishment of the MIS and the community based targeting mechanisms. 42 Annex 1: Letter of Development Policy 20 FEB 2013 llf.l'l)BIJC OP RWANtM }Qslli, . . .................... .............. ,., \t\l,b f.A:OI!.l9JE.fv MINISTJn' Ot ll'l~ 'ljAN(:t AN() tC::ONOYII C 1'1.-J\NNIN(; 1'.(). 80 t 153 Kif;_:tli Td: • 150 t52 515156 F.u: +2$t2$2 $'11$8 1 £-aail: errje1j!minttnfin y.w ryr M r .•loh.mne~ C. M . Z utt Coun try Oin.:C;tor for R1unda The WoJid Bank Hill Part BulldJn~ Upper HJJI Road, P.O. 801: 30577, Nairobi J(f.NYA Dear Mr. zuu. ~:Rwanda- Ltcter of Devtlopmtn.t Policy for tbe S«ond Support to Sodal Prottctlon Systtnl (SSPS-2) l. 0!1 behalf of ll~e GO\'CMtnttU of R\~-at1da, r am reque:uin& a jpnl in lite amount of US$50 nillion from Ole lntemalional DewiQpment A~oci:llion {lOA) for the Second SuPJ)Oft b Social Prottc~~ion Sy.steot (SSPS-2). 2. lbe Go~ent of Rwanda remains committed to adlic\•ing sustai1 )Cd CCOI)OO'lic growth 8ld po\'C11Y rtduction and consolid:iting ma.crocoonontic nability. The sttategje$ 10 achieve these &ools art: set aut in lite Seoond F.eonomic Developmenl and Poverty Revi$i(lt'l of ~:Si lOtrvkt$ o llld public iQC.lds is Steadily bc::re~~.sing, whith i$ rd.lectod in the ootnttry's lorudable progre:ss tow;ud~ achieving related MiUennium J)eo.'elopmeot Goals QoiDGs), b)' for exampk ex-tending tbe delivery of benlth and education ser.•iecs. 43 ·'. 4. While these impro\'~ments art. \Ooidelyaeknowled,g~ as remarl:able, pove11y remains hi.gll. particuJarly among holl$Cholds whh tnat~y ehlldtto, and tbild m.'llnU!ritioa coatinues to affccc a si&•lifieant number <>f Rw#nd11n:;. The £1CY3 found: tbo1t households in lhe poorest quintile are~ avtr:.\ge li11,et:r than those in tbt biJbest quiotile by ooe person, and tbe former c:on~atn m<.lf'C dcpendccus (infiUUs, children. aod elderly people). Hooseholds that rely Ol\ fann Wllie L1hor c:nntim~ 1n he lUTOf>ll8 rht! ~It Anti IU~\~ l,reH y m;~ N il M> 1hl> hl>n~>liT<~ additi ~ elimate-relatCIJ arising from the pove11y reduction trend O\'C: the la!!t 10 y~t$. fn risks exace1bate. the problems faced by the extrem~ poor wbo rely primarily on ntin-fod agriculture for their sub$i.s'lenoe. Mitn)' housebolds aJ:Io face ooosidcrable health risks despite 11te fact lb:tt mutu;d hCillth insurnnce CO\'mxl O\'~r 68 percent of the population in 2010/11. WhiJe clim!Uc-rdatcd risks are expected to iJcrc:ase O\"Ct time and to p:uticulady affect the poor and vulnerable population, tbc go\• emmcm is oonlmlued tO miliaadn.i t.he9e rj$k$, for example. b)' polieics SU:pf!Orted by this 1 om thlll i_nV()h'e c:rc:iltin.i links betv.~en .social Jll'O(ec:tio" Md early warni.na S)'$tems aod couiJibute to the development of a better disaster rtSJX.Ifi!SC: fr.uo~wk. Pf'(lt~ in the S(lcial Pn11Cc!inn rsn Ss;ctor 5. The $()Ci;~l protcctioa (SP) sector in llwuda bas evol\.'¢<1 in rtoent years with tbe Vi$ioo 2020 Umureoge Program (VUP). one of the tbtee flagship programs utlder 1.h c eovernment's Eeooomic Development and P overty Reduction Strategy (EDPRS·l 200$- 2012). expanding steadily to cover about 4<1 pc1cent of the country aOO lin e$tiro.ued OS lnillion people. amoos the taz~ted poor hwseholds. I>uriog lhe implemcnt.ltion of the EDPRS-1, the iO\'emrttenl h3$ ShO\'oll iLs c:nbmced oommitmeot to pro-poor reforms and has been $1.1ppor1c:d by the inereo:scd invoh-eltl¢Jrt of the World Bank and other devc- lopl'ltellt pllltDel'll in tbe SP sector. The next strategy (IDPRS-2 20 13·2018), which is cu~nll)• being de.,~lopcd. continues to cmpbasi:c.c SP. panicularty oomributina, 10 the de:Jired objectives under tbc rural oo..·dop!lletlt pillar. The $tr3te!)' Ill$() ~~rds $Qti.;!.l procec.1ion aun impon.mt \'Chicle for $UStabtina tbe posith-e hullWl c,k\-elopment outcome$ acbie,-ed uock:r tbe fitst ~1\SP (200l-<>S) M81'3m$. 'The O~"C:aJI objccti"e of the NSPS is to "'build a social prQteetion Sy$tem that tackle$ po~-ert)' and inequality. enables the poor to move out of PQ\1::11:)', helps rodtaee \'Uinernbility and protcer people fiotu shocks, helps improve health and education among all Rv.udat~s, and ootttributet to ecooomie growth.... 1. SP spending adjuSted fbr intl.ui<>n in;relt$ed b)' mofl: lhan 13 times in real tenns between 2004 and 201011 1 and $pmdi-.a: oo CJ$h tmnsfen aloac has expe.ndod by more than 14 times, " lhich i.s a retleccion of the higter priority that tbe sector is now given in ttoven:uncru spc:ndiog. Tocal public elCpc:oditwe on the SP scc:tor re-ached 2.8 percent (social SAfdy Dets) and 8 percent (brooder social protection programs} of total expenditure in the 2009-10 budgecs. Tbc govcrn.rncm rernains t()lnmined &<> tbe sectOr itod bu:s de"'elopod a fmaneing strategy that includ~ a mtdiurr.~lcnn expenditure frrunev.'Ork. ~fTEf') and inOOrpOratcs bolh on-budget and program fmarcing projections. 44 ., . Jd Ba1 Rsquut for Wtn• 1k Sup oort 8. ln context of Rwanda's O\•«aiJ poverty reduction, i.ocluding ptogrcss toward th! lagging MOOs. and in line with its recently apf)I'O\•ed NSPS, the Ocwemment hru> req~t:l World &nlc suwon «> C()(IS<>Ildate, en.hflllCe the etlectiveness, and ~ cover~gc of its st~cia.l Jllf'()lection $Y$tem under 11 tlvec-~r PTOIP'<~mtnlltK. «k\-ebpmcot policy oP«aaion. This Ovt:rAll operation, Support to Social Protection S)~ems (SSPS). supports tbe cstablishrncot cf an integrated social protection system lhlll wiiJ hanuonizc. and expand selected safety tl(' programs, improve their tatgcting of the extremely poi)t hoUSf.holds tO m.<~:cimi~ impoct <;( po\N'Ir'".,-i,..ly w;llo 1M eJ)}.,,:t~;~ rnote e-tliciCil¢)' and oohercoce in the sector; (i\') approval of a rt'•i.sed ltabor-ioteo:sive public "'Orks sttatcgy that will it!Crt:Ue upUike of beneficiaries b)' ,v;fkoilti the scope of PW CO\'~Nge and lntrOdudna gender mt.Sitive 1Jex.ibk wod. opportunities; (v) introduction of a district po~ rnnkin.J in :sdcctin& the number of Scct<>f'S in eacb district for VUP scale-up to sttt:11gtbe1. efl'octiveQC.S:S in rellCihing extreme-l)' poor geographical areas; and (vi) devclopnent of poli~ guidelines on how social proccction 1=roa;ran1S sOOuld respond to di~er r4b 45 ... These policy aod institutional actions are (i) adopcion of policy guide.lil'les tO m3in$1ream sodal protection into brooder dc..-el<)pment dls i()Sue !I!M!Qh Join~ ,r\~Qo l)e'~PDKDI Forums (JADF) !It districts • tO enhan~ mt~n:tgement c;~:p<~cjty 111 districts nnd ~tors le'lels and fadJitate more effi:c.d"e implcmenta1ion;; (i.i} iJIIPI'O"nl of broad parameters for the design of ;s robllSt imp.1cc cv.Juation of selected SP programs to inform poli<:y de.,'tlopment and dialogue within go"cmmcnt and with development partners; al)d(iii) revision of the VUP tq)pcals and complaints mechanism and t:lCI.end thlei1 imple•nerttlltioo t() tl\e f AltO ~oi! RDRC social prottccion Jlf(ISr.:url$ IQ ellh;l;oce their effcct.i\"eness lllld go,Cration. 83-.itline illld target \'alucs for each ytar have been established, agai!Ul wflich annual actu:tl values wUI be mca!!ured. CoosJ!!Hon 13. The Govtmment's oomm.itment to f'tdi)Ce !)O\'f:rt)' am(lngthe poore$1.se&mc:nts of' the RwMda l)()pUiatiOI'I is de:roon$lrated tb.ro~o~,ab ils <»mmitmtnl to it:s n¢w NSPS Md EDPRS. As the Ia~ EICV·3 datil shows, the GoveJ:lllllCot's ¢/forts toward reducing the levcl of po''erl)' in Rwanda are paying off. and gr<)\\'th bas become more pro-poor and inclusi-..'t. The oogoing implementation of tbe NSPS requires ortgoing dynamic 1 >0liey lind in3tit\Jlion:ll reform for which the Qo,•emmem $td:S the Satl.ks' 3$$iS1Mce ln 1 he f0m:1 of this policy deve!<>pmenl operation. \\'e are coufi<.kot lh<1l tbe:se refoon:s wi ll go a loQg way toward pwvM:tina ~imble Ji,~liltoods for the poor Rwandan bousehokls and allow tbc country to make progress toward its bard-tO·rt'ach MOO goals. We tbc:rtforc submit this l...euer of Development Policy to seek suppott from the ln-1en~ationlll De-.,elopmen.t Association of tbe World Bank through this Qiltf81i0fl. We be.lie,,e lhis &;rani is SirOn& ~nd focused, builds on previOU$ support provi&:d by !he World &Ilk. through it.s Cooununity Living Standnrd:s OranJ$/Cro:(jt:s und the l~irsC S1.1pport to Social Procec.tion ~)stem and fully supports tbc Oo,~mment' s oomprehensi,·e and ambitious vision of mt'dhm-u:rm economic and social de'•e-Jopmcnt. Yours Sincerely, Hon. Mlnb-ttr, MINALOC, Count'r')' Mana&er t~f the Worid 82nk Rwtmda Office KIGAlJ 46 Annex 2: Policy Matrix and Results Framework Rwanda Support to Social Protection System Policy Matrix Medium-Term Prior Actions and Triggers Expected Outcomes Outcome Framework Indicators Objectives (ii) & Responsible Entity (iv) (i) FY11/12 FY12/13 prior actions are FY13/14 (iii) bolded To be completed To be completed by December 2012 Theme 1: Within the national policy MINALOC to develop and MINALOC to introduce and Outcome: Strengthening the (i) Number of SP staff within Strengthening the framework of the approved adopt a strategic plan for implement learning, training policy environment for co- MINALOC recruited as a % of policy development NSPS, Cabinet to establish strengthening capacity at and mentoring objectives in ordination and capacity total SP Staff needed to and management and MINALOC to central and local levels; to performance contracts of all building for the SP sector implement NSPS, as stipulated capacity of the SP operationalize the Rwanda improve policy social protection staff at across different levels of by law. [baseline: 95%; target Sector. Local Development Support development, program central and local government. government. Yr1: 98%;Yr2:99%; Yr3: Fund (RLDSF). design and implementation (NSPS IP outcome 1 modified) 100%; end-target: 100%] [NSPS Strategic of social protection priority 4.4: interventions.(NSPS-IP: Responsible: District Enhanced co- outcome 1, 1.4) governments; MINALOC, ordination of social RLDSF, FARG, RDRC, protection Cabinet (ii) % of SP staff at central programs] Within the framework of the MINALOC to develop and level with satisfactory approved NSPS, MINALOC adopt policy guidelines to performance who get (i) 60%+ [NSPS 4.6:Build to finalize policy guidelines mainstream social protection or (ii) 80+ in their annual capacity on social for the two-tier Social into broader development performance evaluation protection across Protection Sector Working dialogue through the Joint [baseline: 100%; target Yr1: government] Groups. (NSPS-IP: outcome Action Development Forum 100%; Yr2:100%; Yr3: 100%; 1, 1.1) (JADF) at districts - to end-target: 100%]; enhance management capacity at districts and sector levels and facilitate more effective (iii) Timeliness of the VUP (a) implementation. direct support and (b) public (NSPS-IP outcome 1, 1.3) works payments in 5 selected sectors one from each province 37 [new] 37 Measured by average number of days after due date that payments are effected into beneficiary bank accounts 47 Rwanda Support to Social Protection System Policy Matrix Medium-Term Prior Actions and Triggers Expected Outcomes Outcome Framework Indicators Objectives (ii) & Responsible Entity (iv) (i) FY11/12 FY12/13 FY13/14 (iii) To be completed To be completed Theme 2: MINALOC to decide on a MINALOC to conduct MINALOC to install and Outcome: MIS systems to (iv) % of identified beneficiaries Integrating policy framework for detailed MIS requirement pilot the Social Protection capture, process, and report who are captured in MIS Management institutionalizing MIS, assessment, develop and MIS in a selected number of consolidated program generated reports in pilot Information including policy discussion approve the MIS electronic Sectors. (NSPS-IP outcome information to allow for Sectors. [baseline: 0%; target Systems (MIS) for on (i) the institution that will platform design to 4, 4.1) improved delivery and Yr1: 0%;Yr2:0%; Yr3: 90%; the main SP have the mandate to host the facilitate monitoring and monitoring of social protection end-target: 90%] programs. national Social Protection evaluation of the main programs. MIS and (ii) the structure of social protection (NSPS IP outcome 4 modified) [NSPS 4.5: the cross-government team programs. (NSPS-IP: Source: MINALOC strengthen social that will oversee the outcome 4, 4.1) Outcome: Foundation of a protection systems] development of the MIS. robust impact evaluation (NSPS-IP: outcome 4) system has been laid. (NSPS- IP: outcome 2 modified) MINALOC to define and MINALOC to finalize the approve broad parameters baseline survey of the impact Responsible: District for the design of a robust evaluation (NSPS-IP: governments; MINALOC, impact evaluation of outcome 2, 2.7) FARG, RDRC, RDB/IT selected social protection programs to inform policy development and dialogue within government and with development partners. (NSPS-IP: outcome 2, 2.7) MINALOC to roll-out the MINALOC to revise and MINALOC to introduce a Outcome: Effective appeals (v) % of primary appeals that VUP appeals and complaints approve the VUP appeals web-based and/or telephone and complaints mechanisms in have been resolved at first mechanism to all operational and complaints mechanism complaints and appeals place in key social protection instance at Sector levels in 2 sectors. (NSPS-IP: outcome and extend its mechanism. (NSPS-IP: programs successfully weeks in VUP pilot Sectors 4, 4.7) implementation to the outcome 4, 4.7) resolving disputes (NSPS IP [baseline: 80%; target Yr1: FARG and RDRC social outcome 4.7 modified) .≥80%;Yr2:≥80%; Yr3: ≥80%; protection programs to end-target: ≥80%] enhance their effectiveness Responsible: District and governance. (NSPS-IP: governments; MINALOC, outcome 4, 4.7) FARG, RDRC Source: MINALOC 48 Rwanda Support to Social Protection System Policy Matrix Medium-Term Prior Actions and Triggers Expected Outcomes Outcome Framework Indicators Objectives (ii) & Responsible Entity (iv) (i) FY11/12 FY12/13 FY13/14 (iii) To be completed To be completed Theme 3: MINALOC to establish an MINALOC to develop Development of detailed Outcome: The information (vi) In the event of a crisis as Establishing institutional framework for policy guidelines on how contingency plan for social flows and sharing of data defined by policy, % of times operational sharing of data, dialogue and social protection programs protection programs to be across various levels of Districts mobilized resources in linkages between implementation of linking should respond to disaster able to scale up support for governments, enable the SP a timely fashion [within SP and early early warning systems to the risks in the context of the selected beneficiaries in system and programs to established policy parameters] warning systems. SP programs. (NSPS-IP: National Disaster program areas during respond adequately to to respond to crisis.[baseline: outcome 4, 4.12) Management System. disaster. (NSPS-IP: outcome emerging crises. (NSPS-IP: 0%; target Yr1: 0%;Yr2:0%; [CPAF 2.8: (NSPS-IP: outcome 4, 4.10) 4, 4.10) Outcome 4, 4.12; (NSPS-IP: Yr3: 80%; end-target: 80%] Improved social Outcome 4, 4.10 modified) safety nets] Source: MINALOC . [NSPS 4.5: strengthen social Responsible: MINALOC, protection systems] MIDIMAR, MININFRA, MINAGRI, REMA, National Land Center. 49 Rwanda Support to Social Protection System Policy Matrix Medium-Term Prior Actions and Triggers Expected Outcomes Outcome Framework Indicators Objectives (ii) & Responsible Entity (iv) (i) FY11/12 FY12/13 FY13/14 (iii) To be completed To be completed Theme 4: MINALOC to approve a MINALOC to approve MINALOC to determine Outcome: Increased (vii) % of Sectors under Expanding policy implementation plan policy guidelines to common indicators for the percentage of Sectors covered harmonized DS coverage. Coverage and and estimated budget for the harmonized social main social protection by a comprehensive system of [baseline: 0%, target Yr1:0%; Enhancing full coverage of the VUP protection transfer programs and collect cash transfers. (NSPS 3.3.1 Yr2:0%, Yr3:25%; end-target: Harmonization of Direct Support component interventions of the information on them in six modified) 40% ] SP Interventions in and identify the next 60 RLDSF, FARG and RDRC monthly Joint Sector the country. Sectors to be covered in to promote efficiency and Reviews. Responsible: District (viii) Number of DS beneficiary 2012. (NSPS 3.3.1) coherence in the governments; MINALOC, households under VUP. [CPAF 2.8: sector.(NSPS-IP: outcome FARG, RDRC, RLDSF [baseline: 19,583 38; target Yr1: Improved social 2, 2.6) 19,583 39; Yr2: ≥25,500; Yr3: safety nets] MINALOC to approve a MINALOC to approve a MINALOC to extend ≥30,000; end-target: ≥30,000] policy implementation plan revised labor intensive formal operationalization of Outcome: Increased number of [NSPS and estimated budget for the public works strategy that the labor-intensive Public households covered by direct (ix) Number of Sectors under 3.3.1:comprehensive expansion of the VUP will increase uptake of Works approach into at supports and public works DS coverage. [baseline: 120; system of cash Public Works component beneficiaries by widening least two other economic programs.(NSPS IP outcome 3 target Yr1:120; Yr2: 180; Yr3: transfer program] and identify the next 30 the scope of PW coverage sectors, e.g. agriculture and modified) 240; end-target: 300] sectors to be covered in and introducing flexible rural roads. (draft NSPS 2012. (NSPS 3.3.1) gender sensitive work update) (x) Number of Sectors under opportunities. (NSPS -IP Outcome: Enhance PW coverage. [baseline: 120; outcome 4, 4.6) effectiveness of targeting of target Yr1:120; Yr2: 150; Yr3: MINALOC to introduce MINALOC to conduct a eligible beneficiaries in direct 180; end-target: 210] EICV-3 district poverty detailed review of the support and public works ranking to select the Ubudehe poverty components of VUP and other (xi) Number of PW beneficiary number of Sectors in each categorizations and decide main SP programs. households under VUP. district for VUP scale-up on a more objective [baseline: 66,858 40; target Yr1: to strengthen effectiveness definition for the categories Responsible: District 66,858 41; Yr2: 70,000; Yr3: in reaching extremely poor to increase targeting governments; MINALOC, 85,000; end-target: 85,000+] geographical areas. (NSPS effectiveness at household FARG, RDRC -IP outcome 4, 4.4) level. (NSPS -IP outcome 4, 4.4) (xii) % of eligible households employed on VUP public works [new] Source: MINALOC 38 VUP Progress Reports as of June 30, 2011 39 VUP Progress Reports as of June 30, 2011 40 VUP Progress Reports as of June 30, 2011. 41 VUP Progress Reports as of June 30, 2011. 50 Annex 3: IMF Relations Note IMF Executive Board Completes Fifth Review under the Policy Support Instrument for Rwanda Press Release No.12/463 November 28, 2012 The Executive Board of the International Monetary Fund (IMF) completed today the fifth review under a three-year Policy Support Instrument (PSI) for Rwanda. In completing the review, the Board approved a waiver of nonobservance of the quantitative assessment criterion on net domestic financing (NDF). The Executive Board approved a three-year PSI for Rwanda on June 16, 2010 (see Press Release No. 10/247). The IMF's framework for PSIs is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring and endorsement of their policies. PSIs are voluntary and demand driven (see Public Information Notice No. 05/145.) Following the Executive Board’s discussion on Rwanda, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated: “The Rwandan authorities are to be commended for their satisfactory implementation of the economic program supported by the Policy Support Instrument, carried out against a challenging global economic environment. Economic growth has continued to be strong, inflation remains contained, and poverty has further declined. “Fiscal and monetary policies remain appropriate. Delays in budget support have required postponing some government spending, and fiscal policy during the remainder of the fiscal year will need to be carefully executed to minimize recourse to domestic bank financing and avoid crowding out the private sector. Meanwhile, the central bank has appropriately tightened the monetary stance to slow credit growth and mitigate exchange rate and inflation pressures. “Strengthening the domestic revenue base and public financial management are important objectives, including for reducing aid dependency. The recommendations of a recent technical assistance mission on tax policy and revenue administration represent a good basis for broadening significantly the tax base. “The government has taken important steps to strengthen Rwanda’s debt management capacity. It will be critical in the period ahead to continue with prudent management of debt and complete large ongoing investment projects. It will also be important to maintain the momentum of structural reforms to improve the business environment, strengthen competitiveness, and broaden the economic base, in order to sustain economic growth and further reduce poverty,� Mr. Shinohara added. IMF EXTERNAL RELATIONS DEPARTMENT Public Affairs Media Relations E-mail:publicaffairs@imf.orgE-mail:media@imf.org Fax: 202-623-6220 Phone: 202-623-7100 51 Annex 4: Rwanda Local Development Support Fund Organizational Structure I J\