Document of The World Bank FOR OFFICIAL USE ONLY Report No. 136011-LS INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP FRAMEWORK FOR THE KINGDOM OF LESOTHO FOR THE PERIOD FY16-20 APRIL 17, 2019 Southern Africa Country Management Unit, Africa Region International Finance Corporation Multilateral Investment Guarantee Agency The date of the last Country Partnership Framework was June 2, 2016 FISCAL YEAR [April 1 – March 31] CURRENCY EQUIVALENTS (Exchange rate as of March 18, 2019) Unit of Currency = LSL (Lesotho Loti) US$1 = LSL 14.43 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank ASA Advisory Services and Analytics BADEA Arab Bank for Economic Development in Africa Cat DDO Catastrophe Deferred Drawdown Option CDC Centers for Disease Control and Prevention CERC Contingency Emergency Response Component CGP Child Grant Program CPF Country Partnership Framework CRW Crisis Response Window DE4A Digital Economy for Africa DeMPA Debt Management Performance Assessment DfID Department for International Development DLI(s) Disbursement Linked Indicator(s) DPO Development Policy Operation DSA Debt Sustainability Analysis ECCD Early Childhood Care and Development EIB European Investment Bank EU European Union FAO Food and Agricultural Organization of the United Nations FDI Foreign Direct Investment FIRST Financial Sector Reform and Strengthening Initiative FM Financial Management GAVI Global Alliance for Vaccines and Immunization GDP Gross Domestic Product GP Global Practice HIV/AIDS Human Immune Virus/Acquired Immune Deficiency Syndrome HR Human Resource ICT Information Communication Technology IDA International Development Association IFAD International Fund for Agricultural Development IFC International Financial Corporation IFMIS Integrated Financial Management Information System IMF International Monetary Fund IPF Investment Project Financing LHWP Lesotho Highlands Water Project M&E Monitoring and Evaluation ii MCC Millennium Challenge Corporation MFD Maximize Finance for Development MIGA Multilateral Investment Guarantee Agency MOH Ministry of Health MW Mega Watt NDRF National Disaster Risk Finance NISSA National Information System for Social Assistance NISSA-CBT NISSA - Community Based Targeting NSDP National Strategic Development Plan OAP Old Age Pension OFID OPEC Fund for International Development OPRC Output and Performance based Roads Contracts P4R Program for Results PBF Performance Based Financing PEPFAR President’s Emergency Plan for Aids Relief PER Public Expenditure Review PHRD Policy and Human Resources Development PLR Performance and Learning Review PPIAF Public-Private Infrastructure Advisory Facility PPP Public Private Partnership PPP Purchasing Power Parity QMMH Queen ‘Mamohato Memorial Hospital RAMP Reserves Advisory and Management Program SACU Southern Africa Customs Union SADC Southern Africa Development Community SAP Social Assistance Project SDG Sustainable Development Goals SIP School Improvement Plan SREP Scaling up Renewable Energy Program SSA Sub-Sahara Africa TA Technical Assistance TB Tuberculosis UN United Nations UNAIDS The Joint United Nations Programme on HIV and AIDS UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural Organization UNICEF United Nations Children's Fund WBG World Bank Group WEAP Water Evaluation and Planning WFP World Food Programme WHO World Health Organization WTO World Trade Organization iii IBRD IFC MIGA Regional Vice President: Hafez Ghanem Sergio Pimenta Keiko Honda (EVP) Country Director: Paul Noumba Um Kevin Njiraini Merli Baroudi Task Team Leader: Janet K. Entwistle Rajeev Gopal Moritz Nebe iv PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP FRAMEWORK, FY16-FY20 FOR THE KINGDOM OF LESOTHO TABLE OF CONTENTS I. INTRODUCTION......................................................................................................................... 1 II. MAIN CHANGES IN COUNTRY CONTEXT ..................................................................... 2 A. Political Context.......................................................................................................................... 2 B. Economic Developments ............................................................................................................ 2 C. Poverty Reduction and Shared Prosperity .................................................................................. 3 D. Emerging Development Issues.................................................................................................... 5 III. SUMMARY OF PROGRAM IMPLEMENTATION............................................................ 6 E. Progress Towards Attaining CPF Objectives.............................................................................. 6 F. Portfolio Performance ................................................................................................................. 9 G. Evolution of Partnerships .......................................................................................................... 10 IV. EMERGING LESSONS ......................................................................................................... 11 V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP FRAMEWORK ......................... 12 A. Background ............................................................................................................................... 12 B. Adjustments in Light of Country Circumstances ...................................................................... 12 VI. RISKS TO THE CPF PROGRAM........................................................................................ 17 Annex 1: PLR Results Matrix ............................................................................................................ 18 Annex 2: Matrix of Changes to the Original CPF Results Matrix ................................................ 25 Annex 3: Matrix Summarizing Progress towards CPF Objectives ............................................... 32 Annex 4: ASA Activities over the CPF Period ................................................................................. 36 List of Tables Table 1: Selected Economic and Financial Indicators ............................................................................ 3 Table 2: Current Portfolio and the Indicative Lending Program for FY16-20 ..................................... 13 Table 3: Systematic Operations Risk-Rating ........................................................................................ 17 List of Boxes Box 1: Lesotho – Human Capital Index.................................................................................................. 5 Box 2: Maximizing Finance for Development ..................................................................................... 16 v PERFORMANCE AND LEARNING REVIEW OF THE KINGDOM OF LESOTHO-WORLD BANK GROUP (WBG) COUNTRY PARTNERSHIP FRAMEWORK (FY16-20) I. INTRODUCTION 1. This Performance and Learning Review (PLR) summarizes progress at the mid- point of the implementation of the Country Partnership Framework, 2016-2020, (CPF) for the Kingdom of Lesotho.1 The CPF was closely aligned to National Vision 2020, and its supporting operational document, the National Strategic Development Plan 2013-2017 (NSDP), which identified inclusive growth as the key development objective, building on five focus areas: infrastructure, skills, technology, health, and environment. 2. The CPF was crafted to address the high priorities of the NSDP in two focus areas: improving efficiency and effectiveness of the public sector and promoting private sector job creation. Each of these focus areas was supported by four strategic objectives: the first through improving (i) public sector and fiscal management, (ii) the equity of the social assistance system, (iii) basic education outcomes, and (iv) health outcomes; and the second, through improving (v) the business environment to diversify the economy, (vi) smallholder and MSME agriculture productivity, (vii) transport connectivity, and (viii) water and renewable energy supply for industrial, agriculture and export opportunities. 3. This PLR also assesses the validity of the CPF in light of the issuance of the government’s National Strategy Development Plan II 2018-2023 (NSDP-II) and concludes that the original CPF strategy remains relevant. NSDP-II maintains the focus on private sector-led job creation and inclusive growth through four priorities: sustainable growth; human capital; infrastructure; and governance. It identifies four areas of comparative advantage: agriculture; manufacturing; technology and innovation; and tourism and crafts. The PLR proposes certain adjustments to the remaining period of the CPF in order to achieve tighter alignment with the reshaped national priorities. Thus, it selectively tilts the focus of WBG assistance towards deepening assistance efforts on human capital and promoting private investments, particularly in climate smart agriculture and renewable energy, whilst encouraging structural reforms to attain growth sustainability. These changes are expected to sharpen the poverty-fighting focus of the CPF and to strengthen the forces of inclusion. The PLR presents a revised results matrix (Annex 1), compares the changes made to the original results matrix (Annex 2), and also presents progress made under the first three years of the CPF period (Annex 3). 4. This PLR has been prepared in close consultation with the government of Lesotho, with its key development partners. These consultations revealed a strong consensus behind the current strategy, the need to align with NSDP-II, sharpen the focus on capacity and implementation, and ensure greater coherence of approaches by development partners working closely with the government. 1 Report No 97823-LS (June 2, 2016), discussed by the Board of Executive Directors on June 30, 2016, 1 5. Lesotho is not classified as a fragile state but shares the characteristics of one, given its disappointing human capital endowment, political fragmentation and instability, a politicized security sector, weak government capacity, poor quality of most public services and high poverty and inequality.2 II. MAIN CHANGES IN COUNTRY CONTEXT A. Political Context 6. Since independence in 1966, Lesotho has been a parliamentary democracy on the Westminster model with a constitutional monarchy but has suffered from periodic military coups d’état. In response to repeated interventions by the army into politics, a preventive mission in the form of a standby military force was deployed by the Southern African Development Community (SADC) from end-2017 to November 2018 to facilitate a secure, stable and peaceful environment for security sector reforms intended to depoliticize the military. Despite the planned withdrawal of the force, security sector reforms continue. 7. Following the most recent period of military intervention in the initial phase of the CPF period, early general elections were held, and a four-party coalition government took office in June 2017 -- the third government to be sworn into office in five years. The prime minister has to balance a constellation of political forces and demands that are not always consistent – a feature that lends fragility and at times lack of firm direction to the government. 8. Nevertheless, the government is promoting a national dialogue to support internal peace and build political consensus within the country as well as to undertake key constitutional and security reforms. It has pursued initial economic reforms and is working towards a broader consensus across the coalition on overall structural reforms. B. Economic Developments 9. The economy is highly vulnerable to overall developments in the Southern Africa Customs Union (SACU), where South Africa is the dominant member, and which pools and redistributes import-related revenues by formula. Economic activity in the region also drives labor exports by Lesotho and, hence, remittances. Thus, the growth pattern is heavily driven by public spending funded by SACU revenues, and rests on highly volatile foundations. 3 The shock of a sharp fall in SACU-related revenues over 2016-2017 (a fall of 8 percent of GDP compared to the most recent peak in 2014) was not met with an adjustment in expenditures, resulting in a widening of the fiscal deficit and an accumulation of budgetary arrears. Reflecting these developments, output is estimated to have contracted by 1.6 percent in 2017 but recovered to show an expansion of 1.7 percent in 2018. Growth over the past three years has averaged 1.5 per cent annually or below population increase (Table 1). 2 The twin criteria for the classification of fragility are a CPIA score below 3.2 and the presence of UN peace- keeping forces. These criteria are widely considered to be outmoded and are being re-defined as proposed in a discussion paper from OPCS. 3 Despite the volatility, Lesotho draws substantial benefits from SACU membership, particularly access to the large South African market, infrastructure, and the common labour market. 2 Table 1: Selected Economic and Financial Indicators 10. Over recent years, the deficit has been partly financed by drawing down deposits at the central bank, leading to a contraction of international reserves. A further use of this option would undermine the monetary basis for defending the peg to the rand. The need for fiscal adjustment is urgent, especially as SACU revenues are projected to remain weak (given protracted sluggish growth in South Africa) and fiscal space has been exhausted. From 2020, economic growth will be supported by water and mining projects, but to be sustainable a significant fiscal adjustment is required. The joint Bank-Fund 2018 Debt Sustainability Analysis (DSA) suggests that the risk of external debt distress would rise to moderate from low. C. Poverty Reduction and Shared Prosperity 11. Despite economic growth, Lesotho faces severe challenges of poverty, inequality and high unemployment. Poverty remains widespread, but with a recent marginal improvement. Between 2002 and 2010, there was no progress in reducing extreme poverty. The headcount poverty rate (using the national poverty line) remained flat around 57 percent, whilst the Gini coefficient was around 54 percent. The headcount poverty rate at international prices ($1.9/day PPP) fell from 59.7 percent in 2010 to 54.4 percent in 2017. Despite modest progress, Lesotho falls into a pre-fragile group of countries with high poverty and high inequality levels (Charts 2a, 2b). Poverty is deep with the large proportion of the population living significantly below the poverty line. 3 Chart 2a. Poverty and inequality levels Chart 2b. Changes in poverty and inequality 70 B. Low Poverty B. Reduction Poverty 8 C. High Poverty C. Increase Poverty 65 High Inequality High Inequality Increase Inequality Increase Inequality 6 60 55 4 Lesotho Inequality Gini Inequality Gini change 50 2 45 0 40 -30 -20 -10 0 10 20 35 -2 30 Lesotho -4 25 D. High Poverty A. Low Poverty Low Inequality 20 Low Inequality -6 0 20 40 60 80 100 D. Increase Poverty A. Reduction Poverty Reduction Inequality Reduction Inequality -8 Poverty $1.9 a day (PPP 2011) Poverty $1.9 Change Source: Lesotho estimated 2017/8 figures are presented. Poverty rates are PPP US$1.90 a day. Latest available data per country available in the World Development Indicators database (WDI). 12. Economic growth has not been inclusive. Consumption per head of the bottom 40 percent of the population contracted by 0.4 percent annually between 2003 and 2011, but saw a reversal between 2010 and 2018, with a growth of 0.6 percent or below the African shared prosperity average. The geographical disparities in poverty and inequality are significant. The spatial rural/urban poverty split of 60:40 percent has remained relatively constant over time. Extreme poverty is concentrated among the elderly and poverty falls drastically with the level of education. High rates of poverty are linked to a persistent burden of communicable diseases, in particular, TB and HIV/AIDS. The country has a low employment to working-age population ratio, a high level of unemployment (especially youth—more than 40 percent are unemployed), and is a large labor exporter. The level of education is highly correlated with the type of employment. Individuals completing less than primary education have the highest probability of being employed in agriculture. The high fertility rate, 3.3 births per women, retards progress on poverty. 13. Lesotho has made moderate progress towards achieving the Sustainable Development Goals (SDGs), scoring 51 percent on the SDG Index. Progress towards attaining goals related to no poverty, zero hunger, good health, quality education, clean energy, and peace, justice and strong institutions has been stagnant or slow. Progress has quickened somewhat in achieving goals on gender, clean water and sanitation, sustainable cities and communities, and life of land. 14. Lesotho has a disappointing human capital index of 37 (a perfect score = 100), lower than the sub-Saharan Africa average or the average for low income countries (Box 1). In both probability of survival to age five and in the adult survival rate, the index is exceptionally low falling within the first quartile of world distribution. Lesotho also has high rates of stunting and poor learning outcomes. Student performance in harmonized tests is exceptionally low. 4 Box 1: Lesotho – Human Capital Index Lesotho’s HCI is lower than the average for its region and its income group. • Human Capital Index. A child born in Lesotho today will be 37 percent as productive when she grows up as she could be if she enjoyed complete education and full health. • Probability of Survival to Age 5. 91 out of 100 children born in Lesotho survive to age 5. • Expected Years of School. In Lesotho, a child who starts school at age 4 can expect to complete 8.7 years of school by her 18th birthday. • Harmonized Test Scores. Students score 393 on a scale where 625 represents advanced attainment and 300 represents minimum attainment. • Learning-adjusted Years of School. Factoring in what children actually learn, expected years of school is only 5.5 years. • Adult Survival Rate. Across Lesotho, 50 percent of 15-year olds will survive until age 60. This statistic is a proxy for the range of fatal and non-fatal health outcomes that a child born today would experience as an adult under current conditions. • Healthy Growth (Not Stunted Rate). 67 out of 100 children are not stunted. 33 out of 100 children are stunted and are at risk of cognitive delays and physical limitations that can last a lifetime. • Fertility. The total fertility rate is 3.3 births per woman. Childbearing peaks at age 20-24 (181 births per 1,000 women) and drops steadily thereafter. Rural women have 1.6 more children, on average, than urban women (rural total fertility rate of 3.9 vs. 2.3 in urban areas). Source: Human Capital Index (World Bank, 2018) D. Emerging Development Issues 15. The NSDP-II has created the basis for reforms to raise the rate of sustainable growth. The emerging development issues can be clustered under: Macro-adjustment and structural reforms. The exhaustion of fiscal space against the background of economic shocks has heightened the need for economic reforms. Government policy statements (NSDP-II, budget speech 2018/19) indicate a turn away from boom and bust growth cycles dependent on SACU-funded public spending towards a sustainable private sector-driven growth model. Though the budget takes initial steps on expenditure containment, a projected further rise in the wage bill indicates the need for firm measures to rein-in wages and improve expenditure efficiency. Digital technology. The authorities are increasingly also prioritizing digital technologies, particularly e-commerce and e-government applications, to enhance business entry, lower business costs, connect markets to suppliers, reduce the regulatory compliance burden, raise public service quality, and improve access to finance. Human capital. The centrality of human capital as a key development issue is recognized in NSDP-II. Early childhood nutrition has been flagged as a priority intervention by the government, especially in view of the high stunting rate. High social spending has co-existed with disappointing education and health outcomes far below those in comparator countries in spite of higher expenditure as a percent of GDP. In service delivery, the authorities believe that fragmentation of government institutions needs to be countered through stronger internal policy coordination. Wider use of performance-based indicators will scale-up impact in tackling early childhood development and nutrition and systemic issues prohibiting improved health outcomes. 5 Critical to raising results in social spending are strengthening of public financial management and the introduction of effective evaluation systems. Climate-change. Lesotho is highly vulnerable to climate change, which affects food security, human and animal diseases, loss of soil and of biodiversity, and natural resource degradation. Priorities lie in building climate resilience and low-carbon pathways, strengthening climate change governance as well as developing a disaster financing strategy and scaling up shock-resistant social protection. The National Climate Change Policy (2017), built through intensive stakeholder consultations, identifies major vulnerabilities and risks and policies to address them, together with capacity development needs and resource mobilization strategies. III. SUMMARY OF PROGRAM IMPLEMENTATION E. Progress Towards Attaining CPF Objectives 16. The first half of the CPF period has seen an upturn in knowledge-based activities that generated policy recommendations for a shift in the growth model, for raising the effectiveness of public spending, and for building the foundations for climate-change adaptation policies (Annex IV). This emphasis on high-quality, pertinent ASA products has also laid the basis for the lending program for the rest of the extended CPF period and will help bridge the transition to the following CPF period. 17. Over this period, project lending has increased sharply, largely directed at public sector modernization and access to and quality of service delivery. Fresh commitments from country and regional IDA and the Crisis Response Window amounted to US$132.8 million during FY16-18; against the CPF expectation for FY16-20 of US$77 million. With the exception of the transportation sector, the supplementary progress indicators in the CPF results matrix were largely met in the promoting jobs creation focus area. However, in the focus area of improving efficiency and effectiveness of the public sector, targets for many social assistance and health indicators remain to be met. Focus Area 1: Improving efficiency and effectiveness of the public sector 18. Measured by the CPF results matrix, the education supplementary indicator has been met, with the number of schools with school improvement plans reaching 326, 100 percent of the targeted schools. Health indicators are only partially met, and the indicators on public and fiscal management were largely met; the exception is lower than expected progress on old age pension reform (Annex III).4 In some cases, the timetable proved to be over-ambitious: the biometric census of government staff is expected to be completed in early 2019 (not 2017), and the public investment plan also in early 2019. Many indicators under this focus area can be met only later in the extended CPF period: percentage of old age pensioners with yearly proof of life verification, improvements in the health care referral system, and in health PPP contracting as projects mature and begin to show impact and, in health and nutrition as a follow-on project comes on stream. The proposed revisions to the CPF results matrix are presented in Annex 1. 4These indicators proved to be over-sanguine in design as they underestimated the lags of the impact of projects on supplementary or final results. The projects in most cases have an age of around three years. 6 19. The CPF facilitated a transition to sustainable growth by improving access to and quality and targeting of public services, and retooling institutions that has rested on a rich agenda of knowledge and advisory products. A public expenditure review focused on raising impact in social spending and strengthening expenditure management, and was supplemented by diagnostics on youth unemployment, nutrition (and multi-sectoral anti-stunting policies), and secondary and vocational education. Fiscal studies have examined food subsidies, tobacco and alcohol taxation, and efficiency of state-owned enterprises. A poverty assessment has been initiated and will be completed by the end of FY19. Work on trade, employment, debt management, financial sector and capital markets, and state-owned enterprises provide a firm foundation for the next generation of structural reforms and design of budget support operations. 20. The projects in this pillar – public sector modernization, education, health and social assistance -- generally have had high rates of disbursement, but progress in implementation has to be reinforced so as not to lose momentum. Dialogue with the Bank is centered on basic project implementation: cross-ministerial coordination, severe capacity limitations in ministries and agencies, inadequacies in selecting and managing public investments, and deficiencies in procurement, including the recruitment of consultants. The tuberculosis project has the further burden of coordination with its regional country partners and an ambitious implementation timetable. Some of these factors reflect the youth of the portfolio, which has been under implementation in most cases for just three years or less.5 Focus Area 2: Promoting private sector job creation 21. Through the knowledge dialogue and the implementation of the existing portfolio, commendable progress toward supplementary indicator targets can be seen. Indicators on streamlining the one-stop business facilitation center and acceptance of e-payments were met. Infrastructure gap analysis was carried out to identify priority areas for the provision of bulk water supply, and the investment plan for scaling up renewable energy was completed, bringing US$18.5 million for renewable energy development and expecting to leverage US$71 million (including through IDA).6 While there is insufficient data to measure market access for farmers, the competitive grants scheme to help farmers improve their productivity has been scaled up to three additional districts toward greater impact. 22. The road rehabilitation target will not be met in the timeframe of this CPF since road rehabilitation works are planned to be done through output and performance-based road contracts (OPRC). OPRC is a new concept in Lesotho and represents a significant shift away from more traditional approaches.7 For this reason, it was agreed to pursue first an OPRC assessment study through the ongoing project and deferring implementation while the assessment study was done. As such, the CPF presently focuses on the delivery of the OPRC 5 The health sector performance enhancement project is an exception: it was slow-disbursing owing to poor financial management design, but after re-structuring in late 2017, disbursements have increased rapidly. 6 The renewable energy investment plan was endorsed by the Climate Investment Funds in 2017 and is being implemented by the government with the support of the AfDB and the Bank. 7 OPRC is a contracting modality by which a private contractor is responsible for carrying out initial rehabilitation works to bring a road network into a predetermined level of service and is responsible for maintaining such network for a number of years under a lump sum contract. This allows the road agency to focus on the key outcomes-or services levels-that it wishes to achieve on the network (rather than on the inputs) while transferring the responsibility and risks for the delivery of said outcomes to the contractor, as long as pre-defined performance indicators are met at the agreed price (lump-sum). 7 study, the implementation of footbridges as well as improving road safety. The footbridges are intended to provide settlement inhabitants, in particular children and women, with all-weather pedestrian connection over a river or a highland terrain to improve access to schools, health centers and local agricultural markets. Similarly, given that Lesotho has an appalling record of death and injuries on its roads, amongst the worst in Africa, road safety is a high priority in the transport sector. Feasibility studies for the hydropower component of Phase II of the highlands water project are near completion. Geotechnical investigative work, from which the financial and technical viability of the proposed conventional power supply option will be determined is in progress but will no longer be completed with Bank financing due to delays. These studies identify 218MW of large hydropower potential. 23. A private sector diagnostic that examined the impediments to investment and growth, focusing on manufacturing, horticulture, and the digital economy – three of the key priorities of the NSDP-II – was delivered. This work influenced the design of the smallholder agriculture development project phase II, the Agriculture Productivity Program for Southern Africa (APPSA) project and is helping refine activities under the private sector competitiveness project. A digital economy (DE4A) diagnostic is underway. A further knowledge output related to a trade integration strategy and advisory work on trade facilitation, particularly electronic transactions, is now being used to modernize border systems as a part of the private competitiveness project. The IFC has advisory products in helping implement the WTO trade facilitation agreement and raise Doing Business scores, which contribute to scaling up impact under the private competitiveness project. A climate smart agriculture profile was developed to guide policies in this area and will be followed by an investment plan. These are vital inputs into the second phase of the smallholder agriculture development project. 24. Pre-feasibility studies and PPP advisory work are taking place in scaling up renewable energy and on a set of policy, legal, implementation questions, which, if well- designed, could play a major role in energizing the private sector. These ASA activities have laid the foundations of planned projects in agriculture, off-grid renewable energy, and, in the case of the digital economy for lending during the next CPF period starting in FY21. 25. In lending, the transport infrastructure and connectivity project has not progressed as expected. Since the project became effective in December 2017, it focused on bid preparation and tendering for the footbridges. It has disbursed little and critical studies are pending. The OPRC assessment which has been underway since early in 2018 is now near completion. This study will produce bidding documents to enable a procurement process for OPRC to be launched. In the meantime, technical capacity is being built within the country to undertake OPRCs. The assessment needs to be complemented by increased capacity in the Roads Directorate which has been without a Director General, Director and lower level positions for three years, and contract management capacity needs to be embedded in government structures. The project will benefit from an increased presence of Bank staff in the field to provide close implementation support and facilitate consistency and a continued engagement. A reinvigorated effort with a strengthened Bank team is being made, with a transport specialist to be located in the Maseru Country Office. Success will be contingent also on greater government commitment as well, especially to put in place capacity to manage OPRC contracts and implementation of project activities. 8 F. Portfolio Performance 26. The portfolio consists of eight national IDA projects and two regional IDA projects (totaling US$192.3 million) – all of which are effective except a newly approved regional project -- and with US$108.4 million undisbursed, plus two recipient-executed trust fund projects for an additional US$6.2 million. Thus, the grand total of commitments stands at US$198.4 million. 27. Portfolio performance is influenced by weak performance incentives in ministries and agencies, frequent changes in leadership, and severe constraints on local funding. These factors hamper project leadership, execution of tasks (such as planning, adhering to timetables and procurement), and proactivity in finding solutions to emerging difficulties, leading to inadequate monitoring of performance. Capacity strengthening to reinforce the facilitating role of central government ministries such as the Ministry of Development Planning and Ministry of Finance rather than official seeing their role as blocking effective and timely project design and implementation. Finally, poor governance practices in financial management lead to unsatisfactory outcomes. Supplementing project implementation arrangements with additional staff and support to financial management reforms have mitigated the impact of these weaknesses. 28. The Bank has worked closely with the authorities to improve portfolio performance. A review of project implementation arrangements resulted in agreed actions to simplify project implementation structures. The Bank has increased the corps of sector specialists in the field office to intensify supervision and dialogue. As a result, the management of the portfolio has recorded striking improvement in the current CPF period. The disbursement ratio has risen steadily over the CPF period from 16.8 percent in FY15 to 34.2 percent in FY18. Over the same period, projects at risk have fallen from 50 percent to 22 percent, and commitments at risk from 17 percent to 8 percent. The number of problem projects has been reduced from two to one. Moreover, as a percentage of commitments made, climate change co-benefits were zero in all years up to FY18, when they rose to 55; in FY19 they are projected to increase further. 29. The portfolio inherited from the pre-CPF period has three well-performing projects, two of which received additional financing during the initial CPF period, and one unsatisfactory. The private sector competitiveness and economic diversification project (including additional financing) has led to job creation in horticulture and handicrafts and advancements on critical reforms: business licensing and registration; secured transactions; and insolvency. Under the smallholder agriculture development project, gains in productivity have advanced (including under the additional financing). The health sector performance- enhancement project has focused on quality and utilization of primary care facilities and district hospitals but has lagged severely in building up PPP management capability. 30. Performance of the public financial management reform project that finances an upgrade in the IFMIS is unsatisfactory. Business process reviews and reforms, change management, operational acceptance of the upgraded IFMIS as well as procurement have all suffered prolonged delays. Measures are being taken to bolster ownership and to train personnel and helped ensure that an upgrade of the IFMIS took place on April 1, 2019 to secure improvements in financial management in FY20. In addition, the water sector improvement 9 project closed. During the initial CPF period it financed the design studies for the subsequent phases of the lowlands water development program. 31. IFC has a strong advisory presence in the country, but no investments. IFC has been providing technical assistance for public-private partnerships, building capacity for PPP management in government institutions, besides being transaction advisors and improving oversight for the Queen Mamohato Memorial Hospital PPP which has significantly improved tertiary health service provision. It is supporting an international telecommunications company, Vodacom, on a digital services project which targets 685,000 registered clients. It is also working on trade facilitation and Doing Business reforms. IFC has not made any investments largely because of relatively few projects which meet IFC standards and safeguards and potential conflicts of interest inherent in a small economy. Further, given the presence of local and South African banks, which have strong liquidity, IFC’s additionality is constrained. IFC will continue to look for investment opportunities based on outcomes under Focus Area 2. MIGA will continue to pursue opportunities to provide political risk insurance to private cross- border investors, supported by the active involvement of its Africa Hub. G. Evolution of Partnerships 32. Internal partnerships. The WBG has worked in a complementary and collaborative fashion in a number of areas. The Bank and IFC jointly support contract management and fiscal sustainability on the Queen Mamohato Memorial Hospital PPP. The IFC and the Bank have collaborated in trade facilitation, Doing Business reforms, renewable energy, and encouraging FDI in horticulture. IFC is collaborating with the Bank on the DE4A assessment. These activities have leveraged IDA interventions in all these areas by introducing to the client the rich possibilities of private sector involvement and strengthening the enabling environment. 33. External partnerships. The Bank-Fund partnership continues to be strong. The most recent Article IV mission in February 2019, discussions on an IMF extended credit facility arrangement and the Bank dialogue on structural reforms are closely coordinated and aligned with the national development strategy. An agreement on the magnitude and composition of spending cuts and resolution of budget arrears in support of a Fund arrangement is still to be reached. 34. Lesotho benefits from a strong partnership amongst international providers of knowledge and development assistance, with coordination taking place through the Bank office in Maseru. Principal partners are the multilaterals: AfDB, the EU, the EIB, and the UN group. China has an active partnership, including exploring investments in solar energy, health and water supply. USAID, President’s Emergency Plan for Aids Relief, the Global Fund and GAVI (the vaccine alliance) are key partners particularly in health. The US-MCC has agreed to re-enter Lesotho from 2020 with a new compact that focuses on health and governance. UK- DfID is re-establishing an office in Lesotho. 35. The IDA dialogue on economic reforms is partnered with IMF as well as the EU. Cooperation with the UN institutions has been close on improving data, disaster risk management, education, health and social protection; and the EU, IMF and AfDB on public financial management reform. AfDB is also a partner on private sector development, digital economy, energy and water. EU collaboration also extends to social protection, water (where the EU and EIB are financing water supply improvements in different lowlands zones to those 10 than the Bank is financing) and energy (where the EU financing focuses on legal and regulatory reforms critical to the success of the Bank’s investment financing). Work on agriculture has been done jointly with FAO, which implemented contingency emergency (CERC) funds released in response to the drought in FY16 and is now collaborating on the agriculture PER to be completed in FY19, and IFAD which co-finances the smallholder agriculture development projects. IV. EMERGING LESSONS 36. Based on the record thus far of CPF implementation as well as drawing on a longer period of portfolio implementation, the following lessons can be offered: 37. The strategic enlargement of the Maseru office has paid rich dividends. In the first half of the CPF period, the local office was greatly strengthened with the addition of seven Global Practices staff covering governance, health, social protection, agriculture, water, and environmental and social safeguards. This has led to a much more robust, near-continuous dialogue on policies and project implementation with the authorities, to a closer supervision of projects, and to stronger overall development partnerships. An enhanced field presence has also fostered a strengthened capacity within the government. The results are evident in portfolio performance and in knowledge products which benefit the lending pipeline. GPs without a presence in Maseru have continued to face challenges during project preparation (transport, energy) and implementation (transport). 38. Pay close attention to capacity constraints. The CPF experience has reaffirmed earlier insights that binding capacity constraints lie in the areas of technical analysis, in policy analysis and policy-formulation, and in building a shared understanding and coordination within the government to assist implementation of policies and programs. Capacity is particularly weak with respect to soft skills, for example in collaborating across ministries, in monitoring and evaluation and in internalizing a results focus including adherence to agreed timetables. As a result, the design of policies and projects is unduly shouldered by development partners, and implementation requires overly close supervision by partners. The key lesson is that WBG interventions should start by bolstering capacity, especially in public management skills and soft skills, as well as at the project level. It is also vital to expand the absorptive capacity of the client, especially in such new areas as reforms to regain fiscal space; digital technologies; maximizing new sources of finance; and climate-change imperatives. As capacity in skills and systems is built-up, it will become feasible to employ tools such as the PforR instrument. 39. A related lesson is to take explicit account of capacity constraints in designing the complexity, scale and implementation timetable of operations. Particularly in the areas of public financial management (especially procurement), transportation, education, social protection and health, improvements in results performance are contingent on addressing capacity needs. This is increasingly important given the move toward larger projects in the portfolio. 40. Pro-actively address knowledge needs. Substantial knowledge efforts during the initial phase of the CPF period have helped to build the basis for economic reforms and for conceptualizing the deliverables. They have also contributed to the improvement in portfolio performance by identifying points for policy adaptations and building capacity. Several pieces 11 of further analytical work and technical assistance are essential to the CPF agenda: a poverty assessment focusing on human capital; the role of digital economy; climate-change adaptations, especially in agriculture but also in shock-responsive social protection; and a public expenditure review in agriculture. 41. Adopt a holistic approach. WBG interventions are most enduring if based on a thorough knowledge product, well-internalized by the client, and, ideally, in the preparation of which the client has participated. The principal insights of the knowledge product should be supported through programmatic actions in the future such as the possible development policy operations or projects that are designed in a modular form for ease of implementation. Success depends on building-in technical assistance and intensive supervision. The use of disbursement-linked indicators or other forms of results-based disbursements (such as in the social assistance project) provides incentives for high quality project implementation and systemic sector reforms. A strategic reallocation of IDA resources towards development policy operations and/or a Catastrophe Deferred Drawdown operation (CAT-DDO) to support key reforms should a sound macroeconomic framework be put in place would, therefore, be justified. V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP FRAMEWORK A. Background 42. Since the CPF was approved, Lesotho has benefitted from a large unanticipated expansion of its IDA18 envelope from US$77 million to US$151.5 million, including the base US$141.5 million and an additional US$10 million for nutrition (to combat stunting), given Lesotho’s pioneering efforts and leadership in this field. This overall allocation will be supplemented by Lesotho’s share of regional resources8 (e.g., in fighting tuberculosis, improving agriculture research, establish a center of excellence for horticulture, and digital economy), special funds for climate-change (scaling-up renewable energy), and access to the IDA18 Scale-Up Facility (for lowlands water development). These substantial additional resources will be private sector-oriented through investments in agriculture, energy, and water, and will also bolster human capital through further investments in performance-based health systems and nutrition. B. Adjustments in Light of Country Circumstances 43. The CPF with its two focus areas remains an appropriate framework for engagement with the government, but with adjustments to more fully reflect priorities of NSDP-II and the emerging development issues (section II.D). These adjustments are expected to lead to a greater impact on poverty and inclusion. Within the two focus areas, the strategic objectives will be deepened to achieve targeted results and supplemented by the common NSDP-II and WBG corporate priorities in human capital, digital economy (including maximizing finance for development), and climate adaptation and resilience. In particular, in human capital, the Bank will deepen its knowledge and intensify the policy dialogue on stunting and, more broadly, on poor health and education outcomes, and finance a multi-sectoral nutrition and health project. The ASA program (Annex 4) will provide the basis for the design of reforms that could be supported by a Cat DDO and/or DPOs as well as the rest of the lending program. It will add to 8 Prior to FY16, Lesotho had not been awarded any regional project financing. 12 the knowledge base on poverty, human capital, and inclusion and help address capacity gaps in key areas such as the management of PPPs. 44. With a greatly expanded envelope, choices in lending over FY16-18 have been guided closely by the need to ensure adequacy of capacity, firm foundations in analytical and policy work, risks that can be managed and mitigated, and realistic implementation timetables. Lending aimed at minimizing net new projects by focusing on additional financing and follow- on projects to scale up successful interventions (Table 2-Portfolio of Current Programs column). Thus, a proliferation of projects was avoided and the average size of projects increased steadily. 45. The lending pipeline for FY19-20 further builds on existing projects and helps scale up sector wide impact with the possible introduction of the Program-for-Results (P4R) which will build on the use of Lesotho’s first disbursement-linked indicators (DLI) IPF (Social Assistance Project). The average size of projects is planned to almost triple from US$16.5 million in FY15 to almost US$50 million by the end of FY20. The size of the portfolio has been at a steady state of around nine projects throughout the CPF period, with each project being larger in size and impact. Two projects will close this fiscal year. The portfolio will reflect intensified synergies and integrated solutions across projects within prioritized geographical areas, which requires use of teams with diverse skills across GPs. Thus, cross- benefits in energy, water, agriculture and job-creation interventions as well as nutrition will be maximized in a particular area, utilizing insights from spatial approaches to development. Table 2: Current Portfolio and the Indicative Lending Program for FY16-20 Focus Areas Portfolio of Current Programs FY19 FY20 Indicative Lending Indicative Lending Improving • Health Sector Performance • Health and Nutrition Efficiency & Enhancement (US$12m IDA FY13, Project (US$60m Effectiveness US$4m HRITF) closing FY19 IDA) (possibly P4R) of the Public • Education Quality for Equality Sector (US$25m IDA FY16, US$2.1m GPE) • Social Assistance (US$40m IDA FY16 and AF FY17 CRW) • Regional -- TB & Health Systems Support (US$15m IDA FY16) • Public Sector Modernization (US$10m IDA FY16) • Public Financial Management Reform Support (US$5.5m FY14) closing FY19 • Transport Infrastructure and Connectivity (US$18.3m IDA FY18) Promoting • Second Private Sector • Smallholder Agriculture • Renewable Energy Private Sector Competitiveness and Economic Development II and Energy Access Job Creation Diversification (US$26.5m IDA FY13 (US$50m IDA and (US$40m IDA and and AF FY17) US$2m Japanese US$12.9m SREP) • Smallholder Agriculture Development PHRD) (US$20m IDA FY12 & AF FY18) • Lowlands Water • Regional -- Agriculture Productivity (US$78m IDA Program for Southern Africa (US$20m including US$48m IDA FY19) Scale up Facility) Notes: Program leverages Scale up Facility, Regional IDA, CRW, SREP, GPE, Japanese PHRD and Health Results Innovation Trust Fund 13 46. The lessons learned are reflected in the adjustments proposed in this PLR. The enhanced strength of the field office, in depth of talent and coverage, will be maintained and intensified as the transport GP completes the hiring of a transport specialist. Projects proposed are being built upon a holistic approach and programmatic approaches will be used as feasible, especially to support sector or economy-wide reforms. The knowledge agenda continues to be ambitious (Annex 4) and driven by reform needs and emerging priorities. Finally, through ASA and TA as well as the close dialogue via the Maseru office, a reinvigorated WBG approach to building client capacity is central to the strategy. 47. The CPF structure maintains the two original focus areas with changes in the strategic objectives for the extended period to reflect the changing environment: Focus Area 1: Improving efficiency and effectiveness of the public sector 48. Dealing with revenue volatility in the light of fluctuating SACU earnings remains a critical priority for economic stability. This would require the adoption of a medium-term fiscal rule that stabilizes the absorption of revenues in the economy and ensures a viable fiscal balance. On the expenditure side, there is a need, inter alia, for a significant reduction in the public-sector wage bill in relation to GDP over the medium term and for raising the efficiency of public spending, especially in the social sectors, in line with recommendations of recent Public Expenditure Reviews. If the authorities demonstrate a commitment to reforms and a sound macro-economic framework, a DPO series could be triggered.9 Alternatively, as a second-best option, an additional financing to the Public Sector Modernization Project could be considered if performance continues to be strong and it is needed to support reforms in the absence of a DPO. 49. With vast deficiencies in human capital, needs for assistance in this area are enormous. The PLR will step up efforts to assist improvements in human capital by focusing on the most urgent needs. New investment lending will therefore focus on early childhood development and nutrition and systemic health reforms. In the next phase of support – CPF 2021 onwards -- the WBG will build on the recent analytical work in secondary education to 9 This may require restructuring the CPF pipeline to free the necessary resources. 14 scale up its efforts in this area essential to addressing not only efficiency of spending and improved education outcomes but also early marriage and child birth that contribute to lack of progress toward increasing human capital in other areas. 50. The knowledge products of the CPF period and those planned (Annex 4) provide the basis for deepening CPF support to preparedness for disasters. The second strategic objective will be deepened to: improve the risk-responsiveness and equity of the social assistance system. All new lending operations continue to include a CERC. A National Disaster Risk Finance (NDRF) strategy would identify: (i) the key priorities in financing disaster response, (ii) the key beneficiaries to receive assistance during disaster scenarios, (iii) the financing instruments and (iv) the distribution channels for disaster assistance, including national safety net programs. In line with the Bank’s Global Crisis Risk Platform, studies will be undertaken to map multi-dimensional risks and to strengthen client knowledge of and access to crisis risk management. Given high risk, a risk-monitoring mechanism can be developed and used. In view of the emphasis on prevention, options could be explored to trigger upstream financing to stem food security, health and other risks. 51. A lending operation – Cat DDO – would be proposed, provided development policy financing conditions are met, on the basis of a matrix of actions related to hazard risk management that is expected to center on food security, health, integrated catchment management and infrastructure risks.10 A sound disaster risk management plan will be required. Under current policies, half of the proposed credit amount for a Cat DDO would be additional to the IDA envelope. Focus Area 2: Promoting private sector job creation 52. In the first strategic objective, improve the business environment and diversify the economy, the emphasis will shift towards the digital economy.11 In line with NSDP-II priorities on technology and WBG corporate priorities on maximizing finance, the WBG will step-up assistance on digital technologies and e-governance, an essential pillar of competitiveness and the fight against corruption, and critical to raising both business productivity and the quality of public services. Clearly, such a development agenda will need to span two or more CPF periods; only a beginning can be made in the remaining two years of the current CPF period that focuses on diagnosis and the initial steps of delivering a digital service economy. The country has to contend with low ICT literacy and skills and the need to develop laws and regulations to facilitate electronic governance and establish a seamless, open- access cross-border fiber optic backbone managed under high governance standards. The WBG will help unlock dividends from digitalization whilst mitigating risks, through advisory work on digital platforms, identity and literacy and legal and regulatory adaptations. It will review the adequacy of the telecom infrastructure. IFC will explore opportunities to develop or improve the quality of digital infrastructure through PPPs and promote digital technology in financial services. MIGA, working with the World Bank and IFC, will explore opportunities to de-risk foreign investment through its political risk insurance covers to support Maximizing Finance for Development (MFD) initiatives. 10 Since both DPOs and CATs belong to the family of budget-support operations, it is proposed that a flexible approach be taken with DPOs being extended in some years and a CAT DDO in others. 11 The powerful effects of a digital economy on governance, public service quality and responsiveness were discussed in earlier sections of this PLR. 15 53. There is a large development agenda in financial and capital markets, particularly the need to strengthen banking supervision12, deepen financial inclusion, develop microlending through financial and other institutions, including savings and loan institutions, promote consumer financial protection and develop the insurance industry. The WBG will be selective in its interventions given the presence of other donors. IFC will explore support for mobile money operators that are important for financial inclusion and e-payment. 54. The second strategic objective will reflect the salience of climate-change and will be deepened to: build climate resilience and adaptation; and improve agricultural productivity; the earlier objective was limited to small-holder agriculture. The WBG will assist the authorities with the National Climate Change Policy in partnerships with other IFIs and bilateral donors, utilizing instruments to incentivize the private sector (Box 2). Advisory work will focus on developing priorities in climate change policy and to operationalizing the strategy with costing and sources of assistance. This work will rely on the climate smart agriculture policy framework just completed and the investment plan under development, which develops proposals for increasing resilience in agriculture and safeguarding livelihoods in the face of climate change. It will also support water resource management to bolster resilience, relying on a master irrigation plan just developed. The institutional and policy changes necessary to develop an effective irrigation system and the infrastructure required will be supported through the second phase of the smallholder agriculture development project which will replace the smallholder agriculture development project which is closing. Box 2: Maximizing Finance for Development The World Bank, IFC, and MIGA will continue efforts to crowd-in additional private sector financing applying MFD principles through the Cascade approach. In three important sectors supporting the strategy of private sector- led growth, the role of private investments can be greatly enhanced under the MFD/Cascade framework. Agriculture. Private investments in high-potential horticulture will be unlocked with greater certainty in government policies, improved trade facilitation, and the possible use of risk mitigation instruments (including guarantees). The WBG support for horticulture over a decade through pilot projects is attempting to attract agribusiness private investment. This effort will be scaled up using the de-risking tools of MFD/Cascade. Digital technology. The critical task is to complete the legal and regulatory environment and use targeted public investment to leverage private financing for infrastructure and private operation of digital services. The WBG will address public policy gaps, increase digital literacy, and aid public investments in infrastructure, in the long- term purchase of internet and datacenter services from private providers, and in connectivity and e-government applications throughout government. Energy. In renewables, the government could assist the private sector to build new hydropower capacity, capacity in renewables generation (micro-hydro, solar, wind) and support efficiency improvements. There is scope to replace power imports, save costs by reducing diesel generation, and improve energy access (off-grid generation through solar PV & batteries). The WBG will support reforms in energy sector governance and regulation policies, legal framework, planning, and safeguards to support private investment. It will provide investment funding and possibly partial risk guarantees. The IFC could use its energy advisory services to foster private sector projects, strengthen the PPP framework, identify IPPs for possible PPPs and provide transaction advice . 55. The strategic objective in the original CPF relating to increasing transport connectivity to facilitate private sector growth will be eliminated. The public interest objectives of improved road safety and greater use of footbridges has been subsumed under the revised Focal Area 1. The public interest objectives of improved road safely and greater use of footbridges has been subsumed under the revised Focal Area 1. 12 The IMF is providing support in this area. 16 56. Support to the Lesotho Highlands Water Project is no longer envisioned during the CPF period. The strategic objective related to water has been revised to eliminate water export opportunities. VI. RISKS TO THE CPF PROGRAM 57. The risk evaluation has not changed materially since the CPF was prepared. The overall assessment is one of substantial risks (Table 3). Table 3: Systematic Operations Risk-Rating RISK CATEGORIES RATING Political and Governance Substantial Macroeconomic High Sector strategies and policies Moderate Technical design of program Moderate Institutional capacity for implementation and High sustainability Fiduciary Substantial Environmental and Social Substantial Stakeholders Moderate Overall Substantial 58. The mitigation of risks will be assisted if political and governmental stability holds, and the four-party coalition coheres to support economic reforms. Three sets of high or substantial risks – macroeconomic and capacity-related as well as fiduciary – are being addressed through policy dialogue and capacity building. Should the authorities embark upon fundamental macroeconomic and fiscal reforms with firm commitment, ideally with the support of the IMF, and deepen their engagement with PFM and public expenditure reforms, the basis would be created for a DPO series, which would increase efforts to mitigate risks. 17 Annex 1: PLR Results Matrix Strategic Focus Area I: Improving Efficiency and Effectiveness of the Public Sector Justification: Support Lesotho in its transition to a new growth model by assisting the Government to reduce the size of the public sector, promote better institutions and improve service delivery. This focus area will address the key constraints to a well performing public sector—that is, making the state more efficient and effective. Strategic Objective 1. Improve public sector and fiscal management Intervention logic: Improving public sector and fiscal management is essential for building capability to reduce macro vulnerabilities and crises that have a significant negative impact on the poor. Government spends about 30 percent of GDP in three social sectors —education, health and social protection— with deteriorating outcomes. Key structural challenges include reducing government expenditures by reducing ghost workers in the civil service and non-eligible recipients of the Old Age Pension, improving public investment decision making and improving public financial management and procurement. Further, several years following the reforms to improve road sector management, the road institutions continue to experience institutional capacity constraints. Moreover, road safety management capacity is weak in Lesotho, and the road safety reform has not been concluded. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 1: Capital budget is fully derived from public Progress Indicator 1: NSDP public investment ASAs: investment plan that prioritizes capital investments in plan completed − Health PER, FY17 alignment with National Strategic Development Plan II Baseline (2015): No − Public Expenditure Review (PER), Improving Expenditure priorities and macro fiscal framework Target (2019): Yes Efficiency for Inclusive Growth, FY19 Baseline (2015): No public investment plan − Education PER, FY19 Target (2020): 100% Progress Indicator 2: Biometric census of all − Agriculture PER, FY19 government employees completed − State Owned Enterprises, A Country Policy Note, FY17 Baseline (2015): No − Medium Term Debt Management Strategy, FY18 Indicator 2: Irregular HR and payroll records Target (2019): Yes − DEMPA, FY19 corrected/removed − RAMP TA, FY16-21 Baseline (2015): 0% Progress Indicator 3: Percentage of OAP − FIRST TA on Strengthening Insurance and Pension Target (2020): 90% beneficiaries with a yearly proof of life Regulation and Supervision (US$0.37 million; FY16-18) verification. − Tobacco and Alcohol Taxation TA, FY17 – 18 Indicator 3: Non-eligible beneficiaries eliminated from Baseline (2015): 0 the OAP roster Target (2019): 65% − International Tax Capacity Building Program, FY19-21 Baseline (2015): 0 − Continuous Survey Methodology TA FY17 – 18 Target (2020): 90% Indicator 4: Establishment of National Road − Poverty Assessment, FY20 Safety Council − Technical Assistance to the National Identification Baseline (2015): No Department and Civil Registry Department, FY19 Indicator 4: Enhanced delivery of Motor Vehicle Target (2018): Yes − Digital Economy Diagnostic and Implementation Plan, FY20 services to Citizens Lending: Baseline (2015): No − Public Sector Modernization IPF (Ongoing, US$10 million; FY16) 18 Target (2020): Yes, as evidenced by reduction in − Social Assistance IPF (Ongoing; US$40 million; FY16, processing time using the Lesotho Integrated Transport includes US$20 million AF FY17) Information System of: driver licenses, vehicle − PFM Reform IPF (Ongoing; US$5.5 million; FY14) registration certificates, and issuance of roadworthiness − Transport Infrastructure and Connectivity (Ongoing: inspection certifications as well as operationalization of US$18.3m; FY18) Road Accident Data Management System. Partners: AfDB, EU, IMF, UNICEF Strategic Objective 2. Improve the risk-responsiveness and equity of the social assistance system Intervention logic: There is limited effectiveness of social assistance programs to reach the poorest, despite very high spending by international standards (5.7 percent of GDP). Likewise, Lesotho is known to be prone to shocks and natural disasters. Ensuring the effectiveness of existing social assistance programs in reaching the poorest would require the improvement of targeting tools of which the National Information System for Social Assistance (NISSA) is currently the most important. The NISSA is expanding but would need to cover all community councils in the country, in order to be used as the main targeting tool (i) across all existing social assistance programs, and (ii) in the case of a shock or an emergency to reach the poorest and most vulnerable households. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 5: Increased percentage of households Progress Indicator 5: Increased percentage of ASAs: receiving the expanded Child Grant Program that are in community councils in the country covered by − Rapid Social Response Trust Fund (Ongoing; US$250,000) the poorest forty percent of the population NISSA-CBT registry − Forever Young? Southern Africa: preparing social sectors for Baseline (2015): 65% Baseline (2015): 0 a changing population (FY16) Target (2020): 75% Target (2019): 100% − FIRST TA on Financial Inclusion (Ongoing; US$1.49 million) Indicator 6: Increased percentage of vulnerable Progress Indicator 6: Enrollment in the Child Lending: households reached through the existing social Grant Program − Social Assistance IPF (New; US$40 million; FY16, includes protection system if there is a shock or natural disaster Baseline (2015): 24,500 households US$20 million AF FY17) Baseline (2015): 0% Target (2019): 42,000 households Target (2020) 80% Partners: EU, FAO, UNICEF, WFP, UNDP, UNICEF Progress Indicator 7: Number of active mobile money accounts per 1000 adult Baseline (2015): 150 Target (2019): 325 19 Strategic Objective 3. Improve basic education outcomes Intervention logic: Despite reduced repetition rates and high rates of transition in between cycles, Lesotho has low levels of student retention within cycle, with 62 percent retention at the primary level and 70 percent at the junior secondary level. Among other constraints, the lack of all-weather pedestrian connection over rivers in rural areas has contributed to reduced education outcomes. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 7: Reduction in dropout rate (Grade 1–Grade Progress Indicator 8: Increased number of ASA: 6) in targeted primary schools* targeted schools that disburse against approved − Job Readiness of Secondary School Graduates FY17 Baseline (2015): 18% SIPs − Education PER, FY19 Target (2020): 14.5% Baseline (2015): 0 − Disability Trust Fund, (Ongoing US$250,000) Target (2018): 332 (100%) − ECCD Assessment, FY20 Indicator 8: Reduction in dropout rate (Grade 8–Grade 9) in targeted* junior secondary schools Progress Indicator 9: Reduction in pedestrian Baseline (2015): 20% Lending: travel time to basic education services during rainy − Education Quality for Equality IPF (Ongoing; US$25 million; Target (2020): 17% season in project areas FY16) Baseline (2015): 0% *Targeted primary schools are the 300 lowest Target (2019): 50% − Global Partnership for Education (Ongoing, US$2 million; performing schools plus 32 other primary schools FY17) targeted by the basic education project. They are located − Transport Infrastructure and Connectivity (Ongoing, mostly in mountainous poor rural areas. Performance US$18.3m; FY18) criteria includes student flow, examination success rate, resources per student, and poverty level. *Targeted junior secondary schools are 71 junior Partners: AfDB, China, Japan, UNESCO, UNICEF, US Peace secondary schools in the same catchment areas as the Corps, USAID. targeted primary schools. Strategic Objective 4: Improve health outcomes Intervention logic: Despite government efforts, during the past decade Lesotho has only moderately improved health outcomes at a pace slower than its neighboring countries. This is due to system-wide problems in the health sector, such as low utilization of health facilities, poor quality of services, and drug non-availability. These results reflect poor human resource management practices, poor procurement and FM practices, lack of reliable information for decision making and low pa tients’ awareness, contract management issues plague the QMMH hospital and health network PPP, and its integration with the rest of the health system has proved challenging. Maternal and infant mortality in Lesotho is still among the highest in Sub-Saharan Africa, and the HIV/AIDS prevalence and TB incidence are the highest in the world. CPF Objective Indicators Supplementary Progress Indicators WBG Program 20 Indicator 9: Average Health Facility Progress Indicator 10: Number of targeted ASA: Quality of Care Score at targeted primary care facilities* primary health facilities with PBF contract − Health PER, FY17 Baseline: 60.2 for six districts that introduced the Baseline (2015): 35 − Tobacco and Alcohol Taxation TA; FY17-18 performance based approach between 2014 and 2017 Target (2018): 170 (this is 100% of primary health − Queen Mamohato Memorial Hospital (QMMH) PPP Contract Baseline: 62 for four districts that introduced the facilities in all 10 districts) Management TA (IFC) performance based approach in 2018 − Integrated Health Care Delivery, FY18–19, US$451,000 Target (2021): 75 for all ten districts Progress Indicator 11: Develop health care Japanese Policy and Human Resource Development Trust Fund referral guidelines − PPIAF – PPP Diagnostic and Unit Development (including *Targeted primary care facilities are those in all 10 Baseline (2015): no referral system support by IFC Advisory) districts. Target (2019): referral guidelines are developed and adopted Lending: Indicator 10: Improved QMMH contract management − Health Sector Performance Enhancement IPF (Ongoing; IDA Baseline (2015): QMMH contract disputes go US$12 million; Health Results Innovation Trust Fund US$4 Progress Indicator 13: PPP contract management unresolved million) Target (2020): Contract disputes resolved in accordance unit established and fully functional Baseline (2015): no PPP Unit or contract − Regional Southern Africa Tuberculosis and Health Systems with mechanisms and timelines established in the management unit Support IPF (Ongoing; US$15 million; FY16) QMMH PPP contract Target (2019): Clinical and Legal consultants on − Health and Nutrition Project (New; US$60 million; FY20) Indicator 11: Nationwide TB treatment success rate for board in MOH Contract Management Office and MOF PPP Unit Partners: CDC, China, Clinton Health Access Initiative, Global new and relapse TB cases Fund, Japan, Partners in Health, PEPFAR, UNAIDS, USAID, WHO, Baseline (2015): 71% Progress Indicator 14: Number of new/relapse GAVI Target (2020): 80% TB cases notified Baseline (2015): 7,650 Target (2019): 7,150 21 Focus Area II: Promoting Private Sector Jobs Creation With a high unemployment rate of 28 percent, a low employment-to-working-age population ratio, and a high proportion of employment outside of the country, Lesotho development and growth are locked in a poverty trap. To break out, the country will need to focus on a pro-poor and broad-based employment, which is feasible only by building a dynamic, competitive private sector and resilient middle class. Achieving this will require a sustained effort to build an export-led economic model driven by the growth of private sector. Strategic Objective 5: Improve the Business Environment and Diversify the Economy Intervention logic: With such a small domestic market, Lesotho needs competitive, export-oriented firms capable of generating significant employment. This requires a stronger business environment, more efficient customs procedures, expanded range of and access to financial services, investment promotion in new sectors, more backward linkages to the local economy, and targeted support to new growth sectors identified in the NSDP (such as agriculture), with high potentials for domestic and international private sector investment, firm growth, and job creation. CPF Objective Indicators Progress Indicators WBG Program Indicator 12: Number of areas with investment climate Progress Indicator 15: Enhance the technology ASAs: reform progress during the CPF period platforms at the One Stop Business Facilitation − FIRST TA on Financial Inclusion (Ongoing; US$1.49 Baseline (2015): 0 Center million) Target (2020): 4 (Reforms expected, for example, in Baseline (2015): Business registration done online − IFC Investment Climate Advisory Services Program, reducing the time it takes to register a business, dealing at the One-Stop Business Facilitation Center (Ongoing) FY18 with construction permits, improving access to finance, Target (2018): e-payments accepted at the One- − Unlocking the Potential of Lesotho’s Private Sector: and resolving insolvency) Stop Business Facilitation Center for business A Focus on Apparel, Horticulture and ICT, FY19 registration and licensing services − Horticulture Commercialization, FY19 − PPP Readiness Diagnostic and Unit Development (including Indicator 13: Number of areas under horticulture crops support from PPIAF and IFC Advisory) (hectares) with Bank support − Digital Economy Diagnostic and Implementation Plan, FY20 Baseline (2015): 43 hectares Lending: Target (2020): 212 hectares − Private Sector Competitiveness and Economic Diversification IPF Phase II (Ongoing; US$26.5 million, including US$13.4 million AF FY17) − Smallholder Agriculture Development IPF (Ongoing: US$20 million, including US$10 million AF FY18) − Regional Agriculture Productivity Program for Southern Africa IPF (Ongoing; USS $20 million, FY19) − Smallholder Agriculture Development Project II (New FY20; US$52 million including US$2 million from a Japanese Policy and Human Resource Development Grant) Partners: AfDB, EU, USAID 22 Strategic Objective 6: Build climate resilience and improve agricultural productivity Intervention logic: The development of a competitive private sector and broad-based employment incomes will have to come in large part from the rural areas, where three quarters of Lesotho population and most of the poor reside. With the decline of mining jobs and remittances, the WBG interventions will support Lesotho to generate self-employment by raising the productivity and returns of smallholders and MSMEs. This will spur additional demand for non-farm employment opportunities. Commercially viable smallholder agriculture is essential to increase the share of market output and to establish incentives for adopting technologies and production methods that improve yields and mitigate risks. Increased water supply in rural areas will be essential for improved irrigation. Climate change and extremes need to be mitigated. CPF Objective Indicators Supplementary Progress Indicators WBG Program Indicator 14: Change in yields of the major crops in Progress Indicator 16: Number of farmers ASA: targeted districts (percentage)* receiving competitive grants − Water Security and Climate Change Assessment (FY16) Baseline (2015): 0 Baseline (2015): 4,800 − Early Warning System TA, FY16 - 17 Target (2020): 12% Target (2019): 7,570 − FIRST TA on Financial Inclusion (Ongoing; US$1.49 million) − Climate Smart Agriculture Profile, FY18 *Targeted districts are: Berea, Butha-Buthe, Leribe, Progress Indicator 17: Number of farmers − Climate Smart Agriculture Investment Plan, FY19 Mafeteng, Maseru, Mohale’s Hoek and Quthing. Major adopting improved/climate-smart agricultural − Agriculture PER, FY19 crops are: cereals, maize, sorghum, potato, tomato, technologies with Bank support Lending: cabbage, pumpkin, spinach and carrot. Baseline (2015): 234 − Smallholder Agriculture Development IPF (Ongoing: US$20 Target (2019): 3,000 million, including US$10 million AF FY18) Indicator 15: Land area with climate-smart agriculture − Regional Agriculture Productivity Program for Southern Africa and sustainable landscape management practices IPF (Ongoing; USS $20 million, FY19) (hectares) − Smallholder Agriculture Project II (New FY19; US$52 million, Baseline (2015): 175 Target (2020): 1,800 including US$2 million from a Japanese Policy and Human Resource Development Grant) Partners: FAO, IFAD, WFP, Japan Strategic Objective 7. Increase water and renewable energy supply for industrial and agriculture opportunities Intervention Logic: Water contributes substantial, sustainable revenues to Lesotho’s GDP and is its key strategic renewable resource with direct links to the Bank’s twin goals. The water sector is central to Lesotho’s long-term growth and poverty reduction serving as an intermediate input for improving human development outcomes and private sector development by supplying water in the lowlands for domestic needs and manufacturing, mining and agriculture. Bank funds are expected to leverage significant financing from other partners, and access roads to major dam sites improve the road infrastructure. The most promising renewable energy sources are water and solar, which are essential to develop to mitigate against climate change. 23 Supplementary Progress Indicators WBG Program CPF Objective Indicators Indicator 16: Bulk water supply works underway or Progress Indicator 18: Infrastructure Gap ASA: completed in priority water demand zones (ie with Analysis identifies priority areas for provision of − Scaling-up Renewable Energy TA (Ongoing; US$3.9 million) significant industrial water demand) bulk supply to meet water demand especially in − Water Security and Climate Change Assessment, FY16 Baseline (2015): 0 areas of high industrial, commercial and/or − Scaling up Renewable Energy TA (Closed; US$0.39 million) Target (2020): 2 designated water demand zones agricultural use and potential (Maputsoe and Leribe) with bulk water supply works Baseline (2015): 0 Lending: underway or completed Target (2018): 9 designated water demand zones − Water Sector Improvement IPF - Phase II (Closed; US$53.4 million) Indicator 17: Number of privately financed Progress Indicator 19: SREP Investment Plan − Lowlands Water Development IPF (New; US$78 million) industrial/agriculture projects to be supplied by completed − Renewable Energy and Energy Access Project IPF (New FY20; electricity infrastructure through Bank support Baseline (2015): Not completed US$52.9 million, including US$12.9 million from SREP) Baseline (2015): 0 Target (2018): Completed Target (2020): 10 Partners: Abu Dhabi Fund, AfDB, BADEA, China, EU, EIB, Kuwait Fund, OFID, China, USAID 24 Annex 2: Matrix of Changes to the Original CPF Results Matrix Strategic Focus Area I: Improving Efficiency and Effectiveness of the Public Sector Strategic Objective 1. Improve public sector and fiscal management Original CPF Objective Indicators Revised CPF Objective Indicators Rationale for Change Indicator 1: Capital budget is fully derived from Revised Indicator: Capital budget is fully derived Indicator refined for clarity. Alignment with the NSDP II refers to public investment plan from public investment plan that prioritizes capital projects newly added to the capital budget. Baseline (2015): No public investment plan investments in alignment with National Strategic Target (2020): 100% Development Plan II priorities and macro fiscal framework. Indicator 2: Irregular HR and payroll records corrected/removed Baseline (2015): 0% Target (2020): 90% Indicator 3: Non-eligible beneficiaries eliminated The government is now expected to roll out a proof of life exercise from the Old Age Pension (OAP) roster to 65% of OAP beneficiaries by the end of 2019 and by 2020 to Baseline (2015): 0 amend existing OAP regulations to make the national ID the only Target (2020): 90% acceptable identification document to apply for and collect the old age pension. These steps will facilitate achievement of the target to eliminate non-eligible beneficiaries from the OAP roster in 2020. Several years following reforms to improve road sector New Indicator: Enhanced delivery of Motor management, road institutions continue to experience institutional Vehicle services to Citizens capacity constraints. The Lesotho Integrated Transport Information Baseline (2015): No System supported by the Transport Infrastructure and Connectivity Target (2021): Yes Project is expected to improve road safety, revenue collection and reduce the cost of service delivery. 25 Strategic Objective 2. Improve the risk-responsiveness and equity of the social assistance system (Changed from Improve equity of the social assistance system) CPF Objective Indicators Revised Indicators Rationale for Change Indicator 4: Increased percentage of households The Government has undertaken to expand the National receiving the expanded Child Grant Program that are Information System for Social Assistance (NISSA) to all 64 in the poorest forty percent of the population Community Councils by April 2019. This includes the update of the Baseline (2015): 65% data of 36 Community Councils that were collected in 2012. This Target (2020): 75% will increase the accuracy of the targeting of CGP recipients which is based on the NISSA data. New Indicator: Increased percentage of This proposed new indicator will measure improved risk- vulnerable households reached through the responsiveness of the social assistance system. Bank support was existing social protection system if there is a shock scaled up in this area following the 2015/16 El Nino induced or natural disaster drought through the Additional Financing of the Social Assistance Baseline (2015): 0% Project and the Social Rapid Response Trust Fund. Target (2020): 80% Strategic Objective 3. Improve basic education outcomes CPF Objective Indicators Revised Indicators Rationale for Change Indicator 5: Reduction in dropout rate (Grade 1– Increased number of targeted schools to include those targeted by a Grade 6) in targeted primary schools* GPE grant executed by the Bank. Baseline (2015): 18% Target (2020): 15% Indicator 6: Reduction in dropout rate (Grade 8– Grade 9) in targeted* junior secondary schools Baseline (2015): 21% Target (2020): 18% * Targeted primary schools extended to 332 *Targeted primary schools are the 300 lowest schools based on the same criteria. In addition, performing schools. They are located mostly in targeted junior secondary schools are those in the mountainous poor rural areas. Performance criteria same catchment areas as the primary schools that includes student flow, examination success rate, are targeted. resources per student, and poverty level. 26 Strategic Objective 4: Improve health outcomes CPF Objective Indicators Revised Indicators Rationale for Change Indicator 7: Average Health Facility Target revised upward to 75. Baseline revised to The current average quality score for all 10 districts is 72.4. The Quality of Care Score at targeted primary care 60.2 for the initial six districts (2014-2017) and 62 43.8 baseline score applied to 6 primary care facilities that facilities* for the four districts that introduced the introduced the PBF approach in 2015. The initial 6 districts Baseline (2015): 43.8 performance-based finance (PBF) approach later (enrolled between 2014 and 2017) had a baseline average quality of Target (2020): 60 (2018). care score of 60.2, while the baseline score for the four districts that enrolled in July 2018 is 62. The proposed target of 75 would *Targeted primary care facilities are those in the *Targeted primary care facilities extended to all 10 require the initial 6 districts to maintain their score and the recently following 6 districts: Leribe, Mafeteng, Mohale’s districts. enrolled districts to improve to their level. Hoek, Mokhotlong, Quithing, and Thaba Tseka. Indicator 8: Improved QMMH contract management Slower than expected establishment of the PPP unit in the Ministry Baseline (2015): QMMH contract disputes go of Finance and contract management unit in the Ministry of Health unresolved mean that contract disputes continue to go unresolved. With one Target (2020): Contract disputes resolved in additional year and continued support, the original target is accordance with mechanisms and timelines expected to be met one year later. established in the QMMH PPP contract Indicator 9: Nationwide TB treatment success rate for new and relapse TB cases Lesotho achieved a 77% TB treatment success rate by December Baseline (2015): 71% 2018, and with continued Bank support is likely to achieve the 80% Target (2020): 80% treatment success rate target by 2020. 27 Focus Area II: Promoting Private Sector Jobs Creation Strategic Objective 5: Improve the Business Environment and Diversify the Economy CPF Objective Indicators Revised Indicators Rationale for Change Indicator 10: Number of areas with investment Lesotho has made progress on two reforms, credit reporting and climate reform progress during the CPF period construction permits, and Bank support continues in these areas to Baseline (2015): 0 deepen the reform. Legislation has been submitted to Parliament Target (2020): 4 (Reforms expected, for example, in on business registration and licensing, movable collateral and reducing the time it takes to register a business, insolvency after extended delays. Given delays one additional year dealing with construction permits, improving access is needed to achieve the original objective. to finance, and resolving insolvency) Indicator 11: Increase in domestic enterprises Revised Indicator: Number of areas under Change made to recognize support under the CPF to economic registered and operational in non-textile sectors horticulture crops (hectares) with Bank support diversification is concentrated on promoting horticulture as a future Baseline (2015): 17,330 Baseline (2015): 43 hectares engine of growth rather than the registration and operation of Target (2020): 18,240 Target (2021): 212 hectares businesses in general. 28 Strategic Objective 6: Build Climate Resilience and Improve Agriculture Productivity (Changed from Improve smallholder and MSME agricultural productivity) CPF Objective Indicators Revised Indicators Rationale for Change Indicator 12: Household commercialization level in Revised Indicator: Change in yields of the major The revised indicator on yields of major crops is more relevant to targeted agricultural areas* crops in targeted project districts (percentage)* measure agriculture productivity. Measuring marketing surplus Baseline (2015): 64% Baseline (2015): 0 does not reflect an actual increase in crop productivity. Target (2020): 70% Target (2020): 12% *Targeted districts are: Berea, Butha-Buthe, Leribe *Target districts extended to 3 additional districts: and Mafeteng. Maseru, Mohales Hoek and Quithing. Major crops are: cereals, maize, sorghum, potato, tomato, cabbage, pumpkin, spinach and carrot. New Indicator: Land area with climate-smart New indicator added to measure new strategic objective of building agriculture and sustainable landscape management climate resilience. Climate-smart agriculture is an integrated practices (hectares) approach to managing landscapes—cropland, livestock, forests and Baseline (2015): 175 fisheries--that address the interlinked challenges of food security Target (2020): 1,800 and climate change. Sustainable landscape management practices refer to a combination of at least two technologies and approaches to increase land quality and restore degraded lands for example, agronomic, vegetative, structural, and management measures that, applied as a combination, increase the connectivity between protected areas, forest land, rangeland, and agriculture land. 29 Strategic Objective 7: Increase transport connectivity to facilitate private sector growth (Deleted) CPF Objective Indicators Revised Indicators Rationale for Change Indicator 13: Number of local agricultural markets Both indicators deleted. Given delays in completing the planned OPRC assessment, road and tourist sites with improved transport connectivity rehabilitation is no longer envisioned during the CPF period. The Baseline (2015): 0 objectives of support in transport have shifted to focus on expected Target (2020): 5 outcomes related to road safety and the construction of footbridges. Indicator 14: Number of construction and road Since road rehabilitation using OPRC is no longer within the scope maintenance jobs created during CPF period of the CPF, Strategic Objective 7 has been deleted. Baseline (2015): 0 Target (2020): 1,000 Outcomes of Bank support to the transport sector linked with road safety have been merged into Strategic Objective 1 under Strategic Focus Area 1 as they contribute to public sector management. The impact of support to footbridges is captured under Strategic Objective 3 (Focus Area 2) as they contribute primarily to education outcomes. Strategic Objective 8. Increase water and renewable energy supply for industrial and agriculture opportunities (Changed from Increase water and renewable energy supply for industrial, agriculture and export opportunities) CPF Objective Indicators Revised Indicators Rationale for Change Indicator 15: Bulk water supply works underway or Revised Indicator: Bulk water supply works Extension is in line with CPF extension, and the focus of the completed in priority water demand zones (ie with underway or completed in priority water demand lowlands water project to focus on 2 designated water zones (Zone significant industrial, commercial and/or agriculture zones (i.e. with significant industrial water demand) 2--Maputsoe and Zone 3--Leribe) with 2 others (Mafeteng and water demand) Baseline (2015): 0 Mohale’s Hoek financed by the EU and EIB). Water will supply Baseline (2015): 0 Target (2020): 2 designated water demand zones the Maputsoe Industrial Park and surrounding households and will Target (2020): 3 designated water demand zones with bulk water supply works underway or not be available for agriculture use. The indicator has been revised completed accordingly. Indicator 16: New viable renewable energy Revised Indicator: Number of privately financed The target was met in December 2017 when the SREP Investment generation projects identified industrial/agriculture projects to be supplied by Plan was completed. It identifies 32.7 MW of off-grid renewable Baseline (2015): 0 electricity infrastructure through Bank support potential. Target (2020): 30 MW Baseline (2015): 0 Target (2020): 10 30 Indicator 17: Feasibility study for hydropower Original Indicator 17: Deleted Support to Lesotho Highlands Water Project not envisioned during component of Phase II of the highlands water project the CPF period. The feasibility study is near complete; (includes feasibility of export opportunities) geotechnical technical investigative work is outstanding. It will no Baseline (2015): not completed longer be completed with Bank financing due to delays. This study Target (2018): completed identifies 218MW of large hydropower potential. Strategic Objective 8 has been revised to eliminate water export opportunities as an objective. 31 Annex 3: Matrix Summarizing Progress towards CPF Objectives Indicator Unit of Baseline Target Value, Status Measurement Value, 2015 2018 (as of end-2018) Strategic Focus Area I: Improving Efficiency and Effectiveness of the Public Sector Strategic Objective 1. Improve public sector and fiscal management Progress Indicator 1: NSDP public Yes/No No Yes Almost Achieved/Minor delay investment plan completed The NSDP public investment plan is expected to be completed by end April 2019. Progress Indicator 2: Biometric Almost Achieved/Minor delay census of all government employees Yes/No No Yes Enumeration of civil servants is complete. Consultations on key completed findings and the final report highlighting payroll irregularities is expected by end April 2019. Progress Indicator 3: Percentage Percentage 0 75 Not Achieved. No OAP pensioners have a yearly proof of life of Old Age Pension (OAP) verification. The government began a pilot proof-of-life and National beneficiaries with a yearly proof of ID roll out in 2018. The pilot is expected to be completed in April life verification. 2019 and the lessons applied to a nationwide roll out. By the end of 2019, the percentage of OAP beneficiaries with yearly proof of life verification is expected to be 65 percent. Strategic Objective 2. Improve equity of the social assistance system Progress Indicator 4: Percentage of community councils in the country Percentage 0 50 Achieved. 91 percent coverage in December 2018 covered by NISSA-CBT registry (58 out of 64 community councils). The target is being revised to reflect government plans to reach full coverage of all 64 community councils by end April 2019. Progress Indicator 5: Enrollment in the Child Grant Program Number of 24,500 38,000 Achieved. 38,000 households enrolled as of November 2018. The households target is being revised to reflect the expectation that at least 42,000 households will be enrolled in the Child Grant Program by 2019 across the ten districts. 32 Indicator Unit of Baseline Target Value, Status Measurement Value, 2015 2018 (as of end-2018) Progress Indicator 6: Percentage of adults with a mobile money account Percent of total 50 54 Achieved. 79 percent as of end September 2018. It is proposed to adults replace the indicator with “number of active mobile money accounts per 1000 adult.” The revised indicator provides information on both access and usage of accounts in line with the objective of Bank support in this area. Also, data on the revised indicator is collected and reported annually by IMF Financial Access Survey and Central Bank of Lesotho whereas the original indicator is only measured periodically. Strategic Objective 3. Improve basic education outcomes Progress Indicator 7: Increased Number Zero 100 Achieved. All 332 targeted schools completed school improvement number of targeted schools with plans by December 2018. However, the SIP grant is delayed as only 37 approved School Improvement Plans schools have received 50% of the grant in their special accounts by December 2018. None of the schools has spent the grant yet. The government reports improved governance at school level since the preparation of SIPs. Schools are reporting lower rates of teacher and student absenteeism, increased community and parents’ engagement in school life, and increased protection of the physical environment in schools. This indicator is being revised to measure disbursement against the SIPs. 33 Strategic Objective 4: Improve health outcomes Number 35 97 Achieved. The project started implementation in 2014 with only 6 Progress Indicator 8: Number of targeted primary health facilities primary care facilities contracted with PBF in Quthing district. In with Performance Based Financing 2015, the number of facilities contracted increased to 34 with 28 contract additional ones from Leribe District. The PBF approach was then expanded to four additional districts covering 100 facilities enrolled since July 2017. Since July 2018, the PBF approach was scaled-up to cover all 10 districts. 171 facilities are currently under contract Progress Indicator 9: Develop health care referral system Yes/No No system exists System is adopted and in Not Achieved. Development and Implementation of referral place in all tertiary, guidelines has been delayed. Referral guidelines are expected to be secondary and primary developed by 2019. facilities Progress Indicator 10: PPP contract Yes/No No unit exists Unit at Ministry of Not Achieved. PPP Unit at Ministry of Finance was not staffed due to management unit established and fully functional Finance staffed and fully challenges in attracting qualified applicants from the local and regional operational, including markets. One position was filled in 2018, another is due to be filled by Standard Operating April 2019. The Unit is expected to be staffed and fully operational in Procedures 2019. Standard Operating Procedures have been designed. Progress Indicator 11: Proportion Percentage 17 20 Not Achieved. The proportion has fallen to 10 percent. Previously, of health facilities with TB smear the government was focusing on improving microscopy coverage in all microscopy district hospitals. However, gene expert technology is more accurate and faster at diagnosing TB cases, and the government has shifted its focus to improving gene expert coverage. Therefore this indicator is being dropped, and replaced with one to reflect these improvements in TB diagnostic technology. Focus Area II: Promoting Private Sector Jobs Creation Strategic Objective 5: Improve the Business Environment and Diversify the Economy Progress Indicator 12: Enhance the Achieved. technology platforms at the One Yes/No No Yes Stop Business Facilitation Center: e- payments accepted for business registration and licensing services 34 Strategic Objective 6: Improve smallholder and MSME agricultural productivity Progress Indicator 13: Targeted beneficiaries recording better access Percent of total 23 50 No Data/New Indicator. Data for this original indicator is not to markets beneficiaries available. However, this indicator has been replaced by the number of farmers receiving competitive grants, which is expected to lead to increased agriculture productivity. The 2015 baseline is 4,800 farmers, and the 2019 end target is 7,570. As of December 2018, 6,270 farmers had received competitive grants. Strategic Objective 7: Increase transport connectivity to facilitate private sector growth Progress Indicator 14: Not Achieved. The planned OPRC assessment study has not yet been Kilometers of roads under Kilometers 0 200 completed. Given the delays and financing for road rehabilitation has rehabilitation and/or been dropped from the CPF program and may be considered once the maintenance OPRC assessment is done, government capacity bolstered and an approach to MFD/Cascade explored. New progress indicators are being introduced in focal area 1 related to road safety and footbridge construction. Strategic Objective 8. Increase water and renewable energy supply for industrial, agriculture and export opportunities Progress Indicator 15: Number 0 4 designated water zones Achieved. This gap analysis was completed for all 9 zones that are Infrastructure Gap Analysis part of the Lesotho Lowlands Water Development Program Phase II. identifies priority areas for provision of bulk supply to meet water demand especially in areas of high industrial, commercial and/or agricultural use and potential Progress Indicator 16: Scaling up Achieved. The SREP Investment Plan was completed in December Renewable Energy Investment Plan Text Not completed Completed 2018. It brings US$18.5 million for renewable energy development to completed Baseline (2015): Not Lesotho aiming to leverage US$71 million (including IDA). completed Target (2017): Completed 35 Annex 4: ASA Activities over the CPF Period Activities completed over FY16-18 Improving Efficiency and Effectiveness of the Public Sector Reports: • Health Public Expenditure Review • Job Readiness of Secondary School Graduates • Forever Young? Southern Africa: getting social sectors ready for a changing population • State-owned Enterprises: A Country Policy Note • Medium-term Debt Management Strategy Technical Assistance: • Continuous Multipurpose Household Survey • Youth Unemployment Diagnostic • Vocational Education • Tobacco and Alcohol Taxation • Money Laundering Promoting Private Sector Job Creation Reports: • Water Security and Climate Change Assessment • LHWP Royalties Model Modernization • WEAP Manual • Climate Smart Agriculture Policy Framework • A Snapshot of Early Mobile Money Service Uptake in Lesotho Technical Assistance: • Early Warning System • FIRST--Technical Assistance on Strengthening Insurance and Pension Regulation and Supervision • Developing a Trade Integration Strategy • Scaling Up Renewable Energy Investment Plan Activities proposed for FY19-20 Improving Efficiency and Effectiveness of the Public Sector Reports: • Public Expenditure Review: Improving Expenditure Efficiency for Inclusive Development and Growth (FY19) • Education Public Expenditure Review (FY19) • Agriculture Public Expenditure Review (FY19) • DEMPA (FY19) • Poverty Assessment (FY19) • PPP Readiness Diagnostic and Prefeasibility Study (FY20) • Adolescent Girls Health (FY20) • Social Protection System Performance (FY20) Technical Assistance • Regional High-level Forum on Early Childhood Nutrition in Southern Africa (FY19) 36 • Combatting Early Childhood Nutrition Roadmap (FY19) • National Identification and Civil Registry Department (FY19) • Integrated Health Care Delivery (FY19-20) • RAMP (FY19-20) • International Tax Capacity Building Program (FY19-20) • Disaster Risk Management Assistance (FY19-20) • Rapid Social Response (FY19) • IFC Advisory Services: PPP Unit Development and PPP Agreement (FY19-20) • Disability • ECCD Study Promoting Private Sector Job Creation Reports: • Unlocking the Potential of Lesotho’s Private Sector, A Focus on Apparel, Horticulture and ICT (FY19) • Climate Smart Agriculture Investment Plan (FY19) • Horticulture Commercialization (FY19) • Digital Economy (DE4A) Diagnostic and Implementation Plan (FY20) Technical Assistance • FIRST--Technical Assistance on Financial Inclusion (FY19-20) • IFC Advisory Services: Doing Business (FY19-20) • IFC Advisory Services: Trade Integration (FY19-20) • Integrated Catchment Management (FY20) 37 MAP OF LESOTHO 38