Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 69231-NI
THE INTERNATIONAL DEVELOPMENT ASSOCIATION
AND
INTERNATIONAL FINANCE CORPORATION
COUNTRY PARTNERSHIP STRATEGY
(FY2013-2017)
FOR THE
REPUBLIC OF NICARAGUA
October 3, 2012
Central America Country Management Unit
Latin America and the Caribbean Region
This document is being made publicly available prior to Board consideration. This does not imply a presumed
outcome. This document may be updated following Board consideration and the updated document will be
made publicly available in accordance with the Bankfs Policy on Access to information.
The date of the last Country Partnership Strategy Progress Report was December 4, 2009
CURRENCY EQUIVALENTS
Currency Unit = Nicaragua Cordobas (NIO)
US $1.00 = NIO 23.56
Fiscal Year:
January 1 - December 31
ABBREVIATION AND ACRONYMS
AAA
AF
Analytical and Advisory Activity
Additional Financing
CEA
CEM
CORAZON
Country Environmental Assessment
Country Economic Memorandum
Bi-National Project on Protected Areas - Nicaragua, Honduras
CPC
CPS
CPIA
CPPR
Citizenfs Power Councils
Country Partnership Strategy
Country Policy and Institutional Assessment
Country Portfolio Performance Review
DFID U.K. Department for International Development
DPC
DSA
Development Policy Credit
Debt Sustainability Analysis
EFA
ENACAL
ENDESA
ENITEL
ESW
Education for All
National Water Supply Enterprise
Nicaraguan Demographic and Health Survey
Nicaraguan Telecommunications Company
Economic and Sector Work
EU European Union
FOMAV
FSAP
GEF
Roads Maintenance Fund
Financial Sector Assessment Program
Global Environment Facility
HIPC Heavily Indebted Poor Countries
JSDF
LSMS
NLTA
MDG
Japan Social Development Fund
Living Standard Measurement Study
Non Lending Technical Assistance
Millennium Development Goals
MDRI
M&E
Multilateral Debt Relief Initiative
Monitoring and Evaluation
MIGA
MINED
MINSA
Multilateral Investment Guarantee Agency
Ministry of Education
Ministry of Health
MSME
NGO
NLTA
PASEN
PEFA
PER
PERZA
PFM
PNDH
Micro-Small & Medium Size Enterprises
Non Governmental Organization
Non Lending Technical Assistance
Nicaragua Education Support Program
Public Expenditure and Financial Accountability
Public Expenditure Review
Off grid Rural Electrification Project
Public Financial Management
National Human Development Plan
RAAN North Atlantic Autonomous Region
RAAS South Atlantic Autonomous Region
SERCE Second Regional Study for Learning Assessments
SIICAR Integrated System for Cadastre and Land Registration
SILAIS Local System of Integrated Health
TA Technical Assistance
TELCOR Telecommunication Regulatory Institution
WSP Water and Sanitation Program
WBG World Bank Group
IDA
Vice President: Hasan A. Tuluy
Country Director: C. Felipe Jaramillo
Task Team Leader: Andrea Kucey and Camille Nuamah
IFC
Vice President: Bernie Shehan
Country Director: Jean-Philippe Prosper
Task Team Leader Juan Carlos Pereira
JOINT IDA-IFC COUNTRY PARTNERSHIP STRATEGY
FOR THE
REPUBLIC OF NICARAGUA
TABLE OF CONTENTS
Executive Summary ..................................................................................................................................... i
I. Introduction ..................................................................................................................................... 1
II. Country Context .............................................................................................................................. 1
Political Context ........................................................................................................................................ 1
Citizen Security ......................................................................................................................................... 2
Poverty ...................................................................................................................................................... 2
Recent Economic Developments .............................................................................................................. 4
Impact of the of the 2008-2009 global crisis and economic recovery ...................................................... 5
Macroeconomic Outlook and Debt Sustainability .................................................................................... 6
III. Government Program and Development Challenges .................................................................. 8
Improving Social Service Delivery ....................................................................................................... 9
Accelerating Growth and Improving Incomes .................................................................................... 12
Making the Most of the Rural Economy ............................................................................................. 13
Raising the Impact of Infrastructure Investments ............................................................................... 14
Transversal Challenges ....................................................................................................................... 15
IV. The Country Partnership Strategy FY08-FY12 ......................................................................... 17
Portfolio Performance ............................................................................................................................. 18
Lessons Learned ...................................................................................................................................... 18
Consultations ........................................................................................................................................... 19
V. The Country Partnership Strategy FY13-FY17 ......................................................................... 20
Objective ................................................................................................................................................. 20
Principles of Engagement ....................................................................................................................... 20
CPS Program and Results ....................................................................................................................... 21
Strategic area 1. Raise welfare by improving access to quality basic services .................................. 21
Strategic area 2. Raise incomes by enhancing competitiveness and diversifying exports ................. 23
Transversal Themes ............................................................................................................................ 25
Monitoring and Evaluation ..................................................................................................................... 27
World Bank Group Program ................................................................................................................... 27
Managing Program Implementation ....................................................................................................... 29
Partnerships ............................................................................................................................................. 30
Regional .................................................................................................................................................. 30
VI. Risks ............................................................................................................................................... 31
TABLES AND FIGURES
Figure 1. Headcount Total Poverty Rates by Area ............................................................................................. 3
Figure 2. Decomposition of Changes in Poverty 2005-09 ................................................................................. 3
Figure 3: Access to Services by Income Quintiles, 2005-2009 (percent) .......................................................... 4
Table 1. Nicaragua: Key Economic Indicators 2007-2011 ................................................................................ 5
Table 2. Nicaragua: Medium Term Macroeconomic Outlook ........................................................................... 7
Table 3. Indicative CPS Lending and AAA Program FY13-17 ....................................................................... 28
ANNEXES
Annex 1. CPS Results Matrix ........................................................................................................................... 32
Annex 2. Millennium Development Goals in Nicaragua ................................................................................. 36
Annex 3. Nicaragua: Summary Gender Assessment ........................................................................................ 37
Annex 4. Nicaragua: Summary Governance Review ....................................................................................... 42
Annex 5. Trust Fund in Nicaragua ................................................................................................................... 46
Annex 6. Executive Summary of IDB Strategy for Nicaragua 2012-2017 ...................................................... 47
Annex 7. Donor Annex ..................................................................................................................................... 48
Annex 8. Nicaragua At A Glance ..................................................................................................................... 50
Annex 9. Selected Indicators of Bank Portfolio Performance and Management ............................................. 52
Annex 10. Nicaragua Social Indicators ............................................................................................................ 53
Annex 11. IFC Investment Operation Program ................................................................................................ 54
Annex 12. MIGA Exposure .............................................................................................................................. 55
Annex 13. Nicaragua Key Economic Indicators .............................................................................................. 56
Annex 14. Nicaragua Key Exposure Indicators ............................................................................................... 58
Annex 15. IBRD/IDA and IFC Portfolio.......................................................................................................... 59
Annex 16. FY2008-2012 CPS Completion Report .......................................................................................... 61
ACKNOWLEDGEMENTS
The World Bank Group greatly appreciates the close collaboration with the Government of Nicaragua in the
preparation of this Country Partnership Strategy.
The World Bank Nicaragua Country Teams contributions were critical to the production of this document.
Special thanks go to several colleagues including Luis Alvaro Sanchez, Raul Antonio Barrios, Barbara Cunha,
Javier Baez, Juan Carlos Pereira, Miriam Montenegro, Augusto Garcia, Michael Drabble, Amparo Gordillo-
Tobar, Enrique Pantoja, Lilian Pena, David Michaud, Stephen Muzira, Sabine Perrissin, Alma Hernandez, and
Sonia C. Molina.

i
Executive Summary
1. Nicaragua is the poorest country in Central America with a GNI per capita of
US$1,510. Decades of civil conflict and a series of catastrophic natural disasters have left the
country behind most of its neighbors in terms of economic and social indicators. The poverty
headcount stands at 42 percent and one in seven Nicaraguans lives in extreme poverty. Most of
the poor live in the rural areas; many in remote communities where the access to basic services is
still constrained by very limited infrastructure. The country also ranks among the most
vulnerable in terms of natural disasters and extreme climate. Interestingly, however, Nicaragua
has not been as plagued by the same levels of violence as some of its Central American
neighbors: homicide rates are the lowest in the sub-region.
2. Over the last decade or so, major progress has been made in improving service
delivery to the poorest and results are beginning to show. Public expenditures in
infrastructure and reforms in social service delivery have been targeted toward rural areas and
poorer households. Poverty reduction accelerated in the last five years, inequality has fallen and
social indicators are showing steady improvements. However, while a significant number of the
Millennium Development Goals (MDGs) are on track to be achieved, rural-urban disparities
remain stark and other key human development indicators, such as educational attainment are
still very low.
3. Sound macroeconomic policies have also allowed for moderate and steady economic
growth, but increasing productivity is needed to accelerate convergence in income levels
with the rest of the region. Nicaragua has maintained disciplined macroeconomic policies
since 2001 underpinning average growth rates of around 3.5 percent and a strong rebound from
recent crises. Despite these positive trends, however, the country remains quite vulnerable to
external shocks and to natural disasters. More recently, exports and FDI have picked up but the
underlying productivity has not improved and is limiting the countryfs overall competitiveness.
4. The Governmentfs current National Plan for Human Development (2007-2012)
gives priority towards pro-poor delivery of basic social services and infrastructure,
particularly in rural areas. Implementation has yielded some critical innovations, notably in
social service delivery and rural infrastructure that are showing promising results. More
recently, there has been a renewed emphasis on the need to stimulate investment and to improve
productivity, particularly in export-oriented sectors. This shift is likely to be reflected in the
ongoing revision to the National Human Development Plan (PNDH).
5. Even with limited resources, the Bank Group has supported important advances in
Nicaragua. Implementation of the last CPS saw IDA consolidate lending around a core set of
well-performing investment programs focused on rural infrastructure and social services while
IFC accelerated growth in its Nicaragua portfolio, including in key export sectors. Key lessons
include the strategic value of Bank Group engagements in helping Nicaragua to mobilize
resources from other development partners and from the private sector, as well as the need to
maintain flexibility to respond to emerging challenges in a country buffeted by external shocks
and natural events.
ii
6. Against this backdrop, the proposed WBG continues to focus on improving the
delivery of basic services, and adds an emphasis on strengthening competitiveness as a
means to accelerate growth in incomes. Under the first, the objective is to raise welfare by
improving access to quality basic services. The IDA lending program will help Nicaragua to
scale up new models of service delivery in health, education, social protection and water and
sanitation, particularly in areas where Nicaragua faces significant challenges to achieve the
remaining MDGs. The second strategic objective is to raise incomes by enhancing
competitiveness and diversifying exports. Under this objective, the CPS program seeks to
deepen the impact of current programs in rural infrastructure, land and SME administration by
adding a focus on productivity, and through greater synergies with IFC and MIGA engagements
in agribusiness, and in the energy and financial sectors. The CPS will continue mainstreaming
attention to gender and indigenous peoples, disaster risk mitigation and climate adaptation.
7. The CPS program will leverage the full bundle of WBG services to complement IDA
resources and help mobilize other development financing. The key principles of engagement
involve maintaining Nicaraguafs very strong record on project implementation, building scalable
programs that can attract additional resources, and leveraging the full breadth of WBG
instruments by coordinating IDA, IFC and MIGA interventions. The Government has agreed to
a lending program of one or two new investment projects a year with remaining resources
reserved to scale up successful ongoing projects and for emerging challenges. Investment
lending would be complemented with a strong program of knowledge services, as well as
support to mobilize additional resources (e.g. from global programs, trust funds, public private
partnerships).
8. The CPS program is complemented by a series of regional initiatives that address the
citizen security agenda, support a greater economic integration through trade facilitation, and aim
to reduce disaster risks across Central America.
9. The Bank will coordinate with IMF and the Inter-American Development Bank
(IDB) in supporting policy reforms. Although expectations of an ambitious reform agenda on
governance are low at this time, the CPS program will renew its emphasis on transparency and
monitoring and evaluation. More joint Government and Bank dissemination of good program
results and analytical work to stakeholders, including civil society and local academia, may
provide an opportunity to build a more substantive governance agenda over the medium term. A
strong monitoring and evaluation system will be a prerequisite for anchoring a more determined
transparency effort, and to support mobilization of resources.
10. Risks to the implementation of the CPS program are considered relatively
moderate. Political risk is mitigated in part by the alignment of the CPS period with the
political cycle in Nicaragua. While political polarization could encumber the pace of policy
reform, an improving government dialogue with the private sector has strengthened the outlook
for consensus building. A potential economic crisis in Europe, a further slowdown in the US
economy or a sudden stop in support from Venezuela would create challenges for program
implementation. The Bank will coordinate with the IMF and the IDB to encourage Nicaragua to
create necessary buffers, and will maintain flexibility in the IDA program to respond to emerging
challenges. The Government has also agreed to introduce the new IDA Immediate Response
Mechanism (IRM) into the portfolio to mitigate the persistent risk from natural disasters.
1
I. Introduction
1. Nicaragua is one of the poorest countries in Latin America with a GNI per capita of
US$1,510 in 2011. Approximately 42.5 percent of the population still lives below the poverty
line and one out of every seven Nicaraguans lives in extreme poverty. The country is particularly
vulnerable to adverse natural events which threaten development gains.
2. A number of macroeconomic reforms and stabilization policies undertaken during
the 1990s paved the way for improved economic performance over the last decade.
Moderate growth over the past decade of roughly 3.2 percent per annum has translated into some
improvements in poverty rates, particularly in rural areas. The current Government has placed a
strong emphasis on delivering services to the most vulnerable population, and is focusing its
second term on reducing poverty by deepening rural services, creating job opportunities, and
promoting foreign direct investment (FDI) and exports. Within this objective there is a renewed
attention on improving productivity.
3. The country has had a stronger economic recovery following the global economic
crisis than its Central American neighbors. The countryfs growth rate in 2011 was the highest
in a decade at 5.1 percent, and FDI and trade are both improving at good rates. Prudent
macroeconomic management and favorable export prices have helped support the economic
recovery. Meanwhile employment has kept pace with population dynamics, but been dominated
by low income and informal jobs. The challenge over the longer term is to sustain higher growth
rates to accelerate poverty reduction. This will require not only improving the efficiency of
public spending and improving the effectiveness of the state, but jumpstarting improvements in
productivity that can translate over time into higher income growth across the population.
4. The Government and the World Bank Group (WBG) have agreed on a five year
program of engagement, designed in close coordination with the IDB and IMF, to support
Nicaragua in achieving its key development goals. The proposed Country Partnership Strategy
(CPS) for FY13-17 supports government priorities in two key areas of engagement: (i) raising
welfare by improving access to quality basic services; and (ii) raising incomes by improving
productivity and enhancing competitiveness. The transversal themes of disaster risk
management, gender and transparency are mainstreamed throughout the CPS program to
enhance the sustainability of program outcomes. This CPS has been prepared jointly with the
IFC and MIGA, with the objective of leveraging each groupfs comparative advantage and
expanding the suite of instruments available to support Nicaragua. Finally, the strategy has been
prepared in close coordination with the IDB and the IMF, and reflects an intention to collaborate
more intensely in areas of policy dialogue which are critical to the development agenda as well
as to improve the efficiency of development assistance.
II. Country Context
Political Context
5. Nicaragua continues to be characterized by high levels of political polarization, but
also a broadening consensus around macroeconomic policies. In November 2011, the current
President and Administration were re-elected for a five year term, with a parliamentary majority.
2
While the political opposition has not been able to consolidate around a unified platform, control
of both the executive and legislature has not yielded the expected stability in government sector
policy-making. Indeed, competing demands within the ruling party constituencies have begun to
surface. Outside government, Nicaragua has seen continued development of civil society and
other groups calling for improved governance. As such, the Government is also likely to face
greater scrutiny and demand for enhanced transparency in the use of public resources and about
its programs in general.
6. In contrast, the Governmentfs relationship with the private sector has been
improving, and provides a space for more open and constructive debate on economic
strategy. This includes a broad based consensus on the need to maintain macroeconomic
stability, the promotion of both private domestic and foreign investment, and on the need to
address lagging productivity and export competitiveness. Municipal elections will take place in
November 2012, raising issues related to electoral processes, but there seems to be a potential for
negotiation between political actors on some elements of electoral reform.
Citizen Security
7. Although Nicaragua is comparatively safe among Central American countries,
crime rates are increasing and could pose important risks to development. The homicide
rate per 100,000 inhabitants was 13 in 2010 down from 14 in 2009, and together with Costa
Rica, is the lowest in the region. Nicaragua is also the only country in Central America where
these rates have remained stable over the last 5 years. In the 2011 Latinobarometer survey,
Nicaragua is the country where the least number (only 3 percent) of respondents name crime as
the number one problem versus a regional average of 28 percent. As such, the country allocates
relatively fewer resources to security and justice, leaving more room for social spending and
investment which also contributes to prevention.1 While Nicaraguafs homicide rates are stable,
crime rates are increasing and the economic costs of crime remain high even by Latin American
standards.2 There are also future risks related to the movement of drug trafficking routes which
could negatively affect Nicaragua.3
Poverty
8. The second half of the last decade brought a notable reduction in poverty and
inequality, concentrated mostly in rural areas. In contrast to the period 2001-2005 in which
poverty essentially stayed constant at 48 percent, the country saw a significant reduction in the
poverty headcount of nearly 6 percentage points (equivalent to around 230,000 fewer poor
people), reaching a national rate of 42.5 percent in 2009. Meanwhile, extreme poverty fell from
17.2 to 14.6 percent between 2005 and 2009. Poverty remains a largely rural problem. By 2009,
more than one in four Nicaraguans that reside in rural parts of the country were unable to meet
1 The country spends on average US$2,500 per 100 inhabitants on the security and justice sector, similar to
Honduras (US$3,700) and Guatemala (US$4,600), which have homicide rates over three times as high, and much
lower than the average for Central America (US$9,400).
2 According to the World Bank Enterprise Survey, the share of firms that consider crime and theft as a major
constraint to business increased from 18 percent in 2006 to 48 percent in 2010, above the average for LAC (32 %).
3 There is much speculation about why Nicaragua seems not be affected by the homicide trend of the region,
with several potential hypothesis including the success of the community police, and its geographic location (far
from the Mexican border and a relatively isolated Caribbean coast).
3
Figure 2. Decomposition of Changes in Poverty 2005-09
Source: Staff calculations from EMNV 2005 and 2009.
]7.00
5.60
]10.50
]2.10
]15.00 ]10.00 ]5.00 0.00 5.00 10.00
Total Change
Poverty Line Effect
Grown Effect
Redistribution Effect
their basic food needs; compared to around 6 out of 100 in urban areas. The Gini coefficient fell
for the whole country from 40.5 in 2005 to 37.1 in 2009, and was similar in both urban and rural
parts of the country. These results are confirmed in multiple measures based on consumption.
Figure 1. Headcount Total Poverty Rates by Area
9. Recent gains have been largely
driven by income growth and
improvements in education and access
to basic services but large gaps remain between urban and rural areas and across income
groups. The largest absolute gains in rural income occurred in agriculture, the main source of
employment and income for poor people and contributed to poverty reduction. There were
significant, albeit smaller gains in non-agricultural income among rural poor households. School
attainment for people 20 years and older increased from 5.7 to 6.2 years during 2005-2009, but
in 2009, rural individuals still had four years less average schooling than their urban
counterparts. For the youngest cohort (23-29 years old), this rural-urban gap has been partially
closed but substantial differences remain (5.3 versus 7.8 years of schooling). Likewise, there has
been notable progress in access to electricity and water services that have been successfully
targeted at poorer quintiles but large gaps remain (see Figure 3).
10. Indigenous peoples and Afro-descendant populations in the rural Atlantic coast
regions continue to suffer more severe deprivation. Notwithstanding similar poverty and
extreme poverty headcounts to the Central rural regions, the social and basic service indicators in
the rural Atlantic remain dramatically lower, in part due to the remoteness of many communities
that are still only accessible by water.
11. Nicaragua remains vulnerable to food price increases. Given that poverty is
widespread in Nicaragua and the poor spend a large share of their budget on food, rising food
prices would present a threat to the nutrition and livelihoods of large segments of the population.
It is estimated that during the 2008 period of sharply rising food prices more than 90 percent of
households were worse off as a result of the increases and that food prices pushed poverty -
especially in urban areas . upwards by more than 4 percentage points.
Note: National, urban and rural changes
statistically significant at least 10 percent
level of confidence.
Source: Staff calculations from EMNV 2005 and
2009.
4
Figure 3: Access to Services by Income Quintiles, 2005-2009 (percent)
Source: Staff calculations, EMNV 2005, 2009
Recent Economic Developments
12. Nicaragua entered the global economic crisis from a position of relative strength.
Economic growth in the past decade was positive, averaging 3.2 percent, in line with the regional
average. More importantly, economic growth has been positive every year during this period,
except for 2009 where the economy contracted 1.4 percent due to the international economic
crisis. Nevertheless, these trends have not been strong enough to compensate for the earlier
collapse of the 1980s and early 1990s. Growth has been partially driven by an expansion in
exports, which grew at an average rate of 11 percent in the decade and currently represent 43
percent of GDP, up from 15 percent in 2000. The free trade agreement signed in 2005 between
Central American countries, Dominican Republic and the United States (DR-CAFTA) played an
important role. Exports to the US (Nicaraguafs biggest trade partner) have more than doubled
since its implementation. More recently, Venezuela has also gained in importance and represents
the second highest export destination.
13. Since 2001 the country has maintained disciplined macroeconomic policies and has
succeeded in increasing fiscal revenues. There has been a consolidation of the fiscal position
through several tax reforms that raised tax revenues from 11 percent in 2001 to 15.2 percent in
2008 of GDP. Furthermore, in 2009 the Ministry of Finance introduced a fiscal reform bill in
order to tackle the slide in revenues triggered by the economic slowdown and the decline in aid
from abroad. The billfs main objectives were to make the tax system more equitable, to
generalize the levying of taxes and to modernize and simplify tax payment procedures. As a
result, the balance in the central government (after donations) has improved, posting a 0.5
percent surplus in 2011, and spending has been reoriented to place greater emphasis on poverty
interventions.
14. Fiscal consolidation efforts, combined with benefits from the HIPC and MDRI
initiative, have improved the countryfs debt outlook. Nicaragua has benefited from the
Heavily Indebted Poor Country (HIPC) initiative and Multilateral Debt Relieve Initiative
(MDRI) which helped reduce the countryfs public and external debt-to GDP ratio from roughly
400 for both in 1994 to 62 and 83 percent, respectively in 2007. These initiatives have helped
relieve the economy from one of its major constraints to growth as the high debt burden was
forcing the country to pay debt services equivalent to roughly 7 percent of GDP. Combined,
37
64
77
89
96
55
76
86
93 98
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q5
Electricity
Electricity 2005 Electricity 2009
31
50
65
80
91
40
54
74
83
93
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q5
Water
Water 2005 Water 2009
5
these initiatives helped relieve US$1.1 billion in IDA debt and charges, more than two times the
current outstanding debt. Since then, public debt has continued to decrease . although at a slower
pace . and is currently 57.7 percent of GDP.
Table 1. Nicaragua: Key Economic Indicators 2007-2011
(percent of GDP, unless otherwise indicated)
Impact of the of the 2008-2009 global crisis and economic recovery
15. The economy was hit hard by the food, fuel and financial crises, as well as other
natural disasters, but has been able to recover its pre-crisis trend. The primary transmission
channels of the crisis were a shrinking FDI, weaker external demand and decrease in the flow of
remittances. Investment plunged 20 percent of GDP due to a collapse of credit and FDI and to a
contraction in the construction sector, while consumption decreased moderately following a drop
in remittance flows. Reduced external demand, weather issues, including shifting rainfall
patterns due to El Nino, and a low-point in the two-year coffee cycle all had a negative impact on
exports which fell by 5.5 percent in 2009. However, imports fell at an even faster pace (19.2
percent) driven by weaker internal demand and lower oil prices (oil imports represent 14 percent
2007 2008 2009 2010 2011
Income and Prices
GDP growth (% change) 5.0 2.9 -1.4 3.1 5.1
GDP per capita (% change) 3.7 1.6 -2.7 1.8 3.7
Inflation (CPI, end of period % change) 16.9 13.8 0.9 9.2 8.0
Investment and Savings
Gross domestic investment 29.5 28.4 24.4 24.4 27.9
Gross domestic savings 3.6 2.0 6.6 6.2 7.1
Central Government
Total revenue 15.0 14.7 14.6 15.3 16.5
Total tax revenues 13.8 13.6 13.5 14.2 15.2
Total expenditure 17.5 17.9 18.6 18.0 18.2
Grants 2.8 2.2 1.9 1.9 2.1
Primary balance (after grants) 1.4 -0.1 -1.1 0.4 1.6
Overall balance (after grants) 0.3 -1.0 -2.1 -0.8 0.5
Public debt
Total debt 62.0 57.6 61.6 63.6 57.7
O/w External 46.6 43.8 46.5 47.1 44.8
External public debt services (% of exports) 8.0 4.4 4.6 3.4
Balance of payments
Current account balance -14.3 -19.1 -10.3 -11.5 -14.4
Trade balance -23.5 -26.8 -19.1 -19.4 -22.2
Exports (including maquila) 31.4 30.8 29.6 37.5 43.5
Imports (including maquila) 54.9 57.5 48.7 56.9 65.7
Foreign direct investment 5.1 7.6 5.4 6.0 10.4
Memorandum item:
Nominal GDP (Millions of USD) 7,447 8,222 8,061 8,427 9,317
Source: Central Bank of Nicaragua and World Bank
6
of GDP). As a result, the trade balance improved and the current account deficit fell almost 9
percentage points (10.3 percent of GDP in 2009).
16. The fiscal and financial sectors remained resilient to the crisis. During the 2008-2009
crisis, the Government implemented some countercyclical measures to mitigate the social
impacts of the recession (mainly through current transfers), which boosted expenditures by 1
percentage point of GDP to 18 percent of GDP. Revenues remained stable at around 15 percent
of the GDP, but grants fell, leading to an increase in the fiscal deficit of the central government
(after donations) to 2.1 percent of GDP in 2009. As a result, Nicaraguafs fiscal performance in
2009 was better than most countries in the region. The financial system also weathered the crisis
without much difficulty. The banksf capital adequacy ratio stayed well above regulatory Tier 1
ratios and liquidity buffers remained high on average.
17. Despite the general elections in 2011, fiscal accounts remained strong in the post
crisis, but there are concerns associated with contingent liabilities. An increase in tax
revenues of almost 2 percentage points of GDP in the post crisis and partial recovery in grants
contributed to a strengthening of public finances. The Government also made efforts to restrain
spending. Public expenditures have decreased with respect to 2009 but remained slightly above
the pre-crisis levels. As a result, the consolidated nonfinancial public sector ran a primary surplus
(after donations) in 2011 for the first time in the decade. While this outcome attests to a budding
economic resilience, new vulnerabilities have also emerged. Over the last three years, the
authorities have used political private cooperation flows from Venezuela of around 2.1 percent of
GDP to pay for, inter alia, current expenditures such as electricity subsidies and wage bonuses
for public employees, which could represent a potential fiscal liability if such financing flows are
interrupted.
18. Since the global crisis, Nicaraguafs economic performance has been strong.
Economic activity rebounded in 2010, and it remained robust in 2011 as real GDP grew at 3.1
percent in 2010 and 5.1 percent in 2011. As a consequence, consumer price inflation escalated to
9.2 percent in 2010 but stabilized at 8 percent in 2011. Exports grew 13.2 percent in real terms,
and investment is approaching its pre-crisis levels (28 percent of GDP) in 2011. The external
sector was boosted by traditional export products such as coffee, meat and sugar. Sales of
manufacturing products to the United States market also expanded. Exports from maquila firms
producing textiles and automotive parts posted a 40 percent increase while tourism grew 10
percent. Strong domestic demand fuelled by both consumption and investment drove imports up
by 22 percent. An increase in imports in 2011 (by 27.8 percent) led to a widening of the current
account deficit to 14.4 percent of GDP, which is higher than in 2009 but lower than pre-crisis
levels.
Macroeconomic Outlook and Debt Sustainability
19. Nicaraguafs economy is likely to grow moderately in the medium term, but it
remains vulnerable to adverse developments in the external sector. Economic growth is
expected to decrease to 4 percent in 2012, reflecting continuing uncertainties with the
international environment, and then to stabilize at around 4.6 percent. This projection can be
affected by a worsening in the European debt crisis and its direct and indirect repercussions for
Nicaragua. The country is heavily dependent on food exports to the US and Venezuela, and on
oil imports. Fluctuations in commodity prices that adversely affect terms of trade would increase
7
the already high current account deficit (17 percent of GDP). The effects of a further
deterioration of the euro zone crisis on global growth and on donor countriesf aid budgets would
have adverse impact on the Nicaragua economy. While Venezuela is the main bilateral lender to
the private sector (75 percent), Europe still plays a role in external financing through official
development assistance (27 percent of total assistance to the public sector and 52 percent of
donations in 2011).
Table 2. Nicaragua: Medium Term Macroeconomic Outlook
(percent of GDP, unless otherwise indicated)
20. External public debt is expected to decline steadily, with total debt decreasing to 43
percent of GDP in 2016. The latest Debt Sustainability Analysis (DSA) carried out by the
World Bank and IMF indicates a moderate risk of external debt distress. The analysis assumes
the resolution of pending bilateral agreements which account for 40 percent of public sector
external debt outstanding under the HIPC initiative in the near term. Medium-term
2011 2012 2013 2014 2015 2016
Income and Prices
GDP growth (% change) 5.1 4.0 4.2 4.4 4.6 4.6
GDP per capita (% change) 3.7 2.7 2.9 3.1 3.3 3.3
Inflation (CPI, end of period % change) 8.0 7.4 7.2 7.0 7.0 7.0
Investment and Savings
Gross domestic investment 27.9 29.4 29.3 30.0 30.0 28.8
Gross domestic savings 7.1 7.6 9.6 9.8 9.4 9.4
Central Government
Total revenues 16.5 17.1 17.3 17.5 17.5 17.5
Total tax revenues 15.2 15.7 15.9 16.1 16.2 16.2
Total expenditure 18.2 19.4 19.2 19.2 19.3 19.2
Grants 2.1 1.9 1.5 1.5 1.5 1.5
Primary balance (after grants) 1.6 0.8 0.8 0.9 0.9 0.9
Overall balance (after grants) 0.5 -0.4 -0.3 -0.2 -0.2 -0.2
Public debt
Total debt 57.7 54.6 52.8 51.1 49.8 47.5
O/w External 44.8 43.8 44.0 44.2 44.0 43.1
Balance of payments
Current account balance -14.4 -17.6 -15.5 -13.6 -11.7 -9.3
Trade balance -22.2 -23.6 -22.1 -20.8 -19.6 -18.8
Exports (goods. FOB) 43.5 45.4 46.4 47.2 48.0 48.2
Imports (goods, FOB) 65.7 69.0 68.4 68.0 67.6 66.9
Foreign direct investment 10.4 8.4 7.7 7.3 7.1 6.8
Memorandum item:
Nominal GDP (Millions of USD) 9,317 9,854 10,414 11,028 11,700 12,437
Source: Central Bank of Nicaragua, World Bank and IMF projections
8
vulnerabilities could arise from a depreciation shock and a historical scenario4 where expected
growth dividend and envisaged adjustments do not materialize.
21. However, modest growth levels make it difficult for Nicaragua to close the gap with
the rest of LAC. As population is expected to grow at around 1.5 percent a year over the next
decade, a growth rate of 4.5 percent would translate into increases in per capita income of only 3
percent a year, thus making it difficult for Nicaragua to catch up with the LAC average.
Considerably higher rates of growth are necessary for the country to converge in living
standards. To this end, an increase in productivity growth . which has been low despite a
relatively high share of investment . will be a critical agenda.
22. Increasing productivity will be critical to raising growth rates and accelerating a
convergence in incomes. However, aggregate productivity (both labor productivity and total
factor productivity) has been declining over the last ten years and is the second lowest in Central
America. Almost all sectors faced reductions in productivity. Construction and agriculture
presented the worst results, while garment and textile manufacturing were the only segments
with productivity gains. Investment rates have been relatively high as a share of GDP, but the
amount per capita actually invested in productive activities is very low. For example, per capita
investment in infrastructure in Nicaragua is three times lower than in Honduras. In addition,
growth returns to investment are lower than in neighboring countries.5
23. Meanwhile, vulnerabilities can be reduced by diversifying export markets and
products. Nicaraguafs export boom has not been accompanied by the diversification needed to
reduce external vulnerabilities. It is the only country in the region for which export markets have
become more concentrated, and the number of export relationships (product-destinations) is the
lowest in Central America. Even though in nominal terms trade has expanded sharply, Nicaragua
did not gain world market share over the past ten years and its exports continue to be dominated
by agriculture products and textiles. This has exacerbated its vulnerability to a concurrent
downturn in commodity prices or other changes in the terms of trade. Meanwhile the jobs
created from the export boom have been concentrated in low wage, low skilled employment.
Reducing trade and logistic costs, investing in the quality and productivity of exports, and
supporting the growth of emerging non-traditional exports will be critical to improve the process
of Nicaraguafs integration in the world economy. In addition, increasing the links between
exporters and the domestic economy will help broaden and distribute the gains from economic
integration and accelerate poverty reduction.
III. Government Strategy and Development Challenges
24. The Governmentfs strategy builds on and consolidates achievements to date. The
Government of Nicaraguafs National Plan for Human Development (PNDH) 2007-2012 remains
relevant, with its emphasis on reducing inequality by increasing poverty-related spending and
boosting investment in social sectors and rural infrastructure. This includes building on the
4 Under the historical scenario, the economy grows 2.9 percent instead of the 4 percent assumed in the
baseline case, and the primary deficit remains at 0.6 percent of GDP instead of continuously declining towards zero.
5 Swinston and Barrot (2011).
9
proven models to further expand access and to achieve more efficiency in the delivery of basic
services.
25. A key element going forward is to achieve faster economic growth while maintaining
its emphasis on poverty reduction and shared prosperity. The Government is expected to
renew its commitment to improve incomes by raising productivity, reflecting the growing
concern that for accelerated poverty reduction the economy will need to grow at higher rates and
provide better jobs. Indeed, this has been the focus of a renewed dialogue between the
Government and the private sector. These efforts would be accompanied by a consolidation and
increased effort on the human development agenda, and will be included in a revised National
Plan for Human Development for 2013-2016 that is currently under preparation.
26. The Government has confirmed the broad continuity of the strategy and the
relevance of the current WBG program in supporting its objectives. The areas of Bank
engagement include sectors with broad public support and a proven track record of delivering
results. The proposed lending program has been confirmed with the authorities and the
knowledge agenda supports emerging government priorities. Given the relatively limited IDA
resources, the Bank is proposing to coordinate closely with the IDB who are also in the process
of finalizing their country strategy.
Improving Social Service Delivery
27. Achieving faster growth rates by improving productivity will require addressing low
education levels. Nicaraguafs educational attainments are very low by global standards. The
population between 15 and 64 years of age has, on average, just 5.8 years of schooling with
accentuated geographical inequalities achieving 8.1 years in urban areas, but only 4.4 years in
rural areas.
28. Inefficiencies in the education system are delaying progress to meet the MDG on
universal completion of primary education. While there is universal enrollment in first grade
and the gross enrollment rate (GER) at the primary level is 120 percent, less than 75 percent of
children actually complete sixth grade (data from 2010)6, around 46 percent complete ninth
grade, and 41 percent eleventh grade. This is the result of a combination of elevated dropout and
repetition rates, which both have remained consistently above 10 percent on average in primary
education over the last few years. These problems are concentrated in multi-grade rural schools
which need better trained teachers, basic learning infrastructure, and adequate pedagogical
materials. Lower secondary education (grades 7-9) also suffers from inadequate and unequal
access and low completion, particularly in rural areas. Low enrollment at the lower secondary
level is a reflection of lack of access which requires at least classrooms and teachers.
29. Improving quality will require strengthening teacher development and monitoring
mechanisms. Nicaragua ranked below the regional average on UNESCOfs Second Regional
Comparative and Explanatory Study (SERCE) in 2006. In addition, national 2009 standardized
evaluations show that learning outcomes in 4th and 6th grades were strongly correlated with
poverty levels, rural schooling, and low retention rates in primary. On secondary education,
6 The Primary Completion Rate is probably overestimated because MINED usually counts all the children in grade 6 without
discounting the repeaters. The real Primary Completion Rate is probably slightly below 70 percent.
10
Nicaragua is still developing the instrument to apply a standardized test in grade 11, but test
results from university applications provides some indication of the secondary education quality
challenge. The low quality is also a reflection of poorly trained teachers. In preschool teachers
are non-formal community volunteers with little training in early-age learning processes. In
primary, two thirds work in rural schools, many as gcontract teachersh lacking any teaching
certification. Finally, 40 percent of secondary level teachers lack formal training and the vast
majority work in rural areas where technical support is scarce.
30. High poverty levels and vulnerabilities also affect the demand for education. About a
third of the estimated 300,000 families with children living in extreme poverty have at least one
child (aged 7-12) working or not going to school. An analysis of the reasons why school-age
children are not enrolled in school indicates that about 12 percent of those who should be in
primary school, 15 percent in lower secondary and around 25 percent in upper secondary were
working. While public primary and secondary education are free, lack of money continues to be
the most common reason cited for not attending school among extremely poor children.
31. The Government has launched a new Education Sector Plan (ESP), with Bank
support, for 2011-2015 to improve: (i) the coverage and quality of preschool education, (ii)
completion of primary education; and (iii) the coverage and quality of secondary
education. Progress has already been made in some of the following areas: (i) the development,
printing and distribution of learning and teaching materials in primary schools under a revised
curriculum; (ii) the revision of the preschool curriculum and its implementation model; (iii) the
extension of school feeding to all preschool and primary school children; (iv) the distribution of
school supplies, including notebooks, uniforms and shoes to children in the poorest households
and those not enrolled in school; (v) small repairs to primary school buildings; and (vi) the
design of a plan for teacher professional development.
32. The Government recently also approved an impressive strategy for achieving
universal access to early childhood education, and plans to extend the ESP to upper
secondary and technical and vocational education (TVET). The efforts in early childhood
education span three ministries, Health, Education and the Ministry of the Family, and have
already demonstrated good results in terms of efficiencies and effectiveness from integrating
multi-service delivery around common goals at the local level. These lessons will be crucial also
for TVET where a consolidated strategy is still under development and Nicaragua has scattered
programs implemented by different ministries (e.g, INATEC, Ministry of Labor, INTECNA) that
could be better coordinated. The strategy will aim to strengthen school-to-work transition and
improve the linkages of the TVET programs with labor market demands.
33. Nicaragua is making slow progress toward achieving the MDGs related to
malnutrition (MDG 1) and maternal health (MDG 5) outcomes (see Annex 2). Although the
2012 Demographic and Health Survey (DHS) is still being collected, there is some data which
shows improvements in the percentage of children under two years of age with chronic
malnutrition. While the MDGs 4 in infant and child mortality are on track to be achieved, the
progress on maternal mortality has been difficult to monitor. Infant mortality fell from 28.1
(2006) to 22.6 per 1,000 live births (UN Interagency group data) in 2010 and under-5 mortality
also fell from 68 (1990 UN Interagency group data) to 26.9 per 1,000 live births (2010
CELADE). Meanwhile maternal mortality shows little or no decline using available data, from
11
96 (2006) to 95 per 100,000 live births (2010 Inter agency group data), but risk factors such as
number of attended births and percent of women receiving sufficient pre-natal checkups has
improved steadily. Nevertheless, progress still appears too slow to achieve the goal of reducing
it by three-quarters from the 1990 baseline.
34. The model of Community and Family Health Care Services is showing promising
results. Along with universal access to basic health and nutrition services, this model builds on
earlier efforts in primary health care service delivery, while placing more emphasis on
promotion, prevention and on collaborating with local community organizations through a
territorial network approach to delivery of a basic benefit package of services. Access for
vulnerable populations, including indigenous groups, women, children, and the elderly is a
priority. Combined with capitation financing and performance-based-incentives, the model, has
shown promising results in the last five years that it has been in place. However, more is needed
to ensure efficiency and the quality of service delivery. Key challenges include the need to
support an evolution towards a results-based financing scheme. MINSA should improve the
systems for data collection, monitoring and evaluation, to accurately cost service provision at
different levels of attention, and to undertake more systemic institutional performance and
impact assessments.
35. The National System of Social Welfare (SNBS) and its flagship Programa Amor have
provided lessons on how to deliver basic services in an integrated way at the local level.
Programa Amor, which is supported by the Social Protection Project (Report No. 56243-NI),
focuses on connecting vulnerable families living in extreme poverty, in particular, those with
children out of school, to all pertinent social assistance programs and basic services. As noted
above, the results to date of integrating services across the Ministry of Education (MINED), the
Ministry of the Family, Youth and Children (MIFAN) and the Ministry of Health (MINSA)
around a first common goal of raising early childhood enrollments . are very promising. The
Government hopes to also raise the efficiency of this new social assistance/protection service
provision model (Modelo Atencion) and to extend it to other vulnerable groups through a lifecycle
approach that reaches to the elderly. Plans to implement a national unified registry of
social program beneficiaries including a digital health registry of families (gFicha de Saludh) is
another step in the right direction.
36. However, given the decline in donor financing for the social sectors, Nicaragua faces
an urgent need to address the sustainability in social service delivery. A gradual decline in
development cooperation in Nicaragua over the last five years (see paragraph 23) has been most
severely felt in the social sectors where aid fell from US$280 million in 2007 to $130 million in
2011 and from 40 percent of the aid flows to less than one quarter. Meanwhile, the Government
is making progress on gradually improving its own revenue flows that could be available to roll
out new service delivery innovations. For this reason, consolidating the above mentioned
models of integrated service delivery that are showing progress, as well as improving planning
and budgeting, are critical to sustaining service delivery and progress on Nicaraguafs human
development agenda.
37. Despite progress in the last decade, there are still large rural-urban gaps in access to
water and sanitation; public financing is used to subsidize operational and maintenance
costs of inefficient urban systems instead of being directed to low-income rural households.
12
Although Nicaragua has achieved its MDG in access to improved water sources, progress on
access to sanitation has been slower. Disparities in terms of urban and rural access to water . 98
percent versus 68 percent, respectively . and to sanitation (63 percent versus 37 percent) are
particularly striking. The sector also needs to look beyond coverage to improvements in service
quality and sustainability. Most of the urban population receives discontinuous supply;
ENACAL, the urban water company, requires continuous transfers from the budget to operate.
With a recent increase in donor flows to water and sanitation, there are opportunities to make
important gains, provided there is progress on sector realignment. The Government is currently
preparing a modernization program for the urban sector (with the support of the Bank and other
donors) and a new master plan of public investments in both rural and urban areas that should
provide a strong basis for moving forward.
38. Ongoing development of the public financial management system needs to be
complemented with improved planning, M&E, and expenditure policy formulation,
particularly in the social sectors. Some progress has been made in moving to results-based
management, multi-year budgeting and expanding public financial management (PFM) reform to
sector ministries and municipalities. The authorities are also implementing an ambitious
modernization effort (supported by IDA, IDB and the EU) to update the ICT platform to better
support public financial and procurement operations making them more effective and
transparent. However, in the social sectors these efforts need to be complemented with
improvements to the systemic capacity of the SNBS for targeting, monitoring, and evaluating
social spending.
Accelerating Growth and Improving Incomes
39. To complement the human capital development strategy, Nicaragua needs to
accelerate economic growth and improve incomes. Despite high levels of investment, gradual
improvements in educational attainment, including a surge of university graduates, a boom in
exports over the past decade or so, Nicaraguafs economic growth remains moderate. The decline
in productivity (see paragraph 19) has not been stemmed, nor has there been any resumption in
average real earnings growth. Current hypotheses point to the still large infrastructure needs and
weaknesses in the investment climate, including property rights. Recent Bank analytical work7
suggests also that improvement in infrastructure needs to be complemented by attention to
logistics and trade facilitation, while the challenge of raising incomes in the rural sector (where
poverty is highest), suggest that the current rural development strategies focused on food security
should be complemented by efforts to raise productivity in export production.
40. Improvements to the investment climate are critical to sustain and diversify local
and foreign investment. Nicaraguafs overall position in the Doing Business Survey is low at
118 of 183 in 2012, recording a slight improvement from the year before. Investment climate
indicators are quite low compared to the regional average in terms of Business Start-up, Property
Registration, Secured Transaction, and Trade Logistics. Recently there has been a renewed
government commitment to improve the business environment and reduce red tape in general,
but efforts in this area need to be accelerated. In addition, the country has a nascent competition
policy and institutional framework to address issues of market dominance in many sectors, as a
means to spur both domestic and foreign investment.
7 A Country Economic Memorandum is currently under preparation.
13
41. Despite credit growth during the last decade, access to finance is still an important
constraint to economic activity in general and productivity improvements specifically
among SMEs. Nicaraguafs banking sector is small and highly concentrated with just seven
banks, the three largest of which hold close to 78 percent of the banking system assets.
Nevertheless, the sector is relatively stable, with adequate risk coverage, capitalization and
improving profitability. Credit as share of GDP almost doubled during the last decade (from 18
percent in 2001 to 33 percent in 2011). However, the expansion in commercial banking has
largely shifted towards consumer credit; less than a third of total loans provided by banks and
regulated financial institutions goes toward productive activities. World Bank and IMF
diagnostics have identified gaps in the national payments system infrastructure. In addition, the
large microfinance sector has suffered in the past years from a broad nonpayment movement by a
large group of rural producers. In mid 2011, the Assembly approved new microfinance
legislation8 which has helped to reverse the impact and provides a strong basis for improving the
regulatory framework. Aside from insurance, the rest of the financial services industry is quite
underdeveloped with equity and security markets still too small to play a significant financing
role.
42. While strong advances were achieved in land tenure security, more remains to be
done. Almost 20 percent of national territory has been titled and registered, including 15
indigenous territories representing the majority of the Atlantic region, based on an improved
national legislation put in place with support from the Bank. Meanwhile, modernization of the
cadastre-registry processes has now yielded significant reductions in the time it takes to register
property from 124 days in 2007 to 49 days in 2012. The Government is embarking on a program
to gradually rollout the regularization process through the remaining territory, however this will
require significant resources and IDA is one of the few active donors in this area.
Making the Most of the Rural Economy
43. Low productivity of the main agricultural crops is a challenge both for exports and
food security. Agriculture remains one of the main drivers of economic growth and represents
21.5 percent of GDP, 32.3 percent of all exports and 32.2 percent of employment. Increases in
production have not been accompanied by much intensification, and yields for Nicaraguan
commodities are consistently below the LAC regional averages. There is significant potential for
agriculture to continue increasing its contribution both to the national economy and to poverty
reduction, provided that structural challenges of the sector are adequately addressed to improve
productivity of both food and export crops, to encourage ongoing diversification into new export
sectors, and to ensure robust linkages with small holder producers.
44. There are opportunities to be transformative. While low productivity has been a
permanent challenge of public and private investment, technological innovation, business
development services, and increasing access to rural finance services could increase the impact
of public policies in the agricultural sector. The Governmentfs continued focus on small
producers is appropriate given that the majority of both food and export crops are based in small
8 To strengthen supervision, transparency and efficiency in the microfinance sector, the National Assembly
approved in June 2011, the Law for the Promotion and Regulation of Microfinance Institutions. The Law provides a
strong basis for monitoring the institutions that intend to transform from non-governmental microcredit providers to
regulated specialized microfinance banks registered with the new microfinance regulator.
14
holder production. However, the strategy of making newer technologies and practices more
widely available through improved extension services could be complemented with innovations
that strengthen the linkages of these small producers to bigger markets and supply chains.
Nicaragua could reinforce its efforts to ensure an integration of environmental considerations
into its agricultural policies . to ensure both climate adapted and sustainable use of its resources.
Raising the Impact of Infrastructure Investments
45. Challenges in infrastructure in Nicaragua are significant, and improvements would
help boost competitiveness, improve productivity and facilitate exports. Only 13 percent of
the road network is paved and only 42 percent is in good or fair condition9. As a result, less than
a third of the population has access to a paved road. The road condition issues are compounded
by heavy vehicle overloading with the destruction of the road infrastructure without viable
mechanisms for cost recovery. This places a significant burden on Government in terms of
maintenance. Extra complications arise from natural disaster vulnerability. Addressing systemic
issues and developing sound strategies would maximize the impact of limited resources.
Nicaragua has seen improvement over recent years reflected in a 10 percentage point gain in
perceptions of infrastructure quality as measured by the Global Competitiveness Index, with the
introduction of a large program of rural road rehabilitation, a sustainable road maintenance
program, and the completion of some key transit routes.
46. More integrated multi-modal planning and reducing high logistics costs could
significantly raise the impact of Nicaraguafs transport investments. Nicaragua has levels of
maritime connectivity that could be associated with a land-locked country and the least
efficiently used trucking fleet in the region. Meanwhile, for agricultural products, with low unit
values, customs and border procedures could represent up to 18 percent of sales costs. The lack
of equipment and appropriate facilities affect the ability to speed up customs and border
processes and facilitate transactions. In some cases, it might take up to 15 hours to cross the
borders. Efforts to raise financing for a new port on the Atlantic coast should be preceded by
efforts to improve the productivity on the Pacific coast port, and border crossings to the two
main ports in Honduras and Costa Rica.
47. Important progress has been made in resolving supply shortages in the energy
sector, but access to energy remains the lowest in Central America. Electricity shortages
were eliminated with significant investment in thermal generation, but with the concomitant
increases in costs due to oil price fluctuations. Today, Nicaraguan firms face the highest costs of
electricity in Central America. Meanwhile, coverage was estimated to be around 69 percent in
2009, and only 40 percent in rural areas. Government is now implementing a two-pronged
investment program: (i) a large scale donor-financed extension of the distribution grid to rural
areas which is expected to raise rural coverage to 84 percent, and (ii) aggressively promoting
new private generation in cheaper, renewable sources. The target is to convert the grid to 94
percent renewable by 2017. Such an ambitious target is indicative of the Governmentfs concerted
9 Data provided by Ministry of Transport and Infrastructure (MTI, 2011). The 42 percent in good or fair
condition refers to the core road network (about 8000 km) which does not include the local tertiary roads. When
those roads are included, the roads in good or fair condition as a share of the total classified network is reduced to
29% which is the baseline in the results framework.
15
effort to move away from dependence on fossil fuels. While there is a steady pipeline in hydro
and wind generation, Nicaragua has among the largest untapped geothermal potential in the
world, the cheapest source of base power. Developing this resource will, however, require
innovative mechanisms to reduce the large upstream development risk.
48. Despite recent advances, including double digit growth since 2006 in mobile
subscribers to 86 percent in 2011, access to telecommunication services in Nicaragua
remains low, particularly in rural areas of the country. Fixed broadband internet penetration
is only 1.1 percent, significantly lower than the Latin American regional average of about 7
percent.10 While Nicaraguafs current telecom regulatory framework encourages competition and
private sector participation, it is difficult to stimulate investment in many rural areas. Recently
the Government has undertaken to roll-out and maintain regional networks11 transmission
infrastructure in more remote locations given that inadequate telecommunications affect
competitiveness by increasing the cost of logistics and curbing development of new IT related
areas that are fundamental for the modernization of industry and trade.
Transversal Challenges
Gender
49. Attention to gender issues can make a strong contribution to inclusive growth in
Nicaragua (see Annex 3). Nicaraguan female labor force participation remains low at around 46
percent, and has not changed much over the last decade. Meanwhile, the level of consumption
per capita of female headed households is around 10 percent lower than for those headed by
men. According to a recent Central America gender study (Report No. 68944), a 10 percent
increase in female labor force participation would raise household incomes in Nicaragua by
around 6 percent, and reduce poverty.8 percent for poverty, 10 percent for extreme poverty.
50. Education is an important driver of labor force participation and empowerment for
women in Nicaragua. For each additional year of education, women are earning 15 percent
more income than men (versus 10 percent more income in the previous decade). Nicaraguan
women have now achieved on average 20 percent higher educational attainments than men. This
phenomenon has been driven by rising attendance and higher primary completion and secondary
enrollment rates for girls. In terms of political and economic leadership, Nicaragua scores well
in terms of women parliamentarians, ministers, and women in managerial positions, and has a
recognized legal framework for ensuring these opportunities, and for business ownership.12
Women also represent 65 percent of microcredit recipients.
51. Given the gradual progress on other fronts, the Government has identified three key
challenges for the future: adolescent fertility, early childhood education and gender-based
violence. Nicaragua has the highest teenage pregnancy rates in Latin America and doubles the
world average with adolescent fertility rates of 110 per 1,000 of women aged 15 to 19 in 2010.
And while unemployment rates are similar for men and women in general, they are 20 percent
higher for 15-24 year old women. The Governmentfs new strategy on early childhood education
10 www.wirelessfederation.com
11 Regulation enabling rural telecom operators was sponsored by TELCOR and financed by a Bank Project.
12 Doing Business, Women and the Law 2012.
16
has the potential to provide childcare solutions to more rural families where this service is scarce
and improve labor force participation or continuing education for young mothers. Finally
gender-based violence remains a problem as evidenced by comparatively high homicide rates for
women. The authorities have just passed a new law with broad public support that should
provide a boost to ongoing efforts by civil society and the security forces to address the issue
(see Annex 3).
Indigenous and Afro-descendant peoples
52. Nicaraguafs indigenous peoples and Afro-descendant ethnic communities represent
roughly 12 percent of the population. A large number live in the Atlantic region where they
retain native languages and customs, and count on autonomous regional governments, while the
majority are found in the Central and Pacific regions, generally with a lesser degree of territorial
integrity. A continuously developing legal framework includes the 1993 Languages Law; the
2003 General Health Law which promotes respect for community health models, 2003 Law on
the System of Communal Ownership which clarifies the communitiesf and titled territoriesf right
to self-government; and the 2006 General Education Law which paved the way for instruction in
local languages. Nicaragua ratified the ILO Convention on the Rights of Indigenous Peoples in
2010. This legal framework has provided a good basis for increasing donor support targeted and
delivered directly to these communities. However, capacity and financing constraints still bind.
Climate and Disaster Risk Management
53. Investing more on disaster-proofing would improve long term productivity and
competitiveness. Nicaragua is one of the worldfs most disaster prone countries and the
economic costs are high. Basic social infrastructure, housing, and the roads system are the most
harshly hit, in part due to the fragility of some of the infrastructure, leading to annual
investments to replace lost capital. Every year floods and droughts already impose high
economic losses on Nicaraguafs economy, particularly by reducing production in the agricultural
sector and, affecting water and energy supplies. Efforts are needed to reduce the high levels of
vulnerability, promote mainstreaming of disaster risk reduction in relevant sectors including
health, education, water and sanitation, and to improve local capacity for disaster risk reduction
and management. The frequency and magnitude of these disasters is a likely factor affecting the
low effectiveness of investment and the low rate of productivity growth in the country.
54. Over time, and with the help of the Bank, Nicaragua has improved its Disaster Risk
Management System. Solid legal and institutional arrangements for DRM are in place led by
the National System for Disaster Prevention, Mitigation and Response (SINAPRED) and the
National Policy and Management Plan for Disaster Risk Management which is aligned with the
Regional Policy and Plan for Disaster Risk Reduction promoted by CEPREDENAC and the
Hyogo Framework for Action at the global level. Together with good inter-sectoral and local
level coordination, these developments can reduce the mortality factor from natural disasters
over time.
55. Policy measures and investments in support of adaptation to climate change in key
sectors could also yield significant benefits, even in the short term. Additional investment
and integrated planning approaches across sectors are needed in order to climate-proof
Nicaraguafs critical infrastructure, promote adaptation in agriculture, water supply and other
17
vulnerable sectors, and create support mechanisms by vulnerable households. Adaptation
measures can be costly, but they often simply mean good development policy and investment
planning. In the agricultural sector, where volatile water supply has high costs, it is becoming
increasingly important to integrate the risks brought about by extreme climate events in sectoral
planning by addressing such aspects as water resource protection measures in investment
programs.
Transparency
56. Nicaragua still faces a variety of challenges with respect to good governance. While
the most high profile aspects relate to the check and balances, including electoral processes,
other issues such as government effectiveness, regulatory quality and the control of corruption
are critical for accelerating and broadening the gains from economic growth. For example, in
terms of government effectiveness, the investment climate is still encumbered with challenges in
the area of property rights and land administration, as well as in judicial services. There are
avenues outside the political system where the demand for good governance could help improve
the quality of public services and development outcomes.
57. Improving transparency in the public sector is crucial to help build broader
consensus around development strategies. Within the public sector, there has been good
progress in the area of budget openness and public financial management, albeit with the need to
further develop better linkages between spending and outcomes that allow for a more transparent
evaluation of public programs. In addition, Nicaragua still has significant weaknesses in the area
of spending oversight both for central government and state owned enterprises. Efforts are
needed to strengthen the Comptrollerfs office and ensure regular publication and auditing of
SOE accounts. In terms of voice and accountability, although access to public information is
regulated and guaranteed by the Access to Public Information Law approved in 2007, the
accompanying regulations continue to be insufficient as to effectively guarantee unrestricted
access to public information. Weaknesses in the monitoring and evaluation systems within the
public sector hinder the presentation of information on the performance of public programs. A
notable example is that the Ministry of Education has not published its annual statistical report
since 2009. In contrast, in those areas where the authorities have encouraged public debate such
as in macroeconomic and fiscal policies, emerging consensus has helped to strengthen reform
options.
IV. The Country Partnership Strategy FY08-FY12
58. The CPS FY08-FY12 (Report No. 39637-NI) discussed by the Executive Directors on
August 27, 2007, was prepared during the first six months of the new administration and
before the Government had articulated its general development strategy. As the
administration matured, several policy shifts emerged which posed implementation issues for a
number of ongoing Bank-financed projects, particularly those which engaged the private sector
in public service delivery, as well as the use of conditional cash transfers to households and
matching grants to firms. Later, adjustments to the lending program were required to
accommodate requests for assistance to address a series of crises. These adjustments were
18
reflected in the CPS Progress Report of December 4, 2009.13 During the CPS period the
Government reaffirmed its emphasis on pro-poor delivery of basic social services and
infrastructure. This continues to be an area of focus for the FY13-17 CPS.
Portfolio Performance
59. Nicaraguafs current IDA program is the best performing portfolio in Central
America. The country program includes 14 projects representing some US$400 million
equivalent of commitments with around US$230 million disbursed. This is complemented by
US$15 million of trust funds (see Annex 5). The average disbursement rate of the portfolio was
29 percent per year over the previous CPS period, and 37 percent in FY12. No commitments are
presently at risk or in problem status. Close supervision by the Bank and the Ministry of Finance
promoted an early response to implementation problems. Although Nicaragua remains a high
risk country for procurement, rigorous attention to fiduciary management, including ongoing
annual training on procurement, financial management and disbursement procedures for
government staff, has helped.
60. IFCfs portfolio (on a commitments basis) has grown from US$53 million at the end
of FY07 to US$160 million at the end of September 2012, continuing an upward trend since
2003. Advisory services of US$5 million have been approved to date, of which around 50
percent of advisory services are linked to IFCfs investment portfolio. This is high compared to
other countries in the region. MIGAfs outstanding gross exposure in Nicaragua as of August 31,
2012 was $34.9 million in support of two power generation projects in the renewable sector and
one project in the financial sector. MIGA's exposure net of reinsurance was US$32.1 million.
Lessons Learned
61. With a five-year CPS in a country that is vulnerable both to external shocks and
policy shifts, flexibility to adjust the program in response to crises and emerging
opportunities can help to maintain a robust program and solid results. Additional financing
have been used to scale up existing projects that are successful. Looking forward, given the
relatively large size of the current portfolio, the Government is adopting a strategy of one
significant new project a year on average. This strategy is useful in that it provides flexibility to
re-program smaller amounts on an annual basis that can be used in the event of a crisis.
62. Development of a transparent monitoring and evaluation system is an important
part of stimulating good governance and must be a priority in all IDA operations. Despite
the advances in many sectors, Nicaragua still faces challenges to measure the results of its
ongoing programs and to use these measurements to effectively evaluate and refine them. For
example, there is no robust official data on trends in primary net enrollment, access to allweather
roads, safe water and sanitation, maternal mortality, or chronic malnutrition.
Implementation demonstrated that in areas with good monitoring and evaluation, transparency
and governance were strengthened by engaging other stakeholders and improving the quality of
public programs at the technical level.
13 Report No. 51616-NI
19
63. The decision to shift resources from budget support to investment lending proved
effective because of the solid implementation performance of the core projects. As options
for policy reform weakened during the CPS period and with it the basis for budget support, IDA
resources were used to finance tested and scalable investment lending initiatives. This experience
shows the importance of developing and maintaining proven investment interventions that have
broad-based support so as to have options to channel resources when the policy agendas are
weak. However moving forward, the Bank will create opportunities to maintain policy dialogue
in key sectors.
64. Consolidating the portfolio around key lines of action can leverage results with
modest resources. Towards the end of the CPS period, the Bank focused its efforts in a few key
sectors through combining ongoing investment lending with technical assistance to provide
support to the Government in designing sector strategies. This has resulted in a role for the Bank
to use its knowledge and convening power to help leverage additional resources to finance well
designed scalable programs. Experience in the education sector for example, is currently being
replicated in water and sanitation. The long term expectation is that consolidating the portfolio
further in key strategic areas will help to foster better results and improve coordination with key
development partners.
Consultations
65. This CPS has been informed by a range of consultations with the government
leadership and line ministries, as well as with the private sector, opposition political
leaders, think tanks, indigenous communities and other development partners. The private
sector representatives from a wide range of sectors unanimously pointed to the issue of trade
logistics and trade facilitation as an emerging priority for Nicaragua. Issues included the high
costs of transport, complex import and export procedures, and congested border crossings as a
key factor in lowering Nicaragua's export competitiveness. Others suggested the need for
additional attention to export promotion, in particular services for smaller exporters and
emerging non-traditional products. In the financial sector, both the private sector and think tanks
suggested that in addition to a strategic agenda for deepening financial access and broadening the
range of financial instruments and products, policy dialogue should also review the existing
financial sector regulation and procedures as a focus for improving the business climate.
Indigenous community representatives sought a more integrated focus of the Bank in the Atlantic
regions, and more integration into the strategic planning process with central government.
66. Among the non-governmental organizations (NGO), the main suggestion was for the
Bank to ensure a multi-sector approach to addressing social issues and some of the lagging
MDGs, in particular building on some of the more successful local grassroots efforts to
treat Nicaragua's vulnerable groups in a holistic manner. Several participants hoped the
Bank could encourage more avenues for NGO participation in social programs, while others
called for greater alignment between non-governmental and government efforts to solve social
issues. All parties called for the Bank to help foster a more open debate on public policies and
programs in Nicaragua, in particular through more outreach about Bank-financed projects and
policy dialogue, broader technical assistance for building monitoring and evaluation skills both
within and outside of government, and renewed support for the full implementation of the
Nicaragua's Freedom of Information legislation.
20
Box 1. Nicaragua Country Survey FY13 . Overall Findings
The FY12 Nicaragua Country Survey, conducted during May-July 2012, records the views of 240 stakeholders
among political leaders, government officials and contractors, local government, donor agencies, private sector, civil
society and the media. This is the first World Bank client survey conducted for Nicaragua. There is an overall view
that the Bank is relevant in the country, that its programs are aligned with the development priorities of Nicaragua,
and that it is respectful toward stakeholders and collaborates well with government. Respondents believe there is a
very valuable role for the IFC in the country, yet familiarity with the IFC is somewhat low.
Survey respondents viewed education and economic growth, followed by rural development and jobs, as most
critical for reducing poverty. Stakeholders see energy development and foreign direct investment as the two critical
drivers of economic growth in Nicaragua. Within this context, the Bank is viewed as having a critical role to play in
the most important areas of development: education, rural development and poverty.
The survey also suggests that stakeholders value the Bank most for its financial resources rather than its knowledge
or technical assistance. The most valued instruments are investment lending, capacity development, mobilization of
other resources and policy-based lending, while the least valued instrument is identified by half of the respondents
as analytical work. This suggests that the Bank could consider ways to improve the relevance of the
knowledge/data/research. Survey respondents also indicated that obtaining Bank financing is too complicated and
one-fifth of respondents suggest that the Bank should offer more innovative financial products. Finally, when
thinking about how the Bank can be of greater value in the country, nearly a third of respondents reported that it
would be valuable for the Bank to focus primarily on advocacy issues.
V. The Country Partnership Strategy FY13-FY17
Objective
67. The CPS is organized around two key strategic areas which address the main goals of the
Governmentfs strategy, namely a continued focus on social welfare through improvement of
peoplefs access to basic services and a heightened concern on issues of productivity,
competitiveness and export diversification. IFCfs engagement is fully integrated in supporting
these areas and will focus on fostering sustainable economic growth, critical infrastructure and
job creation, and helping Nicaragua take advantage of regional integration opportunities.
Principles of Engagement
68. Based on the experience of the previous CPS implementation, and lessons learned in IDA
countries, the proposed CPS will be guided by the following principles:
. Maintaining a strong implementation record. Nicaraguafs IDA portfolio has benefited
from close and careful supervision that has led to good results and rapid disbursement. The
new program will aim to continue this record through the various efforts in fiduciary
management and implementation support, including annual training. In addition, the new
program proposes to add no more than one or two new projects of a moderate size each
fiscal year. The remaining available financing would be used: (a) for additional financing
on projects with a good implementation record; and/or (b) to respond to emerging crises.
With respect to the latter, the Government has agreed to introduce IDAfs Immediate
Response Mechanism (IRM) into the portfolio in FY13.
. Leveraging and bundling World Bank Group instruments. Given limited IDA
resources, the WBG will make a concerted effort to expand the bundle of services being
21
utilized in support of Nicaragua, in line with the regional strategy in Latin America and the
Caribbean region while leveraging each groupfs comparative advantage. The IFC will play
a lead financing role in the energy and financial sectors, while the Bank would primarily
provide technical assistance and supporting analytical work. MIGA will be open to
opportunities to support FDI in the renewable power generation, agribusiness and financial
sectors through the provision of political risk guarantees.
. Scaling-up and resource mobilization. The Bank also will seek to: (a) develop
programs that can be scaled with the support of other donors; and (b) support the authoritiesf
efforts to attract more private investment and participation in public services. The Bank
already has been asked to take the lead in supporting the identification of a pipeline of
potential public private partnerships, and in designing programs that are scalable with other
donor financing (e.g, education and rural roads). The Bank could also support small pilot
interventions that may be rolled out later with other partners. To that end, it will judiciously
use available trust fund programs to complement the IDA lending program or the
IFC/MIGA investments and guarantees. It will operate in this manner in the technical design
of program or reforms where the Bank does not assume a major financing role.
. Improving monitoring and evaluation. The program will emphasize transparent
measurement of results in the areas of its engagement, and work to deepen interactions with
civil society and academia in evaluating and disseminating these results. This will include a
focus on monitoring social sector indicators in particular; and raising the efficiency and
effectiveness of public spending in all operations. A strong monitoring and evaluation
system will be a prerequisite for anchoring a more determined transparency effort, and
ensuring the effectiveness of decreasing aid resources.
CPS Program and Results
69. The CPS supports the Governmentfs program in two key areas: (i) improving social
welfare by improving access to quality basic services, in particular by poor rural households; and
(ii) raising incomes by improving productivity, competitiveness and diversification.
Strategic area 1. Raise welfare by improving access to quality basic services
70. The WBG will seek to accelerate the progress against the MDGs (see Annex 2) in
education, water and health, through the implementation of a series of ongoing and future
projects in these areas, and in social protection. In the social sectors, an integrated approach
geared to better efficiency, quality and expanding access and coverage has already begun to yield
results. The Bank will support the consolidation, costing and expansion, and M&E of these
programs. IFC will work to develop private sector solutions to critical social needs, in particular
by investing in health and education.
71. The CPS will bolster its current support for preschool education. The focus in
education will start with strengthening preschool education (3-5 year olds) where previous
efforts have resulted in a gradually improving access: today 52 percent of 3-5 years old in
Nicaragua attend some kind of preschool. The current Education and Social Protection projects,
together with two large EU and Global Partnership for Education trust funds will support
implementation of the Governmentfs new strategy in Early Childhood Development (ECD). A
22
goal for the end of the CPS is to consolidate the inter-sectoral model for ECD between the
Ministries of Education, Social Protection and Health and to support its nationwide expansion.
The Bank will also support the creation of a national registry of social assistance with well
targeted and operational parameters.
72. The focus on primary education will be on increasing access and improving quality.
The current completion rate of primary education is relatively low at 75 percent. Completion
rates of 85 percent are expected by the end of the CPS period. This CPS program will also
continue supporting improvements in the quality of primary and lower secondary education as
part of the Governmentfs strategy that is centered on reforming teacher training, expanding the
availability of textbooks and learning materials, and improving infrastructure. The impact of this
support will be measured by the results of systematic achievement testing at relevant grade
levels, and transition rates to secondary school. IFC is seeking to make its first investment in the
education sector.
73. In health, the CPS program will continue to focus on reducing infant and maternal
mortality, and addressing chronic malnutrition. The Bank will support the Governmentfs
Modelo de Salud Familiar y Comunitario by strengthening the system of capitation payments
linked to results, costing the system and helping to mobilize resources to expand the financing
mechanisms nationwide. The CPS will pay special attention to targeting outcomes on infant and
maternal mortality.
74. In social protection, the CPS program will continue to support the consolidation of
the Modelo Atencion. Through the ongoing Social Projection project (Report No. 56243-NI)
and related trust funds, the Bank is supporting Government to improve capacities and integration
among social workers and service providers at the local level, and to strengthen monitoring and
evaluation at that national level. Key improvements in the pilot areas, which also aim to raise
the efficiency of social assistance spending, are intended to be mainstreamed nationwide.
75. In water and sanitation, the Bank will continue supporting the design of the national
water and sanitation strategy. Complementary efforts to broaden access to potable water and
improved sanitation are also envisaged as part of the agenda to improve health outcomes in
Nicaragua. Under the new CPS, the Bank will continue providing strategic and policy support to
the sector, policy dialogue and technical assistance for the overall WSS sector, in particular
aimed at improving financial sustainability in the urban systems and mobilization of additional
financial resources for the rural sector to help reduce the current gaps. Through the
complementary Water and Sanitation Program of the Government, which acts as a technical
partner, the Bank will support the development of new techniques of sanitation marketing (with
potential collaboration from IFC), local capacities for small rural and peri-urban projects, and
disaster risk mitigation in urban water systems.
76. In each of the above sectors, there will be a concerted effort to develop more
accurate and transparent measurement of impact and expenditure efficiency which is
intended to allow the Government to better prioritize the allocation of resources. To this end, the
CPS will include results from the ongoing work on the joint Bank-IDB-EU Public Financial
Management project (PMSAF) to modernize Nicaraguafs PFM practices and information
systems with special attention to the basic service delivery in the social sectors and water and
23
sanitation. This will be complemented by analytical work on public expenditure in the
education, health and social protection, which builds on the upcoming Demographic and Health
Survey and a model census of vulnerable households, currently financed by IDA, as well as a
program to improve indicators and measurement in the water and sanitation sector supported by
Water and Sanitation Program. Meanwhile, the Government has requested financial and
technical support for the new 2013 Living Standards Measurement Survey.
Strategic area 2. Raise incomes by enhancing competitiveness and diversifying exports
77. The CPS will continue to support efforts to raise income levels in Nicaragua by
increasing productivity. To begin, the program will broaden previous efforts focused primarily
on access to infrastructure and production geared at the domestic markets and, to the extent
possible, the export sector, as well as strengthening property rights. The program hopes to
expand current support for small rural household producers which have been mainly focused on
the domestic market, toward creating effective linkages between these producers and growing
export markets by linking with the large and vertically integrated firms that are active abroad. In
addition, the program will expand the focus on land administration to other investment climate
issues, in particular, trade facilitation and financial innovation. In each of these new focus areas,
the attention to improving productivity will be complemented by an effort to ensure
environmental sustainability and address emerging climate change issues. Finally, in all the
areas of infrastructure, productivity improvements, and financial innovation, the program will
seek to better coordinate IDA programs with IFC investments and MIGA guarantees.
78. In agriculture, the CPS proposes to support Governmentfs efforts to shift limited
IDA resources toward the emerging competitiveness agenda where small producers are
now ready to move to more productive and higher income engagement in cash crops for
export. The IDA program will collaborate extensively with IFC which is already engaged in
investments with the leading producers and exporters (coffee, palm oil), as well as a program of
advisory services in export crops, and is working on expanding trade and supplier financing.
Resources allocated to foster the diversification of exports will support the Government in the
elaboration of strategies for the sustainable development of new export sectors with potentially
strong developmental impact (i.e. palm oil and cocoa) in coordination with IFC. A joint IDAIFC
Agriculture Competitiveness Project could support the creation of productive alliances in
key crops, aiming to more effectively link small producers and to raise productivity along the
export supply chains, and to complement this with improvement in access to better financing
instruments, and possibly improved logistics along the supply chain. By the end of the CPS
program, joint pilot initiatives for one or more new products to improve productivity and
producers incomes should be in place. MIGA will also be open to opportunities to promote FDI
in the agribusiness sector.
79. The CPS proposes to support the Governmentfs request to mobilize a Global
Agricultural and Food Security Program (GAFSP) grant. The authorities are proposing to
focus a grant proposal on activities to link small-holder producers (particularly the indigenous
and afro-descendant farmers) in the Atlantic coast region and Nicaraguafs productive frontier, to
market-based agriculture and to expand and strengthen value chains and value-added activities.
Such a grant would also build on the ongoing Agricultural Technology project that works toward
improved yields based on better availability of certified seeds. A new PER in agriculture this
24
year, along with data from the 2011 agricultural census, and a multi-donor evaluation of the
Governmentfs ProRural sector-wide program should permit the development of more cutting
edge strategies, including the linkages between nutrition and food security.
80. In transport, the CPS would continue concentrating in the rural roads sector while
adding a new program for improving logistics and trade facilitation. The Bank has already
developed a successful and scalable model for investment and maintenance of rural roads which
has proven to be an instrument to provide jobs for vulnerable communities, including for women,
and attracted significant other donor financing. In terms of financing, this emphasis will
continue including, improvements in road management framework, further development of the
multi-donor program, more climate resilience measures, and greater transparency in the selection
of road segments. It is expected that the share of roads in good condition will increase from 29
percent to 35 percent by the end of the CPS period. Meanwhile, the Bank has just completed
several analytical pieces on trade competitiveness, transport logistics and customs that suggest
more attention to these services would significantly improve the impact of infrastructure
investments on trade. The CPS program will continue technical support from the ongoing Trade
and Transport Facilitation trust fund to introduce improvement in custom administration,
including the introduction of integrated risk management systems. The CPS will also explore the
possibility of a multi-sectoral Trade and Transport Facilitation project that could address issues
ranging from improvements in customs administration, border management, multimodal
transport planning and regulations.
81. In energy, the CPS program will support the Governmentfs strategy to increase
private investments in renewable generation. IFC and MIGA will assume the lead through
investments and guarantees in renewable generation projects, including wind, geothermal and
hydropower, while the Bank will primarily provide technical assistance and supporting analytical
work to backstop these investments, in particular on sector financing, strategies for accelerating
geothermal investments, and strengthening the regulatory and pricing framework for microgenerators
(such as those supported by the recently closed PERZA project). It is expected that,
between IFC and MIGA, new investments could add 100MW of renewable energy generation
capacity in Nicaragua during the CPS period. IDB leads the dialogue in rural areas and has a
large multi-donor program supporting the Governmentfs strategy to roll out the distribution grid
to remote areas.
82. The Government has directed new attention to improving the business climate to
spur both local and foreign direct investment. The centerpiece of the CPS program will be a
second phase of the Land Administration project (Report No. 22399-NI) continuing
improvements in the legal framework, local investments in regularization and the modernization
of titling and registry services. Under the MSME project (Report No. 42806-NI), the Bank is
supporting the modernization of the commercial code while under a new IDF grant the Bank will
help to strengthen the institutional framework for investment and export promotion and to
improve Doing Business regulations. In addition, Nicaragua may receive support from a new
Regional Competition Center spearheaded by the government of Mexico. The Governmentfs
objective is to signal to the investment community a commitment to a better business
environment by, inter alia, improving their position in the Doing Business rankings. Finally, the
Bank is exploring a continuation of recent technical assistance on the Anti-Money
Laundering/FTC with Nicaragua and the development of a program of support for the new
25
ROSC14-based Accounting and Audit action plan. The key results sought in this area would be
continued growth in FDI, improvements in an appropriate measure of trade competitiveness, and
reductions of time and cost to registering property in Nicaragua, and an improvement in the
countryfs results on key Doing Business indicators.
83. IFC will take the lead in providing resources for the financial sector, supported by a
Joint IFC-WB technical assistance program on financial innovation. IFC will continue its
program of credit lines in the trade and housing sectors, while expanding into supplier credits
(i.e., agri-finance, SME lending, among others). Following the conclusion of the current Broad-
Based Access to Finance project in FY13, the two institutions will work together on a
coordinated technical assistance program (from available trust fund programs)15 to support
development of financial instruments and investment vehicles needed to improve financing for
productivity improvements and export growth16. Elaboration of regulations and institutional
development for the new microfinance law is an early candidate. This could, inter alia, permit
IFC to resume financing flows to this critical sector. Another candidate would be support for the
improvement of Nicaraguafs framework for secured transactions, also an area covered by the
Doing Business reforms. MIGA will also be open to opportunities to support foreign investment
in the financial sector.
Transversal Themes
84. Gender considerations have been mainstreamed in the Nicaragua program since the
previous CPS. These efforts are reinforced by the Governmentfs strong gender policy and
institutional focus on equitable access. The majority of projects which support broad-based
service delivery already count on gender-disaggregated indicators for access to these services,
and all of the major IDA16 commitments with respect to a ggender-informed portfolioh have
already been met (see Annex 3). The new CPS will continue to implement gender-based
interventions in sectors for which follow-on operations are planned, such as land administration.
85. The Governmentfs Programa Amor addresses issues such as teenage pregnancy
through its life cycle programs for vulnerable families. Other gender issues perform poorly in
Nicaragua, which include the highest levels of adolescent pregnancy in Latin America,
comparatively low female labor force participation, particularly among young uneducated
women, and high levels of domestic violence. However, because these issues are not limited to
poor rural families, a broader approach is generally needed. The Government has recently
passed a new and important law on domestic violence which is attracting a lot of support from
other development partners. In the current CPS, the Bank will focus additional support on
helping the authorities in formulating and implementing the National Strategy for Adolescent
Sexual and Reproductive Health which would have synergies with work on reducing maternal
mortality and a potential impact on labor force outcomes.
14 Reporting and Observance on Standards and Codes.
15 There is a proposal to review and develop the legal framework for Payment, Remittances, and Securities
Settlement system which is being considered by the FIRST Trust Fund.
16 Support will build on recommendations from the 2009 FSAP conducted by the World Bank and the IMF.
26
86. The Bank has been active in both the institutional and social development of
indigenous communities in Nicaragua across several projects under implementation. In
addition, to a satisfactory implementation of the Bankfs Indigenous Peoples safeguard policy to
over 60 percent of the portfolio, the Bank has supported the development and implementation of
an Indigenous Peoples Land policies under which 15 indigenous and afro-descendant territories
(comprising 19 percent of national territory) have been titled and registered. The Bank has also
supported production of primary textbooks in several Miskito and Mayagna and piloted an agroforestry
model among indigenous and afro-descendent women farmers. Going forward the
Government has proposed to work with the Bank on developing new strategies for supporting for
agricultural development on the Atlantic region.
87. In terms of disaster risk mitigation and climate adaptation, the CPS will concentrate
efforts in areas that are already a main focus of the program: water, land use management
(including forestry) and agriculture. Through a SCCF-financed GEF grant aimed at protecting
rural water sources, the program is expected to play a financing and convening role in the search
for appropriate adaptive responses for the Nicaraguan context, including through non-lending
technical assistance. Meanwhile the Water and Sanitation Program will undertake a regional
disaster risk assessment of urban water systems form which Nicaragua will benefit as we
continue the institutional engagement in this area. Nicaragua has been approved for a Forest
Carbon Partnership Facility REDD readiness grant, and the Government has already requested
both a follow-on GEF grant for the management of the regionally-important Bosawas biosphere
reserve and to include additional protected areas demarcation in the second Land Administration
project. In agriculture, there is potential WBI support to respond to a new Nicaraguan initiative
on developing climate smart-agriculture policies through South-South Exchanges. This would
also help to ensure that the new program focus on agricultural export competitiveness and
includes appropriate dimensions of environmental sustainability and climate resilience.
88. To complement these medium term interventions, the program will make full use of
IDAfs Immediate Response Mechanism (IRM) while supporting the continued institutional
development of the national disaster risk management system. The Government has already
agreed to introduce the IRM in the next lending operation. From the regional program on
Disaster Risk Management (DRM) Reduction, Nicaragua could receive further technical support
for additional risk assessments at the sector level, the formulation of a national financing strategy
for risk management as well as a new generation of support for SINAPRED aimed at integrating
municipal levels in DRM efforts.
89. The transparency agenda will continue to focus on regulatory quality, government
effectiveness, and voice and accountability. In terms of regulatory quality, the support for
improvements in land administration and financial sector legal frameworks and their
implementation are expected to have significant development impact in Nicaragua. On
government effectiveness, the primary outcome under the CPS will be to assist the authorities in
upgrading of the Public Financial Management System and improving the efficiency of
expenditures in the social sectors. Finally, the CPS program will seek an explicit objective in the
area of voice and accountability not only by supporting improvements in monitoring and
evaluation of program-supported activities, but also the disclosure of M&E results and the
greater disclosure of the technical achievements and challenges of these programs to the broader
27
society. In this context, the Bank is well positioned to foster a broad range of technical dialogues
between the Government and other stakeholders, including civil society.
90. The Bank and the IDB will coordinate closely in the area of governance and
transparency. In terms of monitoring governance improvements, the Bank and the IDB use a
harmonized methodology for their respective country policy and institutional assessments
(CPIA/CIPE) that guide the allocation of concessional resources. The Bank and the IDB also
share information with respect to fiduciary issues and are working together to support public
financial management improvements. The Bank will continue to collaborate closely with the
IDB in terms of monitoring the governance environment and identifying entry points for
dialogue and IFI support.
Monitoring and Evaluation
91. This CPS proposes a focused effort on monitoring and evaluation as well as open
data. Given past difficulties in compiling reliable and comparable data for results monitoring, a
concerted effort will be made to ensure both new and ongoing operations introduce better
mechanisms to capture results, and where possible, efforts are made to build better institutional
capacity for monitoring and evaluation. Efforts to improve monitoring and evaluation will be
focused primarily in the context of Bank operations and in the social sectors in particular. In line
with IDAfs Managing for Results agenda, the Bank has provided statistical capacity building to
Nicaragua in particular related to the Living Standards Measurement Surveys (LSMS) for many
years and is currently supporting a number of other survey efforts that are methodologically
matched with previous instruments, namely, the 2011 Agricultural Census and the 2012
Demographic and Health Survey. The Bank will also support the 2013 LSMS with technical,
and possibly financial, assistance, while seeking the authoritiesf commitment for open data
policies. Meanwhile, Nicaragua has a small donor-financed long term impact evaluation
program that has already successfully measured a variety of impacts of some past randomized
social interventions on, inter alia childhood development, climate resilience, and income
generation. The program will also support an impact evaluation of the interventions on SCCFGEF
funded climate adaptation of rural water sources.
World Bank Group Program
92. The CPS expects to concentrate new IDA financing in land administration, agricultural
competitiveness and export diversification, rural roads, rural water and sanitation, social
protection and health. New IFC financing and MIGA guarantees would be concentrated in
renewable energy, agribusiness and the financial sectors. The Government is also likely to seek
support to improve trade logistics and facilitation to broaden existing TA on the business
environment.
28
Table 3. Indicative CPS Lending and AAA Program FY13-17
Raise welfare by improving access to
quality basic services
Raise incomes by enhancing competitiveness
and diversifying exports
FY Lending, Trust Funds, œ AAA US$M Lending, Trust Funds, œ AAA US$M
2013
Hurricane Felix Emergency AF
Rural Water & Sanitation AF
Education Sector Strategy (EU)
Global Fund for Education
Climate Adaptation in the Rural Water
Supply Sector (GEF)
. LSMS and Poverty Mapping TA
. Education Strategy follow-up
. Policy Notes on Climate
Adaptation
5 Land Administration II
. Country Economic Memorandum
. Agricultural Public Exp Review
(Canada)
. ENACAL Modernization Strategy
. Agriculture Price Risk Reduction
(JSDF)
38
6
36
17
6
2014
Rural Water & Sanitation II
. PEFA
. Poverty Assessment (ESW)
. Teenage Pregnancy TA
. Programmatic Social Sector Policy
Notes
30 Agriculture Competitiveness 25
FCPF REDD TF
Corazon II GEF TF
. Joint IFC-WB Financial Innovation
TA
. Sustainable Development Strategy for
Export Sector
3.8
5
2015
. Programmatic Social Sector Policy
Notes
Logistics and Trade Facilitation
. FSAP
. Joint IFC-WB Financial Innovation
TA
25
TBD US$20
2016 Social Protection
Health
25
25
. Joint IFC-WB Financial Innovation
TA
2017
Rural Roads VI 30
TBD US$20
Financial Envelope
93. The lending program for the CPS period is expected to be roughly US$50 million
per year for the remainder of IDA 16. The CPS covers the period FY13-FY17: two years of
IDA 16 (FY13-14) and all the IDA 17 period (FY15-17). The final FY13 allocation for
Nicaragua is SDR39.5 million or about US$61 million equivalent (in grants and credits).17 The
FY14 allocation (SDR 33.8 million) is indicative only and the final FY14 allocation will depend
on: (i) total IDA resources available, (ii) the countryfs performance rating, per capita GNI, and
population; (iii) the performance and assistance terms of other IDA borrowers; (iv) the terms of
IDAfs assistance to the country (grants and credit terms); (v) the number of IDA-eligible
countries. IDA allocations are made in SDRs based on performance, and the US$ equivalent is
dependent up on the prevailing exchange rate. The allocations under IDA17 will also depend on
the above factors, as well as on the overall size of the IDA 17 replenishment.
17 Nicaragua frontloaded SDR11 million in FY12 and cancelled SDR3.4 million.
29
Managing Program Implementation
94. It is expected that by the end of the CPS period the program would be consolidated
and operations would be reduced to roughly 10 projects. The WBG is expected to
concentrate its efforts in: (i) supporting the Governmentfs approach to local delivery of basic
services and an integrated approach for health, education and social protection; and (ii) focusing
on rural areas, particularly for water, agricultural productivity, roads and telecom. Additional
Financing for well-performing operations will be utilized to the extent possible.
95. As with the IDA portfolio, careful attention would be taken to ensure that the trust
fund portfolio remains consolidated, manageable and directly linked with the CPS and
lending program. To support the implementation of the larger trust funds, for example in
education, the Bank would contract additional fixed term staff in the Country Office to enhance
management and supervision. This has been the practice to date with the US$7 million DFID
trust fund for Caribbean Coast development. As much as possible, the smaller technical
assistance trust funds would be assigned to the same project teams in the sectors they are linked
with. The proposed joint IFC-WB Financial Innovations Program would receive some dedicated
budget to support the overall program, with the bulk of supervision resources coming from the
individual trust funds.
96. To manage fiduciary risks, the Bank will continue to decentralize procurement and
financial management supervision. Close supervision, migration to the usage of the electronic
information system gSEPAh, and continual training in procurement, financial management and
disbursement procedures for government staff have generated good results to date. Such training
will continue to be an important tool for strengthening institutional capacity and achieving
fiduciary objectives. The Bank will continue on a recent started program of procurement
seminars for the private sector to help encourage more competition and improved scrutiny.
97. During the CPS period the Bank will focus additional attention on coordinating
closely with the IDB and IMF on key areas for policy reform. Given limited resources, this
would include a suite of Bank services including ongoing investment lending, supporting
analytical work and technical assistance, as well as convening key bilateral partners in some
sectors. As the main development partner in Nicaragua, coordination with the IDB and efficient
division of labor is a key principle in terms of the Bank interventions.
98. The CPS will continue to rely primarily on its investment lending portfolio given its
proven record in delivering resources and results. The CPS will provide analytical and
advisory work to strengthen the dialogue in the main areas of engagement and develop policy
options in critical emerging areas of interest to the Government. Examples of this effort include
analytical work in rural competitiveness, on financial innovation and on monitoring and
evaluation of social outcomes. These efforts will be complemented, as appropriate, by
opportunities for South South learning. The Government has not yet requested Development
Policy Lending from the Bank. However, the Bank could consider this instrument within the
CPS period, provided the macroeconomic policies continue to be favorable and a sufficiently
robust policy agenda emerges in agreement with the Government. To strengthen the policy
dialogue in potential reform areas the Bank will cooperate with the IDB and the IMF (see above)
and support the Government with technical assistance.
30
Partnerships
99. Nicaragua has seen a decline in donor support to the public sector18 from around
US$700 million in 2007 to US$500 million in 2011 due to the departure of several bilateral
partners. Grant donations have been halved from US$430 million in 2007 to US$250 million in
2011, while, multilateral support and loan financing have remained largely constant. IDA is the
third largest donor and IDB is the largest partner, with roughly triple the flows of IDA at US$170
million per year. The European Union, Spain and Japan are important partners for Nicaragua,
and Central America more generally. In the context of declining donor resources, the
Government has requested Bank support for: (i) mobilizing more grant resources from relevant
global funds; (ii) blending available grant resources with emerging commercial financing, e.g.
from the Central American Bank for Economic Integration; and (iii) opening the possibility for
more public private partnerships in some new sectors. In addition, the Bank is engaged in an
active dialogue with development partners and diverse stakeholders to monitor the risk of further
reduction in aid flows to Nicaragua.
100. The Bank will continue to promote an efficient division of labor among key
development partners, as well as more coordinated programs among donors. The CPS was
prepared in close coordination with the IDB, and preparation included discussions regarding an
efficient division of labor of development assistance. The IDB leads on larger road investments,
while IDA supports rural road development.19 IDB leads on rural electrification and the Bank on
rural water and sanitation. The two institutions co-finance a large program on public financial
management, while the IDB has led on procurement reform and the Bank and IDB work together
on customs administration.
101. Areas of collaboration for development partners, including bilateral donors, emerge
as part of the regular dialogue on key sector roundtables. These emesasf for technical
discussion have been instrumental in ensuring close coordination across the donors at the sector
level. In addition, the Bank will continue to pay a role in leveraging resources for larger
government programs in key sectors, for example in education and water and sanitation. In areas
where the Bank does not play a lead role, it would continue to work with other multilateral actors
and provide analytical support as needed. The Bank will continue to work closely with the IDB
and IMF, including to the extent possible on joint analytical work.
Regional
102. The CPS period will support the Nicaragua program through several regional
initiatives. In support of a greater integration of the Central American regional economy, the
Bank will work with Nicaragua to facilitate trade by reducing barriers between countries, for
example customs procedures and border crossing standards. Additional initiatives include: (i)
support for a Central American Private Sector Task Force; (ii) support to strengthen the public
sector through a Regional Integration Training Program (launched in January 2011) and a
Central American Leadership program with the INCAE Business School; (iii) support to the
Central American Council of Ministers of Finance (COSEFIN) for the preparation of a Central
18 This does not include Venezuela oil cooperation which is accounted for as donor cooperation flows to the
private sector, similar to IFC, CAF and some Millennium Challenge Corporation flows.
19 IDB will also finance rural roads as part of its Country Strategy under preparation.
31
America-DR Regional Investment Plan and a trade facilitation window; and (iv) support for the
preparation of a Central American Disaster Risk policy.
103. Support on crime and violence will have a strong regional perspective. Bank support
in this area centers on the Bankfs convening power, including analytical work and technical
assistance, as well as participation and co-organization of high level events in the region. In
addition, the 2011 World Development Report (WDR) on Conflict, Security and Development
and the Central America regional study on Crime and Violence (Report No. 56781) are
informing the regional debate on the topic with analytical work. The Bank is also contributing to
the institutional strengthening of the regional institution responsible for the citizen security
agenda in Central America (i.e., SICA) with financial resources from the Institutional
Development Facility (IDF). Similarly the Bank, together with the IDB and other bilateral
donors, is providing technical assistance to implement SICA's Regional Security Strategy. This
includes the creation of a regional crime observatory (OBSICA) to generate comparable statistics
on violent crimes across Central American countries.
VI. Risks
104. Political economy issues are risks for the CPS period. Polarization of different
political groups inside and outside the dominant political party remains an issue. Mitigating
measures include aligning the CPS with the political cycle and maintaining close coordination
with development partners and diverse stakeholders. There is a slight additional risk that the
revised National Human Development Plan could divert significantly from the current structure
introducing a misalignment with the CPS. This risk is being mitigated through a continuous
dialogue with Government and implementation of a strategy that builds on results in areas with
broad stakeholders support.
105. Nicaragua remains highly vulnerable to external shocks. The country remains
particularly sensitive to economic shocks and an increase in food prices. Global economic
prospects, including a potential economic crisis in Europe, a slowdown of the United States
economy, or a sudden stop of Venezuelan support could affect the Governmentfs ability to
implement its program. Adverse impacts of the external environment on the price of export
commodities could further affect Nicaraguafs external position. The WBG will remain actively
engaged through dialogue, and coordinate closely with the IMF to support the authoritiesf efforts
to maintain macro stability and mitigate the impact of external shocks.
106. The countryfs susceptibility to natural disasters remains a concern. Climate shocks
such as hurricanes, severe storms, floods and droughts occur frequently. The country is also
prone to earthquakes. These events threaten the life and health of the population and the
infrastructure of the country. The Bank will continue to support disaster risk management efforts
through trust funds and analytical work. In addition the new IDA mechanism, IRM, will be built
into selected projects in the portfolio to provide a mechanism for fast disbursing funds in the
event of a natural disaster.
32
Annex 1. CPS Results Matrix
Country
Development Goals Issues and Obstacles CPS Outcomes Milestones Program instruments
(New in Italics)
A. Raise social welfare by improving access to quality basic services
More educated
population.
Slow progress in raising educational
attainment due to inefficient system.
High enrolments but low retention &
completion. Undertrained teaching
corps. Shortage of quality
infrastructure and teaching materials.
Weak stewardship (planning,
budgeting, M&E)
Increase in the coverage of
preschool education (ages 3-
5)
. Gross enrollment rate in
preschool (ages 3-5)
increase from 55% in
2011 to 65% in 2017.
. Increase in the
completion rate of
primary education:
Girls: 81% (2010)
Girls Target: 87% (2017)
Boys: 69% (2010)
Boys Target: 83% (2017)
Combined: 75% ( 2010)
Target: 85% (2017)
Quality of Education in
primary and lower secondary
improved as measure by
national standardized tests
. Increase in the percentage
of Grade 9 students
achieving advanced or
above proficiency levels
standardized evaluations
from 4.4% to 9% in Math
and from 37.4% to 44%
in Spanish in 2010 and
2017, respectively.
ECD Program rollout
nationwide
National Registry of
beneficiaries designed and
implemented
Certification program under
operation produces a steady
flow of certified teachers
(preschool and primary)
Financing:
. 2nd Education Sector
($25m)
. Social Protection ($19m)
. Education Multi-donor TF
(FY13, $52m)
. Social Protection/ECD
(FY16, tbd)
Knowledge:
. Education Strategy Follow
up
. Strategy on Technical and
Vocational Education and
Training
. Costed Strategy for
Reforming Escuelas
Normales (Teacher
training)
33
Country
Development Goals Issues and Obstacles CPS Outcomes Milestones Program instruments
(New in Italics)
Healthier population Slow progress on reducing infant, U5
and maternal mortality. High chronic
malnutrition. Constraints in data
collection and monitoring and
evaluation limit the availability of
robust and measurable indicators.
Significant population share without
access to improved water and
sanitation, especially in rural areas.
High vulnerability of rural water
supply infrastructure to extreme
weather events and climate variability
Percentage of institutional
deliveries in targeted
municipal health networks
Baseline: 72 (2011)
Target: 86 (2014)
Percentage of children less
than one year old immunized
with the Pentavalent vaccine
in targeted municipal health
networks
Baseline: 88 (2011)
Target: 98 (2014)
Once the strategy is
completed agreed Target
Outcomes will be added to
the Results Matrix for the
Progress Report.
Increase in rural access to
water and sanitation
improved by 4.5pp and 1.pp
by 2014.
Note: 2017 targets for health
results will be updated at
Progress Report)
Consolidate capitation
payments link to results
financing of MOSAFC
Robust monitoring system
for nutrition and maternal
mortality in place.
National Adolescent Sexual
reproductive Health strategy
adopted for reducing teen
pregnancy and risk behaviors
Rural W&S Strategy
approved with robust targets
for access and coverage, and
institutional framework in
place for monitoring progress
established.
Pilot climate-resilient rural
water supply systems
established.
Financing:
. Comm. & Family Health
. Managua Water & San
. Rural Water & San
. Rural Water & San II
(FY14)
. Caribbean Coast Devt TF
. Health (FY16)
Knowledge:
. Vital Statistics (TF)
. W&SP . reform, rural
capacity building, econ of
sanitation (TA, ESW)
. Teenage Pregnancy TA
. South-South on RBF
Nicaragua-Argentina
exchange
More evidence-based
spending decisions
As the inherent external allocation
mechanisms of donor financing
disappears, and tax revenues grow,
Nicaragua needs to have better
measures of comparing spending
efficiency across sectors, to help
prioritize.
The current compliance-based PFM
Fiscal and budgetary
projections are analyzed
under a multi-annual
perspective and are linked to
budget and expenditure
policies through the
implementation of the MTBF
and results-budgeting
methodologies as measured
Ministries of Health,
Education and Agriculture
have linked and aligned their
budgets with their sector
plans and started to allocate
resources on the basis of
strategic programs, multiyear
planning and results
information.
Financing:
1. PFM Modernization TAL +
Additional Financing
2. New SP/Health Project
Knowledge:
1. New Social Sector
Expenditure Policy Notes,
e.g. Costing Teacher
34
Country
Development Goals Issues and Obstacles CPS Outcomes Milestones Program instruments
(New in Italics)
system serves as an effective reporting
instrument but do not allow for a
strategic use of the budget as a tool to
improve quality of resource allocation
at the sector level nor as a budget
management instrument during budget
implementation.
by improvements in the
PEFA indicator #PI-12.
Baseline: C (unpublished
rating for PMSAF, 2010)
Public expenditure AAA on
health, education and social
protection completed.
Training, MOFSAC,
Program Amor rollout
2. PEFA Assessment
B. Raise incomes by improving competitiveness and productivity
Improve infrastructure High cost of transport and logistics.
High cost of energy . tariffs and
emissions.
Roads in good and fair
condition as a share of total
classified roads
Baseline: 29% the total
classified network of 23,647
km (MTI 2011 data)
Target: 35% in 2017
Increased 100 MW in
renewable energy (IFC,
MIGA) (2012-2017)
National rural roads program
designed with transparent
road selection mechanisms,
and with baseline and targets
set for share of population
with access to all weather
roads.
Integrated Risk Management
Systems in Customs and
common risk criteria and
procedures used by entities
involved in border
management.
Financing:
. Roads Rehab & Main. IV
. Rural Roads
. Rural Telecom
. Hurr. Felix Emergency
. IFC energy portfolio
. MIGA energy portfolio
. Logistics & Trade
Facilitation (FY14)
Knowledge:
. ENACAL Modernization
Strategy
. Geothermal Strategy
----------
Energy (IFC, MIGA)
Sustainable
improvements in
productivity, reduced
CC vulnerability of
some key gcash
cropsh and export
diversification
Low yields, high post-harvesting
losses, low value-added, high CC
vulnerability, low production in key
export products, including where there
is already significant private sector
participation and large numbers of
small producers, and lack of strategy
for the sustainable development of
new sectors
Improve productivity,
production and producers
incomes in one key export
crop (detail indicators to be
added at Progress Report)
Pilot productive alliance
project in place to improve
productivity, production and
producers incomes in one
key export crop
Country strategy adopted for
the sustainable development
of one/two non-traditional
export crops
Financing:
. Ag Technology II ($22m)
. Precious Woods (Carbon
Offset)
. IFC-WB Agriculture
Competitiveness (FY15)
. FCPF REDD Readiness
(Carbon Offset) &
Corazon II GEF (FY14)
Knowledge:
. JSDF Agriculture Price
Risk Reduction - FY13
. Agriculture PER ( FY13)
35
Country
Development Goals Issues and Obstacles CPS Outcomes Milestones Program instruments
(New in Italics)
Improve investment
climate
High cost of doing business, red tape,
legal uncertainty, weak land tenure,
lack of business services, deteriorating
security
Time to register property at
Departmental levels reduced
Baseline: 49 days to
complete a new land
transaction in SIICAR
Target: 25 days (2017)
Doing Business overall
country ranking improved
Baseline: 26th percentile rank
among Latin America
countries (2012)
Target: 50th percentile rank
Number of days to a register
a new business reduced
Baseline: 39 days (2012)
Target: 10 days (2017)
Rollout of SIICAR in Esteli,
Madriz and Leon
Books I and II of the new
commercial code updated.
Financing:
. MSME Development
(Commercial Code)
. Land Admin II (FY13)
Knowledge:
. CEM (FY13)
. Investment & Export
Promotion TA (IDF)
. Doing Business Ref
TA(ongoing)
. AML/FTC TA program TF
Improve access to
finance
Inefficient financial sector. Low
levels of credit to the private sector.
Narrow range of financial
instruments.
Stock outstanding of IFC
credit lines increases.
Baseline: Baseline: $23.8
million (2012, June 30)
New regulatory institution
for microfinance, CONAMI
established and operating
with adequate regulatory
framework
Improved legal framework
and registry functions for
secured transactions
Financing:
. IFC Credit Lines . trade,
microfinance, housing,
small supplier finance
. MIGA guarantees in
financial sector
Knowledge:
. Consumer Prot TA
. IFC-WB Financial
Innovation Programmatic
TA (FY14 onward)
. FSAP (FY15)
36
Annex 2. Millennium Development Goals in Nicaragua
1990 Baseline
2005/2006
Most
recent
Goal
2015
Achievable
?
Monitoring
Target 1 Eradicate extreme poverty and hunger
Extreme poverty (% headcount) n.a. 17.2 14.6/2009 11.0 Likely LSMS
2013
Prevalence of malnutrition, weight for
age (% children under 5 years old)
30.0 21.5 19.0/2008 7 Difficult DHS 2012
Target 2 Achieve universal primary education
Net primary enrollment rate (%) 67.0 87.7 93.4/2010 100 Possible MINED
Completion rate of primary education
(%)
39.2 68.5 75.0/2010 100 Difficult MINED
Target 3 Promote gender equality and women empowerment
Ratio of girls to boys in primary &
secondary education
119 101.9 101.6/2010 100 Likely MINED
Proportion of women in legislature (%) 15.0 20.7 41.3/2012 50 Likely n.a
Target 4 Reduce infant mortality
Infant Mortality rate (per 1000 live
births)
51.6 28.1 22.6/2010 20 Likely DHS 2012
Mortality rate for children under 5
years old (per 1,000 live births)
68.0 34.1 26.9/2010 24 Likely DHS 2012
Immunization, measles (% of children
ages 12]23 months)
82 95 99/2010 100 Achieved
Target 5 Improve maternal health
Maternal mortality rate (per 100,000
live births)
170 96 95/2010 22 Unlikely DHS 2012
Births attended by qualified health
personnel (% of total)
n.a. 66.9/2001 73.7/2007 100 Possible DHS 2012
Target 6 Combat HIV/AIDS, malaria and other diseases
Incident of Tuberculosis (per 100,000
people)
108 53 42 MINSA
Prevalence of HIV, total (% of pop ages
15]49)
0.1 0.2 0.2/2009 DHS 2012
Tuberculosis case detection rate (%, all
forms)
66 66 100 MINSA
Target 7 Guarantee the sustainability of the environment
CO2 emissions (metric tons per capita) 0.60 0.70 0.76/2008 MARENA
Forest area (% of land area) 37.5 28.8 25.9
Improved sanitation facilities (% of
population with access)
43.0 50.0 52.0 73.0 Unlikely
Improved water source (% of population
with access)
74.0 83.0 85.0 85.0 Achieved
Terrestrial protected areas (% of total land
area)
15.4 36.7 36.7 MARENA
Target 8 Promote a global partnership for development
Unemployment rate, youth ages 15]24 n.a. 46.8 45.9 LFS
monthly
Mobile cellular subscription (% of
population)
20.6 65.1 TELCOR
Access to internet (% of population) 2.6 10.0 n.a TELCOR
37
Annex 3. Nicaragua: Summary Gender Assessment
1. Nicaragua has good legal foundations for the various levers of gender equality . building
human capital, access to economic resources, participation in society and protection. Public
policies are helping to raise girlsf and womenfs access to education, health care, credit, land and
other productive resources. However, in terms of outcomes, results are mixed. On the one
hand, significant progress has been made on education and incomes. While on the other hand,
Nicaragua remains challenged by very high levels of gender-based violence and teenage
pregnancy, combined with exceptionally low levels of female labor force participation and high
levels of unemployment among the most vulnerable . young, uneducated women.
2. Legal foundations for gender equality. The Constitution of the Republic of Nicaragua
grants equal civil rights to all citizens and prohibits gender-based discrimination. Electoral laws
call for a gender-balanced representation in Parliament. Nicaragua scores well on laws and
regulations affecting women's prospects as entrepreneurs and employees. There are no legal
inequalities in terms of accessing institutions and property and Nicaragua has laws mandating
equal pay and protecting maternity benefits, and provides publically-financed, mandatory
primary education.20 Interestingly, the minimum legal age for marriage (with parental
authorization) is only 14 years for women and 15 years for men. Most recently, Nicaragua
passed a new Law on Violence against Women (February 22, 2012) that mandates punishment
for different types of violence, defines habitual abuse as a separate offense and makes mediation
inadmissible in cases of violence. The Government has a strong gender policy which has been
internalized in most ministries striving to ensure womenfs access to public and private services.
Nevertheless, the institutional framework needs further strengthening, in particular on the
judicial side, to ensure that womenfs rights are fully protected in practice.
3. Political and economic representation. Political participation of women is very high in
Nicaragua when compared to the region, same income level countries and the world. At the
National Assembly, 20.7 percent of parliamentarians are women (2010), compared to 17.6
percent on average in the world and 13.9 percent for same income level countries. Today,
Nicaragua has the highest number of women holding ministerial positions in its history (55
percent, 2010) and at the same time the country has the highest share of female Ministers in the
region (ECLAC). In 2006, the share of women in managerial positions at 41 percent was
relatively high compared with other low-income countries (27 percent), while in 2010
Nicaraguan women participated in the ownership of 62 percent of all firms, also very high when
compared to other countries in Latin America. Finally, according to recent market information
provided by the industry (Mix Market, 2011), the majority . 65 percent . of microcredit
recipients are women.
4. Education, employment and incomes. Over the last decade, women in Central America
have not only closed the education gap, but in the case of Nicaragua, they are also ahead of men.
20 Women, Business and the Law: Removing Barriers to Economic Inclusion, the Doing Business review which
presents indicators based on laws and regulations affecting women's prospects as entrepreneurs and employees.
Latest data for Nicaragua is 2011.
38
In 200921, Nicaraguan women had achieved 20 percent higher educational attainments than men.
These improvements have been driven by
rising attendance and higher primary
completion rates for girls. The latter was
82 percent in 2010, compared to 68
percent for boys. Working women have
seen a steady reduction in the wage-gap
and a 30 percent increase in their
contributions to household income (which
now stands at an average 35 percent).
Notably, the reductions in the wage-gap
include the impact of not only rising
education levels among women . for each
additional year of education, women are
earning 15 percent more income (versus 10 percent in the previous decade . but also a change in
perceptions about womenfs employment.
5. Nevertheless, womenfs labor force participation still remains as low . at around 50
percent . as a decade ago. As shown in Chart 1, education is an important driver, with
participation flat for women with less than 6 years of education but rising sharply thereafter. The
national averages also reveal a sharp difference between rural and urban areas with rural women
aged 35-39 averaging 42 percent participation versus their urban counterparts at 72 percent (in
2009). Meanwhile, recent reductions in poverty in Nicaragua between 2005 and 2009 have been
concentrated in low-income, informal work in which women are even more likely to be
employed. Consumption in the growing number of female-headed households still remains
around 10 percent lower than that for households headed by men. Finally, while unemployment
rates are similar by gender, they are 20 percent higher for younger, less educated women than the
national rate.
6. Health and civil protection. Among Nicaraguan women, fertility levels have been
falling, while progress in reducing the comparatively very high levels of maternal mortality has
been moderate. Institutional advances have been broadening access to maternal health services,
including the Government 2007 policy of free public healthcare, development of the family and
community health services model and public support for Nicaraguafs famous casas maternas.22
Contraceptive prevalence rate is moderately high, at 72 percent, well above the average for
countries with similar income levels, 43 percent. In 2011, 72 percent of births were attended by
skilled health staff, which is lower than the world average of 82 percent, but equivalent to
countries with similar income levels, 73 percent. However, this coverage shows a strong
variation by income quintiles: while 95 percent of all deliveries in the richest quintile are
attended by a trained doctor, the percentage drops to 56 percent among poor women.
Meanwhile, adolescent fertility rates in Nicaragua are still the highest in Latin American and
21 The most recent living standards measurement survey in Nicaragua was 2009.
22 From these casa maternas, networks of community volunteers identify pregnant women in remote areas and bring
them an array of services, including pre-natal checkups, birthing plans, and post-natal follow-up. Around the time of
delivery, the women stay in the casas maternas, usually located near health units, and receive additional support,
such as help with breast feeding, early parenting skills and family planning.
0%
20%
40%
60%
80%
100%
0 5 10 15 20
Labor force participation
Years of Education
Chart 1: Labor force participation by education
(2009)
Men
Women
39
among the highest in the world. At 110.5 for every 1,000 girls, it is twice the world average of
49.4 and well above the 59.5 for the same income countries (2009).
7. Gender-based violence is still a serious problem in Nicaragua. The Demographic and
Health Survey (DHS 1997/98) revealed that 28 percent of women who were or had been once
married had been physically abused by their partner at least once, and 10 percent had been
sexually abused (DHS Report 2002). In 2011, there were at least 82 deaths from gender violence
and 25,600 complaints of violations against women. In 2007, the National Commission on
Violence against Women, Children and Young Persons for which the Nicaraguan Institute for
Women serves as executive secretariat was established, to address that problem.
8. Given the gradual progress on other fronts, the Government has identified three key
challenges for the future: adolescent fertility, early childhood education and gender-based
violence. Given the correlations between teenage pregnancy and maternal mortality, lower
education achievement and poor labor market outcomes, improving early reproductive health
among women in Nicaragua has the potential to be a key driver in gender outcomes. Meanwhile,
the Governmentfs new strategy on early childhood education has the potential to provide
childcare solutions to more rural families for whom this service is scarce. Finally gender-based
violence remains a problem as evidenced by comparatively high homicide rates for women. The
authorities have just passed a new law with broad public support that should provide a boost to
ongoing efforts by civil society and the security forces to address this issue.
9. Bank Program. At the end of the last CPS, 13 projects were rated ggender-informedh as
having been based on gender analysis, including gender sensitive/targeted actions or monitoring
and evaluation. Table 1 below shows a mapping of these projects to the priority areas of the
LAC Gender Strategy, while Table 2 shows the Nicaragua program implementation of
monitorable actions indicators and targets in the IDA16 Gender commitments.
40
Table 1 : Priority Issues in LAC Gender Strategy
LAC
Lower
middle
income
Nicaragua Nicaragua portfolio active in
these areas
Endowments
1. Maternal Mortality rate (modeled
estimate, per 100,000 live births)
85.13
(2008)
300.00
(2008)
95
(2010)
. Strengthening and Response
to Epidemiological
Emergencies
. Improving Community and
Family Health Care Services
. Social Protection
. Pregnant women receiving prenatal care
(%)
96.53
(2010)
78.13
(2010)
90.20
(2007)
. Births attended by skilled health staff (%
of total)
90.12
(2010)
56.90
(2010)
73.70
(2007)
2. Boys underperformance in school
. Boysf primary completion rate
100.46
(2009)
89.99
(2009)
78.00
(2010)
. Second Support to the
Education Sector
. Boy.girl gap in primary completion rates
(yrs.)
-1.11
(2009)
3.78
(2009)
-6.01
(2010)
. Ratio of female to male primary
enrollment
96.72
(2009)
94.20
(2009)
97.96
(2010)
. Ratio of female to male secondary
enrollment
108.11
(2009)
90.16
(2009)
109.87
(2010)
. Tertiary enrollment, male (% gross) 32.93
(2009)
16.98
(2009)
Not avail
. Tertiary enrollment, female (% gross) 41.48
(2009)
14.33
(2009)
Not avail
Economic opportunity
1. Labor market participation
. Labor force, female (% of total labor
force)
41.17
(2010)
31.48
(2010)
37.88
(2010)
. Micro, Small and Medium
Enterprise Development
. Land Administration Project
. Broad-based Access to
Finance
. Hurricane Felix Emergency
. Second Agricultural
Technology
. Rural Roads Infrastructure
Improvement
. Road Rehab and
Maintenance
. Corazon Transboundary
Biosphere Reserve
. Female labor force participation rate (%
female population 15-64)
57.57
(2010)
38.55
(2010)
48.60
(2010)
. Male labor force participation rate (%
male population 15-64)
83.71
(2010)
81.61
(2010)
82.10
(2010)
. Ratio of female to male labor force
participation rates
67.12
(2010)
49.42
(2010)
57.75
(2010)
. Share of women employed in the
nonagricultural sector (% of total
nonagricultural employment)
41.24
(2007)
24.43
(2005)
38.10
(2007)
. Unemployment, female (% of female
labor force)
9.81
(2009)
7.89
(2005)
5.10
(2007)
. Ratio of female to male unemployment
rates
1.51
(2009)
1.41
(2005)
1.04
(2007)
2. Entrepreneurship (20100
. Firms with female participation in
ownership (% of firms)
. Firms with female top manager (% of
firms)
40.4
20.8
Not avail
Not avail
61.90
32.2
Agency
1. Teenage pregnancy
. Adolescent fertility rate (births per 1,000
women ages 15.19)
. Teenage mothers (% of women ages 15-
19 who have had children or are currently
pregnant with their first child)
71.67
(2010)
Not avail
67.90
(2010)
Not avail
107.99
(2010)
25.50
(2006)
. Rural Water and Sanitation
2. Gender-based violence***
41
LAC
Lower
middle
income
Nicaragua Nicaragua portfolio active in
these areas
. Proportion of women who have ever been
victims of physical violence by an
intimate male partner
Not avail Not avail Not avail
3. Participation in decision-making
. Share of Parliament seats held by women
22.72
(2011)
15.40
(2011)
20.70
(2011)
. Percentage of women in managerial
positions [Female legislators, senior
officials and managers (% of total)]
Not avail
Not avail
40.99
(2006)
Monitorable Actions Indicators and Targets for IDA 16,
B. Tier 1: Country Progress.Indicators, Targets and Monitoring Unit (IDA16, Transition Plan and
Corporate Score Card)
Indicator
IDA
16
Transition
Plan
Corp.
Scorecard
LCR LMI* Nicaragua
Ratio of girls to boys in primary and
secondary education ã ã ã + 101.84
(2009)
92.67
(2009)
101.61
(2010)
Primary completion rates . Girls (% of
relevant age) ã 101.57
(2009)
86.21
(2009)
84.01 (2010)
Ratio of female to male labor force
participation ã ã ã 67.12
(2010)
48.77
(2010)
57.75 (2010)
Adolescent fertility rate (births per
1,000 women ages 15-19) ã ã
71.67
(2010)
67.90
(2010)
107.99
(2010)
Maternal mortality rate (modeled
estimate, per 100,000 live births) ã ã ã 85.13
(2008)
300.00
(2008)
95.00
(2010)
Prevalence of HIV, female (% of ages
15-24) ã Not
available
0.48
(2009)
0.10
(2009)
Number of gender-informed national
surveys (that collect and report sexdisaggregated
data)++
ã
Not avail Not avail
All
Tier 2: Development Results23
Priority Areas
Indicator
IDA 16 Transition
Plan
Corp.
Scorecard
Nicaragua
Status
Education of girls in rural
areas and ethnic minorities;
educational performance of
boys in MICs, etc.
Percentage of education projects
(primary, secondary, tertiary and
vocational) that tracks attention to
vulnerable groups in their M&E
ã 100%
Health Percent of pregnant women receiving
antenatal care during a visit to a
health provider
ã ã ã 52% (4
checkups)
Social protection Number of women and girls
benefiting from social protection
programs and other targeted schemes
ã To be added
23 The indicators were adopted and harmonized with the respective sectors in November 2011. The Transition
Planfs Three-Year Road Map proposed additional indicators for access to finance to be monitored by IFC: Number
of loans disbursed to women and men by IFC clients; value of all loans disbursed to women and men by IFC clients;
active number of microfinance loan accounts disaggregated by sex.
42
Annex 4. Nicaragua: Summary Governance Review
1. The trends on governance in Nicaragua over the last decade and a half have been mixed
(see figure below). There has been some improvement in political stability; little change in
regulatory quality, rule of law, government effectiveness and control of corruption; and steady
deterioration in voice and
accountability. The country
remains below the averages for
lower middle income countries (a
group recently joined) in all areas
except for regulatory quality.
2. Voice and accountability.
The bases are in place for voice
and accountability to strengthen
governance. Nicaraguan society is
characterized by significant
participation in social
organizations, community actions
and volunteering, particularly by
social groups that are traditionally
excluded (women, indigenous and
rural communities). Over 30
percent of the population report
being a member of a CSO
(compared to membership in
political parties at 10 percent and trade unions at 3 percent. Access to information is guaranteed
by the Access to Public Information Law approved in 2007. Nicaragua has improved its score
in the Open Budget Index from 21 in 2006 to 37 in 2010 on par with the Central America
average. Nicaragua publishes a budget proposal, mid and year end reports but in general these
are not comprehensive and do not provide an adequate basis for the public to judge performance.
The government is working toward preparing financial assets/liabilities reports, while overall
central government balance sheets, as well as audit reports are still pending.
3. However, the potential for strong voice and accountability remains constrained.
Implementation of the 2007 Access to Public Information has been suffered by a general decline
in transparency at the ministerial level in public programs. Most importantly lack of timely and
accurate information on key development outcomes and institutional performance limit
effectiveness of the law, even if well implemented. Budget oversight provided by Nicaraguafs
legislature and Supreme Audit Institutions (SAIs) also remains weak.24 The Comptroller
Generalfs Office (CGRN), responsible for auditing all government entities, has limited resources
and in fact does not carry out audits of most SOEs. Moreover, CGRNfs external audit review
process as it is currently designed represents a significant bottleneck, preventing the public from
24 IBP, Open Budget Index, 2010, Nicaragua.
43
receiving timely SOE financial statements. In addition, checks and balances on the executive
continue to be weak in Nicaragua, because appointments to key oversight institutions such as the
judiciary, the Comptroller General Office and the Supreme Electoral Council remain politicized.
4. Political stability and absence of violence. Nicaragua saw a significant improvement in
its WGI indicators on political stability around the millennium but still ranks comparatively low.
Even after elevated political tensions surrounding municipal elections in 2009, a constitutional
challenge in 2010 to allow the then President to run for a third term and general elections in
2011, approval ratings for the President are the highest in Central America at 61 percent.25
Confidence on basic institutions is also on the increase, as shown in Table 1. The ruling party
now holds both the presidency and majority in the legislature. The conduct of upcoming
municipal elections (2012) will test the capacity of the political actors to come an agreement on
the fundamental of political transparency. Meanwhile, Nicaragua remains relatively free of the
levels of violence that have plagued the Northern Triangle, w sharing the lowest homicide rates
in the region with Costa Rica. Periodic violent clashes do occur however in the Northern
Atlantic region mainly related to unresolved land claims.
5. Government effectiveness. Nicaragua
ranks lowest among Central American
countries on this measure in the WGIs, but
survey data26 point to comparatively high and
improving approval ratings on public services.
In terms of the public administration,
Nicaragua benefits from a sound legal
framework for the Civil Service Law but has yet to emerge from a long tradition of blurred lines
between political and executive functions. These appear to have been exacerbated in recent
years, with more overt use of state appointments and resources for political purposes.
6. In terms of policy formulation and
implementation, Nicaragua has seen steady
improvements in public financial
management over the last few
administrations, with a Medium Term
Expenditure Framework is now in place in
all central government and decentralized
agencies, and has served to strengthen the
links between planning and budgeting. The
modernization of the current financial
management information system II is underway and should help to strengthen these links further,
and also improve budget execution and reporting. Implementation of government policies in this
and previous administrations has been rather robust. The variances between budget plans and
execution have been small and reducing, while implementation rates of government-executed
development projects for both the Bank and the larger Inter-American Development Bank are
25 Survey: Evaluacion Gobierno, Marzo 2012, M&R Consultores.
26 Latinobarometer and local Sistema de Monitoreo de la Opinion Publica
Table 1. Public Confidence in Public Agencies
Confidence in: 1996 2001 2005 2010
Government 37% 15% 38%
Judiciary 47% 20% 15% 24%
Public Administration 43% 21% 18% 25%
Municipal/Local Govt 20% 21% 31%
Source: Latinobarometro.org
Table 2: Public Satisfaction with Service Delivery
2009 2010 CA LAC
Level of satisfaction with:
Public hospitals 57% 64% 55% 51%
Public education 72% 77% 59% 57%
Police 54% 56% 35% 49%
Judicial system 54% 56% 36% 34%
Municipal services 58% 54%
Urban transport 50% 50%
Road and highways 38% 41%
Source: Latinobarometro.org
44
above average for the region. There remain serious weaknesses in terms of monitoring and
evaluation, transparency of public programs and external audit by the Comptroller General.
7. Regulatory quality. Nicaragua has maintained a
sound macroeconomic framework for several years and
the trade regime has benefited from implementation of
the DR-CAFTA agreement, but continued weaknesses in
customs administration raise the cost of exports and
reduce the countryfs competitiveness. Nicaragua has
also seen its ease of Doing Business rank decline from
56 in 2005 to 122 in 2011 as other countries have made
greater progress in streamlining business regulations.
Table 2 shows the most problematic areas as reported by
firms in the World Bank-IFC 2010 Enterprise Survey.
According to the Heritage Foundation, gLand reforms
have led to [some] improvements in the protection of
property rightsh27, an assessment that is confirmed by the
progress made under the Bankfs Land Administration
project. In terms of corporate governance, a recent
Report on Standards and Codes on accounting, financial
reporting and auditing practices notes that Nicaragua is converging with International Financial
Reporting Standards (IFRSs) in its financial sector and moving toward adopting IFRS in other
sectors.
8. However, reports of gland invasionsh and gland takingsh that are either politically or
judicially sanctioned continue. Finally, the legal and institutional framework for anti-trust and
competition is rudimentary, and firms continue to rank ginformal practices by othersh as high
among obstacles to doing business. In addition, the quality of SME financial reporting tends to
be quite low and insufficiently standardized28 and the financial reporting and audit processes
within SOEs require significant improvement. Some SOEs do not undergo any external audit.
9. Control of corruption. Nicaragua has a well-developed legislative framework that
criminalizes acts of corruption, but the implementing institutional framework is weak and the
political will is waning. After tackling high levels of corruption being major theme of the
current administrationfs earlier political campaign in 2006, it did not feature much in the recent
elections. No prosecutions of high-level politicians or officials for corruption have taken place
since 2007. Meanwhile, members of the National Assembly enjoy immunity from prosecution.
27 The Heritage Foundation, 2011fs Index of Economic Freedom.
28 Nicaragua: A Review of Accounting and Reporting Practices, Report on the Observance of Standards and Codes
(ROSC), March 2011.
Table 3: Obstacles for doing business
Share of firms responding (%) 2010
Electricity 24.2
Practices of the informal sector 19.4
Political instability 8.8
Access to finance 8.8
Corruption 7.2
Crime, theft and disorder 7.2
Customs and trade regulations 6.9
Tax rates 6.0
Business licensing and permits 3.2
Courts 2.7
Inadequately educated workforce 2.5
Transportation 2.3
Tax administration 0.5
Labor regulations 0.2
Access to land 0.1
45
10. Surveys suggest that corruption is more
of an issue for business than for households. The
2010 Enterprise Survey lists corruption as the
fifth largest obstacle to doing business (same as
in 2006), whereas household reports of direct
experience with corruption is comparatively low
and falling (Chart xx). A larger share of firms
report corruption as a major constraint than in
several comparator groups of countries and cite
arbitrariness and discrimination in taxation and
customs procedures, as well as a lack of
professionally trained tax and customs officials.
The handful of INT cases in the Bank
procurement over the previous CPS period were
generally attributed to wrongdoing by bidding firm and have resulted in a few disbarments, while
the two cases of mis-procurement reflect deep capacity limitations in the public administration.
Although, Nicaragua does stand out with respect to judicial corruption, the household survey
Percepcion de Corrupcion 2009 conducted by General Prosecutor's office found that two out of
five citizens perceive the judiciary to be corrupt. As a result, one of the most serious obstacles
for investors in Nicaragua is the difficulty in resolving commercial disputes in courts,
particularly concerning the enforcement of commercial contracts.
Table 4: Firms Experience with Corruption
Enterprise Surveys
Lower
MIC LAC CA Nicaragua
Percent of firms identifying corruption as a major constraint 36.1 39.9 48.6 52.2
Percent of firms expected to give gifts:
to public officials "to get things done" 25.5 10.9 11.3 8.3
in meetings with tax officials 15.7 6.1 4.2 4.2
to secure government contract 23.7 9.9 5.9 4.5
to get an operating license 15.0 8.4 5.7 5.0
to get an import license 14.3 5.7 1.4 0.3
to get a construction permit 23.2 12.9 13.6 18.2
to get an electrical connection 16.0 4.0 3.0 7.8
to get a water connection 15.4 9.7 7.5 3.7
Value of gift to secure a govt contract (% of contract value) 2.2 0.9 0.6 0.4
Bribery depth (% of public transactions where a gift/informal
payment was requested) 15.1 6.5 5.4 4.3
Percent of firms experiencing at least one bribe request 19.6 9.6 8.0 8.6
Percent of firms identifying the courts as a major constraint 19.1 25.0 35.0 38.4
Source: World Bank Enterprise Surveys (2010)
Chart 1: Direct family experience of corruption (% of
those responding yes)
Source: Latinobarometer
0%
10%
20%
30%
40%
50%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
46
Annex 5. Trust Fund in Nicaragua
Trust Fund Donor US$f000 Implementing Agency Type of activity
1. Alternative Sustainable Agro-Forestry
Management for Indigenous and Afro-Descendant
Women
JSDF 3,029 Community Agroforestry
Association for
Indigenous Women
Recipient Executed Project & Bank
Executed Project/activity support
2. Agricultural Census 2011and Public Expenditure
Review
Canada 2,350 Ministry of Agriculture
and INIDE
Recipient Executed Project & Bank
Executed Project/activity support
3. Program Management and Supervision for the
Caribbean Coast Development Program
DFID 200 IBRD/IDA Bank Executed Partnership Secretariat
& Trust Fund Admin
4. FADCANIC - Grant for under the Caribbean
Coast Development Program Investment Phase
DFID 2,470 FADCANIC Recipient Executed Stand-alone Project
5. FADCANIC- Second Grant for Investment Phase
under the Caribbean Coast Development Program
DFID 850 FADCANIC Recipient Executed Stand-alone Project
6. Save the Children - Grant for Investment Phase
under the Caribbean Coast Development Program
DFID 1,200 Save the Children Recipient Executed Stand-alone Project
7. OXFAM GB - Grant for Investment Phase under
the Caribbean Coast Development Program
DFID 851 OXFAM Recipient Executed Stand-alone Project
8. Expansion of the Family and Community Based
Social Welfare Model with Cash Transfers
RSR 2,750 Ministry of the Family,
Youth and Children
Recipient Executed Cofinancing
9. Strengthening 's Vital Statistics System TFSCB 398 Ministry of Health Recipient Executed Cofinancing
10. Strengthening Investment & Export Promotion IDF 240 ProNicaragua Recipient Executed Other Project
11. Financial Consumer Protection Project FIRST 217 SIBOIF Bank Executed Project/activity support
12. FCPF Readiness Preparation Proposal FCPF 200 Ministry of
Environment and
Natural Resources
Recipient Executed Project
13. Healthy Kids, Healthy Forests: Miskito
Communities Thrive on Native, Nutritious
Rainforest Foods
Devt
Market
Place
200 Cooperativa de
Profesionales
MASANGNI R.L
Recipient Executed Stand-alone Project
14. Promoting Efficiency & Poverty Focus of Public
Water Utilities
Spanish 95 ENACAL Bank Executed Project/activity support
15. Strengthening government capacity for rural &
peri urban water & sanitation projects
WSP 34 La Nueva FISE Bank Executed Project/activity support
TOTAL 15,084
47
Annex 6. Executive Summary of IDB Strategy for Nicaragua 2012-2017
Country
Context
Between 2007 and 2011 the Nicaraguan economy grew at an average of 2.8% per year, in line
with the average for Central America. The social context has made progress in reducing levels of
poverty and inequality, but still has major challenges to address, especially in rural areas. Thus,
42.5% of the population lives in poverty and 14.6% in extreme poverty.
The IDB in
Nicaragua
The IDB is the main source of external financing in Nicaragua and a leading institution of
multiannual and multisectorial schemes. During the last years, IDBfs support has been focused
on: i) Energy (20.23%); ii) Fiscal and Municipal Management (19.50%); iii) Social Protection
and Health (19.42%); iv) Environment and Rural Development (13.81%); and v) Transport
(11%). The current portfolio29 comprises 31 sovereign guaranteed loans for a total available
amount of US$367 million, 26 operations of the Multilateral Investment Fund for a total of
US$16.5 million, and 45 technical cooperation interventions worth US$18.8 million. The loan
portfolio with sovereign guarantee focuses on the following sectors: Energy (27%), Transport
(11%), Social Protection (17%), Environment Rural Development (17.8%), and Water and
Sanitation (11.7%).
The IDB
Strategy
2012-2017
The IDB strategy for Nicaragua (2012-2017) aims to help the country to overcome some of the
main growth challenges and to improve the living conditions of the population, specifically those
in the rural areas. The main areas of support will be: Energy, Transport, Health, Social
Protection, and Rural Development. Additionally, the IDB will include in its programs the
following cross-cutting topics: gender, diversity and climate change and natural disasters.
Regional integration will be promoted through actions within transport and energy sectors. Rural
development, energy, and transport will be areas of collaboration with the World Bank.
Strategy
Implementation
During the implementation of the country strategy, the Bank will continue promoting the use of
the Country Systems, and strengthening the institutional and fiduciary capacities of executing
agencies. Moreover, the Bank plans to adapt the design and implementation of programs
according to local capabilities with the aim of improving portfolio execution, and continue
monitoring development results.
Risks The main risks identified are: i) limited execution capacities of local counterparts, which may
slow portfolio's performance, hence affecting the impact of IDB's interventions; and ii) the
contraction of concessional resources which could bring changes in the grants to loans flows,
hence increasing the country's vulnerability to possible reductions from these sources. To
mitigate these risks, the Bank: i) will support institutional strengthening actions that lead to the
identification of new schemes of programs design and implementation, adapted to local
capabilities; ii) Bank's interventions will have a greater sectoral focus and donor coordination to
maximize the flow of development aid.
29 Data as of June 2012.
48
Annex 7. Donor Annex
Public Sector: Official External Cooperation (Loans and Grants) p/
(Millon dollars)
2010 2011
Agriculture, forestry
and fishing
Mining
Manufacturing
Electricity, gas and
water Supply
Construction
Trade
Transport and
Communications
Financial
intermediation
Social Work, Health
and Education
Public administration
Others
Multilateral 323.1 333.9 20.3 0.0 0.0 74.0 61.2 0.0 21.2 4.1 69.7 75.7 7.6
Inter-American Development Bank (IADB) 150.9 157.7 7.2 0.0 0.0 40.3 32.6 0.0 6.2 3.7 11.0 55.3 1.5
International Development Association (IDA)- World Bank 47.0 61.7 2.6 0.0 0.0 7.8 15.2 0.0 2.1 0.4 30.1 1.5 1.9
Central American Bank for Economic Integration (CABEI) 43.2 41.1 0.8 0.0 0.0 11.5 13.3 0.0 12.9 0.0 2.5 0.2 0.0
United Nations (except World Health organization) 42.0 32.2 9.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 21.7 0.4 0.3
International Monetary Fund (IMF) 19.6 17.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.8 0.0
European Union (EU) 0.0 15.1 0.0 0.0 0.0 10.5 0.0 0.0 0.0 0.0 0.1 0.5 3.9
European Investment Bank (BIE) 0.3 4.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pan American Health Organization and World Health organization (OPS/OMS) 7.9 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0
The Global fund to Fight AIDS, Tuberculosis and Malaria (FGSTM) 6.2 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.0
Nordic Development Fund (NDF) 2.7 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0
Organization of American States (OAS) 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
OPEC Fund for International Development (OFID) 1.3 0.0 0.0 0.0 0.0 (0.1) 0.0 0.0 0.0 0.0 0.1 0.0 0.0
Bilateral 213.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Russia 18.0 40.6 0.0 0.0 0.0 0.0 0.0 0.0 31.6 0.0 9.0 0.0 0.0
United States 18.3 21.0 8.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.2 8.4 0.0
Switzerland 8.9 16.4 3.3 0.0 0.0 5.2 0.1 0.0 0.0 0.6 1.9 4.7 0.7
Nederland 5.3 14.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.2 0.9 4.0
Canada 12.1 12.7 1.2 0.0 0.0 6.7 0.0 0.0 0.0 0.0 4.4 0.0 0.4
Finland 11.1 10.8 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 0.0 0.0
Germany 19.1 10.7 0.0 0.0 0.0 2.8 0.0 0.0 0.0 0.0 5.2 0.0 2.6
Spain 60.1 9.2 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 6.2 1.4 0.6
Taiwan, China 5.2 8.8 0.1 0.0 0.0 0.0 0.0 0.0 2.2 0.0 5.2 1.3 0.0
Norway 4.5 5.3 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 3.0 0.0
Japan 10.4 4.5 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 3.1 0.0 0.0
Denmark 18.7 4.1 0.0 0.0 0.0 0.0 0.0 0.0 2.4 0.0 1.8 0.0 0.0
Austria 2.1 3.7 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0
South Korea 5.2 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.0 0.0
Luxembourg 9.1 3.1 0.0 0.0 0.0 1.9 0.0 0.0 0.0 0.0 1.2 0.0 0.0
OTHERS 5.5 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0
Total 536.8 333.9 20.3 0.0 0.0 74.0 61.2 0.0 21.2 4.1 69.7 75.7 7.6
p/: preliminary
Source: MINREX and BCN
49
Private Sector: Official External Cooperation (Loans and Grants) p/
(Millon dollars)
2010 2011
Agriculture, forestry
and fishing
Mining
Manufacturing
Electricity, gas and
water Supply
Construction
Trade
Transport and
Communications
Financial
intermediation
Social Work, Health
and Education
Others
Bilateral 643.7 747.7 17.2 0.0 0.0 30.7 4.5 0.0 0.0 639.4 26.6 29.3
Venezuela 522.0 564.1 557.4 6.7
United States 35.2 66.9 4.1 4.5 36.4 10.0 11.9
Nederland 55.5 61.7 2.8 19.3 33.0 2.5 4.1
Germany 0.0 19.3 8.0 11.3
Finland 3.7 10.1 5.0 1.3 3.7
Spain 14.3 9.1 0.2 0.8 6.8 1.3
Switzerland 0.0 6.3 5.0 0.1 1.3
Others 13.1 10.1 2.1 0.0 1.7 5.9 0.3
Multilateral 165.2 158.4 2.0 0.0 1.5 94.3 0.0 8.9 0.0 13.7 11.9 26.2
Central American Bank for Economic Integration (CABEI) 108.7 65.8 0.0 1.5 16.6 8.9 13.7 1.8 23.4
International Finance Corporation (IFC - World Bank) 32.7 38.2 38.2
Inter-American Investment Corporation (IIC - IADB) 6.5 21.3 21.3
Multilateral Investment Fund (MIF - IADB) 7.1 18.2 18.2 0.0
European Union (EU) 10.2 14.9 2.0 0.0 10.1 2.8
Total 808.9 906.1 19.2 0.0 1.5 124.9 4.5 8.9 0.0 653.1 38.5 55.4
p/: preliminary
Source: MINREX and BCN
50
Annex 8. Nicaragua At A Glance
Nicaragua at a glance 10/15/12
Latin Lower
Key D evelopment Indicators America middle
Nicaragua & Carib. income
(2011)
Population, mid-year (millions) 5.9 583 2,519
Surface area (thousand sq. km) 130 20,394 23,579
Population growth (%) 1.3 1.1 1.5
Urban population (% of total population) 57 79 39
GNI (Atlas method, US$ billions) 8.9 4,505 4,078
GNI per capita (Atlas method, US$) 1,510 7,733 1,619
GNI per capita (PPP, international $) 2,790 10,926 3,632
GDP growth (%) 5.1 6.2 6.9
GDP per capita growth (%) 3.7 5.0 5.3
(most recent estimate, 2005.2011)
Poverty headcount ratio at $1.25 a day (PPP, %) 5 6 ..
Poverty headcount ratio at $2.00 a day (PPP, %) 21 12 ..
Life expectancy at birth (years) 73 74 65
Infant mortality (per 1,000 live births) 23 18 50
Child malnutrition (% of children under 5) .. 3 25
Adult literacy, male (% of ages 15 and older) 78 92 80
Adult literacy, female (% of ages 15 and older) 78 90 62
Gross primary enrollment, male (% of age group) 117 119 110
Gross primary enrollment, female (% o f age group) 115 115 104
Access to an improved water source (% of population) 85 94 87
Access to improved sanitation facilities (% o f population) 52 79 47
Net A id F lows 1980 1990 2000 2011 a
(US$ millions)
Net ODA and o fficial aid 218 330 560 628
Top 3 donors (in 2010):
Spain 0 15 20 106
United States 79 97 73 54
Japan 2 1 76 34
Aid (% of GNI) 10.8 33.4 11.4 7.7
Aid per capita (US$) 67 80 110 108
Long-Term Economic T rends
Consumer prices (annual % change) 35.3 7485.2 9.6 7.9
GDP implicit deflator (annual % change) 37.0 5,018.1 8.6 10.5
Exchange rate (annual average, local per US$) 0.0 0.2 12.7 22.4
Terms of trade index (2000 = 100) 108 66 100 91
1980.90 1990.2000 2000.11
Population, mid-year (millions) 3.3 4.1 5.1 5.9 2.4 2.1 1.3
GDP (US$ millions) 2,144 1,009 5,107 9,315 -1.9 22.2 3.2
Agriculture .. .. 19.5 20.0 .. 4.7 3.6
Industry .. .. 22.1 25.8 .. 5.3 3.0
M anufacturing .. .. 13.7 18.1 .. 5.2 4.9
Services .. .. 62.1 54.2 .. 5.3 2.6
Household final consumption expenditure 82.5 58.6 85.5 86.3 -3.6 -6.1 3.0
General gov't final consumption expenditure 19.7 43.5 8.7 7.1 3.4 -12.1 1.9
Gross capital formation 16.8 19.3 30.5 27.9 -4.8 1.9 -0.2
Exports of goods and services 24.2 24.9 20.1 41.1 -3.9 -6.4 9.6
Imports of goods and services 43.3 46.3 41.2 60.5 -3.2 -1.0 5.0
Gross savings -8.1 -4.3 13.5 24.3
Note: Figures in italics are for years other than those specified. 2011 data are preliminary. .. indicates data are not available.
a. Aid data are for 2010.
Development Economics, Development Data Group (DECDG).
(average annual growth %)
(% of GDP)
10 5 0 5 10
0-4
15-19
30-34
45-49
60-64
75-79
percent of total population
Age distribution, 2010
Male Female
0
10
20
30
40
50
60
70
80
1990 1995 2000 2010
Nicaragua Latin America & the Caribbean
Under-5 mortality rate (per 1,000)
-4
-2
0
2
4
6
8
95 05
GDP GDP per capita
Growth of GDP and GDP per capita (%)
51
Nicaragua
Balance of P ayments and T rade 2000 2011
(US$ millions)
Total merchandise exports (fob) 643 2,264
Total merchandise imports (cif) 1,806 5,094
Net trade in goods and services -1,050 -716
Current account balance -842 1,555
as a % o f GDP -16.5 16.7
Workers' remittances and
compensation of employees (receipts) 320 823
Reserves, including go ld 497 1,743
Central Government F inance
(% o f GDP)
Current revenue (including grants) 14.5 18.0
Tax revenue 10.6 16.2
Current expenditure 10.5 15.7
T echnology and Inf rast ructure 2000 2010
Overall surplus/deficit -3.9 -0.8
Paved roads (% o f total) 11.1 11.6
Highest marginal tax rate (%) Fixed line and mobile phone
Individual .. .. subscribers (per 100 people) 5 70
Corporate .. .. High technology exports
(% of manufactured exports) 4.9 4.8
External D ebt and R esource Flows
Environment
(US$ millions)
Total debt outstanding and disbursed 6,740 4,246 Agricultural land (% o f land area) 42 43
Total debt service 287 210 Forest area (% of land area) 45.6 42.7
Debt relief (HIPC, MDRI) 4,847 1,178 Terrestrial protected areas (% o f land area) 36.7 36.7
Total debt (% of GDP) 132.0 45.6 Freshwater resources per capita (cu. meters) 36,343 33,221
Total debt service (% o f exports) 19.7 4.1 Freshwater withdrawal (billio n cubic meters) .. ..
Foreign direct investment (net inflows) .. .. CO2 emissions per capita (mt) 0.72 0.77
Portfo lio equity (net inflows) .. ..
GDP per unit o f energy use
(2005 PPP $ per kg o f o il equivalent) 4.0 4.6
Energy use per capita (kg of oil equivalent) 536 540
Wo rld B ank Gro up po rtfo lio 2000 2010
(US$ millions)
IBRD
Total debt outstanding and disbursed 5 0
Disbursements 0 0
P rincipal repayments 5 0
Interest payments 1 0
IDA
Total debt outstanding and disbursed 654 494
Disbursements 87 97
P rivate Sector D evelopment 2000 2011 Total debt service 6 7
Time required to start a business (days) . 39 IFC (fiscal year)
Cost to start a business (% of GNI per capita) . 111.5 Total disbursed and outstanding po rtfolio 6 94
Time required to register property (days) . 124 o f which IFC own account 6 87
Disbursements for IFC own account 2 6
Ranked as a major constraint to business 2000 2010 Portfolio sales, prepayments and
(% o f managers surveyed who agreed) repayments for IFC own account 0 11
Access to/cost of financing 65.9 ..
Corruption 65.7 .. M IGA
Gross exposure 81 100
Stock market capitalization (% o f GDP) .. .. New guarantees 145 13
Bank capital to asset ratio (%) 6.3 ..
Note: Figures in italics are for years other than those specified. 2011 data are preliminary. 10/9/12
.. indicates data are not available. . indicates observation is not applicable.
Development Economics, Development Data Group (DECDG).
0 25 50 75 100
Control of corruption
Rule of law
Regulatory quality
Political stability and
absence of violence
Voice and accountability
Country's percentile rank (0-100)
higher values 2010 2000 imply better ratings
Governance indicators, 2000 and 2010
Source: Worldwide Governance Indicators (www.govindicators.org)
IBRIDDA, ,0 608
IMF, 226
Other multiBilateral,
967 lateral, 1,437
Private, 227
Short-term, 781
Composition of total external debt, 2011
US$ millions
52
Annex 9. Selected Indicators of Bank Portfolio Performance and Management
53
Annex 10. Nicaragua Social Indicators
Latest single year Same region/income group
Latin Lower-
America middle-
1980-85 1990-95 2004-10 & Carib. income
POPULATION
Total population, mid-year (millions) 3.7 4.6 5.8 582.6 2,518.7
Grow th rate (% annual average for period) 2.6 2.4 1.3 1.2 1.6
Urban population (% of population) 51.1 53.5 57.3 79.3 39.4
Total fertility rate (births per w oman) 5.4 4.1 2.6 2.2 2.9
POVERTY
(% of population)
National headcount index .. 50.3 42.5
Urban headcount index .. 31.9 26.8
Rural headcount index .. 76.1 63.3
INCOME
GNI per capita (US$) 690 520 1,510 7,741 1,623
Consumer price index (2005=100) .. .. 159 126 140
INCOME/CONSUMPTION DISTRIBUTION
Gini index .. 50.4 37.1
Low est quintile (% of income or consumption) .. 4.2 6.8
Highest quintile (% of income or consumption) .. 55.2 44.5
SOCIAL INDICATORS
Public expenditure
Health (% of GDP) .. 5.4 5.4 3.9 1.7
Education (% of GDP) 5.6 .. .. 4.4 4.0
Net primary school enrollment rate
(% of age group)
Total 66 73 93 94 85
Male 64 72 92 94 87
Female 68 74 93 94 83
Access to an improved water source
(% of population)
Total .. 77 85 94 87
Urban .. 94 98 98 93
Rural .. 58 68 81 83
Immunization rate
(% of children ages 12-23 months)
Measles 59 85 99 93 80
DPT 39 80 98 93 79
Child malnutrition (% under 5 years) .. 30 19 3 25
Life expectancy at birth
(years)
Total 61 67 74 74 65
Male 58 65 71 71 64
Female 64 70 77 77 67
Mortality
Infant (per 1,000 live births) 60 42 23 18 50
Under 5 (per 1,000) 82 54 27 23 69
Adult (15-59)
Male (per 1,000 population) .. .. 197 181 244
Female (per 1,000 population) .. .. 111 98 175
Maternal (modeled, per 100,000 live births) .. 170 95 86 300
Births attended by skilled health staff (%) .. 61 74 90 57
Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to
change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one
year of age or at any time before the survey.
World Development Indicators database, World Bank - 17 April 2012.
54
Annex 11. IFC Investment Operation Program
2009 2010 2011 2012 2013*
Commitments (US$m)
Gross 61.45 18.39 201.79 22.8 12.4
Net** 61.45 18.39 62.09 22.8 12.4
Net Commitments by Sector (%)
FM 31.6 51.1 19.0 100.0 100.0
INR 3.3 0 81.0 0 0
MAS 65.1 48.9 0 0 0
Total 100.0 100.0 100.0 100.0 100.0
Net Commitments by Investment Instrument (%)
Equity 4.9 0 0 0 0
Guarantee 23.5 51.1 19.0 78.1 100.0
Loan 68.3 48.9 48.8 21.9 0
Quasi loan 3.3 0 32.2 0 0
Total 100.0 100.0 100.0 100.0 100.0
* As of October 1, 2012
** IFC's Own Account only
55
Annex 12. MIGA Exposure
MIGA Outstanding Exposure (Gross
Exposure, $ million)
As of end of fiscal year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
Sectoral Distribution
Finance 1.4 1.4 3.4 3.4 0.0 0.0 0.0 0.0 12.9
Infrastructure 112.9 105.9 102.0 98.4 95.0 91.7 86.9 86.9 86.9
Mining 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Oil & Gas 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Agribusiness/Manufacturing/Services/
Tourism 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
114.4 107.3 105.4 101.8 95.0 91.7 86.9 86.9 99.8
MIGA's Risk Profile
Transfer Restriction 96.2 89.1 87.2 83.6 76.8 73.6 68.7 68.7 68.7
Expropriation 112.9 107.3 105.4 101.8 95.0 91.7 86.9 99.8 99.8
War & Civil Disturbance 112.9 107.3 105.4 101.8 95.0 91.7 86.9 86.9 86.9
Breach of Contract 90.1 86.9 86.9 86.9 86.9 86.9 86.9 86.9 86.9
MIGA's Gross Exposure in Country 114.4 107.3 105.4 101.8 95.0 91.7 86.9 99.8 99.8
% Share of MIGA's Gross
Exposure 2.2% 2.1% 2.0% 1.9% 1.5% 1.3% 1.1% 1.2% 1.0%
MIGA Net Exposure in Country 57.7 54.2 53.9 52.1 47.5 45.9 43.4 56.4 56.4
% Share of MIGA's Net Exposure 1.8% 1.7% 1.6% 1.6% 1.3% 1.2% 1.0% 1.2% 1.0%
56
Annex 13. Nicaragua Key Economic Indicators
Actual Estimate Projected
Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015
National accounts (as % of GDP)
Gross domestic producta 100 100 100 100 100 100 100 100 100
Agriculture 17 19 18 19 20 21 21 21 22
Industry 23 23 24 24 26 26 26 26 27
Services 59 58 58 57 54 53 53 53 51
Total Consumption 95 98 93 94 93 91 89 90 88
Gross domestic fixed
investment 30 27 23 23 26 27 29 31 32
Government investment 8 5 6 5 5 6 6 6 7
Private investment 22 22 17 17 20 22 23 24 25
Exports (GNFS)b 29 32 31 37 41 52 54 54 56
Imports (GNFS) 54 57 48 54 60 73 72 71 73
Gross domestic savings 5 2 2 1 2 2 4 7 11
Gross national savingsc 16 9 13 11 11 10 14 17 20
Memorandum items
Gross domestic product 7446 8221 8062 8426 9315 9853 10414 11027 11699
(US$ m at current prices)
GNI per capita (US$, Atlas
method) 1300 1390 1370 1410 1510 .. .. .. ..
Real annual growth rates (%, calculated from 2006 prices)
Gross domestic product at
market prices 5.0 2.9 -1.4 3.1 5.1 4.0 4.2 4.4 4.6
Gross Domestic Income 5.0 2.9 -1.3 3.2 5.1
Real annual per capita growth rates (%, calculated from 2006 prices)
Gross domestic product at
market prices 3.7 1.6 -2.7 1.8 3.7
Total consumption 2.0 3.0 -1.3 2.2 2.2
Private consumption 3.0 2.7 -1.9 2.5 2.0
Balance of Payments (US$ millions)
Exports (GNFS)b 2709 2985 2886 3628 4717 5184 5567 5992 6433
Merchandise FOB 2336 2586 2390 3157 4057 4474 4828 5210 5618
Imports (GNFS)b 4633 4686 4574 5486 6963 7816 8181 8629 9027
Merchandise FOB 4078 4078 3929 4792 6125 6869 7197 7546 7943
Resource balance -1924 -1701 -1688 -1858 -2246 -2632 -2614 -2637 -2594
Net current transfers 1075 1263 369 1173 1374 1653 1692 1641 1634
Current account balance -984 -793 -928 -963 -1311 -1677 -1591 -1527 -1563
Net private foreign direct
investment 382 626 434 508 968 829 799 806 836
Long-term loans (net) .. .. .. .. .. .. .. .. ..
Official .. .. .. .. .. .. .. .. ..
Private .. .. .. .. .. .. .. .. ..
Other capital (net, incl.
errors & omissions) .. .. .. .. .. .. .. .. ..
Change in reservesd -179 -38 -432 -226 -93 14 -112 -121 -77
Memorandum items
Resource balance (% GDP) -25.8 -20.7 -20.9 -22.0 -24.1 -26.7 -25.1 -23.9 -22.2
Real annual growth rates ( YR94 prices)
Merchandise exports (FOB) 2462 2530 2390 3157 4057 4474 4828 5210 5618
Primary .. .. .. .. .. .. .. .. ..
Manufactures .. .. .. .. .. .. .. .. ..
Merchandise imports (CIF) 4635 4713 3929 4792 6125 6869 7197 7546 7943
(Continued)
57
Actual Estimate Projected
Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015
Indicator
Public finance (as % of
GDP at market prices)e
Current revenues 15.0 14.7 14.6 15.3 16.5 17.6 17.8 18.0 18.1
Current expenditures 12.1 13.2 14.3 13.8 14.2 14.9 14.5 14.3 14.3
Current account surplus
(+) or deficit (-) 2.9 1.5 0.3 1.5 2.3 2.7 3.3 3.6 3.8
Capital expenditure 5.5 4.7 4.3 4.2 4.0 4.5 4.7 4.8 4.9
Foreign financing 2.0 1.2 2.5 1.9 1.6 1.3 1.6 1.3 0.8
Monetary indicators
M2/GDP 31.2 28.9 31.8 36.1 33.7 28.8 22.4 18.3 ..
Growth of M2 (%) 18.5 7.3 13.4 24.6 8.3 -28.3 -13.3 -9.0 ..
Private sector credit
growth / total credit
growth (%) 10.3 12.5 -7.5 5.9 15.6 6.4 9.7 .. ..
Price indices( YR94 =100)
Merchandise export price
index .. .. .. .. .. .. .. .. ..
Merchandise import price
index .. .. .. .. .. .. .. .. ..
Merchandise terms of
trade index 79.0 75.0 82.0 82.0 83.0 .. .. .. ..
Real exchange rate
(US$/LCU)f 86.0 89.2 97.7 91.2 88.5 88.0 88.1 87.5 92.0
Real interest rates
Consumer price index (%
change) 16.9 13.8 0.9 9.2 8.0 7.4 7.2 7.0 7.0
GDP deflator (% change) 9.0 14.0 4.9 5.6 6.5 6.6 6.7 6.7 6.6
a. GDP at factor cost
b. "GNFS" denotes "goods and nonfactor services."
c. Includes net unrequited transfers excluding official capital grants.
d. Includes use of IMF resources.
e. Consolidated central government.
f. gLCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.
58
Annex 14. Nicaragua Key Exposure Indicators
Actual Estimated
Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total debt outstanding and 4070 5665 6101 6846 6582 7145 7870 8534 9187
disbursed (TDO) (US$m)a
Net disbursements (US$m)a 1595 436 745 -264 563 725 664 653 612
Total debt service (TDS) 755 761 632 575 651 551 590 714 778
(US$m)a
Debt and debt service indicators
(%)
TDO/XGSb 110.0 139.9 156.4 140.4 126.3 124.4 129.5 132.7 134.6
TDO/GDP 72.7 88.9 98.2 104.5 93.0 96.1 99.6 101.8 103.4
TDS/XGS 20.4 18.8 16.2 11.8 12.5 9.6 9.7 11.1 11.4
Concessional/TDO 5.4 5.8 4.7 2.0 2.6 2.4 2.2 2.1 1.9
IDA exposure indicators (%)
IDA DS/public DS 0.9 2.9 3.5 5.7 7.8 8.2 8.5 9.6 9.5
Preferred creditor DS/public 76.2 51.0 48.5 54.1 58.6 62.7 65.5 68.3 68.8
DS (%)c
IDA DS/XGS 640.3 651.1 1149.5 1430.9 1751.3 1723.5 1671.4 1748.0 1667.0
IDA TDO (US$m)d 321.4 347.5 418.0 447.2 468.3 491.8 512.5 528.0 540.0
IFC (US$m)
Loans 33 59 85 83 93 113 121 .. ..
Equity and quasi-equity /c 3 3 5 5 3 13 23 .. ..
MIGA
MIGA guarantees (US$m) 104 98 93 89 93 100 100 .. ..
a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net shortterm
capital.
b. "XGS" denotes exports of goods and services, including workers' remittances.
c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the
Bank for International Settlements.
d. Includes present value of guarantees.
e. Includes equity and quasi-equity types of both loan and equity instruments.
Projected
59
Annex 15. IBRD/IDA and IFC Portfolio
Closed Projects 69
IBRD/IDA *
Total Disbursed (Active) 229.75
of w hich has been repaid 0.00
Total Disbursed (Closed) 460.22
of w hich has been repaid 32.91
Total Disbursed (Active + Closed) 689.97
of w hich has been repaid 32.91
Total Undisbursed (Active) 160.42
Total Undisbursed (Closed) 0.00
Total Undisbursed (Active + Closed) 160.42
Active Projects
Project ID Project Name DO IP Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd
P126357 I 2nd Support to the Education Sector S S 2012 25 23.58 0.87
P083952 NI (CRL) Roads Rehab & Maintenance I S S 2006 99.3 10.79 -33.09
P087046 NI 2nd Agricultural Technology Project S MS 2006 22 9.17 -1.26
P077826 NI Broad-Based Access to Finan Servic S S 2004 7 2.28 1.88
P106870 NI Comm. and Family Health Care Servi S S 2011 21 16.04 5.17
P110092 NI Greater Managua Water and Sanitati MS MS 2009 40 2.03 17.43 5.48
P108974 NI Hurricane Felix Emergency Recovery MS MS 2008 17 4.38 5.01 1.18
P056018 NI LAND ADMINISTRATION PROJECT S S 2002 42.6 1.25 0.13 -15.39 -8.84
P109691 NI Micro, Small & Medium Enterprise D MS MS 2008 20 5.27 8.80 15.19
P111795 NI PFM Modernization TAL S S 2011 10 7.39 2.15
P123447 NI Rural Roads Infrastructure Imp. S S 2012 35 34.61 0.00
P089989 NI Rural Telecom S S 2006 12 5.15 -0.36
P106283 NI Rural Water Supply and Sanitation MS S 2008 20 5.52 2.49
P121779 NI Social Protection S MS 2011 19.5 15.13 3.42
Overall Result 390.4 8.56 160.42 -8.44 -7.66
Supervision
Rating
Original Amount in US$ Millions Disbursements a/
Operations Portfolio (IBRD/IDA and Grants)
As Of Date 10/3/2012
Difference Between
Last ISR Expected and Actual
60
61
Annex 16. FY2008-2012 CPS Completion Report
Country: Nicaragua
CPS Coverage: FY08-12
Date of Progress Report: December 4, 2009
CPS Completion Report completed by: Camille Nuamah
I. EXECUTIVE SUMMARY
1. The FY2008-2012 CPS was implemented in period of unanticipated challenges.
Within one month of the approval of the CPS, Nicaragua was hit by category 5 Hurricane
Felix. A few months later the country suffered the affects of the food price crisis, the
global financial crisis, unprecedented oil price spikes and the H1N1 pandemic. During
the CPS period, the country also experienced a series of alternating droughts and flooding
associated with an abbreviated El Nino/La Nina cycles. These developments, together
with a shifting institutional landscape, created both challenges and opportunities for the
Bank program.
2. The Bank program responded with appropriate flexibility both to the new
challenges and shifts in government priorities. Additional resources were mobilized to
respond to several of these crises, while close supervision and dialogue helped to resolve
delays in ongoing project implementation. Later, in the face of growing governance
risks, the Bank shifted resources from development policy lending to social sectors,
primarily, where institutional developments at the technical level allowed for the creation
and consolidation of new, innovative models in service delivery.
3. Notwithstanding these changes, the CPS program was moderately satisfactory.
Results targeted in the CPS were generally achieved, except in the area of governance.
Following the global financial crisis, economic growth averaged 4.6 percent from 2010-
11. Poverty and inequality have fallen, particularly in rural areas. Access to key
infrastructure services has improved, in particular for the rural poor. Meanwhile,
progress on the social MDGs has continued, albeit very slowly. More recently, the
authorities have made significant and promising adjustments to the models of social
service delivery. However, a key remaining challenge is to strengthen the monitoring
and measurement of program results, to establish a more routine evaluation of program
interventions, and to raise the general transparency of development programs and
outcomes.
4. Bank performance was satisfactory. As the Governmentfs development strategy
evolved, the Bank was able to adapt projects to focus on small producers and rural
households, without sacrificing the technical quality of the supported interventions.
Throughout the CPS period, the Bank devoted adequate management attention,
manpower and administrative resources to resolve implementation challenges. When
crises hit, the Bank responded swiftly to identify additional financing opportunities and to
modify the CPS . as reflected in the Progress Report. Later, the reallocation of resources
62
from budget support allowed to scale up successful programs, rather than adding new
projects, and helped to improve implementation rates and consolidate the portfolio.
5. The CPS implementation shows that the flexibility to respond to crises and
emerging opportunities can be managed effectively in order to maintain progress on
the original program goals. However, within crisis response and other program
changes, it is important to maintain avenues for high level policy dialogue on key sectors,
to not sacrifice the requirements of good M&E throughout the portfolio and to avoid the
proliferation of too many small operations. The flexibility also to scale up on-going
programs was also key to achieving program goals.
II. DEVELOPMENT OUTCOMES
6. During the CPS period from 2008 to 2012, Nicaragua had to weather a range of
different crises . external and internal. The external ones included a category 5
hurricane on the Atlantic coast weeks after Board discussion of the CPS, followed by the
global economic crises, H1N1 pandemic and shorter, more dramatic cycles of the El
Nino/La Nina weather systems in the following years. Internally, the new administration,
having been out of power for over a decade, took some time to develop its new strategy
with the added political difficulty of having only minority representation in the
legislature. Criticism of the mid-term municipal elections as well as the Presidentfs
constitutional challenge to run for a third term elevated political tensions in the country.
At the same time, earlier gains on transparency in government programs were undone.
Following the national election in 2011, the same ruling party now dominates the
legislature with a qualified majority.
7. The authorities, however, continued what Nicaraguafs recent track record of
maintaining sound macroeconomic policies during the CPS period. These efforts
helped to sustain growth, albeit at moderate rates, raise foreign direct investment, and
garner support from the private sector. After the global financial crisis of 2008-09,
economic growth resumed, averaging 4.6 percent 2010-11. Following some limited
countercyclical fiscal policies during the crisis, the authorities have continued with fiscal
consolidation, helped in part by the series of tax reforms that steadily improved revenue
performance. Rapid export growth fueled by the long upswing in commodity prices and
preferential access to Venezuelan markets has helped to sustain growth. As such, this
export growth remains vulnerable to shifts in the terms of trade and changes in existing
international agreements.
8. On the structural side, the Government focused on redressing persistent inequalities
and the limited progress on poverty reduction by reorienting its programs toward
direct support for poor households and small producers. In service delivery, these
included an early policy change toward free access to public education and primary
health care. The government also shifted away from support to the larger productive
sector in traditional and maquila exports toward programs aimed at food security and
subsistence production, microfinance and micro- and small enterprise development.
63
9. After little change during 2002-05, poverty and inequality fell from 2005-09,
particularly in very poor rural areas, as measured by the Living Standards
Measurement Surveys. Since then, a smaller survey instrument repeated annually
between 2009 and 2011 indicates that the broad trend in poverty reduction has continued.
When one disaggregates the causes, economic growth and in particular increases in
agricultural incomes among poor families has been the major contributor to poverty
reduction. Nevertheless, over 40 percent of Nicaraguans remain poor and high levels of
inequality persist between rural and urban access to basic services.
10. Nicaraguafs social indicators are improving, but generally at a slow rate. The
assessment of the pace of progress in social areas has been complicated by lack of robust,
timely data and transparent measurement of results. Nicaragua made notable progress in
reducing infant mortality (achieving its targets), net school enrollment and access to
water, whereas progress on maternal mortality, primary school completion, and chronic
nutrition are either slow or unclear. Likewise, large rural-urban gaps persist and while
existing measurements suggest that these are reducing, it is not clear whether the pace is
sufficient to achieve the goals set by the authorities. More recently, the authorities have
made significant and promising adjustments to the models of social service delivery.
11. Another key development in the CPS period includes the resolution of technical
shortages in electricity supply, the maintenance of broadly open dialogue with the
private sector and success in attracting foreign direct investment. In 2007 the new
government moved quickly to use Venezuela oil cooperation to resolve long standing
energy shortages by investing in thermal generation, and is now focused on raising FDI
to shift the generation matrix toward a greater share in renewables. Nevertheless, key
imbalances remain in the electricity sector financing which have only been temporarily
mitigated using resources from the Venezuela oil cooperation and require a longer term
solution. The dialogue with the private sector on key economic and political issues is
being maintained as are strong efforts to promote more FDI.
12. Finally, governance challenges emerged during the CPS period. Controversies
surrounding the municipal elections in 2009 resulted in the suspension of budget support
and reduction of other aid flows by several bilateral donors. The authorities have
compensated for much of the lost resources with large private flows of aid and
investment from Venezuelan oil cooperation. Later, the Presidentfs constitutional
challenge to run for a third term further elevated political tensions in the country. The
authorities have since undone much of the earlier gains in transparency of government
programs.30 Following the national election in 2011, the ruling party now dominates the
legislature as well with a qualified majority. The Government has yet to articulate its
new program, but it is expected that this program will retain its primary goal of providing
direct support to poor households and small rural producers, but with an added focus on
productivity improvements to raise incomes. The Government is also expected to
maintain sound macroeconomic policies and seek a new IMF program.
30 A notable example is that the Ministry of Education has not published its annual statistical report since 2009.
64
II. PROGRAM PERFORMANCE
13. The CPS program was able to meet most of its outcome targets, although measurement
challenges remain. The authorities maintained an adequate macroeconomic framework
that helped to underpin growth, and support poverty reduction. Nicaragua saw a stronger
decline in inequality and poverty, particularly in rural areas, where much of the program
support was targeted. However, lack of agreement over key policies limited results in the
governance and accountability agenda.
A. CPS Pillar One: Reactivating the Economy, Stimulating Productivity and
Competitiveness
14. This CPS Pillar supported the (a) maintenance of an adequate macroeconomic framework
for growth and poverty reduction; (b) diversification and promotion of value-added in the
micro and SME sectors; (c) improvements in land tenure security; (d) increased
agricultural productivity and sustainable use of natural resources.
15. Throughout the CPS period, Nicaraguafs macroeconomic performance was good, as
reflected in a stable rating of 4.2 in the CPIA macroeconomic cluster. After
averaging 4.0 percent during 2003-07, economic growth recuperated following the
2008-09 global economic crisis, averaging 4.6 percent over 2010-11. A significant but
limited fiscal impulse during the crisis helped strengthen domestic demand. Since then,
central government fiscal balances have returned to surplus in part owing to steady
improvements in revenue performance over the CPS period. After an increase in 2009,
public debt, including its external component, has gradually declined. The central bank
also adopted supportive measures and the financial sector has remained stable, although
credit to the private sector declined sharply and has yet to fully recover. Inflation has
been largely under control since its spike in 2008, in part anchored by Nicaraguafs
crawling peg. Despite buoyant remittances and strong export growth, the current
account deficit remains chronically high dominated by the oil bill. It has been offset by
improvements in loans and FDI (including the significant flows from Venezuela),
resulting in a notable improvement in international reserves.
16. The CPS aimed to deepen the impact growth on poverty outcomes by supporting
microfinance and microenterprise development, improving productivity of small
agricultural producers, and strengthening land tenure. After little movement during the
first half of the decade, poverty in Nicaragua declined from 48 to 43 percent between
2005 and 2009. These gains were accompanied by a moderate decline in inequality and
in the severity of poverty. They were also concentrated in rural areas where the poverty
rates are highest. Economic growth was the principle factor in these developments
through 2009. However, much of the income growth was concentrated in informal
sector, in the lower productivity agricultural sector, and among workers with little or no
education.
17. Strong advances were achieved in land tenure security and agricultural
productivity. Almost 20 percent of national territory has been titled and registered,
including 15 indigenous territories representing the majority of the Atlantic region, based
65
on an improved national legislation. Meanwhile, modernization of the cadastre-registry
processes has now yielded significant reductions in the time and cost of registration
procedures, and is reflected in an improvement in Nicaraguafs ranking on this Doing
Business indicator from 151 to 122 in 2011. Under the 2nd Agriculture Technology
Project, over 34,000 farmers have adopted improved production or processing
technologies, yielding on average a 38 percent increase in yields on basic grains.
However, while these advances have been focused on food security, Nicaragua has seen a
stagnating and in some cases declining productivity in yields on agricultural exports.
18. Progress on microfinance and microenterprise development has been mixed, in
large part due to policy reversals and weak implementation. The WBG made a
positive contribution to increasing the access to finance for small and medium urban and
rural MSMEs, with the share women receiving financing rising. This happened despite
the government legally sanctioning a non-payment movement that arose in the large
microfinance sector (20 percent of financial sector assets) in 2009 when the crisis hit after
a period of rapid credit growth. However, continued dialogue between the government,
the WBG and the IMF contributed to new legislation that strengthened the regulatory
framework and helped reverse the large retrenchment in microfinance assets in 2010. On
the microenterprise side, significant delays in the implementation of the MSME project
make it too early to see any results from the development of a small business matching
grants program. In retrospect, this project was launched as too large a program and
arguably it would have been preferable to begin working at a smaller, pilot scale. An
array of other improvements have been made to the business registration and some key
inspection processes, but these have not been sufficient to prevent Nicaraguafs ranking
on the majority of Doing Business indicators from deteriorating over the CPS period and
the associated loss in the competitiveness of the local business climate.
B. CPS Pillar Two: Pro-Poor investment in delivery of basic services
19. This CPS Pillar was combined (at the Progress Report stage) to include both social and
infrastructure services, and focused on rural areas where poverty is highest in Nicaragua.
Combined, it accounted for two-thirds of the CPS lending program. In the area of basic
services . health, education, water and sanitation . progress has been achieved in
project activities, targets and goals. Other infrastructure services . electrification,
telecom, and roads . have achieved the goals laid out in the CPS. While significant
progress was made in terms of institutional development, overall development outcomes
remain unclear due to persistent weaknesses in monitoring MDG performance in
Nicaragua and updating key indicators.
20. In education, a major change in policy orientation of the new government, which took
some time to evolve, presented key challenges for measurement of program results.
Even so, the shift to universal free primary education in 2007 did raise access and
accelerated increases in primary enrolment. The CPS program helped to maintain these
enrolments over time by providing emergency financing for the national school feeding
program from various sources (IDA and trust funds) during the food price crisis.
Meanwhile, the Bank refocused the project toward improving quality with the reform of
key primary level curricula, provision of new textbooks to all primary schools, and the
66
design and implementation of a learning assessment program. The complementary MDG
of primary completion rates also advanced but is still short of the targeted levels.
Completion rates, together with a new thrust in early childhood education, are now the
main focus of Nicaraguafs new education strategy, which was prepared and is being
implemented with Bank support.
21. In contrast, the policy stability in health care . the administration has been consolidating
the long-standing model of basic benefits package with emphasis on preventative care at
the family and community level . delivered some clear progress on both infant and
maternal health in particular in improving access to care and reducing risk factors. While
this progress is clearly reflected in falling infant mortality rates, measured reductions in
chronic child malnutrition and maternal mortality rates have been more elusive.
Meanwhile, the Bank program assisted Nicaragua to mitigate the H1N1 pandemic while
strengthening its preparedness for future epidemiological emergencies.
22. The remainder of this component focused on access to basic infrastructure services,
predominantly in rural areas. Despite the implementation delays in the majority of the 6
projects in this area, the Bank program helped in significantly to raise access of rural
households to telephony, electricity and improved roads, at the same time reducing the
rural-urban gaps in access. In addition, each of these programs pioneered innovations in
service delivery .through the use of small private sector providers in telecom and rural
off-grid electricity, and through large scale community works and road maintenance
programs, and a low-cost road building technique in the rural road construction. The
more recent programs in water and sanitation are now beginning to yield results both in
rural and urban areas, also with innovations in twinning civil works with social awareness
programs for hygiene, water conservation and services sustainability. Again, a key
challenge remains in the area of measurement of the improvements in access, nationwide,
as well as the ensuing impact on the communities in a sustainable way.
C. CPS Pillar Three: Strengthening governance and accountability
23. This CPS pillar was aimed at improving the capacity of the public sector in Nicaragua by
continuing efforts to strengthen civil service management, planning and financial
management; as well as social accountability. By the time of the CPS Progress Report,
the new administration had begun stalling the overall public sector reform agenda and
adopting a more narrow focus on public financial management. However, the CPS
Progress Report did not revise the governance agenda and results driven by the
expectation that the on-going dialogue would lead to a resumption of the pace of work on
public sector reform. At the end, implementation of civil service reform was never
extended to the broader public sector and was dropped as a CPS outcome at the time of
the Progress Report. Some progress was made on wage bill management, particularly in
the social sectors where wage scales were rationalized to open fiscal space for future
salary increases when fiscal space allows. However, these were complicated by the
annual off-budget wage bonuses financed through the non-sovereign Venezuelan
cooperation flows.
67
24. Meanwhile, the focus on PFM has yielded progress in the rollout of the Medium Term
Expenditure Framework to all central government and decentralized agencies, beyond the
CPS outcome targets, and has served to strengthen the links between planning and
budgeting. The development of a new SIGFA II was delayed until the preparation of the
follow-up PMSAF project in 2010 and so far system requirements have been agreed upon
and the bidding process is just getting underway. However, little else was achieved in
terms of strengthening monitoring and evaluation, transparency of public programs and
external audit by the Comptroller General. Finally, the CPS outcomes on social
accountability and decentralization of the public investment planning were dropped
because of a change in approach by the new administration to decentralization. Instead,
the authorities have put in place a network of Citizen Councils from the community up
through national levels of government. These have achieved an increase in social
participation in government activities in many sectors, but they also suffer from some
criticism of being highly politicized.
III. BANK PERFORMANCE
A. Program Design
25. The CPS FY08-FY12 was prepared during the first six months of the new administration
and before the Government had articulated its general development strategy, which took
over two years. As such, the CPS was based in part on the strategic framework
articulated in the Economic and Financial Program of the IMF PRGF/ECF program.
However, as the administration matured, several policy shifts emerged which posed
critical implementation issues for a number of ongoing projects, particularly those which
engaged the private sector in public service delivery, as well as the use of conditional
cash transfers31 to households and matching grants to firms. The highest risks to the
program were attributed to natural disasters and electricity sector issues, while risks of
macroeconomic instability, weak institutional capacity and inadequate donor alignment
and harmonization were rated as moderate.
B. Program Implementation
26. There were significant modifications to the lending program during
implementation. The Bank program was adjusted in response to unexpected crises. Of
the 15 new projects approved during the CPS period, only five of them were planned in
the CPS and three in the CPS Progress Report. Meanwhile, the Bank planned to commit
around US$240 million at the CPS (and US$274 million at the Progress Report in
December 2009), but finally mobilized new IDA commitments of just under $300
million32, and roughly additional $45 million in trust funds.
31 The authorities originally rejected the idea of conditioning cash transfers on school attendance, viewed more as a
social obligation, and later accepted the use of family grants to promote attendance at parenting/other workshops.
32 This included $17 million cancelled from the IDA14 FY07 lending program and reallocated in FY08, an
additional $14.3 from the IDA15 Crisis Window, front-loading of $15million from the IDA16 indicative allocation
for FY13, and supplementary grants for H1N1Response and the GFPR Additional Finance for the 2nd Agriculture
Technology project.
68
27. In addition to the external volatilities, the program faced a number of internal
challenges. The new administrationfs evolving policy and institutional agendas delayed
the preparation of the planned development lending operations, delayed implementation
and required extensive restructuring in several projects, and held back the release of a
number of key economic and sector studies. Eventually, the ongoing projects accelerated
into a robust implementation pace and achieved solid results on the ground, particularly
for rural poverty reduction. The programmed series of four DPLs was reduced to only
one operation that responded to the global economic crisis. The DPL series was
eventually suspended because of lack of agreement over policy reforms related to
governance and transparency.
28. The authorities and the Bank were quick to make use of the resources from budget
support for additional investment lending. There were two important impacts of this
shift. A first impact of the shift to investment lending in the Bank program was a
renewed emphasis on social sectors which responded to the emergence of an integrated
strategic framework and the gradual consolidation of service delivery models in health,
education and social protection under the new administration. Second, however, was that
the cessation of budget support by the Bank and bilateral donors resulted in loss of donorcoordinated
engagement in specific policy dialogues with the authorities. Even though
there remains strong donor coordination in investment programs, e.g. in rural
electrification, urban water and sanitation, agriculture, education and health, the
willingness to, and practicality of, engaging in high level policy dialogue (as opposed to
technical discussions) under these operations does not happen in practice.
29. IFCfs portfolio in Nicaragua achieved significant growth, in line with its global
objective to focus more on IDA countries. During 2008-12, IFC-syndicated financing
totaled almost $400 million (of which $245 million were IFCfs own investments) in 22
projects. This compares with only $15 million in two projects in the years before the
CPS period. Today, the portfolio includes projects in a range of sectors, from
agribusiness which has a 48 percent share, to renewable energy with 32 percent, and the
financial sector at 15 percent. The most notable investment during the CPS was the
award-winning 72 MW geothermal installation at San Jacinto-Tizate, in which IFCfs
investment of $50 million helped catalyze $140 million from other international
development banks. San Jacinto Central provides more than 15 percent of Nicaraguafs
energy needs and supports the Government strategy of switching the generation matrix
toward renewables.
30. For IFCfs Advisory Services, the strategic focus on Nicaragua during the period FY08-12
continued around the core strategic themes: business climate (IFC worked with the
municipal scorecard for a number of years), access to finance (development of new
mortgage and SME lending products, and support for leasing regulation), and the rural
agribusiness sector (farmer extension services and sustainability topics, in particular in
coffee and forestry). Key project highlights include Sustainable Forestry (2008-12); with
two projects in sustainable forestry benefiting 4 indigenous communities to promote a
business approach in community forestry; support to 8 municipalities in making business
licensing and operating simpler and various projects helping 13,000 farmers in the region
link into premium markets for sustainable coffee.
69
IV. RATING
31. The CPS program is rated moderately satisfactory. The IDA and IFC programs
achieved substantial development results in agricultural productivity (in basic grains and
coffee), land administration and titling, roads, telecommunications and electricity. These
achievements contributed to a commensurate reduction in rural poverty. While more
modest, advances were also made in the health, education and microfinance services
outcomes, particularly in building an institutional framework for the future. However, in
the area of governance and accountability, there was little progress outside of some
improvements in public financial management. Together with the fact that
macroeconomic policy stability has helped to provide a good basis for past and future
growth, the sum of program results can only be deemed moderately satisfactory.33
32. The World Bank Group performance is rated satisfactory. As the Governmentfs
development strategy evolved, the Bank was able to adapt projects to focus on small
producers and rural households, without sacrificing the technical quality of the supported
interventions. Throughout the CPS period, the Bank devoted adequate management
attention, manpower and administrative resources to resolve implementation challenges.
When crises hit, the Bank responded swiftly and flexibly to identify additional financing
and modify the CPS . as reflected in the Progress Report. Later, the move away from
budget support proved to be an appropriate measure in view of the subsequent
controversy over deterioration in political accountability. And the decision to reallocate
budget support to scaling up proven programs, rather than adding new projects, helped to
raise implementation rates while consolidating the portfolio. In turn, the IFCfs
involvement in the country grew significantly going from 2 to 22 projects over a wide
range of sectors, mobilizing significant levels of complementary financing, and receiving
international recognition for the design of some of the operations.
V. LESSONS LEARNED AND RECOMMENDATIONS
33. With a five-year CPS in a country that is vulnerable both to external shocks and
policy shifts, the flexibility to adjust the program in response to emerging
opportunities helps to maintain a robust program and solid results. However, this
will require a CPS program that includes a combination of proven interventions that have
broad-based support, and pilot interventions to push the envelope on longer term issues.
With this combination, it is important to maintain a strong focus on quickly resolving
implementation challenges of the backbone programs. At the same time, the judicious
use of technical assistance and trust funds to test new areas is a useful pre-requisite
before engaging in new large projects/programs. The difficult history of the MSME
project which launched a large multi-component project in an area in which the
Governmentfs own policy agenda was evolving offers some lessons on going smaller,
first.
33 It should be noted that the CPS results framework did not fully capture the impact of the program because it
omitted the achievements from efforts that respond to emerging needs or demands arising from unexpected shocks.
Such is the case, for instance, with the response to the 2008-09 food price crisis which saw the Bank provide needed
financing to sustain Nicaraguafs school feeding program and its impact on school attendance.
70
34. Development of a transparent M&E systems is an important part of stimulating
good governance and must be a priority in all IDA operations. Despite the advances
in many sectors, Nicaragua still faces challenges to measure the results of its ongoing
programs and to use these measurements to effectively evaluate and refine those
programs. For example, there are no robust official measurement of trends in primary net
school enrollment, access to all-weather roads, safe water and sanitation, maternal
mortality, and chronic malnutrition, to name a few. The UNfs Joint Monitoring Program
and Inter-Agency Working Groups have proved useful in aligning development partners
and ministries in some sectors around measurement methodologies, but these are not
generally accepted as official by the authorities.
35. The decision to shift resources from budget support to investment lending proved
effective because of the solid implementation performance of the core projects;
however, moving forward, the Bank strategy needs to create space to maintain
policy dialogue in key sectors. As the options for policy reform weakened and with it
the basis for budget support, the resources released provided complementary financing
for innovative and scalable investment lending initiatives. This experience shows the
importance of developing and maintaining proven investment interventions that have
broad-based support so as to have options to channel resources when the policy agendas
are weak. Lacking such options, resources could end up being channeled through budget
support without a significant policy impact. That being said, the Bank did not
sufficiently create alternate mechanisms for advancing policy dialogue in key sectors for
which donors still retained large financing flows. While the expectation could have been
that policy dialogue could continue through supervision of investment projects, in
practice this did not occur. Supervision teams did not have sufficient resources to divert
to addressing policy issues, particularly as they are not often critical to project
implementation. For example, Nicaragua still faces overarching policy issues in its
electricity sector. Continued Bank engagement through analytical support in the energy
sector could have been helpful, particularly in backing up IFC and other players.
36. In crisis response, it is important to avoid the proliferation of small operations that
later strain supervision resources and to avoid including too much focus on
institutional development in these operations. Over the CPS, the portfolio grew from
11 operations in FY08 to 15 operations in FY12, while a number of simultaneous, and
sizeable, recipient-executed trust funds stretched manpower and complicated oversight.
On institution building, the Hurricane Felix and Emergency Food Price Response
operations both included institution building activities which proved challenging and
ultimately delayed the delivery of the emergency support . to address weaknesses in the
regional governments, and to establish a new program in certified seeds, respectively.
Nevertheless, both efforts yielded some progress on the institutional front and on which
the authorities were able to build future programs. In the case of Hurricane Felix, some
planning and coordination capacities in the RAAN regional government have been
achieved. And a component which was cancelled from the Emergency Food Response
later spawned Nicaraguafs national seed certification program incorporating lessons from
the earlier design challenges. Likewise, actions to strengthen epidemiological
surveillance under the H1N1 response project have helped to create a sustainable capacity
that proved effective in later outbreaks of H1N1 and other communicable diseases.
71
37. Consolidating the portfolio around key lines of action can leverage results even with
modest resources. Towards the end of the CPS period, the Bank focused its efforts in a
few key sectors through combining ongoing investment lending with technical assistance
to provide support to the Government in designing sector strategies. This has resulted in a
role for the Bank in helping to leverage additional resources to finance well designed
scalable programs. Experience in the education sector for example is currently being
replicated in water and sanitation. The long term expectation is that consolidating the
portfolio further in key strategic areas will help to foster better results and improve
coordination with key development partners.
38. Any future engagement with the Autonomous Regions should focus mainly on
building out institutional capacity in regional and local governments and not on
proliferating small community development type of investments. The recent
experiences have proven that the lack of a clear institutional framework assigning clear
roles and responsibilities among the regional, municipal and territorial governments
needs to be addressed before those authorities can effectively guide development in those
regions. In light of this, when central government programs extend to these regions,
there is still a tendency to focus on those interventions that do not require complex
engagement by the regional authorities. Other development partners have concentrated
on geographically focused CDD operations, but given the challenges of working with
territories with limited access, capacity and markets, this is not the Bankfs comparative
advantage and the operating and supervision costs of making these types of operations
effective with Bank regulations are prohibitive.
72
TABLE 1: SUMMARY OF CPS PROGRAM SELF-EVALUATION
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
Pillar 1: Reactivating the Economy, Stimulating Productivity and Competitiveness
1. Principal
macroeconomic indicators are
consistent with fiscal and macro
stability and sustainability
Achieved
Completed Lending
- DPC (FY09)
Completed Non Lending
- Public Expenditure Review (FY08)
- Poverty Assessment (FY08)
- Institutional and Governance Review
(FY08)
- Poverty Assessment Update (FY11)
- Monitoring and Evaluation TA (FY11)
Ongoing Non-Lending
- Poverty Monitoring and Measurement
TA
2. Number of days for
business and property
registration (both Commercial
Register and National
Cadastre) in four departments
reduced by 30%
Commercial Register (days)
Baseline : 42 (2006)
Target: 35 (2010)
National Cadastre (days)
Baseline: 30 (2006)
Target: 21 (2010)
Achieved
39 days
10 days (2012 avg for the 4 depts: Chinandega,
Esteli, Madriz & Leon compared with
baseline in 2009 of 15 days in 2009)
14-21 days ( Managua, DB 2012)
Ongoing Lending:
- Land Administration (PRODEP)
- MSME Development
Completed Non Lending
- Regional Investment Climate
Assessment (FY09)
- Simplifying Municipal Business
Regulation (2008-09) IFC Advisory
Services (AS)
On the measurement side,
care should be taken to
ensure that results
indicators focus on the
territorial areas where
project impact is to be felt
as opposed to DB which
measures procedures in
Managua. Also cadastre
certificates are not a good
proxy for property
registration.
73
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
3. Increase in access to
credit for small and medium
urban and rural Micro-SMEs
with data segregated by gender
Womenfs participation
Baseline: 59% (2008)
Target: 65% (2012)
Increase by 50% the ASOMIF,
finance companies and
cooperative networks in total
accounts & loan portfolio
Baseline (2003):
310,300 persons
US$138.4 million
Target (2012):
465,450 persons
US$207.6 million
Increase in number of access
points for rural financial services.
Baseline: 200 (2005)
Target: 220 (2010)
Five MFI have been transformed
into regulated special financial
institutions for micro credit.
Achieved
65% female borrowers (Mix Market, 2011)
450,930 persons
$256.5 million
(ASOMIF, Mix Market, WOCCU)
249 points for rural financial services are
currently in operation.
Four MFIs and one more in the process.
Ongoing Lending
- Broad-based Access to Financial
Services
Completed Non Lending
- SME Lending (2008-10) IFC AS
Ongoing Non Lending
- FIRST Financial Consumer Protection
- MIGA (ProCredit)
4. Indigenous
communities have territories
demarcated, titled and
registered
- Number of Territories
Baseline: 1 (2006)
Target: 12 (2012)
Achieved
15 indigenous and afro-descendantsL territories
were demarcated, titled, and registered.
Approximately 103,790 persons in 214
communities (22,478 km2 or 19% of the
national territory)
Ongoing Lending
Land Administration (PRODEP)
Ongoing Non Lending
Innovations for the Empowerment of
Rural Women TF
74
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
5. Farmers participating
in agricultural and forestry
extension services have adopted
at least two new production
and/or processing technologies
Baseline: 0 (2005)
Target: 25,000 (2010)
Men: 17,500
Women: 7,500
Achieved
187 new technologies developed
34,168 farmers (91% of the 37,548 producers
served by INTA
Source: 2011 INTA Survey
Ongoing Lending
-2nd Agricultural Technology Project &
Additional Financing
Completed Non Lending
- GFPR Food Crisis Emergency
Response
- Indigenous & Afro Descendent Cocoa
Farmers JSDF
- Supply Chain Wood IFC AS
- SMG Wood Supply IFC AS
Ongoing Non Lending
- Healthy Kids, Healthy Forests DM
Grant
- Ecom Coffee IFC AS
- Cocoa Mesoamerica IFC AS
The sector needs to
promote better support to
connect farmers to,
markets, business
opportunities and access to
credit and investment
financing as well as more
intensive adoption of
innovative technologies.
6. Productivity levels of
farmers engaged in technical
assistance programs by INTA
and FUNICA have increased
Baseline: 100 (2005)
Target: 115 (2010)
Achieved
138 (average for four basic grains regularly
monitored by INTA)
Maize 114
Beans 126
Sorghum 153
Rice 162
Source: 2011 INTA Survey
Support to staffing
(including their gradual
absorption into the public
payroll) in INTA has been
effective in helping the
institution become a key
player in the agricultural
sector.
7. Certified seed
availability increased:
Baseline: 1,700 tons/year (2009)
Target: 11,000 tons/year (2012)
Not Achieved
Additional Financing only became effective
only in 2011. Results to be evaluated during
2012-2013.
Moving forward, support
to the National Seed
System by the Bank and
other donors require better
inter-institutional
coordination among
PRORURAL agencies
Pillar 2: Pro-Poor investment in delivery of basic services
75
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
8. The prevalence of
chronic malnutrition in
children under 5 years old has
been reduced.
Baseline: 21.5% (2005)
Target: 18% (2011)
Not Achieved
The country does not have an updated figure
until DHS 2012.
Completed Lending
] Health Project (APL II)
Ongoing Lending
-Rural Water & Sanitation
-Managua Water & Sanitation
- Family & Community Health
Completed Non Lending:
- H1N1 Response
- Epidemiological Emergencies TF
- Social Sector PER (FY10)
- Nutrition TA
- Immunization GAVI TF
Ongoing Non Lending:
- Caribbean Coast Development TF
- Strengthening Vital Statistics TF
A more systematic
monitoring mechanism for
child nutritional status at
national and regional level
is needed. The
Demographic and Health
Surveys are crucial but
follow up is needed since
these are produced every 5
years.
76
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
9. Maternal, infant and
child mortality have been
reduced
Infant Mortality (per 1,000 live
births)
Baseline: 35 (2006)
Target: 26 (2011)
Maternal Mortality (per 100,000
live births)
Baseline: 96 (2006)
Target: 90 (2009)
Partially achieved.
Infant Mortality: 23 (2010, UN Inter-Agency
Working group).
Maternal Mortality: 95 (2010, UN Inter-Agency
Working Group)
Completed Lending:
- Health Project (APL II)
- H1N1 Response Project
Ongoing Lending
- Family & Community Health
- Rural Water and Sanitation
- Managua Water and Sanitation
Completed Non Lending
- H1N1 Response
- Epidemiological Emergencies TF
- Social Sector PER (FY10)
- Nutrition Video TA
- Immunization GAVI TF
Ongoing Non-Lending
- Caribbean Coast Development TF
- Strengthening Vital Statistics TF
- Institutional Dev of MINSA TA
Nicaragua needs to better
target vulnerable
populations (e.g.
adolescents, remote and
indigenous communities
municipalities with the
worst indicators,) and to
improve the measurement
of the quality of care
delivered.
The extension of coverage
per capita model has
proven to be effective in
producing results and
should be reinforced with
new resources.
77
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
10. Net primary
enrollment (% of relevant age
group) and primary school
completion rate have been
increased.
Net Primary Enrollment (% of
relevant age group)
Baseline: 87.7% (2006)
Target: 90.1% (2009)
Primary School Completion (rate,
%)
Baseline: Boys 62 (2004)
Girls 75 (2004)
Target: Boys 75 (2010)
Girls 85 (2010)
Partially Achieved
93.4 (2011, MinEd)
Boys 68 (2010)
Girls 82 (2010)
Completed Lending
- Education PASEN (FY11)
Completed Non Lending
- Education for All Fast Track Initiative
- Food Crisis Emergency Response
Program
- Social Sector PER (FY10)
- Social Services Delivery Regional Study
(FY111)
-Early Childhood Development Study
(FY11)
-Regional Teacher Policy Assessment
(FY11)
- Employment in CA & Better Jobs in
Nicaragua Study (FY12)
Ongoing Non-Lending
- School Feeding JSDF
- Education for All Fast Track Initiative
EPDF
- Early Grade Reading Assessment for the
Atlantic Coast
Key future challenges
include strengthening: (i)
the nuclearizacion model
of targeting and territorial
organization of the
education system; (ii) preservice
and in-service
teacher training systems;
(iii) M&E and the
complementary IT system;
and (iv) management
capacity, including in
fiduciary and social
accountability, to
accommodate the
increasing resources.
Multi-grade schooling is a
modality with proven
results -- its experience
needs to be systematized
and analyzed for further
expansion.
11. MINED has developed
a reliable internal M&E system
which generates information on
key education quality and
access indicators.
Achieved.
MINED has a reliable internal M&E system,
but it remains overly centralized and
requires further automation and integration.
78
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
12. Increased water &
sanitation coverage in Managua
Water*
Baseline: 60% (2005)
Target: 85% (2012)
*Measure of effective coverage
no longer measured.
Sanitation
Baseline: 57% (2005)
Target: 80% (2012)
Partially Achieved
% of population with 16+hrs of access has risen
from 53.8% in mid 2010 to 54.3% in mid
2012
PRASMA has increased basic access by 2.5%
in 2012, with plans to reach 4.2%
additional coverage by 2014.
80% (2009, JMP adjusted)
PRASMA has increased coverage by 3.8% in
2012 and expects to achieve 5.5%
additional coverage by 2014.
Ongoing Lending
Managua Water & Sanitation
Completed Non Lending
- Water Sector Policy Note (FY12)
Ongoing Non Lending
- Water Utility TA, SFLAC
- WSP Technical Assistance
- ENACAL Modernization TA
Current improvements in
access could be threatened
if sustainable financing of
new services is not
achieved. Despite
improvements in
efficiency, ENACAL's
financial position has
worsened, mainly due to
rising energy costs and unindexed
tariffs. A
dialogue on the right mix
of tariff adjustments and
targeted subsidies is
needed, as well as a
system of regular and
public accountability,
efficiency indicators and
establishment of
performance targets.
79
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
13. Increased effective
water and sanitation coverage
in rural areas (% of
population).
Water
Baseline: 44% (2005)
Target: 70% (2012)
Sanitation
Baseline: 69% (2005)
Target 90% (2012)
Partially Achieved
JMP measurements: 65% (2005) to 68% (2010)
FISE: 62.4% (2011)
PRASNICA has increased coverage by 0.7% in
2012, and expects to achieve 4.5% additional
coverage by 2014.
JMP: 35% (2005) to 37% (2010)
FISE: 78% (2011)
PRASNICA has increased coverage by 0.7% in
2012, and expects to achieve 1.4% additional
coverage by 2014.
Ongoing Lending
- Rural Water & Sanitation
Completed Non Lending
- Water Sector Policy Note (FY12)
Ongoing Non Lending
- WSP Technical Assistance
- Water Utilities Management TA,
SFLAC
Nicaragua is moving
towards the concept of
sustainable water and
sanitation service
provision, where
communities manage
infrastructure and public
sector provides TA. This
will yield significant
empowerment and long
term benefits, but requires
additional efforts and time.
Strong measurement
remains elusive. While
the JMP program has
proved valuable it
competes with
administrative data.
14. Increased percentage
(%) of households in rural
areas which have access to
electricity.
Baseline: 28.9 (2005)
Target: 40 (2012)
Achieved
44% (2009, LSMS)
Completed Lending
- Off-grid Rural Electrification Project
Completed Non Lending
- Central American Regional Energy
Study (FY10)
This project provided an
successful model of
mobilizing and training
small local providers and
microfinance in providing
solutions for rural service
delivery, that can be
extended to other sectors
15. Increased percentage
of rural population with access
to at least one public telephone.
Baseline: 14% (2006)
Target: 70% (2011)
Achieved
83% (2011, TELCOR).
Ongoing Lending
- Rural Telecom and Additional
Financing
80
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
16. Increased access to allseason
roads percent of rural
population.
Baseline: 19% (2005)
Target: 25% (2011)
Achieved
55% (LSMS, 2009)
However, a current Road Inventory and
Condition study in underway financed by Bank
project
Ongoing Lending
- Road Rehab & Maintenance IV
Additional Financing
- Rural Roads Infrastructure &
Maintenance
Need for a more integrated
concept of agriculture,
transport logistics and road
rehabilitation. Also more
emphasis on natural
disaster adaptation (and
mitigation) both
construction (drainage,
etc,) and environmental
services solutions.
On donor financing, the
model is sufficiently
developed to now explore
ways SWAp or P4R
program. Need also to
prioritize completion of
evaluation impact surveys
and updates of core
indicators.
17. A 15% reduction in
vehicle operating costs, as
measured by lowered road
roughness indices (IRI).
Baseline: 9 (2005)
Target: 5 (2010)
Achieved
4 (2011, MTI estimates)
81
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
18. Development
outcomes for the RAAN and
RAAS have improved and the
gaps between national averages
and RAAN/RAAS indicators
have diminished.
Pac. Cent. RAAN/S
Access to Electricity (2006)
86.8% 56.8% 34.2%
Children in Primary Sch. (2006)
86.1% 84.9% 80.8%
Access to Paved Roads/Aquatic
Transport (2006)
60% 39% 9.9%
% families receiving production
credits (2004)
60% 39% 9.9%
Access to Potable Water (2006)
82.8% 63.2% 31.2%
Partially Achieved
URBAN
Atlantic
Pac-Atl
gaps
Cen-Atl
gaps
Access to Electricity
2005 80.1 8.3 10.0
2009 90.5 0.7 7.1
Access to Water
2005 44.0 3.6 43.6
2009 64.9 5.0 21.5
Access to Paved roads
2005 27.3 15.9 39.8
2009 47.4 3.6 30.8
RURAL
Atlantic
Pac-Atl
gaps
Cen-Atl
gaps
Electricity
2005 8.8 37.8 23.9
2009 6.8 27.9 37.0
Water
2005 13.3 9.1 12.8
2009 5.4 18.2 16.5
Paved roads
2005 0.4 9.2 19.4
2009 3.9 12.1 13.2
Source: LSMS 2005, 2009
Completed Lending:
- Education PASEN I
- Off-Grid Rural Electrification (PERZA)
Lending Ongoing:
- Land Administration
- Family and Community Health Care
- Road Rehab & Maint. IV
- Hurricane Felix Emergency
- Rural Water & Sanitation
- Broad Based Access to Financial
Services
Non Lending-Ongoing:
- Caribbean Coast Devt DFID TF
- Corazon GEF
- Alternative AgroForestry JSDF
Any future engagement
with the Autonomous
Regions should focus
mainly on building out
institutional capacity in
regional and local
governments and not on
proliferating small
community development
type of investments.
82
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
Pillar 3: Strengthening governance and accountability
19. National monitoring
and evaluation system designed
and implemented,
strengthening SIGFA,
SYSODA and the M&E systems
in Health and Education
ministries.
Not Achieved
Efforts to align the diverse M&E systems
across government saw some progress, while
the e reform of budget classification was
delayed until the design of SIGFA II. As such,
it remains difficult to track program indicators
in the budget and to attribute their contribution
to overall goals.
Completed Lending
- State Modernization Project
Ongoing Lending:
- Public Financial Management
System Modernization Project
Completed Non Lending:
Social Sector PER Review (FY08)
Monitoring and Evaluation NLTA
(FY10)
20. Medium term
expenditure framework
(including all norms and
guidelines consistent with
M&E) is implemented in
all central government
entities and key
decentralized agencies.
Partially Achieved.
The MTEF has been rolled out to all 19 central
government and all 41 decentralized agencies,
but weaknesses remain in linking planning and
budgeting. Existing information is very rich but
requires additional coordination to consolidate
the MTEF.
21. The SIGFA II has been
fully implemented and is used
as an important tool to
formulate, develop, execute and
monitor public policies,
especially those related to
poverty reduction.
Not Observable.
The new SIGFA is still in development stage.
The PMSAF project was approved in FY10
and is now in implementation.
Expectations regarding
implementation
timeframes need to be
revised. Similar projects
usually take more than 5
years to be completed.
83
CPS Outcome and Outcome
Indicators
Status and Evaluation Summary Lending and Non-lending Activities that
contributed to the outcome
Lessons for the new CPS
FY13-17
22. All public entities of
Central government certified
by CGR for the use and
implementation of the
Technical Norms of Internal
Control according to
international standards.
Baseline: 43% (2006)
Target: 100% (2012)
Not Achieved
No advances were observed in the certification
and implementation of the Technical
Norms of Internal Control according to
international standards.
23. Increased percentage
of public investment programs
registered in SNIP which was
proposed at municipal level.
Baseline: 30% (2007)
Target: 60% (2012)
Not Achieved
The SNIP methodology changed under the new
administration. A network of Citizen
Councils (instead of the Local Public
Investment Units) are used to channel local
needs into central government plans. As
such, the SNIP only registers the capital
transfers to municipal governments.
Completed Lending
State Modernization Project (PSTAC I)
Ongoing Lending:
Public Financial Management
System Modernization Project
(PMSAF)
Completed Non Lending:
Social Sector Public Expenditure
Review FY08
Monitoring and Evaluation NLTA
(FY10)
84
TABLE 2: PLANNED LENDING PROGRAM AND ACTUAL DELIVERIES
CPS PLANS (October 11, 2007) STATUS
FY Project
IDA
IDA
US$ m US$ m
2008
PRSC 20.0 Dropped
Rural Water & Sanitation 20.0 Actual 20.0
Additional Projects
MSME Development 20.0
Hurricane Felix Emergency 17.0
Subtotal 40.0 Subtotal 57.0
2009
PRSC 20.0 Actual 20.0
Managua Water & Sanitation 45.0 Actual 40.0
Subtotal 65.0 Subtotal 60.0
Subtotal FY2008-2009 105.0 Subtotal FY2008-2009 117.0
PROGRESS REPORT PLANS (December 4, 2009) STATUS
2010
PRSC I 25.0 Dropped
Public Sector TA 10.0 Delayed to FY2011
Land Administration AF 10.0 Actual 10.0
Additional Projects (not CPS)
H1N1Response 5.0 Actual 5.0
Road Rehab & Maint. IV AF 20.0 Actual 39.3
2nd Agricultural Technology AF 10.0 Actual 10.0
Futuro Forestal (Carbon Fin.) Dropped
Subtotal 80.0 Subtotal 64.3
2011
PRSC II 25.0 Dropped
Additional Projects (not CPS)
Rural Electrification 25.0 Dropped
Additional Projects (not CPS PR)
Comm. & Family Health Care 21.0
Social Protection 19.5
PFM Modernization TA 10.0
Subtotal 50.0 Subtotal 50.5
2012
Transport V 30.0 Actual 35.0
Rural Water II or Electrification 22.0 Dropped
Additional Projects (not CPS PR
Education PASEN II 25.0
Rural Telecom AF 5.0
Subtotal 52.0 Subtotal 65.0
Subtotal FY2010-2012 182.0 Subtotal FY2010-2012 179.8
Total FY 2008-2012 287.0 Total FY 2008-2012 296.8
85
TABLE 3: PLANNED NON LENDING PROGRAM AND ACTUAL DELIVERIES
CPS PLANS ( October 11, 2007) STATUS
2008
SRM Impact Assessment Dropped
Nutrition TA FY10
Social Sector PER FY10
Additional Products
Institutional and Governance Review (FY08)
2009
Country Environmental Assessment FY1034
Investment Climate Assessment Dropped &completed as part of a Regional ICA FY09
Social Sector PER (NLTA) FY10
Additional Products
Regional ICA (FY09)
Forest Law Enforcement and Gov TA (Dropped)
Design of MIS for Deposit Insurance Agency (FY09)
PROGRESS REPORT PLANS (12/04/09) STATUS
2010
FSAP Update FY10
Nutrition TA FY10
Social Sector PER FY10
Additional Products
Land Administration TA (FY10)
Improved Small Scale Energy Supply TA (FY10) ROSC
Accounting and Auditing (FY10)
2011
Poverty Assessment FY11
Additional Products
AML/FTC Strategic Imp. Planning (FY11)
Poverty Monitoring & Policy Evaluation TA (FY11)
MTDS Follow Up (FY11)
Debt Management Program Assessment (FY11)
Public Sector Advisory Services (Dropped)
2012
Additional Products
Water and Sanitation Policy Note (FY12)
Rural Womenfs Economic Empowerment (FY12)
Country Economic Memorandum (FY13)
Financial Consumer Protection TA (FY13)
34 The Country Environmental Assessment by completed as individual studies addressing: (i) institutional
arrangements for environmental impact assessment in Nicaragua; (ii) environmental management for Lake
Nicaragua Watershed; and (iii) environmental health issues and priorities.

Agua
Waspan
Siuna
Prinzapolka
Blefields
El Rama
Puerto Cabezas
Cua - Bocay
Rosita
Paiwas
El Tortuguero
Bonanza
Agua
Nueva Guinea
El Viejo
Boaco
Waslala
Matiguas
Castillo
Leon
Acoyapa
Camoapa
Laguna de Perlas
La Cruz de Rio Grande
Esteli
Wiwili de Jinotega
Carlos
Kukra Hill
Tipitapa
Tola
Jinotega
El Ayote
Jalapa
Morrito
San Juan del Norte
Juigalpa
El Almendro
San Miguelito
Somotillo
El Sauce
Murra
Villa Nueva
Teustepe
La Libertad
Telica
Granada
Larreynaga
Nagarote
Muelle de los Bueyes
Comalapa
Rio Blanco
Matagalpa
Somoto
Quilali
Ciudad Dario
Desembocadura del Rio Grande
Chinandega
Villa Sandino
Rivas
El Jicaro
La Paz Centro
El Jicaral
Condega
Achuapa
San Lorenzo
Santo Domingo
Belen
Muy Muy
Diriamba
Sebaco
El Coral
Rancho Grande
Nandaime
San Ramon
Mateare
El Tuma - La Dalia
Telpaneca
San Franciso Libre
Jinotepe
Puerto Morazan
San Isidro
Managua
Terrabona
Nindiri
San Juan de Limay
El Crucero
Tisma
Esquipulas
Totogalpa
San Lucas
Santo Tomas
Villa Carlos Fonseca
Macuelizo
La Trinidad
Mosonte
San Juan del Sur
Potosi
Cardenas
Santa Maria de Pantasma
San Pedro de Lovago
Altagracia
Masaya
San Sebatian de Yali
San Rafale del Sur
Chichigalpa
Dipilto San Fernando
Wiwili de Nueva Segovia
Santa Teresa
Posoltega
Ocotal
San Nicolas
Pueblo Nuevo
Palacaguina
San Dionisio
Santa Maria
San Rafael de Norte
La Concordia
San Francisco de Cuapa
San Jose de los Remates
Santa Lucia
Santa Rosa del Penon
San Marcos
EL Realejo
Corinto
San Juan de Rio Coco
Ciudad Antigua
Yalaguina
Diriomo
La Conquista
Masatepe
Granada
Ticuantepe
Quezalguaque
Moyogalpa
San Jose de Cusmapa
Las Sabanas
Diria
Cinco PinosSan Francisco del Norte
La Concepcion
San Pedro del Norte
Ciudad Sandino
Buenos Aires
Niquinihomo
San Jorge
Puerto Cabezas
Buenos Aires
Santo Tomas del Norte
San Carlos
Nandasmo
Catarina
El Rosario
Corn Island
La Paz de Carazo
San Carlos
Corn Island
San Carlos
La Paz Centro
Acoyapa
Morrito
Granada
Corinto
San Carlos
Acoyapa
Granada
San Carlos
Laguna de Perlas
Comalapa
El Viejo
Agua
Agua
Somotillo
San Carlos
El Viejo
Granada
C o r d i l l e r a I s a b e l l a
C o r d i l l e r a C h o n t a l e n n a
M o s q u i t o C o a s t
Wawa
Kukalaya
Bambana
Prinzapolka
Grande de Matagalpa
Kurinwas
Mico
Escondido
Siquia
San Juan
Rio Indio
Turna
Coco
Bocay
Amaka
Pahara
Lagoon
Karata
Lagoon
Punta Gorda
R I VA S
BOA CO
J I NOT E G A
AT L A N T I CO
NOR T E
San Benito
Rama
Nuevo
Amanecer
El Castillo de
La Concepcion
Kukalaya
Leimus
Bonanza
Bocay
La Rosita
Muy Muy
El Sauce Wiwili
San Sebastian
de Yali
Siuna
La Cruz de
Rio Grande
Nueva
Guinea
Matagalpa
Granada
San Carlos
Esteli
Somoto
MANAGUA
AT L A N T I CO
S U R
MATAGALPA
CHONTALES
R IO
S A N
J U A N
CARAZO
GRANADA
MASAYA
L EON
CHINANDEGA
MADRIZ
E S T E L I
NUEVA
SEGOVIA
MANAGUA
Laguna
de Perlas
Punta Gorda
Prinzapolka
Somotillo
Sebaco Rio Blanco
Corinto
Potosi
Puerto
Sandino
Quilali San Juan del Norte
San
Miguelito
Lovago
San Juan del Sur Penas Blancas
Masachapa
Waspam
Juigalpa
Bluefields
Puerto Cabezas
Leon
Jinotega
Jinotepe
Boaco
Masaya
Ocotal
Chinandega
Rivas
EL SALVADOR
H O N D U R A S
C O S T A R I C A
Gulf of
Fonseca
Gorda
PACIFIC OCEAN
Lake
Nicaragua
C a r i b b e a n
S e a
Lake
Managua
Wani
Lagoon
Wounta
Lagoon
Perlas
Lagoon
Bluefields
Bay
Punta
Gorda
Bay
To Tegucigalpa
To Auasbila
To San
Miguel
To San Jose
Cabo Gracias
a Dios
Punta Cosiguina
Cayos Miskitos
I. de Ometepe
Mogoton
(2,438 m)
15‹N
13‹N
15‹N
14‹N
13‹N
12‹ N 12‹N
11‹N
87‹W 86‹W 85‹W 84‹W 83‹W
86‹W 85‹W 84‹W 83‹W
NICARAGUA
This map was produced by the Map Design Unit of The World Bank.
The boundaries, colors, denominations and any other information
shown on this map do not imply, on the part of The World Bank
Group, any judgment on the legal status of any territory, or any
endorsement or acceptance of such boundaries.
0 20 40
0 10 20 30 40 50 Miles
60 Kilometers
IBRD 33456R
APRIL 2010
NICARAGUA
SELECTED CITIES AND TOWNS
DEPARTMENT CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
MUNICIPAL BOUNDARIES
DEPARTMENT BOUNDARIES
INTERNATIONAL BOUNDARIES