The World Bank Social Assistance Project (P151442) REPORT NO.: RES40631 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SOCIAL ASSISTANCE PROJECT APPROVED ON JUNE 3, 2016 TO THE KINGDOM OF LESOTHO SOCIAL PROTECTION & JOBS AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Marie Françoise Marie-Nelly Regional Director: Amit Dar Practice Manager/Manager: Iffath Anwar Sharif Task Team Leader: Victoria Monchuk The World Bank Social Assistance Project (P151442) ABBREVIATIONS AND ACRONYMS CGP Child Grant Program DLI Disbursement Linked Indicator ECHO European Commission for Humanitarian Aid ID Identity IDA International Development Association IP Implementation Progress MIS Management Information System MoF Ministry of Finance MoHA Ministry of Home Affairs MoSD Ministry of Social Development NMDS National Manpower Development Secretariat NISSA National Information System for Social Assistance OAP Old Age Pension OVC Orphan and Vulnerable Children PA Public Assistance PDO Project Development Objective PIU Project Implementing Unit SAP Social Assistance Project UNICEF United Nations International Children's Emergency Fund The World Bank Social Assistance Project (P151442) BASIC DATA Product Information Project ID Financing Instrument P151442 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 03-Jun-2016 30-May-2020 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Social Development,Ministry of Finance Project Development Objective (PDO) Original PDO The objective of the proposed project is to support the Government of Lesotho in improving the efficiency and equity of selected social assistance programs. Current PDO The objective of the Project is to support the GoL in improving the efficiency, equity and shock responsive function of selected Social Assistance programs and, in the event of an Eligible Crisis or Emergency, to provide immediate and effective response to said Eligible Crisis or Emergency. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-59320 06-Dec-2016 02-Feb-2017 24-Feb-2017 30-May-2020 20.00 20.32 .01 IDA-58340 03-Jun-2016 15-Jun-2016 12-Jul-2016 30-May-2020 20.00 8.75 10.85 The World Bank Social Assistance Project (P151442) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING Project Status The original US$20 million IDA Credit for the Social Assistance Project (SAP), which was approved on June 3, 2016, and became effective on July 12, 2016, was complemented by an Additional Financing credit of US$20 million approved on December 3, 2016, and effective as of February 24, 2017. The project is expected to close on May 30, 2020 and had its Mid-Term Review in December 2018. As of February 25, 2020, the project has disbursed 64 percent of the funds. The PDO rating was recorded in the latest ISR from November 2019 as Moderately Satisfactory, while the Implementation Progress (IP) rating was Moderately Unsatisfactory. The project is a Category C project and does not trigger any safeguards policies. The fiduciary risk is rated moderate, while the overall risk rating is also moderate. The SAP covers three main results areas: (i) improved administrative efficiency, (ii) improved equity, and (iii) enhanced shock-responsiveness of social assistance programs. These are organized around four key reform areas: (i) the expansion of the Child Grant Program (CGP); (ii) the harmonization of targeting, enrollment, payment and grievance redress mechanisms of the three main social assistance programs managed by the Ministry of Social Development (MoSD); (iii) the modernization of the Old Age Pension (OAP), (iv) and the strengthening of the shock-responsive functions of the social protection system through the expansion of the National Information System for Social Assistance (NISSA), and the provision of emergency assistance in case of an emergency. The project was recently restructured two times. The first restructuring, finalized in November 2019, aimed at addressing some of the delays in the social assistance reforms needed to achieve the PDO. The restructuring included the simplification of the Disbursement Linked Indicators (DLIs) related to social assistance reform and the dropping of the planned community development component, which was not ready for implementation during the project time frame. At the time of the restructuring, the Government of Lesotho had already issued a drought emergency declaration. Hence, it was agreed that the project would go through a two-stage restructuring process – the first, to simplify the project and maximize disbursements before closing, and the second, to respond to the emergency, subject to receiving a request from Government. This second restructuring, completed in January 2020, reallocated US$7.4 million from selected DLIs to finance emergency cash transfers to around 38,000 poor and vulnerable households affected by the crisis. The World Bank Social Assistance Project (P151442) Project status by the three results areas. 1. Administrative efficiency indicators have been partially met. The government had some early successes with the transfer of the Orphan and Vulnerable Children (OVC) program from the National Manpower Development Secretariat (NMDS) to the MoSD, and seamlessly integrated at MoSD, as well as at the district level. Presently, only the OVC and the CGP have modules in the new Management Information System (MIS), while the challenging Public Assistance (PA) program is not yet integrated. It is unlikely that the PA will be fully integrated into the MIS system, given the critical policy decisions that have to be made about its targeting. However, the successful pilot, which tested the use of the same improved unified payment modality as the CGP program led to a MoSD decision to rollout the harmonized and unified payment system, to all PA beneficiaries. The expectation is that within a year the payment systems will be fully harmonized between the CGP, OVC, PA and OAP programs. The only outstanding issue would then be to reform the targeting of the PA program, which does not use the harmonized and the centralized targeting method and, therefore, is also not fully integrated into the social registry and MIS system. The indicator that is still of concern related to the share of OVC and CGP children who hold a national ID number/birth certificate. The Ministry is currently developing a plan to meet the indicator. 2. Moreover, the project has made significant progress in strengthening the OAP program. The Ministry of Finance (MoF) successfully carried out a Proof of Life exercise to verify beneficiaries to clean the database and, therefore, reduce leakages in the system. The transfer of OAP to the MoSD was announced in the 2019 budget speech. However, due to the lack of political will, the physical transfer of OAP to the MoSD may not occur before the end of May 2020. The new OAP MIS system will be interoperable with MoSD’s system. A new OAP operational manual has been developed and is awaiting approval (DLI). The Proof-of Life exercise was completed in January and all previously identified ghost pensioners will be removed from the program in March (DLI). Also, continuous cross- checks have been built into the OAP payment system. These will verify data with both the Civil Servant and the National ID databases so that no ‘non-existent’, ineligible or dead pensioners can receive the OAP. Additionally, for efficiency gains, the MoF is preparing to pilot various payment modalities for the OAP and an “enhanced” cash payment that is more secure and efficient and will ease the difficulties that the Pensions Department encounters in managing loose cash and reconciling cash payments at the end of the month. 3. 3. Increased equity of selected social assistance programs. Five of the 10 equity related indicators have been achieved or over-achieved and 3 others are partially achieved. Social assistance is equitable across genders and there has been an increase in the enrollment of poor or ultra poor social assistance beneficiaries; a large proportion of them are children (115,890) and second highest is the elderly (82,098). Income equity of the PA program has improved from 56 to 64 percent and almost reached its 65 percent target but unlikely to improve further since the PA targeting method is still unclear. For CGP, the planned March enrollment of another 10,000- 12,000 poor or ultra poor households may improve the equity indicator but new household survey data to measure the indicator will only be available in a years’ time. Of the intermediate equity indicators, the MoSD has achieved the National Information System for Social Assistance (NISSA) enrolment in the 64 community councils. There are plans to rollout NISSA in the 12 urban councils as well. It is anticipated that at least 6 of these councils will be enrolled before the project expires. The significance of this achievement is that social assistance programs now use this registry to identify beneficiaries however the harmonization of the CGP, OVC and PA for targeting has moved at a slow pace. 4. Shock responsiveness of the social assistance is improving. Overall, the social assistance systems have been made more shock responsive and have been able to scale up vertically to respond to chocks. The CGP is one of the most drought responsive programs in Lesotho and has been instrumentally used to respond to drought both in 2017 and in the current drought season of 2020. The CGP top ups provided in the 2017 were vertical and only given to The World Bank Social Assistance Project (P151442) existing 27,000 CGP recipients. Another 28,000 top ups are currently being undertaken in response to the 2019/20 drought and are being financed by the SAP. One key feature about the current response is the inclusion of additional 10,000-12,000 new households through horizontal expansion in drought affected areas. While such decisions can be taken during emergency response, it is better to frontload the procedures and processes to minimize time lags and such action require a pre-existing plan. To make the program more responsive, the MoSD is developing a plan to make the CGP responsive during drought (or any type of shock). Separate frameworks for early action, contingency finance and social protection policy for shock response are also in the process of being developed by the MoSD with the support of ECHO and UNICEF. The presence of NISSA in all rural households (and in the process of being rolled out in urban councils) and the use of it as a tool to identify households to be supported during an emergency is also a very important component for a shock-responsive system. So far, 3 instances of humanitarian support have used NISSA to identify beneficiaries and the 2020 CGP scale up is drawing all the new households from the poor and ultra-poor groups in NISSA. Rationale for Restructuring The proposed six-months closing date extension, from the current closing date of May 30, 2020, to November 30, will allow SAP to complete the remaining activities related to the emergency response that were added, and therefore achieve the PDO by the new closing date. Since the emergency cash transfers financed by the project will continue beyond April 2020, this does not give the project enough time to complete the necessary reconciliation and reporting. During the implementation support mission in early February 2020, the Principal Secretary of the Ministry of Development Planning requested the Bank to consider an extension of the closing date. The Government also followed up with a formal request letter on March 3, 2020 asking to extend the project closing date by six months to November 30, 2020. Moreover, because the project needs a higher ceiling on its designated account to allow for the cash transfer emergency withdrawals, this restructuring will also revise the disbursement letter and raise the ceiling. II. DESCRIPTION OF PROPOSED CHANGES Extension of closing date. The project closing date would be extended for six months until November 30, 2020. This date should leave enough time to complete the project’s emergency response activities which are estimated to end in May and account for all funds. Revision of Disbursement Letter and ceiling on Designated Account. Because the project needs a higher ceiling on its designated account to allow for the cash transfer emergency withdrawals, this restructuring will also revise the disbursement letter and raise the ceiling from US$3.0 million to US$7.7 million. Because the CGP cash transfers are paid quarterly it does not allow a full reconciliation of the funds from one pay period before the project needs to with draw funds for the next pay period. Hence, the ceiling would be increased to US$7.7million to allow both the February and the April transfers to take place in a timely manner. III. SUMMARY OF CHANGES Changed Not Changed Loan Closing Date(s) ✔ The World Bank Social Assistance Project (P151442) Disbursements Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-58340 Effective 30-May-2020 30-Nov-2020 30-Mar-2021 The World Bank Social Assistance Project (P151442) IDA-59320 Effective 30-May-2020 30-Nov-2020 30-Mar-2021 .