Mozambique - Health and Nutrition Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4880-MOZ MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOED CREDIT OF SDR 21.0 MILLION (US$27.0 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF MOZAMBIQUE FOR A HEALTH AND NUTRITION PROJECT FEBRUARY 23, 1989 This document has a restricted distribution and may be used by recipients only in the performance of their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Metical (pl. Meticais) At appraisal US$1 - 580 Meticais (July 1988) Mt 100 = US$0.17 At negotiations US$1 620 Meticais (October 1988) Mt 100 , US$0.16 MEASURES 1 Meter (m) = 3.28 Feet 1 Square Meter (sq m) = 10.76 Square Feet ABBREVIATIONS AND ACRONYMS ERP - Economic Rehabilitation Program GOM - Government of Mozambique IPPF - International Planned Parenthood Federation HOC - Ministry of Commerce MOH - Ministry of Health NORAD - Norwegian Development Cooperation Agency PPF - Project Preparation Facility SDR - Special Drawing Right UNICEF - United Nations Children's Fund UNFPA - United Nations Fund for Population Activities WFP - World Food Program GOVERNMENT FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY Credit and Proiect Summary - Borrower: People's Republic of Mozambique Beneficiary: Ministry of Health, Ministry of Commerce Amounts SDR 21.0 Million (US$27.0 Million equivalent) Termns Standard with 40 years maturity Onlendina Terms: Not applicable Financins Plan: Government US$ 3.7 million IDA US$27.0 million WFP US$ 4.4 million UNICEF US$ 1.9 million NORAD US$ 0.2 million Switzerland USS$ 5.3 million Total US$42.5 million Economic Rate of Return: Not applicable Staff Appraisal Report: Report No. 7423-MOZ Maps IBRD No. 21274 This document has a restricted distribution and may be used by recipients only in the performance of their official dutis Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF MOZAMBIQUE FOR A HEALTH AND NUTRITION PROJECT 1. The following memorandum and recommendation on a proposed development credit to Mozambique for SDR 21.0 million (US$27.0 million equivalent) is submitted for approval. The credit would be on standard IDA terms with 40 years maturity. It would help finance a health and nutrition project. The project would be financed parallel by WFP for SDR 3.4 million (US$4.4 million equivalent), UNICEF for SDR 1.5 million (US$1.9 million equivalent), NORAD for SDR 0.2 Lillion (US$0.2 million equivalent) and the Government of Switzerland SDR 4.1 million (US$5.3 million equivalent). 2. Background. Despite severe economic difficulties and the ongoing security situation, the Government is making encouraging progress in implementing an Economic Rehabilitation Program (ERP) that provides a promising basis for future development. Within this context, the Government is strongly committed to improving social sector services, including health and nutrition, and to developing appropriate policies to cushion the social impact of adjustment measures. 3. On health, policies stressing preventive and basic health services have been adopted and implemented, leading to a rise in the number of primary care facilities from 546 to 1,416 between 1975 and 1985. Despite this progress, health status remains poor in comparison to other low-income African countries, due both to the low base inherited at Independence and to continuing problems within the health system itself. Key problems include a cumbersome Ministry of Health (MOH) structure, fragmented health information systems, weak management, lack of maintenance capacity, and shortages of crucial inputs -- together contributing to low efficiency and poor quality of services. Moreover, widespread armed bandit activity has led to damage or destruction of much of the health facilities network and to disruption of services. Increased cost recovery has been introduced, but major questions have yet to be resolved about implementation and about protecting vulnerable groups. Family planning services are readily available at health facilities and contraceptive prevalence rates of 18 percent in Maputo are high by East African standards. The MOH is currently receiving substantial support from UNFPA in strengthening family planning services and has just established an IPPF- affiliated family planning association to promote family planning. The Government has indicated that a possible financial gap may emerge in later years for health and population, thus a future operation in the sector (currently shown as FY92) would aim to contribute towards any such financing gap. 4. On nutrition, there are serious and widespread problems stemming largely from the severe deterioration in food production. While the Government's new policies under the ERP, including improved prices and other incentives to producers, will have important beneficial effects in the medium- and long-term, their short- term consequences have been negative for urban residents, particularly poor households with high dependency ratios, who have experienced food price increases ranging from 100-300 percent in the rationing system. Overall food security is likely to remain precarious for some time due to climatic vagaries, infrastructure deficiencies, weak institutions and continuing bandit activity which has led to displacement of an estimated 1.5 million people and affected a further 3 million. For the next several years at least, Mozambique will continue to be dependent upon substantial inputs of food aid, the main responsibility for distribution of which rests with: (a) the Ministry of Commerce (MOC) for the sale of food, particularly  - 2 - rn urban areast and (b) the Department for the Prevention and Control of Natural Calamities of the Ministry of International Cooperation for free food distribution as part of emergency relief effozts. It will be crucial during this rereol to ensure that food aid is used as efficiently as possible and in ways that promote productive activities and protect vulnerable groups. 5. ProJect objectives. To help improve health and nutrition status, the project has four main objectives: (a) strengthening capacity in policY formulation and management on health and food security issues, with special attention to resource mobilization, institutional development, information systems, planning and analysis; (b) improving efficiency, to enhance the impact of services within the tightly constrained budgett (c) improving service quality, to enhance the provision of basic needs for the population: and (d) helping to mitigate some of the social costs of adjustment, to help sustain the ERP. 6. Project description. Supporting these objecti$es within the context of building a firmer basis for longer-term development and institution-building, the project, comprised of two components, would involve the following: (a) For the objective of strengthening capacity in policy formulation and management, the project would: (i) facilitate development of imProved policies in the health sector in the areas of cost-recovery, manpower planning, and facility management through studies and assistance in implementation of these studies' recommendationss (ii) strengthen the MOH through reorganizing the central ministry, developing a better financial management information system and establishing a central unit, under the Department of Planning, to manage and supervise the implementation of investment programs; and (iii) contribute to improving food security policies and information by aiding in policy analyses regarding food pricing and distribution and improvements to the food security information sy-tem. (b) For the two objectives of improving quality and increasing efficiency of services, the project would: (i) support the health facilities reconstruction program, through renovating and equipping selected health facilities; (ii) improve hospital efficiency through establishing better management procedures; (iii) strengthen health facility maintenance capability at the provincial and central levels through technical assistance for MOH maintenance centers and the provision of initial stocks of basic materials and vehicles; (iv) improve pharmaceutical supply system, through construction/renovation of drugs storage facilities in Maputo and Beira with a view to strengthening inventory control and reducing spoilage and upgrading overall management; (v) improve health manpower training, through enhancement of teaching quality, curriculum development, and capacity for in-service training and through upgrading of training centers, teaching materials and technical assistance; and (vi) increase the efficiency of the urban food distribution system through streamlining food supply management and information in the ration system, easing the transport shortage for moving food supplies from central depots to consumers in Maputo and Beira, supporting supplemental feeding programs targeted to primary school children in Maputo and Beira, and improving the nutritional status of factory workers. These activities would, in addition to their other benefits, also contribute to the fourth objective of helping to mitigate the social costs of adjustment. In particular, the supplemental feeding programs would directly help the targeted groups in dealing with the ERP's transitional costs. Additionally, improvements to  - 3 - the rationing system would help ensure regular availability of essential cereale and other comuodities to the urban population. 7. Health-related project activities would be carried out by the MOH and nutrition and food security-related activities by the MOC. Both Ministries have appointed project directors and coordinators and established the necessary administrative units for proj9ct implementation. The project, to be executed over a period of five years, would include funds for equipment, supplies, civil works, vehicles, technical assistance (including housing), training and incremental recurrent costs. Preparation of the project was undertaken by the Government of Mozambique (GOM), with assistance from an IDA Project Preparation Facility (PPF) of US$0.8 million. Including refinancing of the PPF, the total cost of the project is estimated at US$42.5 million with a foreign exchange component of US$36.4 million. By project cloeing, December 1994, the annual incremental recurrent costs generated directly by the project would be about US$0.67 million for the MOH, only 3 percent of the 1988 MOH recurrent budget. Annual incremental recurrent costs of US$0.19 million for the MOC represent less than 1 percent of the 1988 MOC recurrent budget. 8. The proposed site for the Maputo pharmaceutical warehouse was legally transferred to the MOH by Maputo City authorities prior to credit negotiations. There are presently about 60 families living on the Maputo warehouse site. A plan for resettlement of the families on alternative sites has been developed. Taking into account Government objectives of supporting the private sector, about 100 vehicles intended to alleviate the transport shortage for the distribution of food supplies would be transferred to independent retailers as part of the ration scheme. 9. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and the allocation and disbursement of the IDA Credit are shown in Schedule B. A timetable of project preparation and the status of Bank Group operations in Mozambique are shown in Schedules C and D, respectively. A map is attached. The Staff Appraisal Report No. 7423-MOZ, dated February 1, 1989 is also attached. 10. Rationale for IDA Involvement. IDA involvement is needed because (i) the Government has not yet developed sufficient capacity and experience to address effectively the complex technical, strategic, and policy issues that must be resolved; (ii) IDA has a comparative advantage in these areas, including considerable experience from other countries; (iii) other donors are already fully extended in other areas (e.g., emergency relief) or lack the required expertise or resources; (iv) the Government and other donors, recognizing these points, are seeking IDA involvement and see it as an aid to strengthening other donor-assisted initiatives; and (v) the project will contribute to ensurin, that the adjustment process remains sustainable. 11. Aareed Actions. The Government has agreed to the following main actions: A) by credit effectiveness: i) submission to IDA of an evaluation of the cost recovery scheme together with MOH comments; and (ii) finalization and submission to IDA of the study on food needs, supply and access based on IDA comments on the draft study presented by the Government during negotiations; B) Covenants: i) a joint review of the cost recovery evaluation by GOM and IDA by October 31, 1989, with implementation of the jointly agreed action plan to commence by April 30, 1990; ii) submission of manpower development plan to IDA by July 31, 1990, with a joint review to be held by October 31, 1990, and implementation of the jointly agreed recommendations to commence immediately thereafter; iii) submission of the study on the MOH's organization by October 31, 1989, with a joint review to be held by January 31, 1990 and implementation of the jointly agreed action plan to commence  - 4 - immediately thereafter; iv) implementation of the resettlement plan for the families on the site of the proposed Maputo pharmaceuticals store in a manner acceptable to IDA; v) transfer of tru^ks for strengthening of the urban food distribution system to the private sector in accordance with the procedures agreed during negotiations; and vi) that all the necessary measures be taken to provide housing for the resident consultants to be employed under the project; and C) conditlons of disbursement of funds for: i) the second phase of health facilities rehabilitation (about 60X of the funds for the sub-component) would be the satisfactory demonstration to IDA of the attainment of jointly agreed efficiency measures (namely reductions in the average length of patient stay, and reducing excess meal production in the hospital kitchens) to be implemented at the three main hospitals of Maputo, Beira and Nampula; and ii) the housing for foreign technical assistance personnel, IDA approval of the designs, architectural plans and financial terms for the construction of such housing. 12. Justification. The project provides a significant opportunity to aasist Mozambique in: a) human capital development, thereby laying the foundetion for long-term economic growth; and b) protecting vulnerable groups during the adjustment process, thereby helping the adjustment process to be sustainable. The project thus would make a contribution towards both the longer-term institutional, policy, and service deliveLy development in the health ar_ nutrition sectors, and tcwards meeting the immediate basic needs of the population during the transitional stage in the ERP process. The improved policy formulation capability and efficiency measures to be introduced through the project would assist the Government in making better use of scarce domestic and foreign resources, thereby improving both the quality and the sustainability of service delivery within the tight resource constraints facing Mozambique. 13. Risks. Risks are twofold. First, the ongoing security situation presents special difficulties. In order to minimize possible disruption, project activities have been restricted to secure areas. Second, Mozambique's experience in managing health projects is still quite limited, there are few trained managers, and tnere is little experience in project management and in procedures such as international bidding procedures, project monitoring, keeping accounts or performing audits. This risk is being addressed through the strengthening of program and project Implementation capacity and provision of technical assistance and training under the project. Additional support to implementation capacity is also being provided through multi lteral/bilateral agencies and NGOs. 14. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments By W. David Hopper Washington, D.C. February 23, 1989  Schedule A Page 1 of 1 MOZAMBIQUE HEALTH AND NUTRITION PROJECT ESTIMATED COSTS AND FINANCING PLAN a/ (US$ Million) Estimated Costs Local Foreign Total A. Policy Formulation & Management Strengthening (Sub-to:al) 0.5 3.3 3.8 1. Health Policy Studies & Implementation 0.2 0.6 0.8 2. Management Strengthening of the MOH 0.2 2.1 2.3 3. Food Security Policies and Information 0.1 0.6 0.7 B. Improving Efficiency and Quality of Services (Sub-total) 5.0 26.3 31.3 1. Rehabilitation of Health Facilities 2.1 7.5 9.6 2. Hospital Efficiency 0.2 1.3 1.5 3. Health Facility Maintenance 0.2 4.0 4.2 4. Pharmaceutical Supply System 1.2 4.0 5.2 5. Health Manpower Training/Effectiveness 0.4 1.7 ?.1 6. Urban Food Distribution System 0.9 7.8 8.7 C. Project Preparation Facility 0.0* 0.7 0.7 Total Baseline Costs 5.5 30.3 35.8 Physical Contingencies 0.3 2.2 2.5 Price Contingencies 0.3 3.9 4.2 Total Project Costs 6.1 36.4 42.5 Financing Plan Government 2.2 1.5 3.7 IDA 2.6 24.4 27.0 Parallel Finiancing WFP 0.2 4.2 4.4 UNICEF 0.2 1.7 1.9 NORAD 0.0 0.2 0.2 Government of Switzerland 0.9 4.4 5.3 a/ Net of customs duties and taxes. * US$35,000, which rounds to US$0.0 million.  Schedule B Page 1 of 2 Procurement a/ (in USS million) Procurement Method LCB and Int./Local ICR Shopping Other bI Total Cost Investment Costs: A. Civil Works 4.4 2.7 6.5 13.6 (4.4) (2.4) (0.2) (7.0) B. Furniture 0.3 _ 0.3 (-) (0.3) (-) (0.3) C. Equipment 3.9 0.5 0.9 5.3 (3.9) (0.5) (-) (4.4) D. Supplies 4.6 0.8 4.4 9.8 (4.6) (0.8) (-) (5.4) E. Vehicles 3.5 0.2 - 3.7 (3.5) (0.2) (_) (3.7) F. Technical Asst. - - 4.6 4.6 (-) (-) (4.4) (4.4) G. Project Management - - 0.1 0.1 (-H........... - (0.1) (0.1) H. Local Salaries/Inc. - - 0.4 0.4 I. Travel/Per Diem - - 0.2 0.2 J. Training/Workshops - - 0.3 0.3 (-) (-) (0.3) (0.3) K. PPF - - 0.8 0.8 '-- (-) (0.8) (0.8) Recurrent Costs: A. Vehicle Q&M - _ 0.7 0.7 B. Equipment O&M - - 1.0 1.0 (-) (-) (0.6) (0.6) C. Building O&M - - 1.7 1.7 Totals 16.4 4.5 21.6 42.5 (16.4) (4.2) (6.4) Note: Figures in parentheses indicate the amounts to be financed by the IDA credit. a/ Costs include physical and price contingencies. b/ Other means of procurement include force account civil works, procurement of consultancies in accordance with IDA guidelines and procurement of other items through regular Government procedures, or donor agencies procedures in cases where items are expected to be financed under co- or parallel-financing arrangements.  Schedule B Page 2 of 2 Allocation and Disbursement of IDA Credit Disbursement Category IDA Allocation 2 of Expendlture SDR US$ to be Financed Million Million 1. Civil Works 5.0 6.4 100? of foreig3 and 90? of local expenditures 2. Equipment, Furniture, Supplies, Vehicles 10.1 13.0 1002 of foreign expenditures, 1002 of local expenditures (ex factory) and 90S of other local expenditures 3. Consultant Services, Studies and Audits 3.4 4.4 1002 of total expenditures 4. Training/Workshops 0.2 0.3 1002 of total expenditures 5. PPF 0.6 0.8 100? of total expenditures 6. Resettlement Plan 0.0* 0.0 1002 of foreign and 902 of local expenditures 7. Operating Costs 0.5 0.6 60? of total expenditures for equipment operation and maintenance and 100? for project management-related costs Unallocated 1.2 1.5 Total 21.0 27.0 * SDR 15,600, which rounds to SDR 0.0 million. US$20,000, which rounds to US$0.0 million. IDA Disbursements ------------------IDA FISCAL YEAR----------------- 89 90 91 92 93 94 95 Amount Disbursed 0.8 2.2 3.5 5.9 7.0 5.2 2.4 Cumulative Amount 0.8 3.0 6.5 12.4 19.4 24.6 27.0 Percentage of Total 3 11 24 46 72 91 100  Schedule C Page 1 of 1 MOZANBIQUE HEALTH AND NUTRITION PROJECT Timetable of Key Process int Events (a) Time taken to prepare: 6 months (b) Prepared by: Government (c) First IDA mission: January 1988 (d) Appraisal mission departure: June 20, 1988 (e) Negotiations: October 31, 1988 (f) Planned date of effectiveness: July 31, 1989 (g) List of relevant PCRs and PPARs: None  MOZAMBIQUE HEALTH AND NUTRITION PROJECT ESTATUS OF BANK GROUP OPERATIONS IN MOZANBIOUE A. STATMENT OF BANK LOANS AND IDA CREDITS (As of December 30, 1988) Amount in US$ Million Loan or Fiscal Project (less cancellation) Credit No. Year- Borrower game Bank IDA Undisbursed C16100 1985 GOM Rehab. Program 45.00 4.60 C18060 1987 GOM Energy TA & Rehab. 20.00 18.42 CA0330 1988 GOM Rehabilitation II 18.60 7.48 C18410 1988 G0M Rehabilitation II 70.00 18.90 C19700 1988 GOM Education 15.90 14.65 C19490 1989 G0OM Urban Rehab. 60.00 59.21 Total Number of Credits - 6 229.50 123.25 Total (net approved) 229.50 of which has been repaid to the Bank Total now outstanding 229.50 Total undisbursed 123.25 r" t1l t*  Schedule D Page 2 of 2 MOZAMBIQUE HEALTH AND NUTRITION PROJECT B. STATEMENT OF IFC INVESTHNNTS (As of December 30, 1988) Investment Fiscal Type of Number Year Obligator Business Loan Equity Total ----(US$ Million)--- 864 1987 Lomaco Food Processing 2.5 2.5 978 1988 XaiXai Petrochemical 7.8 7.8 Total Gross Commitmentas 2.5 7.8 10.3 Less Cancellations, Terminations, Repayment and Saless 0.0 1.2 1.2 Total Commitments Now Held by IFC: 2.5 6.6 9.1 Total Undisbursed: 0.0 5.3 5.3 Total Disbursed: 2.5 1.3 3.8 cm