Zambia - Health Sector Support

Document of The World Bank Report No. 13480-ZA STAFF APPRAISAL REPORT ZAMBIA HEALTE SECTOR SUPPORT PROJECT OCTOBER 14, 1994 Human Resources Division Southern Africa Department Africa Regional Office  CURRENCY EOUIVALENTS August 1994 US$1.00 = K 700 K100 = US $0.14 FISCAL YEARS IDA Fiscal Year = July 1 - June 30 Government Fiscal year = January I - December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immune Deficiency Syndrome BHA "Better Health in Africa" (World Bank document) CAS Country Assistance Strategy CSO Central Statistics Office DANIDA Danish Intemational Development Agency DHB District Health Board DHMT District Health Management Team DHS Demographic and Health Survey EC European Community EPI Expanded Program of Immunization FP Family Planning GRZ Government of the Republic of Zambia HMIS Health Management Information System HRD Human Resource Development HRIT Health Reforms Implementation Team ICB International Competitive Bidding IDA International Development Association IEC Information, Education and Communication LCB Local Competitive Bidding MCH Mother and Child Health care MoH Ministry of Health MSL Medical Stores Limited NFA Not Financed by the Association (IDA) NFNC National Food and Nutrition Commission NGO Non-Governmental Organization ODA British Overseas Development Administration PMU Planning and Management Unit, Ministry of Health PPF Project Preparation Facilities RHC Rural Health Center SIDA Swedish International Development Agency SOE Statement of Expenses STI Sexually-Transmitted Infections TFR Total Fertility Rate UHC Urban Health Center UNICEF United Nations Children's Fund WDR World Development Report (World Bank document) WHO World Health Organization ZDHS Zarnbia Demographic and Health Survey  i ZAMBIA HEALTH SECTOR SUPPORT PROJECT CREDIT AND PROJECT SUMMARY BoRRowER: The Republic of Zambia IMPLmENTING AGENCY: Ministry of Health BENEFICiARY: Not applicable POVERTY: Not applicable AMOUNT: SDR 38.7 million (US$56 million equivalent) TERMS: Standard IDA terms with 40 years maturity COMMTMENT FEE: 0.50 percent on undisbursed balances beginning 60 days after signing less any waiver FINANCING PLAN: See para. 3.3 NET PRESENT VALUE: Not applicable. Project design based on cost-effectiveness STAFF APPRAISAL REPORT: 13480-ZA   ii ZAMBIA HEALTH SECTOR SUPPORT STAFF APPRAISAL REPORT' Table of Contents Title Page CREDIT AND PROJECT SUMMARY ................................ i 1. INTRODUCTION AND HEALTH SECTOR ISSUES ...................... 1 A. Introduction ........................................... 1 B. Health Reform .......................................... 4 B.1 The Basis for Reforms .............................. 5 B.2 Planning and Implementing Reform: the Strategic Plan ... ....... 6 B.3 Zambian Packages of Care: Standards and Outputs ............ 7 B.4 What has Changed so Far? .......................... 10 C. Donor Coordination ..................................... 18 II. PROPOSED PROJECT .................. ...................... 19 A. Project Objectives ...................................... 19 B. Project Description ..................................... 19 C. Health Reform Implementation Program 1995-98 ................... 21 D. Project Implementation: Process and Implementation Agencies .... ...... 28 E. Project Sustainability .................................... 30 III. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENTS ....................................... 34 A. Costs . ............................................... 34 B. Financing . ........................................... 34 C. Procurement .......................................... 36 D. Disbursements . ......................................... 38 E. Accounts and Audit ...................................... 39 IV. PROJECT BENEFITS AND RISKS ............................... 41 A. Project Benefits ......................................... 41 B. Project Risks .......................................... 41 V. AGREEMENTS AND RECOMMENDATIONS ..... ................... 43 A. Conditions ......... . .................................. 43 B. Other Agreements ...................................... 43 C. Recommendations ...................................... 43 The IDA preparation team was led by Steen Jorgensen and Reiko Niimi. Jean-Louis Lamboray was the principal health advisor; other preparation team members include: Julie McLaughlin, Norbert Mugwagwa, Jayshree Balachander, and Leo Sinke. The peer reviewers are Willy de Geyndt and Malonga Miatudila; the lead advisor is Eugene Boostrom. The Division Chief, Country Operations Manager, and Department Director are Roger Grawe, Phyllis Pomerantz and Katherine Marshall, respectively.  Figures: Figure I Conceptual Framework for the Strategic Plan ........................ 6 Figure 2 The Zambian Package of Care at the Health Center Level. 8 Figure 3 Projections of Zambian expenditures compared to BHA numbers ($/Capita) . . . . 32 Text Boxes: I Kerosene and EPI in Mumbwa District. 2 2 The Zambian Cadillac. 2 3 Why an Integrated Package? .9 4 The Planner and the TA .19 5 Financing Plan .34 6 Benefits . 41 Tables: Table I Comparative Health Performance. 3 Table 2 The New System is Sustainable: Evidence from Better Health in Africa (BHA) . . 31 Table 3 Financing Plan (US$million) 1995-1998 .35 Table 4 Procurement Arrangements (US$ million) .36 Table 5 Allocation and Disbursement of IDA Credit (US$ million) ..... . . . . 38 Table 6 Estimated Disbursements of IDA Credit (US$ Million) .39 Annexes: Annex 1 Zambia Basic Data and Leading Health Concerns .44 Annex 2 Ministry of Health, New HQ Organizational Chart .46 Annex 3 Draft First Year Implementation Plan .47 Annex 4 Proposed Program for Annual Consultations .55 Annex 5 Joint Donor Statement .56 Annex 6 Supervision Schedule .60 Annex 7 Selected Documents and Data Available in the Project File .62  ZAMBIA HEALTH SECTOR SUPPORT I. INTRODUCTION AND HEALTH SECTOR ISSUES A. INTRODUCTION 1.1 Zambia, one of the more prosperous countries in Africa at independence in 1964, used its wealth to, among other things, substantially increase its health infrastructure. In general, the Government used its international borrowing capacity to support levels of consumption in the public sector that proved unproductive and unsustainable, as its wealth -- dependent on international copper prices- declined. The country now suffers from excessive public sector dominance, a decline of nearly 50% in per capita incomes since 1975, and a dramatic increase in poverty. Yet, commitment to adjustment and reform was not tenable until November 1991, when a new Government was elected on a platform of change and policy reform. The rehabilitation and reform of social service delivery is a key area of concern in Zambia's adjustment program and in the Government's overall development strategy, as stated in the Policy Framework Paper. 1.2 The health sector has not been able to adequately respond to increasing demand for basic health care services to help households address problems of illness and disease. The people of Zambia are experiencing disease and death at new record levels: infant mortality rates are rising instead of declining; the prevalence of stunting and wasting are higher than average for Sub-Saharan Africa, and about 15 times higher than in countries with developed market economies; vaccination rates for children have been falling to an overall low of 54.8% (1993); and increased vulnerability to water-borne and other infectious diseases, caused primarily by declining access to safe water and sanitationA', is reflected in annual cholera epi- demics. Yet, households only get inadequate and uneven support from the existing health care system. Funding cutbacks in all social sectors, during the economic crisis of the 1980s, led to severe dilapidation of existing health infrastructure and inappropriate capital investments. Access to health facilities and utilization of health care, the quality of services, and the availability of drugs and supplies vary widely between poor and non-poor areas, and between rural and urban areas. Health staff are concentrated in the hospitals of urban areas (80 percent of all physicians work along the line of rail), while health facilities in rural areas -- to serve 58% of the Zambian population -- are both understaffed and have a higher proportion of untrained staff. People living in peri-urban areas may live within 15 km of a health facility, but high indirect costs -- such as transport and waiting time -- discourage their use except in dire emergencies. 1.3 Zambia can afford better health care. The Ministry of Health recognizes that its limited resources can be better allocated, and it is committed to reforming the health care system to expand effective coverage with a national package of good quality, essential health care services. The main issue now confronting the Zambian health sector is how to unleash existing capacity that has been hamstrung by major allocative and technical inefficiencies throughout the existing system. Currently, there is heavy dependence upon hospital care; 1 see National Environmental Action Plan', Government of Zambia, Jun 30, 1994.  - 2 - health centers are equipped to provide 1 Kerosene and EPI in Mumbwa District only basic services, and chronic shortages of staff and supplies at this In 1990, Mumbwa district had fully immunized level have caused individuals seeking 75% of its children, under the nation-wide EPI care to consistently by-pass this level -- effort. In 1991, they immunized only about 40%. receiving basic curative care at less cost- Now the proportion shows signs of falling even effective levels of the system. Financing further. Excessively centralized management ex- policies have traditionally encouraged plains most of the decline: According to the dis- inefficient health care, giving budget trict health management team, when refrigerators priority to referral hospitals, which are in most health facilities ran out of kerosene (paraf- less cost-effective than health centers as fin), the provincial offices failed to send them providers of most essential services. more fuel. Two gas stations -- Total and Texaco-- Community outreach activities, including sell kerosene in Mumbwa district, but the health most public health services, were only staff only have government chits to exchange for financed through specially-funded fuel at a (non-existent) BP station. Health staff projects, not as part of government went specially to Lusaka to request that the services. Health care services were Ministry of Health send one of its fuel trucks to provided free of charge until 1989, resupply the health facilities; all were gone on providing no discouragement for other assignments. Too bad for Mumbwa's inappropriate utilization of services. children, who will not get vaccinated because the Evidence in Box 1 illustrates how the refrigerator cannot be run on BP kerosene! health system has been undermining itself by letting existing resources and [-excerpt, World Bank Aide Memoire, 12/92] capacity go to waste. Indeed, resources are considerable: for a population of 8 million Zambia spends about $18 per capita in combined government and donor financing. The 1993 World Development Report shows that Zambia is amnong those countries whose health outcomes are far lower than what could be expected, given its level of spending on health. Despite the availability of resources, the quality of care offered by this system has not been responsive to Zambian health care needs. 1.4 Zambian citizens expect the recent price hikes for health care to be accompanied by improvements in service quality. As with all government spending in social sectors, the health sector 2 The Zambian Cadillac suffered severe cutbacks in funding The Health system in Zambia can be likened to a during the economic crisis of the Cadillac which was maintained by a relatively 1980s. With the realization that free wealthy family for years. The family's economic medical services were no longer situation has changed, and it can no longer afford to affordable, in 1987, the Government maintain this expensive vehicle without seeking officially authorized the charging of assistance from friends and relatives, to help fuel, user fees at Lusaka's University repair and maintain the gas-guzzling vehicle. Teaching Hospital. By the end of 1992, the practice of charging fees The Ministry of Health has initiated the process of had spread to all hospitals and health designing and constructing a more affordable and centers. User fees and other local efficient vehicle that can better meet the family's revenue generating measures have led needs. Cooperating partners are asked to help them to a visible improvement in some realize their vision of a new Zamnbian health vehicle: hospitals (e.g., Livingstone General to try out the parts and road-test it. Hospital), although user fees only  - 3 - cover a small proportion of Table I Comparative Health Performance total costs. These measures have not been enough, how- GNP/ IMR Life Ex- Mal- TFR ever, to meet the population's - pectancy nutrtion increasing demands for health Zambia 420 113 56 25 6 5 care services, nor to prevent Kenya 340 51 59 18 5.4 the deterioration of much of Benin 380 88 46 35 6.3 the existing infrastructure and Togo 410 86 55 24 6.4 equipment. Vietnam 240 37 64 3.8 China 370 35 71 21 2.5 1.5 The Ministry of Health's commitment to re- IMR: infant mortality rate form the health system is both Malnutrition: measured by weight for age .. .. ~~~~~~TFR: total fertility rate an explicit recognition that continuous repair of the cur- Source: 1994 State of the World's Children, UNICEF, rent "Cadillac" system is respective DHS surveys; World Development Report'1994. inefficient and inappropriate for Zambia (see box 2), and a reflection of their intent to develop a more affordable and efficient health system which will better respond to Zambia's health needs. To enable Zambian resources to maintain and sus- tain this new vehicle in the medium term, donor support will be needed to first develop and implement the plans for reform, that is to transform the existing health service system to fit with the new policies. 1.6 Over the last decade, around 6% of total government expenditures and 2.4% of the GDP have been allocated to the health sector, although annual MoH expenditures, at constant 1984 Kwacha, declined from K 159.1 million in 1982 to K 64.5 million in 1989 - a reduction of 59%. Since then, allocations to health have increased, peaking at 13% of the budget in 1994. Despite these fluctuations, Zambia has had the resources to warrant great gains in health performance; yet countries with less resources have achieved higher life expectancy and substantially lower infant mortality rates (see Table 1). Comparison of available resources to health performance indicators suggests that Zambian resources could be more effectively channeled to enable health services to contribute to the achievement of greater health gains. 1.7 Zambian commitment to reform the health system was strongly manifested in late 1991, when the national Health Policy published the decision to decentralize management of health services to the district level. The national health strategy of the Government aims to provide Zambians with "equity of access to cost-effective quality health care as close to the family as possible" by ensuring coverage with a national package of essential health services. The Government-has assumed the responsibility for ensuring these basic human rights. 1.8 The Health Reforms are an initiative to redefine and reorganize the Zambian health care system, in order to operationalize the Alma Ata primary health care principles and to respond more effectively to today's health needs. They are predicated on the belief that Zam- bian health status can be significantly improved with existing resources -- by addressing structural impediments, such as excessive centralization, fragmented implementation capacity, shortage of qualified personnel, poor regional distribution of staff, and chronic budget short- falls. Government has identified the need for reform in the areas of management and accoun- tability, community participation, public/ private partnerships, and human resource develop- ment. This has opened the door to (re)examining what health care is provided, how it is  - 4 - delivered (types of services, access, organization), what inputs are used to deliver it (efficiency), and new possibilities in terms of financing (identifying, mobilizing, and more effectively allocating resources for health care). 1.9 In all of these areas, the district is the focal point, for it is here that the health service system and communities can most effectively interact. Evidence for this comes from regional experiences, as cited in Better Health in Africa and the 1993 World Development Report, as well as from in-country experience during the last decade, acquired in part with donor assistance. Strengthening the management of health services at and within the district is regarded as the crux of the Health Reforms: successful implementation of any nation-wide health program depends on the district's effectiveness. B. HEALTH REFORM 'An anthropologist documented the Zulu healers' method of proving success with cases of epilepsy: to have the patient dive into a river known to be infested with crocodiles and lethal snakes completely nude, early on a morning during the coldest part of the year, and hold his breath as long as possible. If he came up alive, he would be cured of epilepsy. There are no records to show how many survived the ritual to tell the story! We in Zambia are trying to avoid a Zulu healer's tragedy of the past. We all need a real success story in Health Reform, consistent with a vision of health that moves away from orthodoxy... or more of the same thing. Work with us to provide environments that are conducive to health; help our people learn the art of being well; and provide a basic package of health care for all. We want to be able to spend less on drugs, less on expensive technology; less on super- specialists with long credentials whose value is only acknowledged by editors of professional journals. We want cost-effective, quality-assured health, centered around the needs and resource possibilities of the family. This vision we have defined. This vision we share with you. This vision, we learn, is now being shared by many the world over. Somewhere, it must succeed. That place is here... You cannot walk away from Zambia's reform effort saying, 'We helped Zambia dive into the river of comprehensive Health Reforms... and those chaps were courageous, but Zambia's infant mortality rate has become worse; its infrastructure remains unfixed; its drug supplies still inadequate; its epidemics uncontrolled, etc. " There is no taxpayer in Europe, Japan, America or member country of multilateral agencies who wants to hear that kind of 'success' story. Our fate is your fate too; we are in this boat together. We have gone too far together not to share in the common cause for real success - - and not one measured by the volume of documents we collectively produce... " [-Hon. Deputy Minister, Dr. Katele Kalumba - speech at MoH "Appraisal Workshop," 4/94]  -5 - B. 1 The Basis for Reforms 1.10 The National Health Policies and Strategies document of 1991 articulates the Zambian Government's vision of a successful health system that is radical in its move away from exces- sive centralization to a decentralized district focus. Underlying these reforms is the desire to build effective leadership, accountabilitv and partnership. These principles are an integral part of a health reform process that continues to be one of national analysis and debate, to identify solutions instead of scapegoats. The outcomes of this process are expected to be better quality care and better use of existing resources in infrastructure, personnel, equipment, drugs, and information. 1.11 Leadership: The MoH has recognized the vacuum created by depending on donors to provide support for primary health care services during the past 15 years. Numerous national programs, created with donor assistance, resulted overall in fragmented management and delivery of basic health services (such as a limited tuberculosis treatment program, or vaccina- tions for children which are offered on different days from ante-natal care and family planning services) without a coherent national health strategy. Under the reform process, the central Ministry is earning the leadership role in the health sector, by working with donors and national programs in a more coordinated fashion -- and moving away from direct imple- mentation of programs, for which they have little capacity and too much distance. District Health Management Teams are being trained and supported to organize and provide local health services that are of good quality and responsive to real needs of the surrounding communities. 1.12 Accountability: To meet the real health needs of rural and peri-urban populations requires that Health Reforms correct skewed management incentives, staffing patterns and utilization rates. The Ministry of Health's pattern of financial and staffing allocations reflects years of giving priority to high-tech curative care, in response to political and popular pressure, despite official (but rhetorical) support of primary health care. It is therefore not surprising that most illnesses treated at Zambian hospitals could have been treated at health centers, at lower cost and with more continuity and personal attention. The priority that had' been given to first satisfying central-level supervisors, in the past, is being shifted to a client focus, by making health care providers accountable to local Health Boards, which represent a spectrum of the community. The new patterns of accountability are more transparent and have created a spirit of openness that is conducive to discussing both successes and problems between staff and managers, and between the MoH and donor partners -- an ambiance that did not exist before the reforms were undertaken. 1.13 Partnership: Zambian health status could be dramatically improved with the current amount of available resources, both national and international. In order to provide adequate and appropriate support to health facilities, new partnerships are being developed between the center, province, districts, and donors. Instead of working to meet specific project goals and report to natiornal coordinators, health care providers are now being encouraged to organize their skills and services to work as a team providing comprehensive health services. Among the first steps in the health reform process has been the involvement and training of district health staff as partners instead of subordinates in defining appropriate standards for health care services and the use of resources. Beyond the Ministry of Health, new relationships are being explored with private non-profit providers of care, to better serve households by drawing upon private sector strengths and resources. This spirit of partnership is also shared with donors, in encouraging them to also discuss new ways of providing assistance in the health sector. It is  - 6 - clear that decentralization is not a top-down, unilateral exercise, but instead a process in which all actors are expected to contribute to the strengthening and sustainability of the new health system. The biggest remaining challenge of the Health Reforms will be to develop the spirit of partnership between the health system and communities. B.2 Planning and Implementing Reform: the Strategic Plan 1.14 To ensure visible but affordable improvements in health care utilization and quality is the overriding goal of Zambia's health reform process. The existing system has been incapable of meeting these national objectives. The Government recognized that a new frame- work and modus operandi were needed in order to consolidate their vision, past activities, and future direction, and to articulate and systematize their previously ad-hoc and intuitive decision making process. A Strategic Plan has thus been developed by the Ministry of Health, whose starting point and focus are the production levels of health - a fundamentally different ap- proach from the traditional top-down planning method. In effect, the Government is designing a system that furthers national health goals, instead of identifying problems and corresponding solutions (e.g., retooling selected parts of the car). Furthermore, the process of developing this design is fully "owned" by Zarnbia, participatory across a wide spectrum of the Ministry of Health and its outposted staff, and has built Ministry confidence in its own capacity to "drive the new car". 1.15 Zambia's vision of the new health care system is being fleshed out by answering the questions: what do.we want? what do we have? what do we need? what can we afford? In a step-by-step process (see Figure 1), the MoH has: (a) undertaken a critical self-assessment of health needs, identifying financial, physical, human and academic resources, and considering the stakeholders in the process; (b) defined a new set of health system standards - on the basis of equity and affordability principles - through-packaging cost-effective health care services for delivery from appropriate levels of the system to support individual and family health needs; (c) identified requisite inputs and management support by level of institution and its anticipated workload; Outputu hPreCs Obcbvesin (no)(y) PRconsider Figure I Conceptual FraineworkfortheStrategicPlan Figure 1 Conceptual Framnework for the Strategic Plan  (d) estimated consequent costs by types of recurrent and investment costs; (e) identified a health financing strategy to cover these costs: deciding which costs the ministry's budget will cover, what would be willingly, paid for by clients or private expenditures, and what areas external donors are willing to finance; and (f) committed itself to monitoring the progress of implementation and the impact of reform on target beneficiaries. 1.16 In this way, the MoH has developed its own set of national health service standards. The process has both empowered the MoH staff to work with donors and health staff, and legitimized health reforms still further, as the MoH worked with district medical officers, regional advisors, hospital administrators, and academics to define appropriate and affordable packages of care. Qualitative assessments, assumptions and policy decisions have been documented, and the explicit and detailed nature of the Strategic Plan also provides a foundation for future policy revisions. During the implementation phase, these standards will be tested; revisions can be anticipated as districts provide feedback on their appropriateness, and when there are epidemiological shifts in priority needs. B.3 Zambian Packages of Care: Standards and Outputs 1.17 "Health is produced within the household, and the health care system can only support the latter"; this is the Ministry of Health's point of departure for defining new standards of care. System "outputs" describe desired national norms and technical performance criteria by common disease conditions and specific population groups (0-11 months, 1-4 years, 5-14 years, 15 and above), quantifying what each level of the health care system is expected to manage relative to what households can or ought to be able to do. The bulk of the preventive activities are seen as most effective at the household and community levels, and include: use of clean water, good hygiene, nutrition, prevention of injuries, prevention of AIDS, and child spacing. 1.18 The health center has been identified as the key link for households and patients to contact the health system. Its package of services includes imnunizations for young children, health education in support of the community package (above), and other outreach activities to support commnunity health. At this first formal point of interface between the community and the health system, the client will be screened, diagnosed and either treated with basic curative care or referred to the general hospital (see Figure 2). Pre- and post natal care for mothers and children (MCH), family planning counselling and contraceptives, and nutritional rehabilitation will also be available to households through the health center. The treatment of chronic illnesses, such as tuberculosis, STIs/AIDS, and respiratory infections are also included. 1.19 The Zambian health planners, recognize that many patients today bypass the health center to seek care at hospitals. For health centers to be credible therefore requires an improvement in their diagnostic and treatment capabilities (such as blood and stool analysis, minor surgery), as well as improved means of communication with the referral hospital. These responsibilities for the health center imply expansion in terms of equipment, material, and staff. Space and infrastructure needs are also being factored into consideration of inputs required so as to ensure the effective delivery of packages of care.  -8 - The Zambian Package if Car at the HROiji Center LeL (diluutrmbve) Polyvalent Healtht Family Healfth Disease Control Clnical Care Management -Ante-naal care - Mahla Control Screening CHWfrBA Supeivilo NulioeVmia'o-nut _ STD/AIDS lab(or_ Community ri screening Mobilizaton -Family Planning Home-based care Treatment MIS/HIS -Immunizaton - ARI Drug S Youth Sexuality -CDD M n Sdxxc Hoalih _ Waletr/antation Planning qualty contol Contac Tradng GRV/MoH Strategic Plan 894 Figure 2 The Zarnbian Package of Care at the Health Center Level 1.20 With the new focus on health centers, the role of the hospital is also being redefined -- as a facility offering back-up support to the health centers, through interventions that are required too infrequently for health center staff to maintain competence, or through interven- tions requiring technology and resources that are unavailable at the health center. The hospital grounds may also contain an area that functions and is staffed as a health center, to serve the communities nearby. A limited range of preventive services, such as immunization of newborns who are delivered at the hospital or those in the pediatric ward, will be available to in-patients within the hospital, but no outreach to communities is envisioned by hospital staff, and user fees are being structured to discourage bypassing of the health center. 1.21 The content of each package is influenced by the frequency with which technical in- terventions are called for, in combination with the skills and resources required to provide that service. It is expected that the household and conmmunity package together with the services delivered at the health center and general hospital can meet 98 percent of the district popul- ation's health care needs. The criteria that the MoH applied in developing these norms were first based on the relationship between the chosen activities and existing health problems. For example, given current annual growth rates of 3.2% (that will double the population of 8 million in 23 years), and the large proportion of women and children under 15 years of age in Zambia's population (70%) who are the major users of health care facilities, resources and services must be focussed on meeting their needs through children's clinics, ante- and post- natal services, family planning and vaccination programs. To improve continuity of care, the placement of beds is being considered within health centers to permit uncomplicated deliveries. Also, the health center will assume new responsibilities for aggressive contact tracing to follow up on patients who must complete long treatment courses for chronic  - 9 - diseases, such as tuberculosis, and will be authorized to administer the necessary medications, following the hospital's guidance. And although many health center staff claim to see few AIDS cases today -- either because those patients are going directly to the hospital or because staff do not recognize the symptoms and cannot test for seropositivity, health centers will have to assume a greater role in AIDS prevention and (home-based) care, because patients and hospitals will not be able to cope with the burden by themselves. 1.22 The technical content of the national package of essential health 3 Why an Integrated Package? services contains little that health workers do not already know -- although refresher First, as people are uncertain about the nature courses will always be important to keep of the care they require, it is logical to group staff abreast of relevant and applicable procedures to increase the chance of resolving new research findings and technical the problem which they present. improvements. What is new for Zambian health care providers and managers, Second, there is growing evidence that single however, is that these services can be purpose interventions are effective in reducing organized and monitored locally - to be a particular cause of mortality, but not in relevant to their own community and reducing overall mortality. district needs. Through the defined Third, by integrating health care activities, packages of care, health care providers providers can take the opportunity of each will provide services that are compre- contactswian the t oprovide of ean- hensive in scope and integrated for the contact with the client to provide less deman- convenience and benefit of the client and ded, but needed care, such as immunizations or the community (see Box 3); for example, treatment of sexually transmitted diseases preventing future illness while providing among women. curative care; advising on good nutrition practices when providing oral rehydration solution (for diarrhea), and counseling in family planning and/or contraceptives. The packaging of health care services will bring together activities that have been under the responsibility of separate and sometimes parallel administrative structures, by making staff responsible for identifying and providing for health care needs of their clients, instead of responding primarily to vertical program guidelines. Managed in this way, health services are more cost-effective than if provided as discrete inter- ventions. More importantly, individuals with multiple ailments will go home having been treated not only for their respiratory infections but also for their sexually-transmitted disease. The integrated package approach will better reduce disability and deaths. 1.23 While the definition of the package has detailed the necessary inputs for effective delivery (in terms of drugs, staff skills, equipment, and space), it is also constrained by the availability of resources and overall affordability. Government has assumed responsibility for financing the services that are public goods (such as chlorination of drinking water or health education) or those.with positive externalities (such as prevention and treatment of schistoso- miasis). The national package encompasses IEC (eg. for FP, nutrition, AIDS, hygiene) and support for some environmental health measures (eg. vector control, water supply, sanitation). This national definition will provide a standard by which to develop and measure the proposed activities in district health plans. Information will be channeled to health care providers and consumers through research, education, and information dissemination. 1.24 By the year 2000, all Zambians with access to a health facility will be able to benefit from the basic package of care. To provide these packages, the Zambian health system will  - 10 - be structured to have a health facility within 12 kilometers for 80% of all communities; the more remote areas will be served by an outreach health post. The health centers will be staffed by nurses and paramedics with multi-disciplinary training, including management and IEC skills. They will be supervised each quarter by the district health management team, either by the latter's visit to the health facility or through a meeting with other health staff working in the district. While redirecting the main part of public resources toward packages provided under the purview of the district health boards, the Government will also provide tertiary health care and allow those who can afford higher cost services to make that choice, on the principle of individual responsibility for health2'. B.4 What has Changed so Far? (achievements, issues) 1.25 Health System Management: Strong political and technical commitment from central government, particularly the MoH, was the necessary catalyst for the accomplishments of 1993-1994. A small Health Reform Implementation Team (HRIT) was set up in 1992, as a transitional unit to organize the process of internal change. As a project team, it has far exceeded expectations in its ability to create capacity for implementing Health Reforms, by working closely with the Planning and Management Unit and drawing in staff from diverse departments within the MoH, and by working with the Ministry of Finance and Ministry of Justice to develop new modalities for the health system that are financially and legally sustainable. 1.26 The major institutional change so far has been the devolution to district (and central hospital) level of key MoH functions, namely planning, management, service delivery, resource allocation and supplementary revenue generation. In 1992, the HRIT intended to phase in reforms by first working with three and then 22 districts, to deconcentrate fiscal decisions. In subsequent discussions with the World Bank, WHO, UNICEF and DANIDA, the Government decided to provide some direct budgetary support in all 61 districts so that the latter could locally plan and implement health activities'. Autonomously managed District Health Boards (DHB), accountable technically to the MoH and administratively to Local Government, and Hospital Management Boards (for the three tertiary facilities in Zambia) have been legally established since 1993. This enables direct transfer of funds from the Ministry of Finance to districts and tertiary hospitals, where the Boards have been delegated discretionary fiscal authority - enabling management teams to ensure that service providers have the timely supplies of fuel, stationery and materials essential to delivery of care, improved communications and guidance. It is also significant that for the first time, donors also agreed to provide undesignated support to respond to district priorities, instead of ear- marking their assistance to specific and partial disease control projects. 1.27 The receipt of funds in each district was also contingent upon district plans developed by district health personnel and local government, and the availability of a minimum accounting capability within the district health management team (DHMT). Although not all 3' K. Kalumba, E Nangawe, L Muuka-Kalunba, V. Musowe. 'Beyond Our Own Interests: Zambia's Health System Reform Agenda into the Next Century." Paper presented to WHO conference on Health Reform, Geneva, December 1993. 4t This support differed significandiy from traditional modes of assistance: the donors had not only agreed to provide recurrent cost support; districts would not necessarily know the specific source of their funds, and disbursements would be accounted for under one national system.  - 11 - 61 districts possessed the same resources and capacity, all were given an equal opportunity to carry out rapid assessments of their respective coverage areas (districts) to identify and priori- tize problems. Teams of facilitators and trainers fanned out to all provinces throughout 1993, in an effort to bring all districts up to speed. 1.28 The attributions of the provincial level also change substantially under the health reforms. Provincial medical officers, previously the chief administrator of local funds, become regional health (technical) advisors and facilitators with incentives to cooperate with district and central staff. Now considered an extension of the central level, the provincial teams are called upon to provide districts with a pool of expertise in health planning and management, human resource development, technical support for clinical services and basic health programs, logistics, and administration. Routine information collection, monitoring, analysis, and feedback from these levels to the districts will help to strengthen practices for good quality health care. 1.29 The national level is being restructured to provide policy guidance and administrative support to the periphery; sub-divisions within the Ministry (organized around vertical programs and donor inputs, such as MCH or Essential Drugs, until now) are being encouraged to break out of their "fiefdoms" to interact and coordinate with other departments in planning their support activities to districts, especially as donors are asked to support the Strategic Plan instead of targeted interventions. As a typical example, the National Food and Nutrition Commission (NFNC) - that had worked in isolation, undertaken only those few activities with donor support, and languished from a lack of leadership, morale and strategic focus - is now being recognized as the 'program manager' at the central level for combating Zambia's nutrition problems. The nutrition unit of the MoH was dissolved and merged with the NFNC, as part of the reform process; the latter is now represented in the Capacity Building Team and is actively involved in the training and orientation of districts. The Ministry has determined that specific national objectives -- particularly conceming nutrition, family planning, and AIDS- will be best attained by strengthening the entire Zambian health care system, as proposed in the reforms, and ensuring the effective use of an integrated package of care by every household. 1.30 The Ministry of Health has few full-time health planners. The Planning and Management Unit has worked closely with the Health Reform Implementation Team, however, to bring a wide range of doctors, nurses, and para-professionals into the reform decision-making process. The unit has also made extensive use of resident expatriate professionals, particularly through Netherlands, SIDA, UNICEF, and WHO, to complement its members' own skills, and has realized through this process that future skills at the central ministry must go beyond the traditional medical doctor to include planners, economists, archi- tects and nurses, who can contribute non-medical and gender-sensitive perspectives to policy decisions in the workplace, and to the changing relationship between the service provider and user. A supportive MoH will also require capacity to help draft legislation to support the Health Reforms. 1.31 Human Resource Development and Management: The process of reorganizing health services to be decentralized and transparent in their accountability requires substantial changes in current human resource policies and management systems. Technical support and donor funds have already begun to assist the MoH to reformulate human resource policies through establishment of an HRD Policy and Planning Unit. Two people have been appointed to develop a human resource information system, and they are starting by surveying the  - 12 - number and location of staff currently employed by MoH; over 400 doctors and some 10,000 other health staff are currently estimated to be employed by the MoH. 1.32 A study of terms and conditions of service has also been launched by a local consul- tant, to start addressing the chronic staff shortages among Zambia's public and private health care providers. The national Schools of Medicine, Health Services and Nursing have been training doctors, clinical officers and other health personnel since 1973. Poor remuneration and conditions of service for government health personnel (along with others in the public service) have made it difficult, however, to recruit and retain staff, who can find better-paid employment in neighboring countries and the private sector. Those who are employed in the Zambian public sector move to places where they can supplement their income through extra jobs, find educational opportunities for their families, and abandon or ignore rural areas where such opportunities or attractions do not exist. This situation has led to the employment of expatriate doctors (75% of total physicians) - using resources which could be spent elsewhere in the sector. The MoH is considering ways of creating more attractive working conditions in rural areas, through supplementary salary allowances, housing, and improved communications. Current civil service regulations -- that allow working couples to stay together and retain jobs and salary, regardless of location -- are being reconsidered to discourage over-staffing in urban areas and simultaneous under-staffing in rural areas. Although the conditions of civil service for health staff cannot be improved in isolation from the rest of the civil service, health institutions that have generated sufficient medical fees have awarded incentive bonuses to hospital staff. Transport and housing are also being provided to health personnel, particularly in geographic areas that are difficult to staff. 1.33 Furthermore, to prepare district health personnel for increased autonomy and respon- sibilities, many capacity-building activities have been underway since 1992. District Health Management Teams received training in planning, management, financing, and problem- solving methods, while specialized training was given in accounting to hospital administrators. With support from DANIDA, ODA, UNICEF, SIDA, and the Netherlands, the MoH embarked upon an ambitious program of imparting management skills to staff in all districts in early 1993. A private accounting firm was engaged to train at least one staff member from each district in a new set of national accounting and monitoring procedures. Upon satisfactory completion of this accounting course, and development of a six-month district activity plan, districts were granted funds to cover a portion of their recurrent operating and maintenance costs. Each district now has an officer trained in the required accounting and reporting proce- dures, and the MoH recognizes the need to "provide incentives for accountability" or "raise the status" of local staff who are expected to ensure correct accounting. 1.34 Further training is being planned to develop the capacity of district and hospital management boards to plan, deploy and manage their human resources through personnel officers. New job descriptions, performance appraisal systems, a user-friendly personnel record system, and a management development system all for district health personnel are being planned for implementation in the medium-term strategy. 1.35 Rehabilitation of Infrastructure: Critical rehabilitation of central hospitals, pro- vincial hospitals, and district hospitals has been initiated with Government funds. The consi- derable investment made in Zambian health facilities - numbering 1007 health centers and 100 hospitals of varying sizes - requires a substantial increase in funds to prevent further dete- rioration; however, renovation must be to sustainable and appropriate standards. New design standards for facilities are being developed as part of the Strategic Plan. The HRIT has been  - 13 - working on the definition of space requirements for effective delivery of the package of care by each level of the system. In this way, they will be able to apply politically and technically accepted criteria in identifying the health facilities and offices requiring priority attention during project implementation. At the same time, by decentralizing the allocation and use of their financial resources, district health management teams and hospital administrations have already started to address some of the poor hygienic and working conditions that have negatively affected staff morale, motivation, and standards of service in the past. 1.36 New capital investment will also have to be envisioned, to respond to the shifts and growth in population to urban (mainly slum) areas, where almost 50% of the population is now concentrated and where population growth is most rapid. The effectiveness of the MoH has also been impaired by the fact that the central Ministry services are dispersed among six rented buildings that are poorly maintained. Crowded working conditions are exacerbated by the difficulties of communication between the various buildings for lack of telephones, and the distances between ministry buildings hampers efficiency. To call a planning meeting requires a major logistical effort. Investments will also be needed at this level to enable senior health managers to respond more efficiently to ongoing concerns; these will involve telecommuni- cations improvements and facilities that physically unify the central ministry. 1.37 Health Information System (HIS): The development of the Strategic Plan has illustrated the relevance of data collection and analysis to the MoH. The detailed definition of the national package of essential health care, and the packaging of these services for delivery, has led to the creation of a database that can be used to rapidly assess and respond to new assumptions and to provide and evaluate new scenarios. This database will be used in the implementation of the Strategic Plan, and resources are being allocated for its maintenance in the medium term. 1.38 Development of local information systems has been initiated through the inclusion of monitoring indicators within district health plans. District Health Management Teams are starting to ask the central level for support in strengthening their capacity for local data analysis, as they realize the need for information to inform district policy and management decisions. This reverses the situation in which health workers in districts collected enormous amounts of data that had no meaning for themselves, and was consequently delayed and of poor quality. As the quality of district planning will increasingly be judged on the basis of its impact on local health indicators (from 1995), and not on individual program outputs, the regional offices and the Health Information Unit at the MoH are also starting to organize a "rethinking" of the national health informnation system, as part of the Implementation phase. SIDA has provided technical assistance, training, computers, and stationery to address certain resource and capacity issues at the central level, but provincial and district levels will require substantial new support. 1.39 Drugs and Supplies: Aside from sympathetic and skilled health staff, clients place the highest value on the availability of affordable drugs as an integral part of health services5'. The MoH has obtained an annual $5 million in donor support (SIDA, Netherlands, EC) for pre-packaged kits of essential drugs and basic equipment specifically for rural health facilities, for at least the past five years. Of its own Government allocation for drugs and supplies -- K5 billion (US$7 million, 1994) -- half is consumed by the three central hospitals, with the 5' Beneficiary Assessment 1994.  - 14 - remainder going to district hospitals and urban health centers. Thus, while this distribution of government and donor resources has assured a reasonable and timely supply of drugs around the country for rural health centers and (urban) central hospitals, the peri-urban areas and district hospitals have suffered from inadequate government funding and little donor supportt'. 1.40 The HRIT is grappling with several issues in the reliable supply and use of consu- mable products and pharmaceuticals in the public health sector. First, is the anachronism of a centralized supply-driven distribution system interacting with an increasingly decentralized district-based health system. The distribution system undoubtedly needs to become more res- ponsive to district-level concerns - improving regularity of supply (particularly during the rainy season when poor road conditions can leave drug kits at the district capital for months). Medical Stores Limited (MSL), a parastatal with a monopoly on drug purchases and distribu- tion, has overlapping responsibilities with the MoH and juggles a variety of donors and the various medicines supplied by each at different times. Under the Health Reforms, the MoH and the MSL will explore ways of improving the efficiency of this system. 1.41 Availability of imported drugs has also not assured appropriate or efficient use of available drug supplies. The Health Reforms will endeavor to strengthen accountability within the district for proper storage and prescription practices that will lead to more efficient use of drugs. Although those health facilities receiving donor drug kits cite drug shortages as a chro- nic problem (in terms of drug quantity received), part of the problem may be inefficient therapeutic practices, such as over-prescription of penicillin and other antibiotics. Training health care providers in efficient drug use has been unsystematic and not enforced through supervision. 1.42 Transport and Logistics: The distribution of drugs, supervision of staff, community outreach, and referral between different levels of Zambia's health care system all depend upon a functional transport and logistics system. SIDA has supported the training of MoH transport administrators, drivers, and mechanics since the 1980s, and the EC has provided spare parts for the MoH's considerable transport fleet. Yet, even with donor assistance, the MoH was not able to address the fundamental issues of regular maintenance and accountability for use, which become increasingly important for an aging transport fleet. Again, the recent availabil- ity of discretionary funds within the district budget has mitigated some of the immediate logis- tical issues, by allowing health personnel to purchase spare parts and fuel when needed; this has been confirmed by field visits and the review of quarterly district progress reports. Under Health Reforms, the short-term solution is the-partial replacement of run-down vehicles. At the same time, the Ministry of Health is establishing a transport policy that is primarily based upon district level transport needs for assuring effective support for the package of care. 1.43 Financing: By early 1993, the Government decided to make demonstrable progress in the delivery of social services a top government priority - a decision not only warranted by widespread poverty throughout the country, particularly in urban areas, but also essential for sustaining public support for the overall adjustment program. The MoH has successfully argued for and received an increase in the share of the total central budget allocation for health from an annual average of 8% in recent years to 13% in 1994. Within the Health Ministry, the structure of the budget has been revised to better reflect the process of reform, 6' DANIDA is providing drug kits to urban centers for 15 months starting in 1994, as part of an emergency support programn.  - 15 - with the major change being the inclusion of all health services under the Permanent Secretary, Ministry of Health, as opposed to the previous system whereby budgetary estimates and accounting for expenditures on health services at provincial level and below were under the Provincial Permanent Secretary (of the Ministry of Local Government). 1.44 At the same time, health financing is starting to move from a centralized budget system (in which districts suffered from insufficient and sporadic allocations) to a decen- tralized system where the district health boards directly receive block grants. Through an experimental pilot project in three districts during 1991-1992, the Ministry of Health was able to demonstrate that effective and comprehensive management of health services was possible at much lower levels of government, i.e., at the district level. This led to the creation of health and management Boards in April 1993, through special statutory instruments, to enable districts and hospitals to directly receive and disburse government financing. Since August 1993, all districts have received funding for recurrent costs: first on an interim basis with donor financing only, then with the addition of Government funding since January 1994. Building on the results of that effort, after external evaluation, district health budgeting has become a reality throughout the country. 1.45 Nearly 18% of the MoH budget is now allocated as grants to District Health Manage- ment Boards, in line with its decentralization policies. These are currently based on a weighted allocation of US$2/capita for non-personnel recurrent costs. The MoH and the Ministry of Finance have collaborated to allocate funds on the basis of the 1994 population estimates (calculated from the 1990 census) in each district, weighted by the respective population densities. (Low density areas with less than ten people per square kilometer receive proportionately more per capita than high density areas where the population is greater than 150 people per square kilometer.) From 1995 poverty indicators will also be used at provincial levels to weight the MoH financial allocations to districts. Detailed guidelines have been developed by the MoH to assist district management teams in the formulation of their annual plans; funding had initially been contingent upon the development and approval of district health plans that include monitorable indicators; district health management teams must also have proven accounting capacity to handle these funds locally. The criteria for "good" district plans continue to evolve as implementation of Health Reforms progress. 1.46 External assistance has enabled the Ministry to implement new projects and to sustain many others. Realizing that this resulted in program direction and policy decisions being unduly influenced by external priorities, however, the MoH is preparing the Strategic Plan as a framework to facilitate donor coordination for the new health policy and the health sector reforms. The Government is working with donors to use their funds within the context of Health Reforms, e.g., to pool funds for training so as to maximize the benefits for the districts, while strengthening individual staff skills, or pooling funds for purchase of new equipment or to meet other needs identified by districts. The Government also asked the donor community and the World Bank to assist in longer-term institution building and capacity enhancement, as well as to explore the possibility of identifying and removing structural con- straints to the delivery of social services. 1.47 Community Financing & Cost Recovery: Financing of the Zambian health system has always been problematic. The long traditions of central budgeting for health, drawing from public taxation, along with the narrow tax base in the country overall, have frustrated equity-based strategic planning in the health sector. The additional revenue required to finance health services cannot realistically be expected to come through more taxation. At the'  - 16 - same time, there is convincing evidence that Zambia households are already spending substantial out-of-pocket sums for health, both directly to private/traditional providers and pharmnacies and indirectly in transport and waiting time for public services. 1.48 Under the Health Reforms, all able-bodied Zambians with income-earning capacity are expected in principle to contribute to the cost of health care. Various strategies are being explored to mobilize private resources in support of the formal health sector, including health insurance, user fees, and other means of community financing. Private financing is envisaged as a substitute for government involvement, such as when large, urban-based employers spon- sor private health insurance to finance private health facilities. User fees, particularly for recouping public expenditures on curative care at tertiary hospitals, are expected to facilitate the reallocation of public resources for public ends. Revenue generated through agricultural cooperatives and in-kind transactions have also been explored. These options reflect the hete- rogeneity of the Zambian community and the health institutions that make up the national health system. 1.49 User Charges: The Government has progressively implemented a policy of cost- sharing through user fees to help ensure financial sustainability of publicly financed or provided health care. User charges were introduced initially in Zambia in 1989, at a rate of K4 for registration and K50 for medical exanination (when K12.5 = US$1). These fees were collected at the facility level, forwarded to the Province through the district, and banked by the Provincial Accounting Unit. Permission to use these revenues had to be granted by the Permanent Secretary of the Ministry of Health, and was rarely either sought or forthcoming. As such, there was little incentive to collect fees, although some districts/facilities resorted to (unauthorized) retention of a certain proportion for their own use in times of extreme shor- tage. A 1993 MoH directive authorized the introduction of medical fees in all districts. The fees are determined locally - at provincial or district level - with revenues currently being retained at facility or district level. Ad-hoc monitoring of the impact of health financing policy implementation suggests, however, that outpatient attendance fell by about 60% and delivery services by over 20% following introduction of fees in August 1993 in urban Lusaka. At the same time, vulnerable groups seem to have been denied access to health services. The Ministry has reconvened, the Health Care Financing Working Group to ensure that such issues are raised, addressed and fed into the policy development process --with a particular focus on increasing, rather than denyingi access to health care. 1.50 NGO/Private sector: While the Government will continue to play a dominant role in the provision of health services for the foreseeable future, they also provide grants and subsi- dies to (religious) mission and private hospitals (including those run by Zambia Consolidated Copper Mines) in recognition of their contributions to national health service. In rural Zambia, church-run health institutions provide over 50 percent of the health services, and depend upon government block grants as well as overseas contributions to cover their running costs. Incentives and grants to ZCCM hospitals - whose use had been limited to employees, their families, and those others able to pay - are being tied to provision of health services to the community at large, with the intention of improving equitable access to health services and to raising low utilization of the private hospital facilities. NGOs which focus on family planning concerns, such as the Planned Parenthood Association of Zambia (PPAZ), have received direct grant support from the MoH. 1.51 Remaining Challenges: Many politically difficult decisions remain to be made as part of the health reform process. On the basis of technical cost-effectiveness analysis, the  - 17 - MoH has identified the following areas where it must now begin the process of involving politicians more closely, in order to make sustainable changes in the health system: (a) Guarantee first and foremost the provision of the basic package of care. This "limits" the types of service available to those that are more cost-effective; consequently, interventions such as coronary by-pass or MRI will not be provided unless clients can pay for them, and referral hospitals will be limited in the services that they offer; (b) Rehabilitate and even extend those health facilities that are responsible for delivering the bulk of the national package of care, and consequently refrain from rehabilitating some wings of large health facilities that are not likely to be productively and affordably used under the current budget; (c) Identify ways of redeploying staff from line of rail and Lusaka to rural areas, where services have historically suffered from personnel shortages, and from hospitals to health centers, by building on the review of work conditions in the civil service that has been initiated; develop incentives for improving performance and working in needy areas, and shift decision-making authority for hiring and firing to district health boards; (d) Conduct cost-effectiveness analyses of all health departments and para-statal agencies, such as the Flying Doctor Service, in terms of support to basic health services; (e) Move away from the UTH as the sole training center for doctors, by sending medical students to general hospitals and districts for more practical management and clinical training - keeping in mind the need to strike a balance between what is good for the country/society and what is good for individual medical students; (f) Provide supplementary financing for district plans -- beyond the block grants for recurrent costs - using criteria, such as levels of poverty (1994 Poverty Assessment), updated statistical information from CSO regarding population density, proven management capacity through programmatic and financial audits, and conimunity-level initiative to launch new health promotion activities; and (g) Reorganize the central Ministry of Health to more effectively support the district-based system - with the consequent likelihood of down-sizing the number of staff based at headquarters.  - 18 - C. DONOR COORDINATION 1.52 The MoH has encouraged donor coordination in support of the Health Reforms, and has proposed the following principles to their donor partners: (a) The Government's strategic plan will serve as the framework for all donor contributions to the sector, and all donor support should fit within it. This strategic plan will be discussed and updated regularly with all interested donors. (b) Based on the agreed strategic plan, Government will develop a five-year rolling investment program and an annual budget for recurrent costs and grants. These will also be discussed with donors and fully reflect all donor support. The investment program and the recurrent budget will represent a consolidation of the programs from all district, hospital and parastatal boards. (c) For the recurrent budget, all donor support should be channelled to Districts using a single set of planning, budgeting, disbursement, accounting and auditing mechanisms. 1.53 This coordination effort reflects a desire to minimize possible duplication of services, and to avoid contradictory and inequitable policies and activities. By focussing on capacity building, health policy reform and operationally relevant research, the MoH is in a stronger position to negotiate the required donor support for national priorities. The national Health PolicyZ' acknowledges the crucial importance of this donor funding for the future development of the Health sector, and consequently the need to involve donors in the health planning and review process. The Ministry has held regular donor coordination meetings since 1992, to ensure coordinated support for the implementation of the Health Reforms. 1.54 Starting at the early stages of project preparation, the World Bank team worked together with WHO and UNICEF to speak with "one voice." Given the different comparative advantages of these organizations, this partnership has worked well to maintain coherence and continuity in support of the Government's health reform process. 1.55 Since the Health Policy Reforms were articulated, bilateral donors already supporting the health sector have responded very positively, and new donors have entered the sector. Within the new framework, donor pledges and commitments are becoming easier to monitor, and the relationship between the MoH and donor agencies is generally warm. This coordina- tion will continue to be nurtured and encouraged to grow further. For example, donors are making increasing efforts to synchronize missions of a similar nature, in the interests of both information sharing and time savings for their Zambian counterparts, and the MoH Planning and Management Unit will begin to coordinate outside visits and missions, so as to permit more time for staff to carry on with pending work. A joint donor statement reflecting support of the Health Reforms is attached as Annex 4. Z1MoH, "Natiol Health Policies and Soategies (Health Reforns)", October 1992  - 19 - II. PROPOSED PROJECT A. PROJECT OBJECTIVES 2.1 The IDA project would support the process set in motion through the Government's health reform program, with a view to improving access to and the quality of a national package of essential health services in a decentralized health care delivery system. In this way, the project aims to improve health outcomes, particularly in terms of nutritional status, lower fertility, and reduced transmission of HIV. Fulfilling these objectives would contribute to the social sustainability of the adjustment program and strengthen the human resource base necessary for the future growth of Zambia. B. PRoJECT DEscRImON 2.2 The IDA project would consist of investment and incremental recurrent financing within a consolidated health reform program prepared by Government and agreed with a core group of donors. IDA financing will be structured to fit with the national health reform program, financing a slice of each of three national budgets (investment, policy development and recurrent) based on annual agreements. The exact mix would be determined on an annual basis but with a three-year rolling program. 2.3 The project is designed as an inte- 4 The Planner and the TA grated sector support project, such as those projects planned in agriculture and The planner: "I need answers, not ques- education in Zambia and recently approved tions. You are the expert, and you have the in the transport sector in Mozambique. knowledge. If I were lost in a forest and This approach is being taken when the you came by with compass and map, I Government has taken the lead in carefully would ask you to show me the way out!" preparing a common framework under which donors to the sector (including IDA) TA: "Of course, I will show you the way will normally provide their support. This out of the forest, but first you have to tell approach implies changes in the way the me where you want to go" [conversation project is described and outlined. In tradi- excerpt at MoH Lusaka, 1/93] tional investment projects, the preparation and appraisal process focus on reviewing and planning the specific items (such as infrastructure or support systems) slated for financing. In this case, the project supports the Government in on-going development of policy and its operationalization, even as reforms are proceeding. Therefore, specific items will be identified throughout implementation of the project: when applying a sector support model for financing, project preparation and appraisal are focused on the nature of the apex institution's involvement and the processes by which specific investment items will be identified during implementation. It also implies a different attitude towards expert advice (see box 4), where clear directions are specified by Government and the expert helps with the details. 2.4 There are no clear cut answers to a number of issues that the Health Reforms are raising. The MoH will continue to require technical and financial support to test and debate the most appropriate responses for Zambia. The changes being implemented at the district,  - 20 - provincial and central levels will also call for mid-course assessments and revisions that build upon in-country experience 2.5 The IDA credit would be divided into three major components (the numbers in parentheses are tentative estimates of the share of the credit allocated to each component): (a) policy development support (3%), including support for national policy devel- opment and operational research to help refine the basic policy framework, and adapt operational strategies to the Zambian context through phased testing of delivery systems, operations research and studies; (b) investment program support (95%), and incremental recurrent budget support (1 %) which would support Districts in the implementation of Health Reforms through their service delivery, for both capital investment costs (or "hardware" such as civil works, training and logistics equipment) and recurrent costs (including supplies, drugs, maintenance and logistics). This latter support will be provided on a sliding scale, with proportional increases in Zambian contri- butions over the duration of this project; and (c) external monitoring and evaluation (1 %) including support for monitoring progress attained through Health Reforms, and evaluation through beneficiary assessments, auditing, and quality control. IDA would play the role of "donor of last resort", by supporting those elements of the agreed upon national health program for which there is no other donor funding. Bank technical supervision and facilitation will continue to work with all donors and the Government to ensure that the planning, imnplementation and evaluation components are strong, and continue to be developed and institutionalized by the relevant Zambian agencies. 2.6 Under the policy development component, the project will support research and deve- lopment, particularly through operations research. This will include, for example, the devel- opment of community health approaches in peri-urban areas, appropriate cost-sharing mecha- nisms and fees, refining the definition of the multi-disciplinary skills required for effective delivery of the package of care, and methods for strengthening management practices within the health facilities and at the support levels. They will be funded on the basis of: (1) testing new approaches, (2) innovation, (3) limited timne frame, and (4) utility for learning from expe- rience. The HRIT would each year present its plans for following year as part of its discus- sions with donors on the budget for the following year. 2.7 The investment program will include the following elements and be based on a summary of the individual district and hospital boards' investment programs consolidated in accordance with the Strategic Plan. (a) Anfrastructure and equipment: rehabilitation starting with health service facilities, but also considering the needs of newly established Health Boards and DHMTs, and the physically fragmented MoH. Transparent criteria and standards are established in the Strategic Plan to enable the Health Boards to "qualify" for supplementary assistance and supervision;  - 21 - (b) Capacity building: to improve planning and implementation skills at district, regional, and central levels in the areas of clinical competence, corporate planning and management, outreach, monitoring, use of the HMIS, and super- vision; and (c) Supplies: to assure a regular supply of essential drugs and materials for health service facilities to function effectively. 2.8 Incremental recurrent budget support would help finance that part of the Government's recurrent budget that are related to the "retooling" of the health system. At health center level, there will be phased implementation of the Health Reforms, so that in each district, an average of two facilities will be covered each year. These facilities will have incremental capital and recurrent cost implications that would be eligible for IDA funding, such as temporary increases in costs as staff are reoriented towards ensuring that their clients make effective use of the package of care, seminars for district staff on their new responsibilities, and improved community outreach which will be more intense during start-up. Such items would be included in the budget for each year, and discussed with donors in October of the preceding year. 2.9 External evaluation and monitoring will be integral to determining the shape of the following year's funding. Beneficiary assessments will monitor structural and procedural changes within the MoH, and client perceptions of improvements in health care services. These will be supplemented by output measures, such as utilization rate changes, and selected specific program indicators (e.g., nutritional status, vaccination coverage, ante-natal care visits, and contraceptive prevalence rates as collected by the Food Security, Health and Nutrition monitoring system and from the regular reporting from districts). Finally, outcome measures would be monitored by external ad-hoc studies, and by "buying" into the regular social indicator data collection by the Central Statistics Office. The evaluation component would help fund such external evaluations along with technical, financial and procurement audits. The audits would be carried out by private independent auditors; these will help to draw lessons from the Health Reforms and to monitor the innovative aspects of procurement and disbursements being proposed under this project. C. HEALTH REFORM IMPLEMENTATION PROGRAM 1995-98 Health Sector Management 2.10 The role of the Ministry of Health headquarters is being transformed to provide: (a) planning and capacity building support for initiatives in district-based health care management; and monitoring of performance, both for areas of weakness and for disseminating best practice for quality improvements in health care services; (b) technical expertise in basic health programs and clinical services to advise health care providers; and  - 22 - (c) administrative support in the form of a procurement and distribution system that is responsive to district requests (for drugs, medical equipment, etc.), and budgeting, accounting and audit support. The MoH will remain responsible for policy formulation, resource allocation, donor coordina- tion, technical and logistical support (including essential research and technical guidance), but they will shift their modus operandi from top-down planning to support for the district-based planning approach. By consequence, the central MoH is being reconfigured in order to res- pond more effectively to the needs of districts and service providers assigned to health facilities and communities, and a net reduction of central and provincial level staff is anticipa- ted. An initial plan will be finalized by end 1994, and actual changes will be in place in 1995 (see Annex 2). Review of progress will be included in the annual Strategic Plan review. 2.11 Central-level program managers are being trained on-the-job to develop strategies and plans that assist districts in designing and implementing quality health care services. National program managers will become advisors to the districts to help adapt the national package and define appropriate strategies for its delivery in the specific local settings. Program managers will monitor outputs and outcomes to track improvements and/or the need for research in their specific areas. In addition, they will ensure that the continual development of Zambia's health-care system benefit from lessons learned internationally regarding interventions and strategies for addressing special health concerns, and monitor the quality of health care services, ensuring that standards are maintained. For these they will need external financial and technical support for policy development and operations research. 2.12 Program managers will also have a role in directly supporting the household and com- munity package. Interventions such as family planning, prevention of HIV/AIDS, diarrhoeal disease control and good nutrition will require inter-sectoral efforts to enable families to affect change within their households. National program managers have a critical role in coordina- ting with relevant sectors to ensure community access to information, technical assistance and physical resources. 2.13 The most critical dimension of decentralization is the extent to which efforts reach communities and families. District Health Boards (DHBs) will oversee the delivery of the locally adapted national package of essential health services in their geographic areas of res- ponsibility. The DHBs will also work with communities and health centers to set up Area Health Boards (at sub-district level) - further linking the health services with clients, and encouraging quality control and community involvement. Hospital Boards will oversee the delivery of referral packages of care through provincial and tertiary hospitals that support, but do not compete with, delivery of the district packages of care. By 1996, district and hospital authorities will have discretionary authority for personnel recruitment, assignment of tasks, and the allocation of human resources. They will also develop, together with Neighborhood Committees and health workers, suitable structures for local decision-making, quality control and financial accountability. 2.14 These boards will be technically accountable to the Ministry of Health for overall service delivery, and be politically and administratively responsive to the matching local government unit. Districts will receive supplementary funding (in addition to the $2/capita for operating costs) on the basis of their proven capacity to budget for depreciation and manage a separate bank account for non-operating costs, to ensure that funds are reserved for future investment needs. The evolving capacity of the district health management teams are being  - 23 - constantly monitored through regular supervision and contact by the HRIT. For example, a review of district-level capacity to manage funds showed that only 4 out of 61 districts had intentionally mismanaged their discretionary budget in the second hall of 1993. In June 1994, district management teams met for a week in Lusaka with central level program advisors to discuss plans and expectations for next year (a total of six weeks of meetings for central level). Not only did this show that decentralization is not synonymous with a total transfer of responsibility; both central and district staff learned that as the latter's capacity and operational responsibility grow, it is incumbent upon central-level staff to provide timely technical advice. 2.15 The district will be the basic unit of management where bottom-up planning and implementation initiatives meet the thrust of national policies. Future decentralization to districts will be in the following areas: - management of district-based services including all resources (capital, recurrent, equipment and human); - provision of integrated health programs based on established output, process and input standards which respond to local priorities; - auditing district performance in terms of quality, quantity and accessibility; - preparation of an annual health plan in accordance with resources available and local priorities and national goals; - consultation with Local Government and other agencies whose collaboration is required for effective delivery of health care; - collaboration with the Regional Health Manager as the local agent of the Ministry and support to the Manager in the exercise of his/her responsibilities; - establishing Area Boards of Health, provide specific terms of reference, and to support them in their work; - encouraging community participation in health planning and delivery. Progress and future steps in these areas will be discussed at the time of annual consultations. 2.16 To ensure that districts have the capacity to execute the above responsibilities, a training program is planned from August to November 1994, with SIDA funding, for three members of the management team. One course will be geared towards team leaders, and will focus on management and leadership-building skills; the second will be for program develop- ment skills in applied epidemiology and systems research; the third will be for development of administrative skills. These courses have been organized to avoid a vacuum of leadership and management within the district; only one member from each team will be away on training at any given time. 2.17 Commensurate with the changes at district and central MoH levels, the secondary and tertiary hospital levels have requested HRIT assistance in adapting to the new planning and budgeting methods that are based on defined packages of care. While some district-level methods will be adapted to accommodate institutional specificities of larger hospitals, it is significant that the traditionally more recalcitrant sectors of the medical establishment have started to demand participation in the Health Reforms. Training in planning and management problem-solving skills for the provincial hospitals are planned for end-1994.  - 24 - Human Resource Development 2.18 Underlying the vision of decentralization is the development of partnerships for health -- between the MoH, health care providers, district managers, communities, and non- governmental partners. This implies a substantial cultural change -- from "parrots" who respect and obey the hierarchy to partners who can argue back, question and make demands upon the central level - recognized by the MoH as a challenge for Human Resource Development. In order to increase the effectiveness of the planning, deployment and manage- ment of human resources within the Government health service, and to strengthen the capacity of district health staff to think more analytically and productively, the appraisal mission agreed with the Government upon the areas of human resource development that are detailed in the Strategic Plan. Progress in these areas will be discussed during annual consultations. ODA and other donors have already agreed to provide some financial support to the MoH in: - the development and implementation of a personnel handbook, - training of personnel officers, - provision of "training of trainers" skills to district staff, - development of new job descriptions for all categories of staff, and improved transparency in terms of career advancement opportunities, - establishment of a performance appraisal system for senior staff within the districts, - development of a supportive supervision and feedback system, especially where there is a performance gap that needs correction, - development of a district-level human resource planning system and a personnel record system, to enable district managers to improve working relations and staff morale within their teams. The aim is to be able to evaluate district performance primarily on the basis of changes in community health indicators and client satisfaction, with individual staff evaluated on their multi-disciplinary skills and contribution to teamwork. Rehabilitation of Infrastructure 2.19 The investment program will include an infrastructure component, comprising the following Government priorities in the field of rehabilitation and extension of health facilities: (a) rehabilitation and extension of existing Rural Health Centers (RHCs) to enable them to support the delivery of the RHC package of health services; and (b) creating additional bed-capacity at Urban Health Centers in Lusaka to reduce the pressure on hospital bed-space. 2.20 Rural Health Centers (RHC) are being designed to serve a population of 10,000. Considering the services for which they will be responsible, this translates into an area of 492 m2 per facility, in terms of space requirements. Existing RHCs throughout Zambia will be ranked by catchment area population, access radius, and physical conditions. Priority will be accorded to RHCs on the basis of their respective staff's management capacity and performance. Based on existing bed capacity, the required extension floor area is calculated per selected facility. Physical conditions and possibilities for converting and expanding existing facilities to accommodate new spatial needs will be surveyed after selection.  - 25 - 2.21 This new RHC concept will allow for adjustment to typical local conditions and requirements. Where RHCs take responsibility for providing health services to small pockets of population groups living further than 22 km away, mobile health workers will operate from satellite home-based work stations. An estimated 10% of the RHCs will require this set-up. Out of the existing 733 RHCs, 470 are slated for rehabilitation, and 297 require alterations or extensions, at a total estimated cost of US$ 59.3 million. 59 health posts are also identified as needing rehabilitation, at a cost of $2.1 million. A major portion of the resources available for infrastructure will go towards the construction and rehabilitation of staff housing, with particular priority given to those areas where there is no alternative in terms of a rental market. Lack of housing is consistently cited as one of the major constraints to assignment of staff in rural areas. An estimated $94 million is needed for staff housing. The total estimated cost for rural health infrastructure is US$155.4 million over a four year period. 2.22 Urban Health Centers will serve an average population group of 50,000 requiring a total floor area of 1,128m2 per facility. Most UHCs currently accommodate less than ten in- patient beds. This number will be increased to 29 beds, in order to reduce the pressure on hospital beds in Lusaka (less than 2 per 1000). The selection of urban health centers to be rehabilitated is based on criteria of service to low-income groups, urgency of physical conditions, assessment of the possibilities for expansion, staff management capacity and performance. 68 of the existing 203 UHCs are targeted for rehabilitation or extension to a 29 bed capacity. An estimated $22.8 million is needed to realize this goal over a four year period. 2.23 Out of the above identified needs for health infrastructure (both rural and urban), the Governrent, World Bank and ODA will finance $44 million in the years 1995 through 1998. Other donors are being sought to fund the remainder. The funding gap will not, however, jeopardize the sustainability of the project presented here, as the criteria for implementation are based on district-specific capacity and needs. Other infrastructure (such as secondary and tertiary referral hospitals) will be included in the program as their role in supporting the delivery of the basic package of care is clarified and refined; the MoH is currently working on these clarifications. Government has agreed (as a condition of disbursement) to access funds from the IDA credit for civil works for other than District facilities only after the equivalent of at least US$10 million has been disbursed for health centers and other district level facilities (para 5.3). User-Friendly Health Information System 2.24 Redesign of the health information system (HIS) is foreseen as one more component of national Health Reforms, in order to create a system that is more responsive to the district requirements. To build upon the strengths of the existing system, the MoH will review the data that health center and hospital workers are currently collecting, with the objective of consolidating current requirements to be locally useful (to the community and health facility) in the first instance, and aggregated at the district, provincial and central levels. The aggrega' tion of data at provincial and central level will be for purposes of national monitoring. A Core Review Group will be created to analyze this data, disseminate it within the central ministry, and provide feedback with the periphery as part of their district supervision. To strengthen HIS capacity, particularly within the districts, new formats, equipment, training and attitudinal change will be needed at all levels. Progress will be reviewed in the annual Strategic Plan Implementation review.  - 26 - Drugs and Supplies 2.25 The national drug policy will be reformulated by the first quarter of 1995, to reflect more support for the decentralized health system, as articulated in the Strategic Plan. The Zambia National Formulary (essential drug list) will be consequently updated to reflect the drugs needed for effective delivery of the newly defined national package of essential health services. These revisions will be spearheaded by the central Department of Pharmaceuticals and Supplies and Medical Stores Limited, with the involvement of all levels of the health system; they will take into account disease prevalence and incidence, safety and efficacy, therapeutic advantage, benefit/risk ratio as well as costs. 2.26 Decentralization of the drug budget is envisaged to assure that the supply system becomes more responsive to district needs. This means that each district will receive the funds allocated to their budget line for drugs, and have the authorization to purchase these supplies at the most competitive prices. Currently, these funds are a notional allocation, in that the districts receive centrally-distributed drugs (in kind) instead of funds. Under the envisaged system, districts will not necessarily be expected to fend for themselves; the central level will still assure the availability of enough products for the public system, and some provinces are already discussing ways of making bulk purchases of drugs and supplies for their districts as part of their new responsibilities. A decentralized drug-purchasing system also opens the way for linking local revenue generation through user fees with the restocking of drugs for the community health facility. Equipment and Transport: Logistics and Maintenance 2.27 Future vehicle purchases, even those financed by donors, will be standardized by using criteria such as affordable maintenance and availability of spare parts. As part of the decentralized management system, districts will be encouraged to think about the best way to secure a regular supply and safe storage of spare parts. Their budgets, as well as those of the provincial and central ministry will include lines to cover recurrent expenditures for repair maintenance, spare parts, oil, lubricants, fuel and transport allowances. The government garages and workshops, already located in each province, will be strengthened to service repairs that cannot be handled within the districts. Furthermore, district budgets will allow DHMTs to explore contractual relationships with private mechanics. On the basis of these policies, and monitoring of the health sector fleet, the MoH will seek donor funds for the replacement of the vehicles that are beyond repair. Financng 2.28 Zambia's Health Policy document directs the Planning and Management Unit to identify specific initiatives in the area of cost-containment and sourcing of additional revenues for the health sector - tacitly recognizing that the government cannot substantially raise the required additional revenue through taxation. The primary goal is to make better use of available public funds by reallocating them from curative care to preventive and primary health care. 2.29 Public Financing: That it is possible to see a district-by-district breakdown of funding, based on identifiable and transparent allocation criteria, for the first time, represents a step in the right direction. The Ministry recognizes that this budgetary system needs to be further refined, however. The Ministry has allocated nearly 18% of its 1994 budget as (non-  - 27 - salary) grants to District Health Boards in 1994, plus 15.53% to the provinces (provincial hospitals, provincial offices, and personal emoluments for all staff at provincial level and below). An additional improvement is that districts have been notified in advance of their expected allocation, both in nominal terms and as a proportion of the total Ministry budget, in order to ensure that the relative allocations are maintained even in the event of reduced disbursement from the Ministry of Finance. 2.30 Principles for Financing Decisions: In the absence of sufficient funding to meet all demands upon the health sector, the MoH is developing funding guidelines based on national health priorities. The Government assumes responsibility for supply of the basic package of health services, as defined by the Ministry of Health, and will make this their priority in the use of Government budgetary resources. Under the Health Reforms, preventive services in particular will be expanded, based on the premise that prevention is more cost-effective than cure, especially when the personal costs of individual suffering are considered. These include the continued prevention of communicable diseases; prevention of HIV infection/AIDS; prevention of malnutrition; prevention and treatment of malaria; and preventive maintenance of existing health infrastructure. The Government will also take responsibility for funding "public goods" such as chlorination of water sources and public health education/promotion exercises!'. (Water pollution and inadequate sanitation have been identified in the National Environmental Action Plan as the most important issues with the greatest social cost to Zambia.) 2.31 Although significant improvements both in the share of public sector expenditure on health, and in the use of those funds within the sector, are expected through the health reform process, the Ministry of Health can only assess economic efficiency if it knows about total spending from all sources. This is important in order to examine options, help establish priorities and to weigh costs against available finances. It will also enable more realistic figures to be included in the Government's public investment program (PIP). The MoH is collaborating with the Ministry of Finance in a public expenditure review to determine what the government is currently spending on health, in terms of investment and recurrent costs. 2.32 The Government has also moved away from an unaffordable "free health care" system, to consider the revenue-generating potential of cost-sharing through different mechanisms that will not endanger the proposed reforms. Before any nation-wide mechanism is implemented, however, they are committed to improving the quality of services provided through the basic package of care. (a) User Fees: Though total revenues generated may be modest, the MoH will pursue improvement in cost recovery through user fees to (i) strengthen the position of the MoH in its annual "budget battle" with Ministry of Finance; (ii) provide incentives to health service managers to enhance both revenue collections and service quality by allowing retention of fees at the point of collection; (iii) promote equity by requiring that patients from higher income households (many of whom will have health insurance) pay for the health care they receive; and (iv) monitor the rates of cost recovery as a proxy measure of quality care, based on willingness of middle and low- "Public goods ame considerd those whose consumption by one individual does not reduce the amount available to another, and where nobody can be excluded from such consumption.  - 28 - income households to pay for services. Experience in other countries of Sub-Saharan African show that such strategies can help alleviate budgetary shortfalls among public providers, stimulate private financing and provision of health care, and contribute to equity in the process. The success stories have been conditioned, however, by an improvement in the quality of public services that persuade individuals of the "value for money" paid for this type of care. (b) Pre-payment: The Ministry is exploring the possibility of introducing a pre- payment scheme on a voluntary basis to allow for payment in-kind and seasonal pay- ments, as an alternative to user fees and commercial medical insurance, particularly for clients in rural areas. Payments would be collected quarterly to minimize the administrative burden on both households and collecting agencies. 2.33 Donor Funding: Certain vital inputs required to support the national package of health services, such as essential drugs, vaccines, and equipment remain unavailable within the country or available only at high cost. It is therefore more rational to import these items. Given the foreign exchange constraint faced by the MoH, external support for such items is envisaged for the short- and medium-term. At the same time, the exploration of cost-sharing mechanisms reflect national concern and desire to assume an increased proportion of such costs within the country, and to wean Zambia away from dependence on a variety of bilateral and multilateral donors and NGOs. 2.34 Private Funding Considerations: Certain services and functions may be best performed by the private sector, particularly those which are by nature "private" as opposed to "public goods". Some surgical interventions may attract more private funding, for example. The packaging exercise is expected to define activities and resources specific to each level of care, including secondary and tertiary hospital levels, that would reflect priorities for Government funding. Health facilities wishing to offer services in addition to the national package would then have to take responsibility for mobilizing resources necessary for.such services. Certain support functions may also be more efficiently provided by a private agent, such as laundry and catering. Research is currently being undertaken on the scale and scope of the private health sector in Zambia; their findings will be incorporated into the decision- making process. D. PROJECT IMPLEMENATION: PROCESS AND IMPLEMENTATION AGENCIES 2.35 Status of Project Preparation: From the early stages of project identification and preparation, the Ministry of Health has taken the lead in shaping the scope and implementation of the Health Reforms. The Health Reform Implementation Tearn and Planning/Management Unit have worked closely together to draw upon MoH staff in different departments and scattered geographic assignments, to organize the Zambian health system along the lines envisaged by the new policies. As an integral part of this work, they tested a health planning framework introduced by an IDA mission in May 1993. The output catalyzed by this process is the Strategic Plan, whose development process has furthered extensive dialogue and discussion within the Ministry of Health. It has also harnessed existing capacity in the MoH that shows potential for further dynamic evolution, in areas such as human resource development, civil service reform, and coordination of financial planning exercises with the Ministry of Finance. At the same time, the lengthy but intensive preparation process has created an exceptional level of energy and motivation at all levels in the health system.  - 29 - 2.36 Process: The Government, IDA and core donors have agreed on the following imple- mentation process of the Health Reform program. The Government has presented its Strategic Plan which outlines the framework and standards for the new system, including: content and cost-effective delivery methods for the national package; roles and responsibilities of each level of the system (community, health center, general hospital, district health board, secondary and tertiary hospitals and their respective hospital boards, and the central MoH); policies for the health management information system, drugs, supplies, human resource development, and budgeting guidelines. The plan also contains an implementation strategy that details the criteria and means by which district plans will be funded, executed and monitored. It is complemented by an action plan to harmonize planning, budgeting, disbursement and accounting mechanisms to enable all donor support to be channeled through one system, whether supportive of broad sectoral operations or specific program activities. 2.37 The Strategic Plan will be updated annually by government and discussed with donors no later than November 1 of each calendar year (the first review was held in 1994). It would identify the areas for which donor support is solicited. During the annual consultations, IDA and cooperating donors would discuss the proposed plans and investments in light of criteria that include cost effectiveness, institutional capacity at district level, cost recovery potential and affordability. An assessment of the effects of decentralized authority over the preceding year, and plans for the upcoming year will also be on the agenda. 2.38 1995 is planned as a transition year, to train staff and prepare plans that reflect the new standards. The 1995 workplan (see Annex 3) shows that extensive work is scheduled in the areas of human resource development, management, and monitoring to enable staff at all levels of the health system to participate in the on-going reforms. Procedures for procurement of drugs, and rehabilitation of infrastructure will also be more closely examined during this year. 2.39 Based upon the Strategic Plan, the Government will prepare a rolling five-year investment program and an annual recurrent cost budget. These documents will also be discussed with donors (including IDA) before November of each calendar year, starting in 1994. Each donor will then bilaterally structure their support on the basis of the Strategic Plan, investment program and budget. ODA, DANIDA, SIDA, the Netherlands, WHO, and UNICEF, who together account for more than 80 percent of total donor funding, have indica- ted their ihitent in following this system, and have agreed to fund only areas included in the core documents. Other donors will likely follow suit (including EC and USAID), once the new system is in place. The Government has presented the Strategic Plan, the 1995 work plan (see Annex 3), 1995-1998 investment program and 1995 draft budget in a forrn and with a content acceptable to IDA and the above donors. A detailed procurement plan and training plan will be available before the end of 1994 based on an outline acceptable to IDA. The Government will demonstrate to the satisfaction of IDA that the investment program and draft budget for the health sector for 1995 are fully financed as a condition of effectiveness. The Credit will be structured so as to ensure IDA agreement with the current versions of the Strategic Plan, the investment program and the recurrent budget for disbursements to be continued. 2.40 Implementation Agencies: The Planning and Management Unit (PMU) of the Ministry of Health, an existing unit which coordinates all donor-financed investment in the sector, would be responsible for implementation of the project on behalf of the Government of Zambia. The Unit has been strengthened by several donors with long-term international  - 30 - technical assistance and training for Zambian staff, and additional key positions may be funded by WHO and SIDA, so there is no need to fund long-term technical assistance under the IDA credit. However, selected short term technical assistance could be included in the annual budgets as the need arises for specific advice and technical know-how. As with the other investment items, technical assistance will not be predetermined but based on agreed annual programs integrated into the whole reform process as supported by this project. Local long- run technical assistance may be necessary as a temporary measure of adequately funding HRIT staff until the new Human Resource Policy can be implemented. 2.41 Members of the PMU have been identified to liaise specifically with IDA on imple- mentation of the IDA support. These staff have participated in the recent country portfolio performance review, have received specific training in IDA disbursement and procurement procedures and have implemented the PPF in accordance with IDA requirements. The PMU, as discussed above, is an integral part of the ministry and already works closely with the HRIT, so the management of the IDA project is fully integrated into Government structures. 2.42 Reporting requirements: Joint biannual reviews between the Government and the donor agencies will be held in April and October of each year during program implementa- tion. The importance of these meetings for strategic decision-making would obviate the need for a mid-term review. Prior to May I each year, beginning in 1996, the Government will present a report on implementation of the reforms in the previous year. This report will pre- sent evidence that the previous year's budgeted investment and recurrent expenditures took place as envisaged. It will also discuss, inter alia, progress in meeting the agreed output tar- gets in the districts; progress in the number of health centers and other facilities offering the basic package of services in the country; a summary of the beneficiary assessment and other external reviews of the previous year with a summary of actions proposed and taken to correct any problems found; progress in implementation of revised policies and logistics systems in areas such as human resources, drugs and supplies, urban primary health care, family plan- ning, and nutrition; and draft audit reports for the boards that have received support in the preceding year (see Annex 4). 2.43 Alternative implementation arrangements: There are no practical alternatives to the proposed sector approach, as a traditional investment project would destroy the Government- led process of reforms and would not be sustainable institutionally. If it should prove to be impossible to recommend a continuation of the sector-wide approach, as reflected in disagree- ments between IDA and the Govermnent on the Strategic Plan, the investment program or the health budget, implementation would be halted and ultimately the credit would be cancelled (para 5.4). E. PROJECT SUSTAINABILITY 2.44 The project will strengthen the capacity of the health sector to respond to evolving epidemiological and financial circumstances, thereby ensuring the development of sustainable services. Recurrent costs will be financed on a sliding scale, as "re-tooling" of the delivery system from the present inefficient, centralized system will require short-run cost increases. The Government is committed to ensuring sufficient domestic funding of the health system, and has already increased its funding for District non-personnel recurrent costs in the 1994 budget. During budget implementation in 1994, the MoH has protected spending on drugs and on grants to district health boards in absolute terms, although the Ministry received a  - 31 - smaller share of the overall budget than expected. In the past, this had been a problem: the budget figures tended to show a higher allocation to the primary (district) level that was actu- ally released. The Government is also committed to developing a comprehensive health finan- cing framework, and have already authorized local cost recovery measures, albeit outside of the above framework. The linkages between quality, costs, and fees are being addressed as part of the Strategic Plan. 2.45 Zambia will be able Table 2: The New System is Sustainable: Evidence from to afford sustaining the new Better Health in Africa (BHA) health system in the medium term with only minor real (1993 US$/Capita) funding increases and fun- ding realignments over time. BHA numbers According to Better Health low income med. income in Africa9' (BHA) a well run district based system would Health care 5.21 7.29 cost $6.66 per capita per year including central sup- Institutional port functions (see Table 2). support 1.45 2.02 Figure 3 compares the BHA numbers with projections of Nutrition 1.32 2.75 fiscal spending on district Family Planning 1.00 0.50 health services. All the pro- jections are based on Total 8.98 12.56 revenue projections devel- oped under the ongoing public expenditure exercise. Notes: Assuming no increase in the low income = low income countries. health sector's share of the mfred. income = higher incomne countries. overall budget and no The extra costs for family planning and nutrition is intended to rapidly increase in the share of increase the coverage of these services above and beyond that aimed for increase in the share of by the national package. Specifically, these costs will cover working District services within the through NGOs with a specific focus on famnily plaming, and health budget, districts in supplemental feeding programs. Zambia would receive about US$9.37 per year by the year 2000 ("dist 1" in Figure 3). Assuming minimal re-allocations within the health budget (by keeping the real $/capita figure for non-district services constant over time), Zambia could afford to spend US$10.82 on districts in the year 2000('dist 2" in Figure 3). This amount would be higher than that required for a well-run health system in the future assuming that Zambia is comparable to other low-income African countries and almost enough to cover what is required in a higher-cost setting. According to BHA, Zambia would even be able to afford expanding family planning and nutrition services under the recurrent costs, and not have to rely on donor or other ministries' funding for this. 2.46 While it will be possible for Zambia to fund the recurrent costs (including capital depreciation) in the medium term, this would require a major reworking of the system from 2' A Framework and Indicative Cost Analysis for Better Health in Africa, World Bank, Africa Technical De- partment, Technical Working Paper No. 8, May 1993.  - 32 - $13.C00 . . . . . . . . . . . . . . . . . . . $12.00 $11.00 -_--_ dist1 $10.00 --- dist 2 : $9.00 .. -.BHA-low $8.00 - , ~ ~ - - BHA-medium $7.00 $60 I I I X I S6.00 1994 1995 1996 1997 1998 1999 2000 Years Figure 3: Projections of Zarnbian expenditures compared to BHA numbers ($/capita) its current inefficient state. This qualitative change is exactly what the Health Reforms and this project aim to support. In the short run, the total costs of the system would be much higher than Zambia can afford, as investments are made in new systems, infrastructure and human resources. This is the basic justification for the major investments taking place over the medium term financed by external sources. 2.47 Lessons from Previous IDA Involvement: The Bank group has not been involved in the Zambian health sector previously. Health sector experience in other countries demon- strate, however, the need for more comprehensive and integrated sectoral involvement, to ensure sustainable development impact. 2.48 1993 World Development Report and Better Health in Africa both provide insight and lessons within the health sector, particularly within Sub-Saharan Africa, showing that scarce resources for health can be spent far more cost-effectively by emphasizing a package of cost- effective health services. 2.49 We have drawn from the lessons conveyed in the Wapenhans Report and the Long- Term Perspective Study of Sub-Saharan Africa, that the ownership- and capacity-building process of project preparation are the first, critical steps for effective project implementation. 2.50 The Zambia Poverty Assessment (1994) shows the strong linkages between poverty, poor health status and malnutrition; specific measures for improved health and nutrition are essential to mitigate the worst consequences of poverty as a "consumption' or welfare element. But improved health and nutrition is also essential to building the human resource base for long-term pro-poor growth. Irrespective of income level, some categories (e.g. women and children) are in need of special attention. 2.51 Environment. The project has been rated C due to the sector reform nature of the credit, so no environmental assessment has been carried out. Environmental considerations will be built into the sub-project appraisal and financing criteria and agreed with IDA prior to  - 33 - implementation. Such criteria will be in correspondence with the recently completed National Environmental Action Plan. The overall impact on the environment is expected to be small but positive: some of the main health problems are due to poor sanitation and water supply, and remedies for those problems will improve both public health and the environment. All of the infrastructure built will be either rehabilitation or expansion of existing facilities.  - 34 - III. PROJECT COSTS, FINANCING, PROCUREMENT AND DISBURSEMENTS A. Cosrs 3.1 The total cost of the program is US$537 million. This figure is based on the part of the Government's program for which there is agreed funding from domestic and foreign sources. As such, the numbers will be continuously revised to reflect on-going implementa- tion experience. IDA financing is US$56 million. No allowance is made for contingencies as the number and size of activities funded would be revised to fit within the existing financing framework. The nominal exchange rate is assumed to adjust during the life of the project so as to maintain a constant real exchange rate. 3.2 Recurrent Costs and Sustainability. Recurrent cost implications of the project are an integral part of the program. Government will finance salaries and the maintenance costs of new equipment purchased, through the MoH budgetary allocation. The budget for recur- rent costs will be allocated to districts on the basis of a weighted per capita basis. Other run- ning costs are shared between MoH and ongoing donor-funded projects. The financing will be structured so that the donor contribution to recurrent costs would be made on a sliding scale (see also paras. 2.44-2.46). B. FINANCING 3.3 The total program costs will be 5 Financing Plan financed as follows: a proposed IDA credit of US$56 million would cover "We want to encourage you as our coopera- about 10% of total project cost (see Table ting partners to buy into our National Stra- 3). Government would finance from its tegic Plan. We want your input into the annual budget about US$340 million design but then we will discourage parallel equivalent or 63% of the total, including vertical programs which operate outside the all taxes and duties; other donors would National program that is being designed. finance the rest through bilateral We invite you to transcend the temptation cooperation and co-financing of the IDA that you take only that which you can idi- project. vidually label: "Made in the Republic of 3.4 A detailed determination of the Luampungu. investment items can not be made up Donor community funding should be seen front, as this depends on the outcome of in the context of supplementing the Zam- the district planning process. A tradition- bian effort; not the other way round." al pre-determination of investment items would make the project unsupportive of Hon. Deputy Minister, Dr. Kalumba - the Zambian program based on bottom-up speech at MoH "Appraisal Workshop", planning. The crucial role IDA will play April 1994. in this program is to ensure that all agreed, vital elements of the annual plan are funded to enable health reform implementation.  - 35 - 3.5 As IDA funding would function as a "buffer," the exact mix of domestic, donor and IDA funding is undetermined at this point. The financing mix will be based upon annual agreement on the investment plan and recurrent budget. Financing will be structured so that Zambia assumes an increasing share of the recurrent budget over time, and so that IDA will not (explicitly or implicitly) finance ineligible expenditures, e.g., land purchases or taxes. Co-financing will be done on a parallel basis with each donor funding "full contracts" or com- plete sets of goods that do not depend upon administrative obligations of other donors to com- plete the procurement. There will be an exception made for recurrent budget support, where all disbursement, procurement, accounting and auditing rules have been harmonized in accor- dance with Government procedures acceptable to other donors and IDA. Table 3 Financing Plan (US$million) 1995-1998 Expenditure Category ODA SIDA DANIDA Dutch UNICEF IDA GRZ TOTAL Policy Development 3.0 .2 1.5 .8 1.5 7.0 Investment & Recurrent Costs Infrastructure Rehab. 3.5 38.5 2.3 44.3 Medical equipment 1.0 3.0 2.0 4.0 8.0 18.0 Training 3.8 3.1 2.7 1.5 2.0 13.1 Informaton system 4.0 4.0 1.0 0.5 9.5 District Operabons 9.8 5.0 14.0 2.2 0.5 297.7 329.2 Drugs/supplies 8.9 4.9 6.0 8.5 32.0 60.3 Technical Assistance 3.7 1.5 47.2 1.7 54.0 Monitoring/Evaluaton .1 .8 .5 1.5 Total 24.9 21.2 20.0 60.8 14.0 56.0 340.0 536.9 3.6 The large amount of technical assistance (TA) included in the program (funded by the Netherlands and other bilateral donors), mainly covers foreign doctors employed in Zambia. As discussed above (para 1.32), the brain drain of trained Zambian medical personnel has led to serious shortfalls in staffing of health facilities, particularly in rural areas. An important task under Health Reforms will be to improve the conditions of civil service in Zambia, in order to attract Zambian doctors back from neighboring countries, and to revise the training curriculum so as to better match trained cadre to real needs. (For example, the Netherlands is currently supporting management training of medical doctors, because they had not received fornal training in this area before receiving their degree.) In the interim, Zambia must rely on foreign technical assistance for program implementation. 3.7 Also with regard to TA, the HRIT was involved for the first time in interviewing ODA candidates who had been short-listed for six advisory positions in the Zambian health sector. This provided an opportunity to clarify job descriptions, expectations and procedures  - 36 - on the part of both the Government and the donor agency. Some positions will consequently be re-advertised. 3.8 Funding Gap: Despite numerous revisions to tailor national plans to available resources, the national strategic health plan continues to face a shortfall of funds in the areas of infrastructure rehabilitation, medical equipment, training, policy development, and drugs and supplies. While these gaps will not prevent other areas from being implemented, IDA will endeavor to help the Government find additional funding in these areas. C. PROCUREMENT Table 4 Procurement Arrangements (US$ million) Proeect element ICB LCB Other NFA Total Civil Works 32.0 5.5 3.0 3.1 43.6 (30.0) (5.0) (3.0) (-.-) (38.0) Equipment 3.8 0.4 0.7 23.3 28.2 (3.6) (0.4) (0.5) (-.-) (4.5) Consultants -.- -.- 2.5 62.3 64.8 (2.5) (-.-) (2.5) Drugs 6.5 -.- 2.0 51.8 60.3 (6.5) (2.0) (8.5) Training -.- 2.3 11.1 13.4 (2.3) (-.-) (2.3) Recurrent costs -.- -.- 0.2 326.4 326.6 (0.2) (-.-) (0.2) Total 42.3 5.9 10.7 478.0 536.9 (40.1) (5.4) (10.5) (-.-) (56.0) ICB: International competitive bidding LCB: Local competitive bidding NFA: Not financed by the Association (IDA) N.B. Figures in parentheses are amounts financed by IDA 3.9 This project is undetermined for procurement purposes; the exact mix of goods and services to be financed by the Credit will depend on the results of the bottom-up planning process that will be reflected in the annually agreed program. Procurement will be carried out in accordance with IDA guidelines. District Health and Hospital Boards are responsible for procurement of goods, services and civil works with support for bulk procurement from the center. Implementation staff have been trained in IDA procurement procedures and will receive continued guidance from the World Bank's Southern Africa Departmental Procurement Unit throughout the life of the project. The MoH will be able to assist District Boards with procurement matters on a case by case basis.  - 37 - 3.10 Procurement arrangements are summarized in Table 4. Intemational Competitive Bidding (ICB) will be carried out in accordance with IDA guidelines for contracts with a cost of $500,000 or more for civil works and for contracts with an estimated cost of $100,000 or more for goods. Domestic preference will be employed where applicable in these procure- ments as per IDA guidelines. ICB is likely to be used for construction of new health centers and major rehabilitation of hospitals, as well as for purchase of equipment, medical supplies and drugs. 3.11 Local competitive bidding, following procedures acceptable to IDA, will be carried out for contracts with a cost of less than US$500,000 for civil works and less than US$100,000 for goods. This category is not expected to exceed US$5.9 million total during the life of the project. The civil works to be carried out by this process will be upgrading and major rehabilitation of rural health centers. They are scattered and small in nature and are not likely to attract international interest. 3.12 Prudent local shopping, obtaining at least three quotes from reliable suppliers or contractors may be used for contracts with an estimated value of less than US$50,000 equivalent for civil works and less than US$30,000 for goods. Items procured under local shopping is not expected to exceed a total amount of US$3 million for civil works and US$700,000 for goods during the life of the project. This procedure has already been used effectively in Zambia by the Social Recovery Project in the case of small-scale community- based civil works. Items procured under this rule are likely mainly to be small-scale rural health center rehabilitation for civil works and supplies and tools for the same under goods. As far as possible contracts for supplies and equipment will be pooled and carried out by the MoH to ensure cost savings. For the infrastructure community contribution and involvement would be encouraged. To ensure that this takes place communities must manage the projects and be able to purchase both services of skilled laborers and materials locally with minimal delay. Experience in Zambia has shown that it is not cost-effective to do bulk procurement of butilding supplies and then distribute these to sites. Urban health centers and some hospitals are likely to need an emergency supply of drugs in 1995, while the ICB process for drugs is under way. These are proposed to be purchased under "other' procurement procedures (estimated at US$2.0 million), to be procured from UNICEF. 3.13 Other items not subjected to competitive bidding include staff salaries and per diem, fuel, and other administrative expenses, not to exceed a total of US$200,000 during the life of the project. 3.14 Consultant services and training will be procured following IDA guidelines. It is esti- mated that IDA will finance consultant services for a total cost of US$4.8 million mainly for assistance with procurement and supervision of civil works implementation and for in-country training programs. 3.15 Tender documentation format. IDA's standard bidding documents will be used for all ICB financed by the credit. Where no relevant standard bidding documents have been issued by IDA, documents based on accepted international standard forms will be used. For LCB the Government will prepare standard documentation for IDA review based on IDA's standard bidding documents for small civil works and other standard IDA documents. 3.16 Procurement Review Thresholds. During project supervision, bidding packages for IDA financed contracts above thresholds of US$250,000 for works and US$100,000 for goods  - 38 - Table 5: Allocation and Disbursement of IDA Credit (US $ million) Disbursement Category IDA % of Expenditure Financed Allocation (US$ million) 1. Civil Works a) District Health Facilities 28.0 100% of foreign expenditures, and b) Others (provincial/central level) 6.0 90% of local expenditures 2. Equip. Vehicles, Drugs & Supplies 11.0 100% of foreign expenditures, 100% of ex-factory local expendi- tures and 90% of local expenditures for other itemns procured locally 3. Consultant Services/Studies 3.0 100% of total expenditures Audit and Training 4. Incremental Recurrent Cost 0.2 100% of total expenditures 5 Refinancing of PPF 1.5 6. Unallocated 6.3 TOTAL 56.0 'includes administrative and running costs of districts and the HRIT such as staff salaries, per diems, travel costs, office supplies, fuel, equipment maintenance costs and other administrative expenses. would be subject to IDA's prior review procedures. This review would cover all contracts procured by ICB and about 75% of the total value of contracts funded by IDA. For LCB the focus of the review would be on the bid evaluation and award procedure. The threshold for prior review of consultant services would be US$100,000 for contracts with consulting firms, US$50,000 for contracts with individuals and all sole-source contracts and terms of reference regardless of contract value. All other contracts will be subject to selective post review. The executing agencies will be required to maintain proper records for easy review by IDA. It is expected that one in five LCB contracts for works and one in six LCB contracts for goods will be subject to post award review. Prior review arrangements will be reviewed six months after credit effectiveness. D. DISBRSmENS 3.17 It is estimated that the IDA credit will be disbursed over a period of 6 years, from 1995 through the year 2000, with procurement and disbursements completed by June 30, 2000 (completion date) and December 31, 2000 (closing date), respectively. The proposed allocation of the credit is shown in Table 5. All applications to withdraw proceeds from the credit will be fully documented, except for expenditures for training, recurrent costs, and for  - 39 - contracts with a value of US$100,000 or less for goods and services and a value of US$250,000 or less for civil works which reimbursement may be made against certified statements of expenditure (SOE). 3.18 A special account for US$3 million would be made available to the Project/MoH for payments of eligible expenditures. To facilitate payments at the district level, an advance from the Special Account not exceeding US$10,000 equivalent per district may be made to the 61 districts' accounts. Documentation pertaining to the districts' accounts would be retained by MoH who will conduct regular audits of those accounts and will replenish the accounts only when satisfied with the documentation submitted. Replenishment to the Special Account would be submitted to IDA every month under normal circumstances but no later than every three months. Withdrawal applications for direct payment from the Credit Account may be submitted for expenditures above US$100,000 equivalent. Supporting documentation will be retained by the Ministry of Health and will be available for review as requested by IDA supervision missions and project auditors. Estimated disbursements by IDA fiscal year are shown in Table 6. Table 6 Estimated Disbursements of IDA Credit (US$ Million) FY95 FY96 FY97 FY98 FY99 FY00 FY01 Annual 2.2 5.4 11.2 22.4 11.2 2.8 1.1 Cumulative 2.2 7.3 18.5 40.9 52.1 54.9 56 4% 13% 33% 73% 93% 98% 100% E. AccouNTs AND AuDrr 3.19 As soon as possible after the end of the financial year, but no later than nine months after its completion, the Government will present audit reports of the special account and the project accounts with a special opinion on the use of the special account and SOEs. The audits will be carried out by an independent auditing firm with qualifications and under terms of reference acceptable to IDA. In auditing the project accounts, the auditors will pay special attention to verifying the reliability of SOEs, and to the internal controls and procedures involved in the preparation of SOEs. The costs of the audits are eligible for financing out of the proceeds of the credit. One audit report should deal with all accounts, SOE's and other matters requiring audit opinions. 3.20 Project accounts will be established and maintained by the MoH. A Special Account will be opened for this project and maintained with a commercial bank by the MoH. The maximum balance in the Special Account will be US$3 million, which will cover about 3 months of expenditures.  - 40 - 3.21 A joint donor review of accounting and reporting procedures has been carried out. Based on this the Government will present revised procedures, according to an action plan acceptable to IDA and the donors. 3.22 Audit. The Government's performance in auditing project accounts under projects in Zambia has generally been acceptable and the Government is in full compliance on other social sector projects. The quality of the audits has also been satisfactory.  - 41 - IV. PROJECT BENEFITS AND RISKS A. PROJECT BENEFTTS 4.1 The benefits of the project would be the benefits of the health reform pro- 6 Benefits gram. The benefit would ultimately be improved and sustainable health status of The health of a Zambian child who now the Zambian population (as measured by dies from immunizable diseases, the health longer-run outcome measures such as of the Zambian mother whose death rate is infant mortality or adult morbidity). This a national scandal, the AIDS tragedy, all will be accomplished by mobilizing exis- these if we overcome them must be the ting capacity to improve service delivery pride of all the taxpayers in all the (as measured by output and unit cost indi- countries from whence our core partners cators, such as coverage rates for ante- come. natal care, immunizations, growth moni- toring and family planning, and quality of care indicators), and through improved institutional set-ups and procedures (as measured by process and input indicators, such as amount of drugs and supplies entering the system, clinics rehabilitated, degree of budgetary autonomy of the health boards and number of staff trained). Monitoring will be done using beneficiary assessments, review of administrative records, household and facility surveys and periodic technical audits. The annual reports (para 5.4) would be the central place for sum- marizing and reviewing the likely sustainable impact of the project. B. PROJECT RISKS 4.2 The Zambian Government could conceivably abandon the entire structural reform process. This risk is being minimized through adjustment lending that includes commitments to immediate and visible positive results in terms of reforms in social service delivery systems such as those supported by the recently approved Economic and Social Adjustment Credit. The overall program in Zambia is risky, as discussed in the Country Assistance Strategy ap- proved by the Board on March 10, 1994, but the type of reforms supported by this Project would help lower the risk of the program falling apart by building capacity in Government and lowering the unit costs of service provision, generating additional revenue, and thus alleviating the pressure on the national budget. This Project would help support macroeconomic reforms by improving service delivery within a core public expenditure item. 4.3 Another potential risk would be internal political change. Such change has already been weathered during the project preparation process. The broad-based support and momen- tum for health reforms, both within the MoH and in districts across the country, would make it difficult for a different government or a different minister to annul what is already in the pipeline. 4.4 Within the Strategic Plan, the precipitated introduction of cost recovery could poten- tially derail health reforms. Sustainability of the reforms could be put at risk by ad-hoc implementation of cost recovery schemes, in isolation from quality improvements in health services, as perceived by Zambian clients. Resentment of new financial burdens without com- mensurate exchange of service value could undermine public support for the entire reform  - 42 - process. An acceptable health financing plan that minimizes this risk has been agreed upon and forms an integral part of the Strategic Plan. 4.5 There is also a risk that implementation of the Strategic Plan will be stalled on process issues, with little positive impact on the health care services nor for the targeted beneficiaries. Beneficiary assessment and local information systems will be used to monitor change, and their results will be part of the annual review and planning process. Lack of progress in improving monitorable indicators would need to be addressed in an acceptable manner within the next year's plan of action. 4.6 In some respects, it might be easier for the MoH to continue to shape the health sys- tem on the basis of indicative donor interests, instead of defending its comprehensive strategy, and the funding of necessary but less popular aspects. Furthermore, donors may provide aid with conditions that are not compatible with the agreed Strategic Plan for the health sector. It should be acknowledged the proposed sectoral support approach is new, and donors may be initially uncomfortable with some aspects, particularly as this approach is not yet a proven success, and because it requires donors to also modify certain procedures for providing assis- tance. To minimize such risks, continued dialogue with donor agencies, both one-on-one and as a group, will be an essential part of program management and of IDA implementation support (see Annex 6 for a supervision schedule).  - 43 - V. AGREEMENTS AND RECOMMENDATION A. CONDITIONS 5.1 During negotiations, the Government's agreement to the following conditions has been obtained: 5.2 As a condition of effectiveness: the Government will demonstrate to the satisfaction of IDA that the Investment Program and the budget for the health sector for 1995 are fully financed (para. 2.39). 5.3 As a condition of disbursement for civil works: (1) for District level facilities, the Government will have presented standard architectural designs for such facilities. acceptable to IDA; and (2) for other (central and regional) facilities, the equivalent of US$10 million for District level facilities will have been disbursed from the Credit (para 2.23). B. OTHER AGREEMENTS 5.4 To ensure smooth implementation of the project, the Government has agreed to: (a) implement the reform and investment program according to the Strategic Plan and investment program and budget (paras. 1.14-1:16, 2.7 and 2.43); (b) designate the Planning and Management Unit as the responsible agency for implementation of the program and of the IDA credit in support thereof (para. 2.40); (c) carry out all procurement (i) using standard bidding and contract documents for the project and (ii) according to the arrangements laid out in paras. 3.10 to 3.17; (d) prior to October 1 of every year (beginning in 1995), submit to IDA and donors for review and comments a revised Strategic Plan, the subsequent year's budget, investment program and work, training and procurement plan (para 2.39); (e) prior to May 1 of every year (beginning in 1996), present a progress report (para. 2.38) on implementation of the Program (as outlined in Annex 4); (f) adopt Project reporting, auditing and monitoring procedures acceptable to IDA and prepare and submit in a timely manner financial reports and external audits no later than nine months after the end of the financial year (paras. 3.20 - 3.22); and (g) ensure that national Program Managers, District Health Boards and Hospital Management Boards carry out their mandated responsibilities as agreed with IDA (paras. 2.11 - 2.14). C. RECOMMENDATION 5.5 On the basis of the above actions, conditions and agreements, the proposed project would be suitable for an IDA credit of SDR 37.7 million (US$56 million equivalent).  - 44 - ANNEX I Page I of 2 ZAMBLA BASIC DATA AND LEADING HEALTH CONCERNS PARAMETER || PROPORTION NUMBER J TOTAL POPULATION 100% 8,613,314* RURAL POPULATION 58% 4,995,722 URBAN POPULATION 42% 3,617,592 POPULATION GROWTH RATE 3.28% | - POPULATION 0-12 MONTHS 3.99% 343,671 DISTRIBUTION 1- 5 YEARS 16.27% 1,401,386 5-14 YEARS 28.50% 2,454,794 15+ YEARS 51.24% 4,413,462 WOMEN, CHILD 22.1 % 1,903,542 BEARING AGE NUMBER OF PROVINCES 9 NUMBER OF DISTRICTS 61 * 1993 projection based on 1990 census  - 45 - ANNEX I Page 2 of 2 LEADING HEALTH CONCERNS Life expectancy at birth: Women have a life expectancy of 57.5 years, and men of 55.4 years. Infant mortality: The IMR was reported as 90 per 1000 live births in 1986, but the Demographic and Health Survey shows a rise to 107/1000 in 1992, and UNICEF reports 113/1000 for the same year. (Antenatal care: 92% of births were preceded by at least one antenatal care visit.) Maternal mortality: Health facilities report 200 deaths per 100,000 institutional deliveries. Malnutrition of children under five: 40% are stunted (inadequate height for age) Attributed cause for 41 % of child hospital deaths Incidence of stunting among children under five years of age (source: ZDHS, 1992): Low height for age (an indication of chronic malnutrition) has been reported at 46% in rural and 33 % in urban children. Geographical access to health facilities: 75% of the total population, but only 50% of those living in rural areas reside within a 12 km radius of a health facility. Total fertility rate: A Zambian woman today will bear on average 6.5 children. Contraceptive prevalence: 15% of married women use a modem form of contraception Iodine Deficiency: Localized surveys of student populations have reported 47% and 82% goiter prevalence. As goiters are an indication of severe iodine deficiency, the prevalence of unrecognized deficiency -- which can impair reproduction, physical and mental development -- is even higher. Malaria: The incidence of malaria increased from 138 per 1000 in 1978 to 287 in 1988. The hospital case fatality for malaria increased from 14 per 1000 in (1978) to 25 in 1988. HIV/AIDS: In 1992 there were 26,625 reported cases of AIDS and ARC. Recent surveys have found that within a sample of peri-urban antenatal care seekers 28% were HIV positive, and of peri-urban STI clinic attenders 58% were HIV positive. Tuberculosis: New cases of TB increased from 7,909 in 1986 to 16,863 in 1990. 72% of all new TB patients in 1992 tested positive for HIV. Cholera: Cases rose from under 2,000 in 1978 to 12,000 in 1991.  MINISTRY OF HEALTH HQ ORGANIZATIONAL CHART j Minister o Health D/Minister d Health i ~~~~~~~~~~~~~~~~~~~~~Seeay 4- Plarviing, l Health Reform Basi Health u ep. Permi. Sew | Medical Care Pbamacutical Manag t Imlemntation Progamrne (COlpaat Senvic Mecical Mann ~~~~~~~~Suplies Dp Human Resource Erwomvmental Devemna t Capa -bulking Health Logistics S4 Oral Health Pmcurement Monitoring & Training Farmiy HealhPop. Facilities Clinical Care (imd. DisWibution N ~~~Evaluabon___ Rehabilitation) Socil Health & Pe oNn Diagnostic Health Pnomoin _ Audit Nursing z A/C Z  Firt Year Implentatlon Plan DRAFT e of 6 October 1994 tr 4. 1994 Cktr 1. 1995 tr 2. 1996 Otr 3 1996 tr 4 1996 Otr 1, 199 at ID Name Oct Nov |De Jan Feb |Mar Apr |M Jun Jul Aug Sp Oct |Nov O Jon Feb |Mar Apr 1 Human Raaource Davelopmant - - 2 Place and orient now contral level HRD ataff 1/2 2/28 3 Provide tchnircal asiatance to developmnwt of central 3/1 11130 level capacity in HRD 4 Based on new stndarda of creo define national staff b/1 12131 profile for MOH 5 Produce new personnel guidelines 1/1 3131 6 Draft new gnreral ordera together with diatricta 8/1 12/31 7 Identify and train Provincial-level HRD Managera 112 6/30 8 Develop job deacnptione for al MOH position i 3/3 8/3 9 Have diatriict adopt job descriptiona to own settings 7/3 9/30 nd acquire central approval 10 Appoint HRD Officer for each district & estabslh 3/1 lolls edistrict-laval ytawm for humnan resource nmanagemnt v ~~~~Pro>et: Ctideol _Progr Sunwryrr l ~~~Date 10/8/94 Noneritie o l t oono Roll d Llp cm Pe"iI  First Year wImpntodon Plan DItAFT as of 6 October 1994 Otr4 1994 Qtr1, 1s"6 aU2.1996 Oti3. 1996 Otr4. 1996 Otr 1. l096 ot ID Nam Ot Nov Doc Jan Feb MaprJul A S Oct Nov Dec Jan |Fb Mar Apr 1 Appoint personnel to now positions dofined for eontril. 7/3 _ 7/31 provincial and hospital positions 12 R"*iw draft Perfornance Appraisal System from 6116 7/15 cdinet and adapt for MOH 13 Train Provincial staff in performane appraoisa stem /1 | /20 14 Introduce now supervisory systems 911 MI30 15 Districts define tota steff requiromento and training 8/2 8/30 neds in budget l6 Establish centralized databas Irecord sotem for 11/1 12/31 personnel data) 17 Revse nmedical nd nursing acts to support now job 112 12/31 descrptions 18 Implement refreshr courses for staff at ON hevWs 2/1 12/31 imp_ement study on training options 61 121 20 Reviw curricuoa at aN training institutions j/1 12/29 prolect- Crito ical __MOMM Progress g Summa r Dow 10/e/94 Nonidca Ftono Rd Up Oe Ps" 2o  Firft Year Implerentation Plan DRAFT az of 6 October 1994 Qtr4. 1994 Qtr.1 996 Otr2.1995 COtr3, 1996 Otr4 1995 Ot 1,1996 O t ID Name Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 21 Criteria for recruitment, placewmnt and selection for 12/31 training 22 Propose action in response to gender informnaton 1/1 _ l 8/31 acqured in personnel survey. and budget to Impement response in '96. 23 Cspecity building for provincec in new roles of 4/3 6/30 supporting diatricts 24 Drugs and Supplies - 25 Finalize the new drug policy which supports Strategc 1/2 3/31 Plan 26 Finalize new stendards for drug requirements base on 1/2 W6/30 defined package of care 27 Define options or decentralized budgeting. 3/1 7131 procurement, distribution and financing of drugs end nedica supplies 28 Equipment nd Transport VI 29 Define..o cm ded quiptnent rn inten nce respondbiNties 112 _ 2/28 and guidelines for contracting outside maintenance services . 30 Define vehicle maintenance responsibilitis end 1/2 2/28 guideines for contracting outside maintenance services I Date: 10/6194 Nnreltotn tldU Pes3 o  First Year kImplntdion Plan DRAFT a of 8 October 1994 Ctr 4. 1394 O 2t. 1996 tt2. 199 Otr 3, 1995 Otr 4. 1996 atr 1. 1996 Ot ID Naern Oct Nov I De Jon I Fab M r Jul Aug Sp Oct Nov Doc Jon Feb Mr Apr 31 Findlizo standardization guidelines for purchase of 12)15 1/15 mndical equipment 32 Finalize standardizetion guidelines for purchase of 12/15 il15 vehicle 33 Fialize Huts of equipmnt noeds booed on new 1/1 1/31 roqtirements and '94 inventory of that available 34 Finalize Nhte of vehcle needs based on new 1/2 1/31 requiremnts end '94 inventory of that available 35 Produce guiddines for reqistioning/procuremsnt. 12/15 2)11 distribution, use nd rJdposal of rmecal equipment. veNhicls nd connunricatons equipment 36 Train cistrictc in guidelines for 2 requittioning/procureent, distribution, use nd 2/13 e 2/17 disposal of medica equipment, vhides end _____