Conformed Copy - C3058 - Mahaweli Restructuring and Rehabilitation Project - Supplemental Letter

Page 1 April 30, 1998 International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: SRI LANKA: Credit No. 3058-CE (Mahaweli Restructuring and Rehabilitation Project) Performance Monitoring Indicators Dear Sirs and Mesdames: This refers to paragraph 1 (a) of Schedule 4 to the Development Credit Agreement of even date herewith between International Development Association (the Association) and Democratic Socialist Republic of Sri Lanka (Sri Lanka). Unless otherwise agreed with the Association, Sri Lanka shall monitor and evaluate implementation of the Project in accordance with the Performance Monitoring Indicators attached to this letter. Very truly yours, DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA By /s/ Warnasena Rasaputram Authorized Representative Attachment: Performance Monitoring Indicators Sri Lanka Mahaweli Restructuring and Rehabilitation Project Project Design Summary Narrative Summary Key Performance Indicators Monitoring and Supervision Sector-related CAS Goal: Improve fiscal discipline Promote private sector led, environmentally sustainable development Reduction in budget deficit from Rs.69.8 billion in 1997 to Rs 69.0 billion in 2001 and to Rs 68.8 billion by 2003 Government privatization/commercialization program implemented as scheduled Annual review with Ministry of Finance Central Bank Reports Annual review with MASL, PERC , Ministry of Finance and Planning and Ministry of Plan Page 2 Project Development Objectives To shift the focus of MASL from project implementation to river basin management To improve agricultural productivity in System H through the rehabilitation, improvement and better O&M of irrigation facilities Reduced claim of MASL on the recurrent budget from Rs.1,304 million in 1998 to Rs 696 million in 2001 and to Rs 552 million by 2002 Irrigated crop area harvested per unit of irrigation water in any crop season in System H.MASL/GOSL Annual Budgets MASL’s Irrigation Management Monitoring Reports Project Outputs 1. MASL restructuring/ reengineering program implemented, including transferring O&M responsibility for D and F canals to DCFOs and strengthening of river basin management 2. System H irrigation facilities rehabilitated and improved 1.1 Voluntary Early Separation Package (VESP) implemented with objective of 35% overall staff reduction 1.2 Turn over O&M of D and F canals to 283 DCFOs by June 1999; 418 DCFOs by June 2000; 558 DCFOs by June 2001; 679 DCFOs by June 2002; and 757 by June 2003, leading to reduction of MASL O&M expenditures 1.3 MECA commercialized/privatized or liquidated by end 2001 1.4 Hand over MASL constructed infrastructure to national and local line agencies in System H by June 30, 1999; in System C and Victoria by June 30, 2000; and in System B and Kotmale by June 30, 2001 1.5 Natural resources management capacity strengthened/MASL’s focus shifted from implementation to river basin management 2.1 Irrigation facilities covering 2,918 ha rehabilitated and improved by June 30, 1999; 14,353 ha of facilities rehabilitated and improved by June 30, 2001; and 31,500 ha of facilities rehabilitated and improved by June 30, 2003. Project Monitoring Reports Qualitative evaluation by an independent agency Annual reviews and audits Project Monitoring Reports Notes of the International Panel of Experts and PSC Quarterly Progress Reports of PIU Project Components/Subcomponents: [See Annex 2 for a detailed description.]: A. Institutional restructuring/reengineering Voluntary Early Separation Package Staff Retraining/Redeployment through provision of TA and training Promoting farmer sustainability through provision of TA, training, vehicles and equipment Privatizing business units through provision of TA and training Handing over infrastructure to line agencies after repair and rehabilitation Page 3 Strengthening natural resource management capacity through provision of TA and training B. Irrigation rehabilitation and improvement in System H through provision of civil works, vehicles and equipmentInputs: (budget for each component) US$24.0 million US$1.3 million US$1.2 million US$0.4 million -- US$2.6 million US$44.7 million Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact.