Colombia - Social Sector Adjustment Loan Project

Document of JL Be vw orldu EMUi Report No. 24489 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT D1 n.() A MA TArn ThATPlJT FOR A PROPOSED SOCIAL SECTOR ADJUSTMENT LOAN IN THE AMOUNT OF US$155 MILLION TO THE REPUBLIC OF COLOMBIA June 18.2002 Human Development Department Colombia, Mexico and Venezuela Country Management Unit Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective October 25, 2001) Currency Unit = Colombian Pesos (COP) Lr. f :_n r t~ AA tAf _ TTCf1 flA UUIVULU rvu 5'R,J .V.VV - U13.'VU US$0.00042735 = 1 Colormbian Peso FISCAL YEAR January 1 - Decemnber 31 ABBREVIATIONS AND ACRONYMS ARS |Admnistrdora del Rigimen Subsidiado INS National Institute of Health ^Ub auivuejunwas unlaa= ae L mUlam I.N Ur, 14ariaonal wsustu of nuciai muen nousmg anu Urban Reform BTOR Back-to-Office Report - IPS Instisucion Prestadora de Salud CAIP ] Centers of Integrated Attention for Pre-School Children _ISA I International Standards on AUDTITNG CAS Country Assistance Strategy ISS Social Security Institute 'no-rn. LULMJU" 4y ^ &hI, a;tfins = _ .T n.^ vIRe.u . fA L.l. LUUU tUUCIL. 4UU tAlC L-UfelOUl acwui CFAA Country Financial Accountability Assessment LDP Letter of Development Policy CMU Country Management Unit _MEN IMinistry of Education CONPES Consejo Nacional de PoliticaEconomicay Social ____MOF | MinistryofFinanc CPAR I Country Procurement Assessment Report MOH Ministry of Health I______ C lods ej Naia P'taecosy S -c V-.4- ^Ngial PN FincSeo DN ________ Departaento Adminissrasivo Nacional de Estadistica .OPV Organciones Privadas Voluntarias I _ t _ en_ _ __in_ 1a _vo_ci_ _ _ DNP Department of National Planning PAC Plan Anual de Caja DTP?3 Diphtheria^Tetanus^Pertussis Vaccine ..... . .............................. PACES Program for Expanding Coverage of Secondary . - Education IRT DiphthriTn d o Zehnr-rss Vaccinena/ IV PATCE I P-an m Health Oamiwni EN Escuela Nueva PFMPW I Public Financial Management Project EPIIPAI Expanded Immunization Program QAG I Quality Assurance Group EPS IEmresas Promotoras de Salud QER j Quality Enhancemnent Review I FARC I Fuenas Armadas Revolucionarias de Colombia RAS Red deApoyo Social I Frpr I Fnndn dp rnm,mnp,,eniAn 1 . I I R_dd SolAda.ldad Scial I FINDETER Fiacierade Desarrollo Territorial SABER National Evaluation System for the Quality of I_ _ _ __ _ I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ _ - . . ._ . . _ _ _ I Education I tWAFiN I anking ZSupenntendency and Financial Guarantee ISAT I Sitema deAprendizae Tutorial I FOSYGA IFondo de Solidaridady Garanda I SDR [ Special Drawing Rights I FSAL I Financial Sector Adiustment Loan I SECAL I Social Sector Adiusment T nan | GDP | GroDss Dornestic Product !NZ.. I.S.e.....v...i|cSENA Seraiclioaclnal de Aprndizaje J GOC I Govenunent of Colombia ISFAL 4 Structural Fiscal Adjustmnent Loan B i nternatLonal Bank tor Reconstruction and Development I SGP l Sisteia General de Participaciones IICBF I Colombian Institute for Family Welfare SIIF Integrated Financial Management Sytem I DB I Tnter-Amerin Develonnent Bank I SNER.TLA I NationalvswtenmforEvalationnof Results ofPulilic I I I I Sector Performance I IDF InsttutionalDevelopment Facility ISISBEN I Sstema de Selecci4n de Beneficiarios I_ _ Ins mtetnaily espitceco ropuiation INSS I Natronat Pysem ot sociai secuty tiealtti | IFI | Intemational Finance institutions UNESCO/ United Nations Educational, Scientific and Cultimrl I___________________________ _ I IOREALC Oranization Intematiotal Monetary Fund |WBG -- World Bank Group Vice President: David de Ferranti Country Managemenvt/Trector: Oiivier Lafourcade Director: Ana-Maria An-iagada Task Team Leader: Vicente Paqueo This SECAL core team consists of: Vicente Paqueo (Task Team Leader, LCSHS), Laura Rawlinpgs (Deputy TLL, | LCSHS), Ana-Maria Arriagada (LCSHD), Eduardo Velez Bustillo (LCCIC), Fernando Rojas (LCSPS), Vance Dietz I (PAHO), Jairo Arboleda (LCCCO), Panagiota Panopoulou (Consultant), Vicente Fretes-Cibils (LCC1A), Karla | McEvoy (LCSHS), Alejandro Yepes (LCSHS), and Margarita Lannon (LCSHS). Valuable contributions and advice I ~ ~ ~i..I.. /T 'f't A \ T.._ nl,-1. TTt.."~Q IT '~T1 4--t- T .1... -L I QT r.TTI |C were rcived .^I om Marelo;Va 'eugatu IC:AA. If), JUablo rUI I Ufite IvLA f, Maf a zia Ear F..utILVc A.O1rX), Car:os I Eduardo Velez (LCSPP), Gina Tambini (PAHO), Connie Luff (LCCIC), and Zeinab Partow (LCCIC). Peer 3 I Reviewers are: Shantavanan Devaraian (HDNVP). Margaret Grosh (HDNSP). and Lvnne Sherburne-Benz (HDNSP). U  TABLE OF CONTENTS Page LO.AN AND PROCRAM SU .I. ..A.. .1 INTRODUCTION .. 3 1. THE ECONOMIC CONTEXT ..................................................... . . 5 A. POVERTY, ECONOMIC SETBACK AND CONFLICT ................................................5 B. MACROECONOMIC PERspEcTIvE...................................................................................................7 2. THE SOCIAL SECTOR: PERFORMANCE AND CHALLENGES ................................................. 13 A. AN OVERVIEW OF PUBLIC SOCLAL SPENDING ..................................................... 13 B. SUBSECTORAL ISSUES..................................................... 15 (1) SoCIAL SAFETY NET ...................................................... 15 (2) THE HEALTH SYSTEM ..................................................... 17 (3) EDUCATION ..................................................... 20 (4) EMPLOYMENT AND TANNG ..................................................... 22 (5) TRANSPARENCY AND CITIZENS' OVERSIGHT OF SOCIAL PROGRAMS ............................................ 23 3. THE GOVERNMENT REFORM PROGRAM ...................................................... 24 (1) SOCIAL SA?ETY NET ........................................ . . . ... 25 (2) EDUCATION AND TRANING ............................................2......... 26 (~3) viEALn l. 28 (4) TRANSPARENCY AND CITIENS' OVERSIGHT ..................................31........... .. 31 4. THE SOCIAL SECTOR ADJUSTMENT LOAN (SECAL) .. 32 A. O jcT.irvr s A1D CoNTEw ...,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, . 32 B. FISCAL, TIMNG AND OTHERRE;KS ....................................................................................................... 37 C. I OAN AMOI1NT; CONDITIONS. FiNANCAL SAF C7IJARn AND DTswYRsU1MRN Ts AND AirDn--------------- 38 S. BANK STRATEGY . ............................... 4 ........................................................................., 41 A. THE CAS AND THE PROPOSED SECAL ..................... 41 B. COMPLEMENTARrrY WITH OTHER WORLD BANK OPERATIONS AND ACTIVITIES .41 C. COMPLEMENTARTY WITH OTHER INSTITUTIONS' OPERAnONS .42 ANNEXES A. The Republic of Colombia - Country Assistance B. External Financing Requirements C. Letters of Commitment and GOC Request for Financial Assistance D1 CiOC Letter of Develonment Policv E. Bank's Medium Term Social Sector Strategy for Colombia F. Cnsultntion Process in Colomnhia and Actinns Rtelatefd tn the Adillutment Lonn G. Specifications, Definitions and Evidence for Tranche Release Conditions H. 1DB Social Sector Adjustmr.ent T oan Map - IBRD 31251   LOAN ANID PROGRAM SUMMARY REPUBLIC OF COLOMBIA SOCIAL SECTOR ADJUSTMENT LOAN (SECAL) Borrower: Republic of Colombia Amount and Terms: US$155 million fixed-spread loan, with automatic interest rate fixing wvhenever disbh1rcPm.etts reach an, agr,reyatp of TTS ! 51 mi!ion;- fina! repayment maturity of 15 years with level repayments of principal, each equivalent to 5 opercent of the lon aounrr.t. Comnmitmernt charge: 0.85 %A$LI V 1t,.LL V S L~. Ij "I%, Ilwl*l ""1U 11UfL. ~.d -LLfiflUILVL t*&LV percent p.a. for the first four years, and 0.75 percent p.a. thereafter. Front- edIU IfV. I peVrcenL1L VI the loUani tlUIVULIL, LU Ur. paJIU by UIth GoUYVerWimen;L oJUL Vo its own finances. Implementing Agency: Ministry of Finance (Public Credit) Description: The proposed SECAL, a one tranche loan intended to be completed before the end of the current Administration on August 7, 2002, is the Bank's response to the current govemment's demonstrated commitment to social sector reforms. The loan would: (i) encourage and enable the current Administration's momentum on several key social reforms that have been developed with active Bank support; (ii) provide an opportunity to influence the social sector agenda of the next Administration; and (iii) help sustain the Government's fiscal program during this calendar year. The operation supports the medium term strategic framework laid out in Table 4.1 and includes among others the following core set of legally binding actions: (i) the introduction of a system of periodic impact/performance evaluation and public monitoring of the Government of Colombia's (GOC) main social sector programs to improve their transparency and citizens' oversight; (ii) the development of a comprehensive Social Risk Management System, improvements in ICBF child assistance nrograms, and formulation of a time-bound action plan to eliminate barriers to internally displaced population's access to social programs; (iii) the expansion of the subsidi7ed health insuranre coverage of the poor, issuance of regulations to implement the new methodology for a!cting tllhealthlk an 0 to t.rletro".gthanlnr of theJA H!Lth Superintendency, and the revitalization of the country's Expanded IJILUIIUIQLGLV1 JPLo znUIL, a (uiv iVv)i"vFlvIiLent of the public edu mtio regulatory framework (including issuance of regulations to implement a new . _1 vl _ . __ -1 _ ---.: ._u_ - -."- a_- A++ II4LIIUUIUg,y UlI dIlUL.4LIl, VUUdL1uII L1Ull1UbIVLW tLU LrILV 1111 VLUL1ltVA allu guiding contracts between public education entities and private providers), establismnent of performance and monitoring agreements betw-een uisc national and selected local governments/Education Secretariats, and more effective dissemination of information regarding education methodologies to improve the education of the poor.  The above social strengthening program is the product of sustained colla_hOrfionn oa.nn1ngr (-r, the 1snn ui and the 1DB - a_nd is financed in parallel by the IDB's Social Sector Project. Risks and Benefits: The actions supported by the operation are likely to lead to improvements in pAeAoples 1 kA; - -4- --nsrn fk..^4rn,lo,l,m ^mene ,-lAron onA LA A A %1L ILM5 1U --g,A va. tiAdtfIf 1V)W u -a _s .n is. poor. These would include among others: (i) increased health status and _WCi^ ffIr aC