Nepal - Population and Family Health Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No 10812-NEP STAFF APPRAISAL REPORT NEPAL POPULATION AND FAMILY HEALTH PROJECT MARCH 18, 1994 Population and Human Resources Division Country Department I South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without i' orld Bank authorization.  CURRENCY EOUIVALENTS (October 1993) US$1.00 = NRs. 49.00 PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ANM - Auxiliary Nurse-Midwife A&E - Architectural and Engineering BPEP - Basic and Primary Education Project CEM - Country Economic Memoranda CIF - Cost, Insurance, and Freight CIR - Contraceptive Prevalence Rate EPI - Expanded Program for Immunization EP - Eighth Five-Year Plan FINNIDA - Finnish International Development Agency FP - Family Planning FP/MCH - Family Planning and Maternal and Child Health FY - Fiscal Year GDP - Gross Domestic Product GTZ - Deutsche Gesellschaft fur Technische Zusammenarbeit (German) HMG - His Majesty's Government HP - Health Post ICB - International Competitive Bidding IDA - International Development Association IEC - Information, Education and Communication IMR - Infant Mortality Rate IUD - Intra-Uterine Device KfW - Kreditanstalt fur Wiederaufbau (German) LCB - Locai Competitive Bidding MCH - Maternal and Child Health MCHW - Maternal and Child Health Worker MIS - Management Information System MOF - Ministry of Finance MOH - Ministry of Health NCP - National Committee for Population NGO - Non-Governmental Organization NPC - National Planning Commission O&M - Operations and Maintenance ODA - Overseas Development Administration (British) PBHW - Panchayat Based Health Worker PFHP - Population and Family Health Project PHC - Primary Health Center PHRD - Policy and Human Resource Development PIU - Project Implementation Unit SBD - Standard Bidding Document SHP - Sub-Health Post TFR - Total Fertility Rate UNDP - United Nations Development Programme UNFPA - United Nations Population Fund UNICEF - United Nations Children's Fund USAID - United States Agency for International Development VDC - Village Development Committee VHW - Village Health Worker WHO - World Health Organization FISCAL YEAR: July 16-July 15  FOR OFFICIAL USE ONLY NEPAL PROPOSED POPULATION AND FAMILY HEALTH PROJECT Cot tents Page No. Credit and Project Summary ................................ iii I. SECTOR CONTEXT ................1...... ..... 1 A. The Challenge of Population and Developme; ... 1 B. HMG'S Family Planning and Maternal and Child Health Program. 3 C. Pending Sector Issues. 6 D. IDA's Country and Sector Assistance Strategy and Rationale for IDA's Involvement in the Project. 9 E. Lessons Learned. 9 II. THE PROJECT .11 A. Genesis and Objectives .11 B. Project Design and Components .12 C. Project Costs and Financing .18 D. Procurement Arrangements .21 E. Disbursement .23 F. Status of Preparation ..... . ........................... 24 III. IMPLEMENTATION AND SUPERVISION .25 A. Project Organization and Management .25 B. Implementation Plan .25 C. Monitoring and Supervision .26 D. Accounts and Auditing .26 IV. PROGRAMS OF SPECIAL EMPHASIS ................................. 27 The report has been endorsed by Mrs. A. Hamilton, Director (SAlDR) and Mr. M. Karcher, Chief (SAlPH). Peer Reviewers were Messrs. 0. Pannenborg, Chief (AF1PH); S. Sudhakar, Senior Population Specialist (SA1PH); and C. Walker, Senior Population, Health and Nutrition Specie-st (SA3PH). This report is based on the findings of an IDA mission to Nepal in September-October 1993. Mission members included: Messrs./Mmes. B. Duza, Task Manager (SAlPH); M. Mac Donald, Senior Population Specialist (ASTHR); I. Appasamy, Operations Assistant (SA1PH); A. Bhulya (Demographer-Operations Researcher), J. Brandt (Logistics Specialist), T. Coyle (Architect), W. Robinson (Demographer-Health Economist), and J. St. Germain (Architect), Consultants. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Woa Id Bank authorization. l  - ii - V. BENEFITS AND RISKS ...... ................ .................... 27 A Benefits .............................................. 27 B. Risks ......................... ............... 28 C. Sustainability .29 VI. AGREEMENTS REACHED AND RECOMMENDATION .29 TABLES IN TEXT Table 2.1 Project Cost Summary .19 Table 2.2 Financing Plan by Component ................ .... 20 Table 2.3 Procurement Methods .21 ANNEXES ANNEX 1. H_ALTH DATA; MINISTRY STRUCTURE; PROGRAM COSTS 1.1 Population and Health Facilities in Nepal ............ 31 1.2 Pcpulation Projection and Related P-'rameters for Nepal ........................................ .... 32 1.3 Contraceptive Method Mix for Nepal .................... 33 1.4 Structure of Population and Health Service Delivery in Nepal ......... 34 1.5 HMG's FP/MCH Program Components by Financiers ......... 40 1.6 HMG's FP/MCH Program Components by Year ............... 41 ANNEX 2. PROJECT COSTS AND DISBURSEMENTS 2.1 Population and Family Health Project - Expenditures by Components .. 42 2.2 Population and Family Health Project - Components by Year ............................................... 44 2.3 IDA Disbursement Schedule .. 45 ANNEX 3. PROJECT MANAGEMENT. IMPLEMENTATION AND SUPERVISION 3.1 Management Structure for Population and Family Health Project ......................... 46 3.2 Project implementation Schedule by Components ......... 47 3.3 Implementation Schedule - Civil Works ................. 48 3.4 Yearly Critical Dates for Civil Works Implementation.. 49 3.5 List of Sites for First and Second Year Construction Program of Health Facilities ............. 50 3.6 List of Proposed Sites for Primary Health Centers ..... 51 3.7 Implementation Sc:hedule - Logistics ................... 53 3.8 Implementation Schedule - MIS ......................... 54 3.9 Institutional Development Technical Assistance ........ 61 3.10 Construction Monitoring Plan .62 3.11 Implementation Plan - Field Operations Support .64 3.12 Bank Supervision Input into Key Activities .65 ANNEX 4. LIST OF DOCUMENTS IN PROJECT FILE .68 MAP: IBRD 25400 - Nepal Population and Family Health Project 70  - iii - NEPAL POPULATION AND FAMILY HEALTH PROJECT Credit and Prolect Summary Borrower: The Kingdom of Nepal Amount: SDR 19.4 million (US$26.7 million) Terms: Standard with 40 years maturity Proiect DescriDtion: The six-year (FY1995 t- FY2000) Project has been designed within the framework of the Government's comprehensive Family Planning and Maternal and Child Health (FP/MCH) Program. and would supplement funds from domestic and foreign sources, ensuring resource availability and operation of the total Program. It would support the improvement of the quantity and quality of care in FP/MCH service delivery and finance activities designed to: (a) strengthen the effectiveness, access, and utilization of the outreach and clinical programs; (b) refurbish the health facilities and logistics infrastructure; (cl provide operational and management support; (d) develop a functioning Management Information System; (e) provide maintenance support; and (f) enhance institutional development and the absorptive capacity of the sector. Benefits and Risks: Benefits would include lower rates of births, and infant and maternal mortality and morbidity through cost-effective ielivery of the FP/MCH Program. The slower population growth and better family health that would result from these efforts would be a vital pre-condition for the poverty reducing and other development and environment goals of Nepal. The principal risk would be the inability of the Government to accomplish the effective integration of FP/MCH activities with Primary Health Care delivery and the ongoing decentralization of program execution. Other risks would include the inability to ensure appropriate domestic resources and to maintain a critical mass of staff of service providers and managers, and HMG-donor-NGO coordination in the sector, along with their long-range commitment to the sector. These risks are being addressed as part of on-going institutional reforms in the sector and through enhanced management, monitoring and supervision of the Project.  v Poverty Categorv: Not Applicable Eroject Costs: Local Foreign Total -----------(US$ Million)---------- Outreach Service Delivery 26.8 5.3 32.1 FP/MCH Clinical Units 0.9 0.9 1.8 Logistics & Supplies 0.9 0.4 1.3 Institutional Development 2.5 1.3 3.8 Total Project Cost 31.1 7.9 39.0 Financinq Plan' (Estimated) Financier: Local Foreian Total ----------US$ million-------------- Government 12.3 - 12.3 IDA 18.8 7.9 26.7 Total 31.1 7.9 39.0 Estimated IDA risbursements: FY 942 95 96 97 98 99 2000 ----------------------- US$ million ---------------------------- Annu.al 0.2 3.1 4.9 6.3 5.6 4.3 2.3 Cumulative 0.2 3.3 8.2 14.5 20.1 24.4 26.7 Economic Rate of Return: Not Applicable Map: IBRD 25400 lIncludes duties and taxes, estimated at US$1.5 million equivalent. 2Retroactive financing.  NEPAL POPULATION AND FAMILY HEALTH PROJECT BASIC DATA Variables Year Data Total Area (Thousand kM2) 1991 141 Total Population (Millions) Mid-1991 19.4 Density (Per kM2) Mid-1991 138 Population Growth Rate (Percent) Mid-1991 2.5 Crude Birth Rate (Per thourand) 1991 38 Crude Death Rate (Per thousand) 1991 13 Life Expectancy at Birth (Years) Male 1991 54 Female 1991 53 Total Fertility Rate (TFR/Per Woman) 1991 5.5 Infant Mortality Rate (Per thousand live births) 1991 101 Under 5 Mortality Rate (Per thousand live births) 1991 197 Maternal Mortality Rate (Per thousand live births) 1988 8.3 Urban Population (Percent of total population) 1991 10 Adult Literacy Rate (Percent) Total 1990 26 Females 1990 13 Age Structure (Percent) 0-14 1991 43.4 15-64 1991 53.7 65 and over 1991 2.9 Population Per Physician 1993 17,000 GNP per capita (US$) 1991 180 Sources: World Development Report, The World Bank; 1993; Eduard Bos et al., World Population Projections, 1992-93 Edition, The World Bank; and MOH/HMG, National Health Policy, 1991 (for under 5 mortality rate).  I. SECTOR CONTEXT A. The Challenge of Population and Development 1.1 Understanding the implications of rapid population growth is pivotal for a realistic perspective of Nepal's development prospects. The Bank's 1991 Poverty and incomes Study for Nepal identifies this as the most fundamental factor contributing to poverty, eroding the limited gains made in GDP and food production. Had the annual population growth rate been contained to 1.5 percent, rather than the 2.7 percent registered during the past twenty years, the real per capita GDP would have risen 45 percent instead of 14 percent during the oeriod. As the study documents: (a) there is no prospect of significantly increasing average incomes if the population continues to double every 25 years, as in the recent past; (b) curbing population growth is the central, single most important element of any poverty alleviation strategy for Nepal; and (c) in the absence of an effective program to slow population growth, all other poverty alleviation measures would prove ineffective. In that case, per capita annual incomes might stagnate at around US$180, resulting in the addition of 15 million absolute poor over the next two decades.3 This would not be a desirable scenario for a country whuse 1991 per capita G.4P ranked 121st among 127 countries cited in the 1993 World Development Report. Such daunting conclusions are strongly endorsed in the Bank's Country Economic Memoranda (CEM) and reiterated by various experts in the field. Senior Nepali officials have often characterizec' the magnitude of the count2y's population problem as a "Himalayan challenge." 1.2 Illiteracy in the population 15 vears ai:d over is 74 percent, the figure for females being a staggering 87 percent. Also germane to the context of severe poverty, malnutrition, overcrowding and inadequate health services is that Nepal's health status is amongst the poorest in the world, even within the relatively impoverished South Asian region. Access to health care remains extremely limited, with a doctor-population ratio of nearly 1:17,000 and one hospital bed per more than 4,000 persons. The situation is far worse in outlying rural areas and mountains (Annex 1.1). Nepalfs infant mortality rate of 101, child mortality rate of 197, and maternal mortality rate of 8.3 per thousand live births are among the highest in the world; life expectancy of 53 years at birth is among the lowest; and nutrition indicators remain at a critical range -- the percentage of households consuming less than the recommended levels of food being 47% in tle rural hills, followed by 40% in urban areas, 31% in the mountains, and 23% in the rural terai, which is a food surplus producing region.4 3 See: Nepal: Poverty and Incomes, The World Bank, 1991, pp. xi, xiii, 23. 4 Social Indicators of Development, 1993, The World Bank, p. 237; World Development Report, The World Bank, 1993, pp. 238, 292; National Health Policy, MOH/HMG, Nepal, 1991, p.3; Nepal: Poverty and Incomes, The Worlt Bank, 1991, p.74.  -2- 1.3 The number of the absolute poor represented nearly 40 percent of Nepal's estimated population of 19.4 million as of mid-1991, with an annual rate of population growth of 2.5 percent.5 At this rate, the population would double again in the next 27 years. Although a subs.'antial part of this increase is already determined by the great momentum for growth represented by the large number of women in reproductive ages -- 4.5 m_llion in 1991, compared to 2.7 million in 1970 -- as a result of past high fertility, a faster reduction in fertility in the near future would make a significant difference in the total population size twenty years from now. By the year 2015, this could imply a total size of 33 million (low growth scenario), rather than 37 million (high growth scenario), as estimated in the Social Sectoi Strategy Review.6 Under more optimistic assumptions of somewhat faster fertility decline, the Bank's 1992-93 Projections estimate possible doubling of the current size at a later date, about 20307 (Annex 1.2 for projected population growth and related parameters for Nepal). Achieving a slower pace of population growth would call for undertaking the required investment and effort now. 1.4 In the process of continued high fertility and gradually declining -- albeit still high -- mortality, per capita agricultural land has dwindled from 0.6 to 0.24 hectare between 1954 and 1990. The current average farm size in the hills is below one hectare, deemed insufficient to support the average farm household of 6 persons. The consequent pressure has pushed cultivation up the hills and fragile slopelands, associated with declining marginal productivity, deforestation, and other forms of ecological disruptions. The temporary safety margin offered by agricultural expansion in he terai which accommodated an estimated 1.2 million migrants frc.n the hills in the l9(,s and 19-0s is also approaching exhaustion. At the same time, in view of the young age structure of the population, np- entrants would be joining the country's labor force at an annual rate of about 0.4 million by the beginning of the century, twice the rate experienced during the 1980s. Given the limited arable land base, the largest proportion of these new workers would have ' be absorbed in off-farm employment. In contrast, the manufacturing sector is currently adding only some 9,000 jobs per year.8 1.5 This is the overall sector context against which one has to assess the past and prospective FP/MCH (Family Planning and Maternal and Child Health) program of the country. Despite over two decades of official family planning programs, the contraceptive prevalence rate (CPR) remains around 20- 23% of the currently married women, and the total fertility rate (TFR: number of children per woman expected during the entire reproductive period) is estimated to be nearly 6. The current CPR is much lower than the rate required for a significant impact on population growth -- a CPR of 40 percent 5 World Development Report, The World Bank, 1993, p.238; Eduard Bos et al., World Population 2roiections, 1992-93 Edition, The World Bank, 1992. 6 Nepal; Social Sector Stratepy Review, Vol. II, The World Bank, 1989 (Report No. '498-NEP). 7 Eduard Bos et al., World Population Projections, 1992-93 Edition, The World Bank, 1992, pp. 354-355. 8 See: Nepal: Poverty and Incomes, The World Bank, 1991, pp. xi, 24-25, 65.  3- by the end of the century to bring down the population growth rate to two percent per year, and a CPR of 60 percent needed for the population to begin to acabilize.9 These latcer figures are considerably higher than the Government's CPR goal of 33 percert set for the year 2000,10 which itself would be ambitious in terms of current programmatic efforts but should be achievable if the goal is backed by appropriate levels of institutional, financial, and personnel efforts. The same would be true for the MCH goals, discussed later. B. HMG's Family Planning and Maternal and Child Health (FP/MCH) Program 1.6 Population Policy in the 1980s. Recognizing the critical importance of populatioli issues, in the early 1980s His Majesty's Government (HMG) developed a National Population Policy, which was adopted in !983.11 It was in principle a sound population strategy that included: (a) meeting unmet demand for tamily planning; (b) integrating "population" into relevant development programs; (c) adopting programs to intrease female education; and (d) mobilizing community participation. A National Commission on Population was established, under the Prime Minister, to take charge of executing the population policy. Implementation of the policy, however, was piecemeal and ineffective; inter-sectoral coordination weak; and acces- to family planning service delivery limited and irregular. During the late 1980s, population efforts lost momentum and the National Commission on Population was merged with the National Planning Commission (NPC) in 1990. 1.7 Population Policy for the 1990s. The present Government has demonstrated encouraging signs of awareness of the population and development nexus, and in 1991, announced a new population policy, in conjunction with a new health policy. These have been incorporated in the country's Eighth Five- Year Plan (EP: 1992-97) .12 While HMG's awareness of population issues is evidenced in these efforts, as well as in documents and speeches, strong political priority accorded to population in Asian countries with the successful population programs -- such as Indonesia, Thailand, and lately Bangladesh -- is still to emerge in Nepal. Nonetheless, it is important to note that in late 1991, HMG established a National Committee for Population (NCP), chaired by the Prime Minister and comprised of Ministers from the concerned line and core Ministries. The structure of the National Population Program is shown in Annex 1.4. Improvement in the socio-economic environment 9 Nepal - Fertility and Family Planning Survey Report, 1991. MOH/HMG, 1991, p. 108; Nepal - Fiscal Restructuring and Public Resource Management in the Nineties (Draft), The World Bank, February 1994, Para. 5.125. 10 Population Poi.cw and Program, Briefing Paper for the International Donor Meeting on Population, Kathmandu, March 1992, NPC/HMG. 11 National Pooulatic, ,trateqy, National Commission on Population, HMG, 1983. 12 See: National Pealth Policy, MOH/HMG, 1991; Population Policy and Program, Briefing Paper for the Internatioaal Donor Meeting on Population, Kathmandu, March 1992, NPC/HMG; Eighth Five- Year Plan, NPC/HMG, 1992.  -4- that would be conducive to fercility reduction is being supported in NepaL through the ongoing IDA-financEd Basic and Primary 3ducation Project (BPEP), with thrust on increasing fetaale enrollment and female participation in the teaching force; and the Higher E;lucation Project, recently approvec, by the Board. 1.8 FP/MCH Programs in Nepal whicn started in the early 1970s have since continued with support from extsrnal donors -- especially USAID, UNFPA, UNICEF and some international NGOs. Over time, these were developed into a vertical program to deliver family planning, and limited MCH services. Despite meager resources and other constraints, some progress has been achieved during the past twenty years. The CPR is estimaced to have risen fro.n 2 percent in 1976 to 7 percent in 1981, and above 20 percent in 199S, as noted before. While the overall achievement in MCH has been rather trivial, steady progress has been recorded for the Expanded Program f)r Irmmnunization (EPI), with 21 to 80 percent coverage for different antigens.13 1.9 HMG's Cuirent Sectoral Strategy, 14 which is largely supported by the donor community, includes plans to: (a) upgrade the health standard of the population through an integrated approach to Prim,'ry Health Care; (b) pro-ide FP/MCH services in a more effective manner; (c, promote equity of access of the population, especially the rural population, to the services; and (d) decentralize program execution. These are to be achieved by establishing 3,200 Sub-Health Posts (SHP), one in each Village Development Committee (VDC) and deploying a new cadre of 3,200 MCH Workers at the SHP level; strer;gthening of the existing 816 Health Posts (HPs); and creating 205 Primary Health Centers (PHCs), each under a doctor and with a three-bed facility. The structure of FP/MCH service delivery, announced in September 1993, is shown in Annex 1.4. 1.10 Specific goals for the FP/MCH Program, envisaged by HMGl5 for the year 2000, comprise the following: (a) Increasing the CPR from the present level of 23% to 33% and reducing the TFR from 5.8 to 4; (b) Reducing infant, child, and maternal mortality rates respectively from 107 to 50, 197 to 70, and 8.5 to 4 per thousand; and (c) Raising life expectancy at birth from 53 to 65 years. 13 See: references ted in Footnote 11. 14 See: references cited in Footnote 11. 15 See: references cited in Footnote 11.  -5- As a result of the inadequate statistical data base for the country, estimates of uemographic and health parameters from different sources vary widely, but the above figures of current fertility and mortality levels are considered plausible. However, the demographic and health objectives for year 2000 must be assessed in a realistic manner. On the fertility side, serious programmatic c'forts and resource commitments, as envisaged in the Government's Population and Family Health program, can make the CPR goal achievable and bring the more demanding TFR goal within reach. On the other hand, there is a need for caution with regard to the mortality and life expectancy goals set by the Government for the year 2000. These are unlikely to be achieved by the end of the dec.ade, ev-n under the most optimiestic scenarios. There is no precedent in similar developing country settings for such dramati.c improvements over such a short period. The general WHO guidelines indicate that an annual gain in life expectancy in a developing country of about half-a-year is a realistic objecti',e. The proposed Project supports an outreach and clinical program that would widen the access to MCH care throughout the country and set in motion an improvement in mortality conditions over a longer time-frame. 1.11 Major components in HMG's current and prospective FP/MCH Procram consist of outreach service delivery, clinical services, logistics and supplies, and institutional development. Under the recently reorganized organogram (Annex 1.4), these activities would be planned and coordinated through the Planning Division of the MOH and axecuted through the Family Health Division of the new Department of Health Services of the MOH. FP/MCH would be delivered within an integrated package of Primary Health Care. Implementation would be decentralized -- through the Health Directorates in the five development regions and the 75 District Health Orfices. The work will be carried out at the field level mostly through a network of 816 existing Health Posts (HPs) and 3,200 new Sub-Health Posts (SHPs); and through outreach services delivered at the community and household levels. Supportive mechanisms for outreach and clinical services would include a Management Information System (MIS); Information, Education and Communication (IEC) component; National and Regional Training Centers; and infrastructure for various health facilities. These activities would be supported partially from domestic sourcea and largely from donor funding. 1.12 FP/MCH Program Support. The incremental resource requirement for MOH has been stipulated as Rs.5.5 billion (US$127 million) in the Eighth Five- Year Plan (1992-97). This represents 4.8 percent of the total EP budget outlay. Including direct funding of certain components by some donors, the figure is estimated to be Rs.7.5 billion (US$174 million) in HMG's Financing Plan. This level of resource allocation should be adequate to cover the Government's total FP/MCH Program noted in Para 1.11 above at an estimated cost of Rs.6.2 billion (US$127 million)16 for six years (FY95-2000), corresponding to the proposed Project period. As indicated in Annex 1.5, the existing donors -- primarily UNFPA and USAID -- will continue to provide 16 Based on rate of exchange of US$1 - Nrs. 49.00; EFYP estimate based on rate of exchange of US$1 - NRs. 42.75.  -6- funding for contraceptives, with supplementary support from FINNIDA, a new donor in the sector. KfW, another new donor, will be supplying essential drugs, along with UNICEV, which will also support EPI vaccines. Most of the resources for training, IEC, and MIS will be coming from UNFPA and USAID, while HMG will cover part of the recurrent expenditures. In addition to the above-mentioned external donors who have firmed up their commitment to the 'rogram, ODA is in the final stage of its decision to participate in it. However, lack of adequate funding in some critical areas -- including MCH Workers' salary, logistics, infrastructure, and operational and institutional support -- makes the overall FP/MCH service delivery currently ineffective and investments in other program areas wasteful. C. Pending Sector Issues 1.13 A number of key issues have long plagued the implementation of FP/MCH e3rvice delivery in the country, but their resolution has proved to be extremely slow as a res;.X of various systemic problems as well as ad hoc and segmented approaches taken to address them. Some of the outstanding problems are: (a) Priority and Accountability. Lack of perceived priority and accountability for FP/MCH services has been endemic at the field level, both on the part of the workers and their supervisors. This is partially related tc the next problem, but perhaps also to the lack of adequate Government attention to the program. (b) Inadeouate Integration. Inadequate and hasty integration of the previously vertical and "crash" programs in various fields including FP/MCH. failed to produce the desired results in terms of more cost-effective service delivery. Instead, the existing services were largely disrupted. Many workers, including the only female outreach workers (Panchayat-Based Health Workers/PBHWs) were laid off; many others from previously vertical programs were poorly re-trained and re-oriented for integrated service delivery. Only the Expanded Program for Immunization (EPI) did reasonably well in the process, partly at the expense of other components. The Village Health Workers (VHWs) gave priority to immunizations for which supplies were mostly available from external donor support, in preference to family planning and other health measures which were less well understood, had limited resources, and were most difficult to deliver. Continuation of verticality in donor support for particular components slowed down the process of integration. The creation of a new Department of Health Services (DHS), announced in July 1993 -- see Organogram in Annex 1.4 -- would address the problems of incomplete integration and decentralization of primary health care delivery, and HMG and donors seem to be more aware now of the need to provide specialized services through a coherent integrated package.  -7- (c) Resource Allocation and Utilization. The lack of priority to the sector was reflected in inadequate resource allocation to FP/MCH, and even reduction in the budget in FY93. Limited implementation of the program objectives was an inevitable consequence of resource constraints. In addition, the inadequate allocations themselves were often not fully spent, especially for the development budget. An average of 36 percent of the health sector development budget was not spent during FY90-FY92, compared to 30 percent for the entire development budget. FP/MCH services that are largely tied up with external grant funding have also suffered more in the process. This underutilization of resources has raised skepticism about the absorptive capacity of MOH and its FP/MCH operations. Appropriate measures, thus, need to be taken toward institutional development and reforms in financial management. Mechanisms for fund release would require streamlining. The Bank s macro-economic analysis attributes a large part of the problem to the lack of HMG counterpart funding in support of the development budget. It has been pointed out that most of the sector development budget is recurrent in nature and requires sustained financing under the regular budget. However, more than half of these expenditures are parcelled into projects under the development budget for financing by donors, which also results in unreliable service delivery as financing is linked to the project cycle.17 (d) Poor HMG-Donor Coordination. As noted earlier, considerable segmentation and loss of focus resulted from the earlier "project approach" to FP/MCH. This has been exacerbated by a lack of effective mechanisms for inter-ministerial, as well as HMG-Donor, coordination in support of a comprehensive FP/MCH program. (e) Staff Support. The program has suffered as a result of inadequate outreach and clinical service providers, as well as managerial staff. The inability of the program to retain female Auxiliary Nurse-Midwives (ANMs) in the remote Health Posts (HPs), often due to lack of secure accommodation, and failure to deploy local female MCH Workers largely due to fund constraints have resulted in limited service delivery. High levels of doctor and male paramedic vacancies have also been a chronic problem in the outlying areas. The Government has begun to pay attention to these problems, but staff reductions across the board as a result of ongoing administrative reforms may leave the recently reorganized FP/MCH section under the Family Health Division without a critical mass of staff for outreach and clinical services, and program management. (f) Inadeauate Travel and Daily Allowances. Service delivery has proven difficult owing to the inadequacy of travel (T/A) and daily (D/A) allowances for field staff and their supervisors. 17 Nepal - Fiscal Restructuring and Public Resource Management in the Nineties (Draft), The World Bank, February 1994, para. S.117.  -8- (g) Contraceptive Method Mix and Unmet Needs. Partly because of the difficulty of terrain and limited institutional facilities, it was initially found convenient to arrange seasonal sterilization camps across the country. In the process, temporary and spacing methods were neglected, and the national family planning program became synor'mous with a sterilization program. Hasty measures d limit sterilization camps since the mid-1980s and to provide the services in static facilities in a selected number of "institutionalized" districts resulted in heavy decline in sterilization performarce -- from a peak of 68,000 in FY84 to about 20,000 in recent years. Other methods, which could compensate for the loss of sterilization clients, have yet to be effectively disseminated as household visitation by field workers is infrequent, and measures for promoting these alternative methods are still weak. In 1986, about 86 percent of all contraceptive use was by way of sterilization; by 1991, 78.4 percent of CPR was still accounted for by sterilization (see Annex 1.3 for Contraceptive Method Mix). Overall, the quality of care in sterilization and other clinical methods, especially when administered in temporary camps, has also been questioned. At the same time, the "unmet need" for family planning in the 1991 survey was identified as 28 percent among married women and 55 percent of these women wanted family planning in order to "limit family size. "1'8 Besides creating new demand through targeted IEC, intensive program efforts can tap these potential clients and increasingly reach younger women with fewer children through a rationalized method mix of both permanent and temporary methods. It is worth noting that the sensitive topic of abortion has not been an issue in Nepal. It is not legal in the country and was never a part of the FP/MCH program. Nonetheless, although not well documented, the incidence of abortions is believed to be significant in the country. Many of these abortions are supposedly done under unhygienic and life-threatening circumstances, aggravating maternal mortality and morbidity among the women. Better access to family planning services should reduce abortions and the accompanying misery of the women and their families. (h) MIS and Locqistics Support. In the absence of a functioning MIS for FP/MCH, bot-a service delivery and its monitoring at the field level bave proved intractable. Similarly, the logistics system needs major improvements, without which contraceptives and other commodities, even when available, would continue to be erratically supplied. (i) Infrastructure Development and Maintenance. Inadequate infrastructure facilities, their suboptitmal utilization, and poor maintenance of the buildings and equipment have impacted adversely upon the FP/MCH Program. Resolution of these problems would 18 NeDal - Fertility, Family Planning, and Health Survey. 1991, MOH/HMG, 1993, pp. 82-85; 107-117.  -9- require appropriate financial resources as well as skilled personnel to ensure year-round provision of quality services at both outreach and static facilities. D. IDA's Country and Sector Assistance Strategy and Rationale for IDA Involvement in the Proiect 1.14 A major objective of IDA's country assistance strategy for Nepal calls for addressing the interlinked challenges of low economic growth, endemic poverty, high population growth, and environmental degradation. Their solution is viewed in teims of more rapid and broad-based economic growth and human resources development, reinforced by a strong population program. The urgency of tackling the problem of rapid population growth is a theme that cuts across the four main areas of focus of this strategy: (a) poverty alleviation through productivity gains in agriculture, expansion in small- scale industries and services; (b) improvement of absorption capacity through strengthening the finances and management of sectoral institutions; (c) human resource development; and (d) the development of hydropower resources il Nepal's macro-economic management and institutional capacity improve. Therefore, IDA's country assistance strategy identifies population and health as a top priority sector, and the Government has acknowledged the importance of protecting investment funds in this core area. 1.15 This priority emphasis is reflected in several ways. First, through its macroeconomic dialogue with HMG, IDA is in a position to help HMG with the prioritization of public expenditures and with the allocation of scarce domestic and external resources to high return investment programs. In the context of the on-going public expenditure review, HMG's population and family health program was identified as a core program for budget allocation purposes, thus ensuring that adequate funds will be available for the program in a timely manner. Secondly, by taking an overall view of the needs of the sector rather than a more narrow project approach, IDA was able to assist the Government in formulating a comprehensive and sustainable population and family health program, which promotes a more rational contraceptive method mix -- along with a realistic financing plan -- which now serves as a framework for external donor support. Thirdly, by helping the Government to organize a donors' conference on population in March 1992, IDA was instrumental in mobilizing additional Oonor resources for the sector, especially as some donors were waiting for IDA to signal its entry into the sector before committing themselves. Finally, by acting as a lender of last resort, IDA is able to fund critical inputs, such as O&M and TA/DA, without which services do not reach the intended beneficiaries. This will assist in expanding the absorptive capacity of the sector and increasing its effectiveness. E. Lessons Learned 1.16 IDA experience in the social sector in Nepal so far has been in several projects in education. Lessons learned underscore the need to approach the issues at the systemic level; the value of cost-effective and affordable interventions; and institutional reforms and building up  -10- institutional capacities for sustainability of the programs. While IDA has no prior experience in Nepal in the population and health sector, these lessons from the education projects proved most relevant in developing the proposed Project with HMG and in dealing with the sectoral issues identified during the process of Project preparation. IDA experience in the sector in parallel situations elsewhere in the reQion also provided positive lessons in desi7ning the proposed Project. 1.17 Of particular relevance is the leading role that IDA has played in its long-standing commitment to the sector in Bangladesh, a country that is equally constrained by poverty and its associated limitations. The Bangladesh Population and Health Project is now widely acclaimed as a major success story, and IDA is credited with its sustained support for a comprehensive and well-coordinated national program. The country's total fertility rate has fallen from 7 births per woman in 1975 to 4.5 births per woman in 1990. The corresponding change in the contraceptive prevalence rate auring the period is reflected in the dramatic rise from 8 to about 40 percent. Relevant evaluation and research findings' include the following: (a) incontrovertible evidence that there is demand for family planning in rural Bangladesh; (b) the value of programmatic interventions to mitigate the costs of family planning; and (c) confirmation that implementation of appropriate service elements can bring about substantial demographic effects. Based on the research, three key policies were implemented. First, Family Welfare Centers have been established in over 80 percent of the local jurisdictions that have an average population of around 20,000. Second, surgical sterilization services are available in every district and subdistrict hospital at no cost to the patient. And third, over 23,000 female outreach workers deliver family planning services to couples in their homes. 1.18 These observations are directly relevant for the design of the proposed Project. Given the similarities in the contexts of the two countries, it should be possible for Nepal to achieve a breakthrough in its population programs, provided the right policiee are adequately implemented. 1.19 As noted earlier, implementing an effective population program is an essential element of IDA's Country Assistance Strategy as it will contribute to the Government's poverty alleviation and human resource development efforts. 19 Winthrop P. Carty, et al., Success in a ChallenQing Environment: Fertility Decline in Bangladesh, Population Reference Bureau, Inc., 1993; John Cleland et al., Bangladesh: The Determinants of Reproductive Change, The World Bank, 1994.  II. THE PROJECT A. Genesis and Obiectives Project Genesis 2.1 The Project originated from a Government request for IDA assistance for the FP/MCH Program following the discussions of IDA's 1989 Social Sector Strategy Review for Nepal (Report No. 7498-NEP), which highlighted the population-resource strains noted above. The Bank's macro-economic analyses have since echoed the concern that unless a major program intervention were launched, aiming at reducing population growth, the gains of other investments in Nepal would ultimately be frittered away. IDA was initially involved in assisting with the drafting of a population strategy for Nepal in 1983, which was discussed at the Aid Group meeting that year, and subsequently adopted as Government policy (see para. 1.6). However, an IDA-supported project did not materialize at that time. 2.2 Against this backdrop, detailed preparations for the present Project were undertaker, by HMG for over three years. A number of analytical studies and other preparatory work were carried out with support from UNDP, UNFPA, GTZ (Germany), Save the Children Fund (UK), and the Japanese Policy and Human Resources Development (PHRD) Fund. While working closely with the Government, IDA also had extensive consultations with the existing and potential donors both at the headquarters and field levels. Proiect Obiectives 2.3 The Project's main objective is to support the Government's efforts to increase contraceptive prevalence and decrease the total fertility rate. In addition, the Project would help to reduce maternal and child morbidity and mortality, and to raise life expectancy. The Project would contribute to the achievement of these goals through the financing of key components of HMG's FP/MCH program that have inadequate funding and institutional support in order to: (a) increase the coverage, quality, and utilization of FP/MCH services through outreach and clinical services, and ensured supplies of contraceptive and drugs; (b) improve the functions of the grassroots health facilities through recruitment and deployment of female MCH Workers and providing field operations support; and (c) enhance the Government's institutional capability, in particular the managerial capability, to implement a comprehensive Population/MCH Program effectively.  -12- 2.4 The focus of the Project would be on: (a) enhancing the utilization of existing personnel resources and health facilities; (b) supporting a new cadre of female MCH Workers, a long-felt need for the national program in a traditional setting; (c) refurbishing and expanding the health infrastructure and logistics systems; and (d) strengthening MOH's maintEnance and management capacities. With respect to family planning, the goal would be to increase the CPR from 23% to 31% by expanding the coverage from the current figure of about 1.01 million couples to an estimated 1.74 million couples annually by the end of the Project period. With respect to family health goals, the Project envisages a substantial expansion of client access to the improved and expanded network of clinical facilities at the level of District Hospitals, Health Posts, and Sub-Health Posts (SHPs). In particular, by the end of the Project period, the goal would be to hold about 50,000 outreach clinics each month, served by the 3,200 MCH workers and other staff operating out of the Sub-Health Posts. The expanded services and counselling would also help safe motherhood goals for a growing number of women through better child spacing, minimizing vulnerable pregnancies too early and too late in the reproductive life of a woman, as well as through pre-natal care and more effective referral to the 25 new Primary Health Centers (PHCs) and 35 MCH Units in the District Hospitals. B. Proiect Design and Components Evolution of the Project Design 2.5 Since this would be the first IDA-supported Project in the sector for Nepal and since MOH/HMG does not have prior experience with IDA requirements and procedures, considerable preparatory activities were undertaken. Milestones in the evolution of the Project design included the following: (a) Background Technical Papers. Ten major reports were commissioned in 1990 from national experts on various aspects of the FP/MCH outreach and clinical service delivery in the public, NGO, and private sectors. (b) Reports of Seven Working Groups. These Working Groups were set up in 1991 under a National Steering Committee, with inter-ministerial and NGO representation. They embarked upon in-depth analytical work, done in three phases -- Situation Analysis; Analysis of Options for Interventions; and Resource and Management Implications for Project Components. The reports examined management and operational issues at various levels, and considered options and resource requirements for different program interventions. (c) Comprehensive FP/MCH Program. The foregoing reports and analyses provided a basis for defining the parameters and broad resource requirements for a comprehensive national FP/MCH Program. The  -13- technical inputs and outcomes were reflected in HMG's Eighth Five- Year Plan (1992-1997), and provided a framework for dialogue between HMG, IDA, and the donor community-at-large. (d) International Donor Meeting. These efforts were followed by the convening of an international donor meeting on population held in Kathmandu in March 1992. IDA collaborated with HMG and othpr donors in the process leading up to the meeting and in the subsequent follow-up. The documentation represented a further basis for HMG-donor consultations on program objectives and potential support. (e) Detailed Financing Plan. The stage was now set for a detailed financing plan for the sector. Its preparation was facilitated by input from the ongoing Health Resource Allocation Study for Nepal, a UNDP project executed by the Bank, as well as IDA's Public Expenditure Review. The Financing Plan, submitted to IDA by HMG in August 1993 and shared with other donors, provides a comprehensive profile of requirements for the sector within the expected resource envelope of domestic and foreign funds for various components, and identifies the f,inancing gaps for specified areas. A valuable outcome emerging from the analysis of the Financing Plan was the fruitful dialogue with the Government and formulation of alternative scenarios and sequencing of expansion and prioritization for various components of a feasible, affordable and sustainable FP/MCH program, keeping in view the competing demands on financial, personnel, and organizational resources available to HMG. (f) Infrastructure Development Survey. A country-wide infrastructure survey of more than 800 health facilities was undertaken in 1993. Completed in October 1993, the Report provides a detailed picture of the physical status of each of these facilities, along with their accessibility and utilization; it also formulates objective criteria for essential repairs and renovation, as well as replacement on appropriate sites. (g) Locristics Inventory. A similar inventory of the logistics infrastructure system was undertaken. Issues relating to the distribution and storage of FP/MCH supplies in the country were examined, and recommendations for rehabilitation of the system formulated. (h) Operations Research. Operations research in selected areas of three districts was set up with a view to examining implementation issues at the field level. 2.6 Against the background of the studies and reviews noted above, the proposed six-year (FY95-2000) Population and Family Health Project has been based on the Government's FP/MCH Program, and addressee the pending sector issues outlined in para. 1.13. The IDA Credit would supplement funds from  -14- domestic and foreign sources, ensuring resource availability for the total Program. Duplication of efforts and funding for various components would be avoided through coordination and continuing dialogue 'ich the Government and the concerned donors, and where appropriate, through joint supervision missions. The proposed three-tier management structure (Chapter III, para. 3.1) should also be a valuable mechanism for inter-ministerial, NGO, and donor coordination. The Project would cost US$39 million, and cover about 31 percent of the estimated total of US$127 million for HMG's FP/MCH Program for the Project period (Annex 1.5). The formulation assumes that the National Program would continue to be supported by the domestic and concerned foreign sources at least at the present level of support beyond the end of the EP. 2.7 The scope of the Project is fully consistent with the resource envelope of Rs.5.5 billion for HMG's core FP/MCH and other MOH programs for the Eighth Five-Year Plan, as endorsed in the Bank's CEM, and representing 4.8 percent of the total EP budget noted before, and compared to 4.3 percent of the total Government expenditures in the 1980s, 3.3 percent in FY91-92, and 4.4 percent in FY93. It is also in line with the following sector priorities and expenditure efficiency issues underscored by the CEM:20 (a) consolidating and utilizing the existing facilities and personnel, and developing the new system of proposed health facilities only gradually, in line with financial, staffing and managerial potential; (b) ensuring the budget for recurrent excpenditures for basic O&M activities, including maintenance, and funding of the female MCHWs; (c) focussing infrastructure investments first on constructing the HPs and clinical services at the outreach level, limiting PHC expansion to the most densely populated sources of demand; and (d) protecting the critical mass of staff for outreach and clinical services as well as program management and supervision, along with non-wage operational costs. 2.8 While meeting the existing financing gap, the Project would upgrade the infrastructure and provide operational support and MCH Workers' salaries, which are now grossly under-funded; and supplement various components where funding is only partially available -- including MIS, distribution of supplies, and operations and maintenance -- in conjunction with other donors. Details of the specific components are outlined below. w Nepal - Fiscal Restructuring and Public Resource Management in the Nineties (Draft), The World Bank, February 1994, para. 5.130; Financing Plan for Population and Family Health Program, MOH/HMG, August 1993, Table 1.  -15- 2.9 Outreach Service Delivery (US$27.8 million). A major barrier to past program effectiveness has been inadequate outreach from health facilities to clients at the household and community levels. The Project will strengthen this vital area, with support to several key sub-components as detailed below: (a) Female MCH Workers at the Sub-Health Post Level (US$7.3 million). Introduction of this new female cadre to the FP/MCH Program has for long been deemed by IDA and other donors as most critical in order to reach women and children at the outreach level. The MCH Workers would be recruited and posted locally, with three months' training in clinical and outreach service delivery. Appropriate domestic resources will be made available for the MCH Workers salaries component, considered crucial to implement the Project fully and effectively. This would require the continued HMG support for about 1,300 MCH Workers already reciuited by the Government; deployment of the remaining 1,900 MCH Workers--about 650 per year-- during the next three years of the Eighth Five-Year Plan (by July 1997); and their continued funding throughout the Project period (July 1994 to July 2000). Thus, from July 1997, there will be one of these wor':ers in each of the 3,200 Sub-Health Posts being set up in the country. The primary goal is to take services nearer to the people. They will also provide services at outreach clinics in the local community. (b) Health Posts (US$9.8 million). As a key element in the existing health service delivery network at the field level, the Credit will fund the construction/replacement of 125 new Health Posts in areas where they are currently located in rented facilities or inappropriate locations; in addition, 100 Health Posts will be renovated and repaired, thus covering about a quarter of the country's 816 Health Posts. Construction of the new HPs will start in the first year of the Project. The proposed sites for the units to be built during the first two years of the Project are listed in Annex 3.5. Staff quarters for the female Auxiliary Nurse-Midwives (ANMs) will be provided in all these facilities, mitigating a major constraint in retaining technical female staff in outlying rural areas, which seriously limits access of female clients to the existing facilities. These ANMs are parademics with three years' training under the Institute of Medicine, and are nationally recruited and posted across the country. Construction of HPs will start in the first year of the Project. (c) Primary Health Centers (PHCs) (US$3.5 million). This is a new component in HMG's recently announced Health Policy, with an ultimate goal of establishing 205 such Centers in the country, each under a doctor and with a three-bed facility. The EP calls for setting up 100 PHCs during the Plan period. Establishment of these units may pr--e tc be a worthwhile long-range goal for the future. However, in view of the scarcity of doctors in the country and high recurring costs involved, the Project supports a slow and realistic phasing of their expansion. Thus, the Project will provide funding  -16- for the establishment of five new Centers and upgrading of 20 existing Health Posts -- in grod catchment areas, with better potential for utilization of services. Construction will commence in the first year of the Project (for listing of sites, see Annexes 3.5 and 3.6). (d) Field Operations Support (US$7.2 million). One of the key impediments for the mobility of clinical and outreach service providers, as well as their supervisors, has been the lack of adequate and timely release of funds for the purpose. The Government has recently revised the Travel Allowance/Daily Allowance (TA/DA) rates upward, roughly doubling the DA for all ranks and increasing TA as well, which were frozen for nearly twenty years. IDA funding of TA/DA is based on the premise that without this field operations support for the outreach and clinical workers and their managers, investments in personnel, contraceptives and drugs, infrastructure and logistics, and all other activities of the Program would continue to prove wasteful and unproductive. 2.10 Clinical FP/MCH Units (US$1.5 million). Since access to quality FP/MCH clinical services is still very limited, IDA will supplement the funding that is mostly expected from other donors (see Annex 1.5). Under this component IDA will support the establishment of five out of a total of 35 FP/MCH Clinical Units in selected District Hospitals in outlying rural areas. Construction of these units will take place, commencing in the third year of the Project. 2.11 Logistics and Supplies (US$1.1 million). As shown in Annex 1.5, contraceptives and essential drugs would be available from non-IDA sources. Their storage, distribution, and follow-up, however, would remain major problem areas, especially with the addition of 3,200 SHPs across the country. There is a need to develop an effective logistics system, with need-based delivery of supplies; and provide support to storage and distribution. Thus, the Project will support the development of an effective logistics system and fund the following sub-components of Logistics and Supplies: (a) Construction and Renovation of Warehouses (US$0.4 million). The Project will refurbish the dilapidated warehouses, and construct and expand a limited number of them, all on existing sites. New construction will commence in the third year of the Project. (b) Transportation of SuvDlies (US$0.4 million). The Project will cover the distribution of contraceptives, essential drugs, and medical equipment procured from IDA and non-IDA sources, using means appropriate for different terrains of the country. In the past, the unreliable and irregular distributior. of these commodities ilas seriously jeopardized service delivery. The proposed component would constitute a modest but critical program support to ensure the reliability and utilization of the health infrastructures and outreach workers across the country covered under the Project. The grant donors supplying most of the  -17- commodities cover the cost of freight up to the central, and sometimes regional, warehouses. IDA support is envisaged to cover the distribution from these points to the district.s and outlying health facilities, utilizing the private sector which has been found in the Project's logistics analysis to be much more cost- effective and practical, compared to the public sector, in view of the low utilization of the public sector transport fleet, seasonality of distribution, and prohibitive maintenance costs and arrangements. (c) Field Operations SuDport (US$0.3 million). To keep track of the logistics, TA/DA support will be provided to the field supervisors based at the regional level. 2.12 Institutional Development (US$3.4 million). For long-range sustainability and capability building, several activities will be supported under this component: (a) Management Information System - MIS - (US$1.1 million). A functioning record-keeping system at the field level is currently lacking in the country. The problem has become acute in view of the recent integration of previously vertical projects, funded by various donors, each maintaining separate recordkeeping for specific areas. An effective and integrated MIS for the FP/MCH Program in general and the IDA-supported Project in particular is an essential tool for maintaining household and client records needed by service providers and their managers. It is also an important monitoring mechanism to assess the achievement of the stipulated FP/MCH goals, and an indispensable data base for planning purposes. IDA will provide support to the development of an effective field-based and integrated MIS and materials, equipment, and training. The focus will be on ensuring reliable records of worker visitation at the outreach level; specific FP/MCH services delivered; supervisors' visits; and data compilation, reporting, and feedback for monitoring and evaluation -- initially in pilot districts and by the end of the Project period, throughout the country. During negotiations, an understanding was reached with the Government that in the event that grant funding becomes available for this component by November 1994, the corresponding amount under this component may either be cancelled, with prior notice to IDA, or subject to IDA agreement, reallocated for other Project-related purposes. (b) Clinical Training Centers (US$0.1 million). The Credit would fund the creation of seven small units in existing hospitals in the national capital and regional headquarters in order to provide facilities for on-the-job clinical training to various cadres of service providers. The establishment of these units will start in the third year of the Project.  -18- (c) Maintenance Capacity Development (US$0.1 million). In the past, major investments in infrastructure and equipment have proved wasteful and underutilized as a result of their poor maintenanice. This happened because of funding scarcity as well as lack of technical expertise in the field. The Project will start building up capacity in this area through technical assistance, training and skill development, and preparation of training manuals. (d) Proiect Management (US$2.1 million). The Project will support the staffing and operation of a full-time PIU within a three-tier management system referred to in Chapter III. The Unit will be responsible for monitoring Projec- implementation, liaising with, and preparing documentation for IDA, as well as coordinating with HMG's FP/MCH Program and other related agencies. C. Project Costs and Financinq Proje-t Costs 2.13 Cost Summary. The total cost of the Project is estimated at US$39.0 million equivalent, including contingencies estimated at US$5.2 million equivalent and applicable duties and taxes estimated at US$1.5 million. Details by category of expenditure and proportion of foreign exchange are reflected in Annex 2 and summarized in Table 2.1 below. 2.14 Basis of Cost Estimates. As the land for the new health centers and warehouses is already owned by HMG, no p.:ovision has been made for land acquisition. Civil works costs are based on current market rates and quantity take-off estimates from the prototype drawings. Costs of vehicles, equipment and furniture are based on lists of items prepared by MOH and IDA, and costed at prevailing C.I.F. prices or local rates as applicable. Cost estimates of consultant services for technical assistance reflect a mix of the United Nations rates for foreign (including regional) and local consultants. Architectural and Engineering (A&E) services are costed at rates prevailing in Nepal for local consulting services. Goods specifically imported for the Project may be admitted free of duties and taxes. Locally procured goods and services, including materials for construction, carry duties and taxes at varying rates. 2.15 Contingencies and Allowances. Project cost estimates include physical contingencies (US$0.8) averaging 2 percent of base costs (5 percent of civil works, vehicles, equipment and furniture). Price contingencies (US$4.4 million, 13 percent of base costs) are escimated on the basis of local cost escalation at the following annual rates -- FY95: 6.5%, FY96: 6%, and 5% thereafter; and foreign costs as follows -- FY95: 2.4%, FY96: 3.2%, FY97: 3.4%, FY98: 3.2%, FY99: 3.3%, and FY2000: 3.4%.  -19- Table 2.1: Project Cost Summary % %Total (NRs Million) (US$ Million) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs .. O01TREACH SERVICE DELIVERY Wil Workers/Sub-Health Posts 355.3 - 355.3 7.3 - 7.3 - 21 Hlcalth Posts 316.5 165.3 481.8 6.5 3.4 9.8 34 29 Primarv Healt Centers 109.0 62.6 171.6 2.2 1.3 3.5 36 10 Field Operautns Support 351.5 - 351.5 7.2 - 7.2 - 21 Subtotal 1,132.3 227.8 1,360.1 23.1 4.6 27.8 17 82 B. FP/MCH CLINICAL UNITS 34.2 40.2 74.5 0.7 0.8 1.5 54 4 (C. LOGISTICS AND SUPPLIES Stores Construction/Renovation 14.0 7.4 21.4 0.3 0.2 0.4 35 1 Supplies Transport 14.6 3.2 !7.7 0.3 0.1 0.4 18 1 Field Operations Support 10.4 5.2 15.7 0.2 0.1 0.3 33 1 Subtotal 39.0 15.8 54.9 0.8 0.3 1.1 29 3 D. INSTITUTIONAL DEVELOPMENT Management Information System 27.4 24.8 52.2 0.6 0.5 1.1 48 3 Clinical Training Centers 4.2 1.8 5.9 0.1 0.0 0.1 30 - Maintenance Capacity Development 2.1 2.2 4.2 0.0 0.0 0.1 52 - Project Management 74.2 30.9 105.1 1.5 0.6 2.1 29 6 Subtotal 107.8 59.7 167.5 2.2 1.2 3.4 36 10 Total BASELINE COSTS 1,313.3 343.6 1,656.9 26.8 7.0 33.8 21 100 Phisical Contingencies 21.9 15.5 37.4 0.4 0.3 0.8 41 2 P'rice C(onlingencies 190.0 27.3 217.3 3.9 0.6 4.4 13 13 Total PROJECT COSTS 1,525.2 386.5 1,911.7 31.1 7.9 39.0 20 115 2.16 Foreign Exchange ComDonent. As shown in Table 2.1 above, the estimated foreign exchange component (US$7.9 million, including contingencies) represents 20 percent of total Project costs. It has been calculaced as follows: (a) civil works: 30 percent; (b) equipment: 85 percent; (c) vehicles: 25 percent; (d) foreign consultants: 85 percent; (e) studies: 40 percent; (f) operations and maintenance: 17 percent; and (g) consumables: 40 percent. Financinq 2.17 of the total Project costs of US$39.0 million equivalent, the IDA Credit of US$26.7 million (equivalent to SDR19.4 million) will provide 71 percent of Project costs net of taxes and duties estimated at US$37.5 million. IDA will finance 100 percent of foreign exchange costs and 61 percent or local costs. HMG counterpart funding will represent US$10.8 million equivalent net of taxes and duties (29 percent of the Project ccsts net of taxes and duties). Detailed investment and recurrent costs for the Project are shown in Annex 2. The summary Financing Plan is described in Table 2.2 below.  -20 - Table 2.2: Financing Plan by Component (USS Million) Local IDA HMG Total For. (Excl. Duties & Amount % Amount % Amount % Exch. Taxes) Taxes A. OUTREACH SERVICE DEWIVERY MCH Workers/Sub-Health Posts - - 8.9 100.0 8.9 22.7 - 8.9 Health Posts 10.8 90.0 1.2 10.0 12.0 30.6 3.8 7.1 1.0 Primary Health Centers 3.7 90.2 0.4 9.8 4.1 10.5 1.4 2.3 0.3 FieldOperations Support 6.1 85.7 1.0 14.3 7.2 18.4 - 7.2 Subtotal 20.6 64.2 11.5 35.8 32.1 82.3 5.3 25.5 1.4 B. FP/MCH CLINICAL UNITS 1.6 89.0 0.2 11.0 1.8 4.7 0.9 0.8 0.1 C. LOGISTICS AND SUPPLIES Stores Construction/Renovation 0.4 88.8 0.1 11.2 0.5 1.3 0.2 0.3 0.0 SuppliesTransport 0.3 70.5 0.1 29.5 0.4 1.1 0.1 0.3 0.0 Field Operations Support 0.3 92.2 0.0 7.8 0.3 0.9 0.1 0.2 Subtotal 1.1 83.6 0.2 16.4 1.3 3.2 0.3 0.9 0.0 D. INSTITUTIONAL DEVELOPMENT Management Information System 1.1 94.7 0.1 5.3 1.2 3.0 0.6 0.6 0.0 Clinical Training Centers 0.1 90.1 0.0 9.9 0.1 0.4 0.0 0.1 0.0 Maintenance Capacity Development 0.1 92.8 0.0 7.2 0.1 0.2 0.' 0.0 0.0 Project Management 2.1 86.8 0.3 13.2 2.4 6.2 0.7 1.7 0.0 Subtotal 3.4 89.5 0.4 10.5 3.8 9.8 1.3 2.5 0.0 TOTAL DISBURSEMENT 26.7 68.5 12.3 31.5 39.0 100.0 7.9 29.6 1.5 2.18 Retroactive Financing. To facilitate early start-up, the Credit will provide retroactive financing of SDR 150,000 (US$200,000 equivalent) for expenditures for various Project components incurred prior to Project signing, but after January 1, 1994.  -21- D. Procurement Arrangements 2.19 The procurement methods are summarized as follows: Table 2.3 Procurement Methods (US$ million) Project Element Procurement Method ICB LCB Othera Total 1. Civil Works and Related Furniture 14.9 0.3 15.2 (13.4) (0.3) (13.7) 2. Goods and Related Services 2.1 Equipment 2.3 0.2 0.2 2.7 (2.3) (0.2) (0.1) (2.6) 2.2 Vehicles/Transport 0.7 0.2 0.9 (0.7) (0.1) (0.8) 3. Consultancy 3.1 Project 0.7 0.7 Implementation (0.7) (0.7) Support 3.2 Capacity Building 0.7 0.7 and Institutional (0.7) (0.7) Development 4. Training 4.1 Foreign 0.1 0.1 (0.1) (0.1) 4.2 Local 0.3 0.3 (0.3) (0.3) S. Miscellaneous 5.1 Salaries 9.1 9.1 (0.2) (0.2) 5.2 Allowances 7.8 7.8 (6.7) (6.7) 5.3 Operations and Maintenance 1.5 1.5 (0.9) (0.9) Total 3.0 15.1 20.9 39.0 (3.0) (13.6) (10.1) (26.7) Note: Figures in parenthesis are the respective amounts financed by IDA. a/ Other procurement methods include force account, shopping, hiring of consultant services following IDA guidelines and administrative expenditures following Government procedures.  -22- 2.20 Civil Works and Furniture (US$15.2 million). These will consist of: site improvements (including boundary walls and water service); repair and renovation of Health Posts (HPs); construction of new Health Posts to replace those in rented or temporary buildings and those in total disrepair, Primary Health Centers (PHCs), FP/MCH Clinical Units, and Clinical Training Centers; and construction and refurbishing of Warehouses. Procurement of furniture and cabinetry will be packaged with bid packages for construction works for PHCs, Health Posts, and FP/MCH Units that will include five to eight buildings in outlying rural areas in each package and amount to about US$0.5 million. Since most of the civil works will be small and scattered rural facilities, contracts will be awarded on the basis of Local Competitive Bidding (LCB) procedures acceptable to IDA. This would not exclude interested firms from outside Nepal from bidding. Warehouses and Clinical Training Centers, located around the capital and regional headquarters, will be packaged separately. Small civil works amounting up to US$60,000 will be implemented by force account. 2.21 Goods and Related Services (US$3.6 million). Equipment and vehicles will be grouped into packages of US$150,000 or more wherever possible and will be procured through International Competitive Bidding (ICB) in accordance with IDA guidelines. For bid comparison, goods manufactured domestically will be allowed a preferential margin of 15% of the C.I.F. costs of the competing imports or the actual customs duties, whichever is lower. For contract packages of less than US$150,000 up to an aggregate amount of US$600,000, LCB procedures acceptable to IDA will be followed except that contracts below US$50,000 (up to an aggregate of US$200,000) for urgently needed items may be procured under prudent local or international shopping with price quotations from at least three suppliers. Local distribution of contraceptives, essential drugs, and equipment provided for FP/MCH services financed by IDA and other sources would be hired according to shopping procedures acceptable to IDA, in packages not to exceed US$20,000, up to an aggregate amount of US$500,000 during the Project period. 2.22 Consultancies and Training (US$1.8 million). Local and international consultants will be contracted to assist the MOH in the development of a functioning logistics system, a trained maintenance force for the physical plant, and a complete MIS system. A&E consultants will be contracted by the PIU from time to time during Project implementation to prepare site adaptation drawings, drawings for renovations and to supervise the construction of all health facility buildings. All consultants will be hired in accordance with IDA guidelines. 2.23 Procurement Plan. To ensure speedy initial implementation of the Project, detailed procurement plans have been prepared for the first two years of the Project. These will be updated annually by HMG to provide a rolling two-year procurement program as part of the procurement planning and review. Civil works contracts estimated at US$250,000 or more will be subject to prior review by IDA, and this is expected to cover about 90 percent of the contracts. All goods tendered through ICB will also be subject to prior review by IDA.  -23- E. Disbursement 2.24 The proposed Credit will finance about 71 percent of total Project costs, net of duties and taxes, and will be disbursed at the following percentages: 90 percent of 3xpenditures on civil works and related furniture; 100* of expenditures on professional fees for Architectural/Engineering services and other IDA-financed consultants and international training; 100 percent of foreign and local ex-factory expenditures on equipment and vehicles; 75 percent of other local purchases of equipment, vehicles and consumables (stationeries and office supplies); 95 percent of agreed local training costs; and 100 percent of the salaries and operating costs of the Project Implementation Unit (PIU). Field operations support (TA/DA) will be disbursed at the following rates: 100% until July 15, 1996, 90% until July 15, 1998, and 70% thereafter; while support to the cost of distribution of contraceptives, essential drugs, and equipment will be shared 75%-25% between IDA and HMG throughout the Project period. Disbursements will be made over a six-year period, and the closing date will be December 31, 2000. 2.25 The Credit will cover certain recurrent expenditures for activities that are currently in place and being expanded, including -- TA/DA support to the service providers and managers throughout the country. The costs under this component would be US$1.1 million for FY95. Full functioning of the Project Implementation Unit in FY95 would require operational and salary support of US$0.4 million. Thus, a total of US$1.5 million (38.5 percent) would be disbursed for "softwares" with minimal new effort during the first year. The remaining disbursement of US$2.4 million for other activities during the year would mostly cover infrastructure development, preparation for which is at an advanced stage. 2.26 Disbursements against contracts for: (a) goods below US$50,000 equivalent, (b) individual consultants below US$5,000 equivalent, and (c) civil works less than US$100,000 equivalent and works carried out by force account, as well as salaries and operational support, will be made against itemized statements of expenditure. Documentation supporting these statements will be retained by the PIU for review by IDA missions. All other expenditures will be fully documented. During negotiations it was agreed that HMG will open a Special Account at the Nepal Rastra Bank to facilitate payment of eligible minor expenditures. This account will be maintained in US Dollars with an authorized allocation of US$500,000. The account will be used for both local and foreign payments for items costing less than US$50,000 equivalent each, under all categories. All other expenditures will be submitted to IDA for payment. It was also agreed during negotiations that, in order to avoid any delay in fund release and Project implementation, the Project Implementation Unit will be authorized to operate the Special Account directly for disbursement in accordance with IDA requirements.  -24- F. Status of Preparation 2.27 Significant progress has been made with pre-implementation planning: (a) The Government's budget for FY94 already provides for an allocation of Rs.10 million (about US$200,000) against the Project, reflecting HMG's commitment for an early start-up. (b) Details of various software components, including support to MCH Workers, Field Operations, Transportation of Supplies, MIS, Maintenance Capacity, and Project Management have been defined and agreed to in principle. (c) The Proiect Implementation Unit (PIU) has been established and the core staff have been appointed. They are receiving in-country and external training on IDA procedures and requirements. With support from the Japanese PHRD Grant Fund, the PIU is handling further preparation activities for the Project start-up, including: (i) preparation of tender document packages for five prototype designs for health facilities; (ii) detailed working drawings and specifications; (iii) preparation of construction documents and implementation of works identified for retroactive financing; (iv) finalization of site adaptation of the prototype designs; and (v) preparation of detailed equipment and furniture specifications. (d) Infrastructure DeveloQment. The health and logistics infrastructure development, which will involve construction work in 270 sites distributed throughout the country, will be phased over the six years of the Project. Each year, contracts will be organized into regional packages. Projects in each package will be supervised by a full-time engineer who will be supported by on-site overseers for each site. The number of sites to be included in each category of health facilities improvement has been agreed to with HMG. Specific sites for inclusion in the Project have been identified based on overall need, as determined by a range of objective criteria -- the data for which were obtained from the nation-wide Infrastructure Survey referred to earlier. During negotiations HMG confirmed (a) that all the sites for new construction in the first two years are located on HMG-owned land, and that there is no need for site acquisition, and (b) that there are no liens or encumbrances on these sites. Sites for the subsequent years will be finalized and acquired following the Yearly Critical Dates for Civil Works Implementation (Annex 3.4), and List of Sites for Health Facilities (Annex 3.6). Prototype designs for each of the outreach health facility types have also been prepared by HMG and reviewed by IDA. Final drawings, specifications, cost estimates and technical conditions for tender for the five prototype buildings (HPs and PHCs) were reviewed and approved during negotiations. I,, ,  -25- (e) Bidding Documents. IDA's standard bidding documents - SBDs - (for small works) for civil works will be used, amended as appropriate. This document, with suggested amendments by HMG, has been cleared by IDA. (f) Lists of Ecquipment and Furniture. Lists of equipment and furniture have been reviewed by IDA (Project File) and have been finalized in conjunction with the PIU. III. IMPLEMENTATION AND SUPERVISION A. Project Organization and Management 3.1 The management structure for the Project (Annex 3.1) agreed to with HMG will consist of: (a) a FP/MCH Development Board, chaired by the Minister of Health and comprised of senior representatives of key HMG Ministries, with responsibility for overall policy formulation and inter-Ministerial coordination of HMG's FP/MCH Program and the IDA-supported PFH Project; (b) an Executive Steering Committee, chaired by the Secretary of Health and comprised of the Director General, Department of Health Services, and MOH Divisional Chiefs and representatives of other Ministries, responsible for monitoring and directing the operations of PFH Project and coordinating Project activities with the other components in the FP/MCH Program; and (c) a Project Implementation Unit (PIU), consisting of full-time senior personnel, responsible for the day-to-day management and implementation of the PFHP, as well as documentation necessary for IDA management. Core responsibilities at various levels are outlined in Annex 3.1 as well. The PIU will also serve as the secretariat of the Executive Steering Committee and give operational support to the Development Board, and will serve primarily as a senior management team in order to furnish detailed technical services relying largely on private consulting firms, various HMG agencies, and individual contract staff, as needed. Essential equipment, furniture, vehicles, staff salaries, consultant fees and operating costs for the Unit will be provided under the Project. The Unit will be headed by a Project Director and will be assisted by a Deputy Director and four Chiefs responsible for four functional Sections: Program Monitoring and Supervision; Logistics and Procurement; Infrastructure Development; and Finance and Administration. B. Implementation Plan 3.2 Implementation plans for various components of the Project are detailed in Annex 3. These include specification of the key activities and the critical dates envisaged for their completion during the Project period.  -26- C. Monitori .nd Supervision 3.3 Project Monitorinq and Mid-term Review. Project monitoring will be assisted by the management structure proposed for overseeing the PIU (para. 3.1), and through the detailed implementation schedules and performance indicators for different activities outlined in Annexes 3.2-3.4, 3.7-3.8, and 3.10-3.12. The expansion of contraceptive use and family health services will be monitored through the MIS records and periodic Demographic and Health Surveys (DHS). During negotiations agreement was reached with HMG that it will conduct with IDA, a comprehensive mid-term review of the Project no later than May 31, 1997. Also during negotiations, agreement was reached with HMG to have semi-annual progress reports from the PIU to IDA as well as an HMG-IDA Project Completion Review, the scope and timing of which would be determined during IDA reviews toward the end of the Project period. 3.4 Supervision Plans. Supervision of the Project will require additional staff weeks beyond the normal co-efficient for Nepal Projects. This is due to: (a) the national scope of the Project which requires extensive internal travel over difficult terrain; (b) the complex interdependency between various software operations and the challenges of contraceptive and drug distribution; (c) requirements for ensuring full operational status of the health facilities; and (d) the need for extensive interaction with MOH/HMG on IDA procedures and requiLements, this being the first IDA-supported Project in the sector; and (e) the need for close donor coordination in the supervision of the Government's overall FP/MCH program. At a minimum, the Project will require bi-annual visits of FP/MCH and logistics specialists, and an architect to review technical progress in addition to a management expert experienced in the supervision of complex national FP/MCH programs. During negotiations agreement was reached with HMG that it will review the status of Project implementation jointly with IDA by March 31, 1995 and by March 31 each year thereafter and finalize the plans for the following fiscal year. For the Project start-up, this review will commence during the Project launch workshop. D. Accounts and Auditing 3.5 The PIU will establish and maintain separate accounts for all Project expenditures and separate categories for each procurement account. The accounts will be maintained in accordance with sound accounting practices. Accoumts and financial statements for each fiscal year will be prepared and audited by the Office of the Auditor General of Nepal, who would be acceptable to IDA as an independent auditor. Certified copies of the audited accounts and financial statements, together with the auditor's report and auditor's opinion on the operations of the Special Account and on Statements of Expenditures will be furnished to IDA as soon as possible, but not later than twelve months after the end of the fiscal year.  -27- IV. PROGRAMS OF SPECIAL EMPHASIS 4.1 Environmental Protection. The program supported by this Project will have no adverse envircnn,ental effect ana is rated as a 'Category C' operation. Indeed, the IDA assistance to family planning and MCH represents an integral part of the environmental strategy for Nepal. Rapid population growth, which has led to deforestation, breakdown in the fodder-livestock-soil nutrient chain, and the expansion of cultivation into fragile slopelands, is a major cause of degradation of the physical environment. Curbing population growth is thus a prerequisite to solving the environmental problems, which are more acute in the hills of Nepal, and are increasingly exerting pressure in the terai. In addition, the Project will have direct positive effects on the local environment by promoting health and sanitation education. 4.2 Poverty Alleviation. Reduction of population growth should represent a pivotal strategy for poverty alleviation in the country. The contribution of the Project toward achieving this goal should be sianificant both in terms of lowering the size of the population through the FP Program and enhancing its quality through the MCH Program. 4.3 Women and Children in Development. Women and children suffer the worst as a result of implications of population pressure and poor health conditions felt at the micro level of the household. The family planning as well as MCH components would alleviate these conditions through reduced pressure on the household economy; better health of mothers and children resulting from child spacing and avoidance of vulnerable pregnancies; and benefits of immunization and related programs. The Project would also support the new cadre of female MCH Workers at the Sub-Health Post level to provide clinic based and outreach services to women and children. Besides, support for the female Auxiliary Nurse-Midwives at the Health Post and PHC levels would increase utilization and access of the health facilities by the female clients. Additionally, support for these two female cadres in HMG's programs would create viable role models for the rural women for non-familial roles that are promoted in women-in-development programs. V. BENEFITS AND RISKS A. Benefits 5.1 The Project would be a catalyst in helping the development of a comprehensive program of population and family health, as a departure from the erstwhile segmentation of efforts in the field. By meeting crucial financing gaps in the national program, the Project would help ensure, for the first time, the funding for HMG's total FP/MCH Program. Significant steps would be taken to build a foundation for a strong program for ac:iieving the national population objectives.  -28 - 5.2 By enhancing the utilization of services and promoting access to the FP/MCH facilities, the Project would contribute to the welfare of the family and better health of women and children at the micro level of the household; and reducing poverty and environmental stress, and achieving other national development goals at the macro level. Besides improving the quantity and quality of care, the special focus on expanding the workforce of female service providers would have an additional benefit of creating new role models for rural women, which would facilitate women-in-development programs. B. Risks 5.3 The principal risk would be the inability of the Government to fully carry out the ongoing organizational reforms in MOH. This would particularly concern the process of effective integration of FP/MCH and related activities under the Primary Health Care system, along with administrative and financial decentralization of the program at regional and district levels. Given the problem of difficult terrain across the country, failure to take appropriate measures in these areas would seriously handicap the Project's execution. The joint annual HMG/IDA reviews will pay particular attention to these issues while formulating the implementation plan for the subsequent years. 5.4 Another major risk would entail the inability of the Government to ensure the availability of appropriate domestic resources for the female MCH Workers' salaries, considered crucial to implement the Project fully and effectively. HMG has provided assurance to protect the budget for this, along with other components of the IDA-supported Project, including non-wage recurrent costs for O&M (see para. 5.9 below). 5.5 A third risk is the possibility of inadequate staffing due to drastic staff reductions in MOH as a result of the administrative reforms currently taking place in Nepal. In its public expenditure review dialogue, IDA has emphasized the need to maintain a critical mass of staff for outreach and clinical services as well as for program management and supervision in the population and health sector. However, if staff are not available, the IDA- supported program should be restructured to adjust to available staff levels. 5.6 HMG-Donor-NGO coordination has not proved easy in the past, and may continue to be a challenge in view of the complexity of the national FP/MCH program and the multiplicity of domestic and foreign actors involved in the field. To minimize this risk, annual local Donor meetings would be held to discuss implementation progress and constraints. As part of the coordination process, the management plan for the Project envisages a number of mechanisms for improved coordination. 5.7 A potential implementation risk is the MOH's unfamiliarity with IDA's policies and procedures, especially procurement. Thus, the timely achievement of the Project objectives may be difficult without close monitoring. To address this concern, provision has been made for a project launch workshop and for more frequent initial supervision by both Resident Mission and Headquarters staff.  -29- C. Sustainability 5.8 At a total cost of US$39.0 million, the six-year IDA-supported Project would place a nominal burden (less than one percent) on the Government's total public expenditures during that period. However, since the IDA-supported Project is an integral component of the Government's comprehensive FP/MCH program and would not stand on its own, it is necessary to ensure that the overall FP/MCH program is sustainable. The estimated total cost of the comprehensive FP/MCH program amounts to some U$127.0 million over the six-year period (Annex 1.5), out of which capital and recurrent expenditures account for $35.4 million and $91.6 million respectively. The total annual expenditures of the FP/MCH program are projected to increase gradually from about $15.0 million in FY95 to about $23.8 million in FY98, before declining to $22.5 million in FY2000, the last year of the Project period (Annex 1.6). As a percentage of the total public expenditures, 21 the share of the FP/MCH program would increase from 1.8% in FY95 to 2.1% in FY97, before declining to 1.6% in FY2000 .22 5.9 Given these low percentages and given also the critical importance of the Government's FP/MCH program for the country's development outlook, it is highly unlikely that the FP/MCH program would crowd out other more important claims on public resources. The sustainability of the program, therefore, depends entirely on the Government's willingness to allocate sufficient resources to the program. In the context of the on-going public expenditure review and of the investment prioritization exercise, the Government has included the entire FP/MCH program, along with other priority health programs (immunization, malaria control and diarrhoea control), in the so-called "core program," which is to be protected in case of unforeseen budgetary shortfalls during any given fiscal year. While this does not constitute an iron-clad guaranty against possible budgetary cutbacks, it does signal the Government's seriousness about the FP/MCH program and it will ensure more timely and streamlined fund releases to the FP/MCH program. VI. AGREEMENTS REACHED AND RECOMMENDATION 6.1 During negotiations, the following agreements were reached with the Government: (a) in the event that grant funding becomes available for the MIS component by November 1994, the corresponding amount under this component may either be cancelled, with prior notice to IDA, or subject to IDA agreement, reallocated for other Project-related purposes (para. 2.12(a)); 21 Nepal - Fiscal Restructuring and Public Resource Management in the Nineties (Draft), The World Bank, February 1994, Table 3.3. 22 Since the breakdown between development and regular expenditures in the Government's budget is highly arbitrary and varies among sectors, more detailed comparisons between sectoral investment costs and the development budget and between sectoral recurrent expenditures and the regular budget are not particularly meaningful.  -30- (b) HMG will open a Special Account at the Nepal Rastra Bank to facilitate payment of eligible minor expenditures, and the Project Implementation Unit will be authorized to operate the Account directly for disbursement in accordance with IDA requirements (para. 2.26); (c) HMG will conduct with IDA, a comprehensive mid-term review of the Project no later than May 31, 1997 (para. 3.3); (d) the PIU will submit semi-annual progress reports to IDA, and an HMG-IDA Project Completion Review will be carried out at the end of the Project period (para. 3.3); and (e) by March 31, 1995 and by March 31 each year thereafter HMG will review the status of Project implementation jointly with IDA, and finalize the plans for the following fiscal year; for the Project start-up, this review will commence during the Project launch workshop (para. 3.4). 6.2 Recommendation. Subject to the above conditions, the Project would be suitable for an IDA Credit of SDR 19.4 million (US$26.7 million equivalent) to the Kingdom of Nepal on standard IDA terms with 40 years maturity.  -31- AiinexS 1.1I NEPAL POPULATION AND FAMILY HEALTH PROJECT Annex l.lA: Population and Hospital Distribution Ecological Health Health Belt Hospitals Beds Centers Posts Population (million) Mountain 12 183 8 157 1.4 Hill 40 1,556 9 435 8.4 Terai 25 1,095 1 225 8.6 Nepal (Total) 77 2,834 18 816 18.5 Sources: MOH Health Information Bulletin, 1992. PBpulation Census of Nepal, 1991. Annex l.lB: Distribution of Nepal's Population by Ecological Region, 1981 and 1991 Ecoloc*ical Region 1981 Mountain 8.7 7.8 Hill 47.7 45.6 Terai 43.7 46.6 Source: Population Census of Nepal, 1981, 1991.  Nepal - Population Projection and Related Parameters. 1985-2030 Years VariaWle 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Population (Millions) 16.7 18.9 21.5 24.1 26.8 29.4 32.0 34.4 36.6 38.7 Birth Rate (Per Thousand) 40.2 39.6 35.5 32.2 29.0 26.1 23.3 20.3 19.2 Death Rate (Per Thousand) 15.1 14.0 12.5 11.2 10.2 9.4 8.7 8.2 7.9 Growth Rate (Percent) 2.5 2.6 2.3 2.1 1.9 1.7 1.5 1.2 1.1 Total Fertility Rate (Per Woman) 5.9 5.6 5.0 4.4 3.8 3.2 2.8 2.4 2.2 J Life Expectancy at Birth (Years) 51.0 52.6 54 56.8 58.5 60.4 62.3 64.3 66.3 Infant Mortality Rate (Per 127 117 106 93 83 73 63 53 43 Thousand Live Births) Source: Eduard Bos et al., World Population Projections, 1992-93 Edition, The World Bank, 1992, pp. 354-355.  -33- Arnnex 1.3 NEPAL Contraceptive Prevalence Rate (CPR) among Currently Married Women by Tvye of Method (Percent) Currently Married, All Currently Contraceptive Method Non-Pregnant Women Married Women Any Method 25.1 22.7 Any Modern Method 24.1 21.8 Female Sterilization 12.1 11.0 Male Sterilization 7.5 6.8 Pill 1.1 1.0 Injection 2.3 2.1 Condom 0.6 0.r Norplant 0.3 0.2 IUD 0.2 0.2 Diaphragm, Foam, Jelly 0.0 0.0 Any Traditional Method 1.0 0.9 Periodic Abstinence 0.5 0.5 Withdrawal 0.5 0.4 Others 0.1 0.1 Currently Not Using 74.9 77.3 Total 100.0 100.0 Source: Nepal Fertility. Family Planning and Health Survey (1991), MOH/HMG, 1993.  National Population Program NCD | National Development Council I NPC aoa Comte On Populatio Charman; Prime Minister i Chairman. Prime Ministef Vice Chairman nvironment Economic onitoring