Tanzania - Second Health Sector Development Credit Project (APL)

Document of The World Bank FOROFFICIAL USEONLY ReportNo: PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDCREDIT INTHEAMOUNT OF SDR27.9MILLION (USD40 MILLIONEQUIVALENT) AND A PROPOSED GRANT INTHEAMOUNT OF SDR 17.4MILLION (USD 25 MILLIONEQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FORTHE HEALTHSECTORDEVELOPMENT PROJECT lNSUPPORTTO THE SECONDPHASEOF HEALTHSECTORDEVELOPMENT PROJECT November24,2003 Human Development1 Country Department 4 Africa Region This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective October 31,2003) CurrencyUnit = TSh 1047.5TSH = US$1 US$ = SDRl FISCAL YEAR July 1 - June30 ABBREVIATIONS AND ACRONYMS AIDS Acquired ImmuneDeficiency Syndrome AMMP Adult Morbidity and Mortality Project A0 Accounting Officer APL Adaptable Program Lending BCC Behavior Change Communications BFC Basket Finance Committee CAE Country Assistance Evaluation CAG Office of the Controller and Auditor General CAS Country Assistance Strategy CBO Community Base Organization CHF Community HealthFund CHMT Council HealthManagement Team DANIDA Danish International Development Agency DAP Director, Administration and Personnel DDH Designated District Hospital DHIRU District HealthInfrastructure Rehabilitation Unit DHMT District HealthManagement Team DPP Directorate of Policy and Planning EPI ExpandedProgram on Immunization GDP Gross Domestic Product GOT Government of Tanzania HCWMP Health Care Waste Management Plan HAART Highly Active Ant-Retroviral Treatment HIPC Highly IndebtedPoor Countries HSSP Health Sector Strategic Plan I1 IBRD International Bank for Reconstruction Development IDA InternationalDevelopment Association IEC Information, Education and Communication IFC International Finance Corporation IMF International Monetary Fund IMR InfantMortality Rate ITN Insecticide TreatedNets LGA Local Government Authorities LGW Local Government ReformProgram  FOROFFICIAL USEONLY MAP Multi-Sector HIV/AIDS Project MDGs MillenniumDevelopment Goals M & E Monitoring and Evaluation M O U MemorandumofUnderstanding MTEF Medium Term ExpenditureFramework NBC NationalBank of Commerce NHIF NationalHealthInsurance Fund NIMR NationalInstitute of Medical Research NMB NationalMicrofinance Bank OED Operations Evaluations Department PER Public Expenditure Review PIU Project ImplementationUnit PMTCT Prevention of Mother to Child Transmission PLWHAs PersonsLiving with HIV/AIDS PORALG Presidents Office, Regional Administration and Local Government POW Programof Work PRS Poverty Reduction Strategy PRSC Poverty Reduction Support Credit PSAC Programmatic Structural Adjustment Credit PSD Private Sector Development R A S Regional Administrative Secretary RHMT Regional HealthManagement Team STD Sexually Transmitted Disease SWAp Sector Wide Approach TANESCO Tanzania Electric Supply Company Ltd. TAS Tanzania Assistance Strategy TASAF Tanzania Social Action Fund TEHIP Tanzania Essential HealthInterventions Project TSh Tanzania Shillings USAID United States Agency for International Development UNAIDS UnitedNations AIDS Program VA Voluntary Agency VCT Voluntary Counseling and Testing WHO World HealthOrganization ZTC Zonal Training Center Vice President: Calisto Madavo Country ManagedDirector: Judy O'Connor Sector Manager: DzingaiMutumbuka Task Team Leaders: Julie Mclaughlin& EmmanuelMalangalila This document has a restricteddistribution andmay beused by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization.   TANZANIA HealthSector DevelopmentProgramPhaseI1 CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bank involvement......................................................................................... 2 3 . Higher level objectives to which the project contributes .................................................... 2 B . PROJECT DESCRIPTION ................................................................................................. 3 1. Lendinginstrument............................................................................................................. 3 2. Program objective and Phases ............................................................................................ 3 3. Project development objective and key indicators.............................................................. 4 4. Project components............................................................................................................. 5 5 . Lessons learnedand reflected inthe project design............................................................ 7 6 . Alternatives considered and reasons for rejection .............................................................. 8 C. IMPLEMENTATION .......................................................................................................... 8 1. Partnership arrangements.................................................................................................... 8 2. Institutional and implementation arrangements.................................................................. 9 3 . Monitoring and evaluation of outcomeshesults................................................................ 10 4. Sustainablllty..................................................................................................................... . . . 11 5. Critical risks and possible controversial aspects............................................................... 12 6 . Loadcredit conditions and covenants ............................................................................... 13 D APPRAISAL SUMMARY . ................................................................................................. 13 1. Economic and financial analyses ...................................................................................... 13 2. Technical........................................................................................................................... 14 3. Fiduciary ........................................................................................................................... 15 4. Social................................................................................................................................. 15 5 . Environment...................................................................................................................... 16 6. Safeguard policies ............................................................................................................. 17 7. Policy Exceptions and Readiness...................................................................................... 17  Annex 1:Country and Sector or Program Background ......................................................... 19 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................26 Annex 3: Results Framework and Monitoring ........................................................................ 28 Annex 4: Detailed Project Description ...................................................................................... 32 Annex 5: Project Costs............................................................................................................... 37 Annex 6: Implementation Arrangements ................................................................................. 38 Annex 7: Financial Management and DisbursementArrangements ..................................... 40 Annex 8: Procurement ................................................................................................................ 45 Annex 9: Economic and FinancialAnalysis ............................................................................. 55 Annex 10: Safeguard Policy Issues ............................................................................................ 68 Annex 11:Project Preparation and Supervision ..................................................................... 69 Annex 12: Documents inthe Project File ................................................................................. 70 Annex 13: Statement of Loans and Credits .............................................................................. 71 Annex 14: Country at a Glance ................................................................................................. 73  TANZANIA SECOND PHASE HEALTH SECTORDEVELOPMENTPROJECT PROJECT APPRAISAL DOCUMENT AFRICA AFTH1 Date: December 11,2003 Team Leader: Julie McLaughlin CountryDirector: Judy M. O'Connor Sectors: Health (80%);Non-compulsoryhealth Sector MangedDirector: Dzingai B. finance (1 O%);Centralgovernment Mutumbuka administration(10%) Themes: Health systemperformance (P);Othercommunicablediseases(P);Child health (S);Decentralization(S);Nutritionand food security (S) Project ID: P082335 Environmentalscreening category: Partial Assessment ASSOCIATION IDA GRANT FOR POOREST 16.54 8.46 25.00 COUNTRY Financing Gap 548.00 0.00 548.00 Total: 911.56 51.44 963.00 Borrower: Governmentof Tanzania Tanzania Responsible Agency: Ministry of Regional Administration and Local Government P.O. Box 1923 Dodoma Tanzania Tel: 255-61-22848 Fax: 255-61-32216  Ministry o f Health P.O. Box 9083 Dar es Salaam Tanzania Tel: 255-51-116684 Fax: 255-51-139951 FY 4 5 6 7 0 0 0 0 0 Annual 15.00 30.00 15.00 5.00 0.00 0.00 0.00 0.00 0.00 Cumulative 15.00 45.00 60.00 65.00 65.00 65.00 65.00 65.00 65.00 Expected effectiveness date: January 10, 2004 Expected closing date: December 31, 2007 Does the project depart from the CAS incontent or other significant respects? Re$ PADA.3 [ ]Yes [XINO Does the project require any exceptions from Bank policies? Re$ PAD D.7 [ ]Yes [XINO Have these been approved by Bank management? ]Yes IN0 I s approval for any policy exception sought from the Board? [[ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Re$ PAD C.5 [ ]Yes [XINO Does the project meet the Regional criteria for readiness for implementation? Ref:PAD D.7 [XIYes [ ] N o d Project development objective Re$ PAD B.2, TechnicalAnnex 3 To achieve improvements inthe provision of quality health services through continuing to support the reforms, capacity developmentand improved management o f resources, while placing a greater emphasis on quality. Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 1.Improving District Level Health Services 2. Strengthening the Management o f Secondary & Tertiary Hospital Care 3, Ensuringcentral level support to quality, financing and human resources Which safeguard policies are triggered, if any? Re$ PAD D.6, TechnicalAnnex 10 The Environmental Safeguards are triggered because the project will support the delivery o f health services. A Medical WasteManagement Plan has been produced inresponse, and disseminated through the Infoshop. Significant, non-standard conditions, if any, for: Re$ PAD C.7 Boardpresentation: Conditions o fNegotiations: Draft Letter o f Sectoral Policy, Approved FMR format Loadcredit effectiveness:  Covenants applicable to project implementation: N o disbursementswill be made into the pooled funds account untila M O U has been entered into among the Borrower, the Associationand the other Donors contributing to the Pooled Funds. 1. The government will organize ajoint annual review inMarcWAprilo f each year to reviewthe progress o f implementation as wellas a plan and budget for the subsequent year. 2. The government will submit to IDA and other development partners at least 4 weeks before each annualjoint review: (a) an annualreport on implementationprogress, expenditures, and results o f any technical reviews; and (b) a plan o f action for subsequentyear. 3. On a quarterly basis, the government will (a) submit to IDA and other development partners reports on implementationprogressand expenditures, and (b) organize basket financing committee meetings. 4. Annual financial audit reports, carried out by an independent, will be submittedto IDA and other development partners withinsix months after each financial year. 5. Annual external procurement audit reports will be submittedto IDA and other participating partners after each financial year.In addition to the formal annual audits, ad-hoc procurement reviews may be conductedperiodically.   A. STRATEGIC CONTEXT AND RATIONALE 1. Countryandsector issues With a GDP per capita of US$260, Tanzania is one ofthe poorest countries inthe world. Although the country has experienced average real GDP growth around 5% per year since the introduction o f the Poverty Reduction Strategy in2000, thirty-five percent ofthe population still live below the national poverty line, and the country ranks 160thinthe United Nations' Human Development Index. Achieving the MillenniumDevelopment Goals (MDGs) remains a major challenge for Tanzania, giventhat the health-related MDG indicators have either been stagnant or worsened over the last decade. Infant mortality rates (IMR) and child mortality rates (CMR) appear to have worsened (IMRof 99 per 1,000 live birthsand CMR of 147 in 1999, comparedto an IMRo f92 and CMR 141in 1992). The prevalence o f HIV/AIDSi s 12% (2002), and life expectancy at birthdropped from 52 years in 1990 to 49 years in2003. Total fertility rate remains high at 5.6%. More than 70% o f life years lost inTanzania are due to preventable causes, notably malaria, diarrhea, pneumonia, HIV/AIDS, perinatal and maternal conditions. In 1999, the Government ofTanzania (GOT) embarked onahealthsector reform programto focus on implementingthe essential and most cost-effective health interventions given the burdeno f disease, and to transform financing, management and delivery roles by emphasizing quality, empowerment o f local authorities and the beneficiary, and greater use o f non- government agents. The Program aims to substantially shift roles andresponsibilities within the sector, change the ways the sector i s managed and financed, and produce a more efficient and effective health care system. A three-phase, long-term (2000-20 11) Health Sector Development Program (HSDP) was jointly developed by the GOT and development partners and is supported through a Sector-Wide Approach (SWAP). The first phase o f the Program concentrated on initiating reforms within the health sector and puttingsystemsinplace, inparticular those relatedto decentralization. Progress has beenmade inkey areas, including (a) better availability ofhealthservices at district level, (b) rationalization o f the health work force, (c) strengthenedcentral support systems such as the pharmaceuticals and commodity management system, (d) establishment o fthe National Health Insurance Fund (NHIF) and expansion ofthe Community HealthFund(CHF), (e) expansiono fthe district block grants and district planning to all districts, and (f,improved sector budgeting and budget execution. Remaining challenges include: 0 shortage innumbersand skills o f district health staff - as a result o f the public sector employment freeze, reduced investment inhigher education, HIV/AIDS and migration, the workforce has substantially decreased and become older; 0 the need for reforms inhospital management - while districts have received extensive training inplanning and management, the most costly level o f service delivery i s both inefficient and suffers from poor quality control; 0 poor quality o f services - a function o f supervision, training and motivation, the deployment o f staff, logistics and deteriorating infrastructure; 1  8 inequities in access to services - due to staff deployment, transportation, costs and care- seekingknowledge; limitedrecognitionofthe role o fthe private sector - althoughthe prevalence o fprivate providers has dramatically increased, the government i s only beginningto engage in partnerships, such as accrediting private providers underthe National Health Insurance Fund); 8 deterioration o f health infrastructure - lack o f maintenance policies and resources combined with donor hesitationto finance capital investment has resulted inan extensive state o f disrepair at all levels o f service delivery; and 8 weak monitoring and evaluation- despitethe regularity o f Demographic and Health Surveys, extensive sector research and data produced, there i s no systematic effort to monitor and evaluation the impact and results o f health sector development strategies. 2. Rationale for Bank involvement Reductions incommunicable disease, improvements innutritional status andreproductive health, as well as reductions infertility are requiredfor Tanzania to sustain economic growth, reduce poverty and to achieve the MillenniumDevelopment Goals. The Bank can assist the country in translating government-led investmentinhealth, nutrition and population into achievements o f its development objectives. Duringthe 2"dPhaseo fthe Adaptable Program Loan (APL), the Bank will continue to work closely with the other development partners who coordinate their contributions (financial, technical and other) through a Sector-wide Approach (SWAP) insupport o fthe government- definedsector development program as reflected inthe Second Health Sector Strategic Plan (HSSP) andthe accompanyingMedium-Term ExpenditureFrameworks (MTEF). The Bank's particular role inthe SWAp will mobilize the Bank's comparative advantage vis-a-vis the other partners: (a) complementing government financing andthe financing o f other partners to ensure that the sector development program i s fully financed; (b) liaising with central ministries: Finance, PlanningCommission, President Office: RegionalAuthority and Local Government (PORALG), Civil Service Department, Labor and Youth Development, and other sectors (education, agriculture, PSD, environment, social protection) to foster synergy betweenhealth sector initiatives and the range o f development initiatives outside the health sector; (c) transferring knowledge andproviding policy advice related to health sector financing, human resources for health, and the role o f the private sector; and (d) encouraging and enabling the MOHto pay greater attention to the monitoringthe impact of reforms, inparticular assessingwhether the poorest populations are benefiting. 3. Higher level objectives to which the project contributes Tanzania's Poverty Reduction Strategy (PRS) o f October 2000 focuses on: Reducing income poverty through sustaining macroeconomic stability, rural sector development and export growth, and private sector development. Improving human capabilities, survival and well-being through improving education, health, social well-being, reducing vulnerability and protecting the environment. 2  The PRSP commits to reducingmorbidity, improving nutrition and strengthening access to health services "in order to raise the productive life o f Tanzanians". The Health Sector Development Program (2000-20 11) i s the government's long-term strategy to implementthe PRS inthe health sector. The Bank's Country Assistance Strategy (CAS) FY00-FY03 for Tanzania supports the PRS and builds upon the Government's Tanzania Assistance Strategy (TAS). A CAS update will fillthe gap between the ending CAS and the new CAS which will not be delivered until FY05, inorder to coincide with the GOT'Snew Poverty Reduction Strategy. The Program and Project are consistent with the aims o fthe current CAS and PRS. It highlightsboth service delivery and better coordination o f development assistance, endorsing sector wide approaches and the move to program (rather than project) support. The Health Sector Development Program contributes to three o f the four CAS pillars: private sector development, improved social infrastructure to enhance access or the poor to essential public services, and public sector reform and institution building, to increase the effectiveness ofpublic service delivery and improve governance. The CAS states that the Bank will retain a significant focus on health. B. PROJECT DESCRIPTION 1. Lendinginstrument The long-term Health Sector Development Program is supported by an APL which was first approved by the Board inJune 2000. Following the successful completion o f PhaseI, the proposed project, APL Phase 11, will support the first four years o f the government's Second Health Sector Strategic Plan (July 2003-June 2008). Inrecognition o f the priority o f the sector, the APL will employ US$25 million o f the FY04 IDA Grant allocation for Tanzania, complementedby US$40 million credit financing. The government has requested that over the duration o f Phase 11, Bank financing for the Health Sector Strategic Plan would gradually shift to adjustment lending through the Poverty Reduction Support Credit (PRSC), which would incorporate the policy changes requiredto support to Strategic Health Plan. Iftargets are met, the financing underthe third and final phase o f the APL would be substituted by the PRSC. Although the mode o f resource transfer would change, the Bank's role inpolicy dialogue, knowledge transfer, capacity buildingand monitoring o f the Health Sector Development Program will remain consistent through the life o fthe Program. Program objective and Phases The long-term objective o fthe Program (2000-20 11) is to improve access, utilization, quality, and financing of health services through increased efficiency and effectiveness in use and allocation of resources, to maximize impacts on health outcomes, especially among the poor, women, and children. The objective o f Phase I(2000-2003 with an estimated cost o f US$654 million supported by a Credit o f US$22 million) was to improve resource management andthe quality o fhealth services through sector reforms and institutional capacity building. The Phase Iproject focused changingthe way the sector was managed and financed, and by shifting roles and responsibilities. Particular achievements were made indecentralization, institutional capacity and improved resource management. All o f the triggers for Phase Ihave been met per the table below. 3  Performance Trigger Status A health sector program integratedinto Per the Public Expenditure Review, 61% ofthe external GOT'SMTEF, with at least 50% of donor resourceswere "on-budget" for FY03. resources for the health sector reflected inthe MTEF District-based health planning and As of July 2003, all districts produce comprehensiveplans and managementsystems and its financing receivegrants against these plans. through block grants, that are linkedto outputs/outcomesand performance, operational and tested inat least 30% ofthe 114 districts. National guidelines for an EssentialHealth i)ThenationalguidelinesforanEssentialHealthPackage package completed, costed; District have beendevelopedand costing done. management teams trainedon it's use, and ii)Trainingguidelineshavebeendevelopedandusedinthe quality assuranceprogram for basic services MPH program inMUCHS and selectedfunctioning Zonal inplace. training centers. Districtlevel training i s ongoing. A review and revision of the planning guides are warranted inview of a) the needfor review ofthe basketrestrictions for use of funds, andb) for inclusion of a minimumset ofpreventive nutritioninterventions. iii)Qualityassuranceprogram:Accesstodrugsandtraining have been strengthened. Further improvements are dependent on strongerisupportivesupervision from the regional level. For HIVIAIDS, high level national bodies i)HIV/AIDsPolicyinplace (NABA, NAC, NACP) to oversee the multi- ii)TACAIDSestablishedtocoordinateanational sectoralresponse, strengthenedinstaff an multisectoral responseand anational MultisectoralStrategic fully functional. Framework developed Common disbursement, reporting, monitoring Financial Managementand reporting through the Platinum i s and evaluation systems developedand tested. inplacewith quarterly reporting At least 75% of the Phase Icredit disbursedor As ofNovember 20,2003 94.28% ofthe credit has been committed. disbursed. Based on the experience and lessons learned inPhase I,the objective of Phase I1(the proposed project) i s to achieve improvements in the provision of quality health services through continuing to support the reforms, capacity development and improved management of resources, while focusing on quality. The Project will support the implementation of the Second Health Sector Strategic Plan (HSSP) July 2003-June 2008 which was reviewed and endorsed by Partners inMay 2003. The estimated cost i s US$963 million, of which IDA will finance US$65 million. As was the case under the Phase IProject, Phase I1will be implemented by the Ministry of Health (MOH) and the District Councils under the President's Office, the Regional Administration and Local Authority (PORALG). The objective ofthe final phase ofthe government's Program (2007-2011)is to institutionalize output-based management and achieve measurable improvements inhealth status. This third phase i s now expected to be supported by PRSCs rather than a subsequent APL. 2. Project development objective and key indicators The objective of the project (the Second Health Sector Strategic Plan) is to achieve improvements inthe provision of quality health services through continuing to support the 4  reforms, capacity development and improved management o f resources, while placing a greater emphasis on quality. Agreed upon indicators for assessing the long-term impact o fthe Health Sector Development Program a current status are as follows': InfantMortality Rate (IMR)(99.1 in1999) Ratio o f the IMR o f the poorest quintileto the IMR o f the least poor quintile (113:88 in 1999) Under-five mortality rate (146.5 in 1999) Life expectancy at birth(49 in2003) Total fertility rate 15-49 (5.6 in 1999) Maternal Mortality Ratio (370/100,000 women o f child bearingage per surveillance in2002) Results Indicators: The following milestones are intendedto monitor the transition from the APL to the PRSC: 0 The gradual shift o f Bank financing for health from the Adaptable Program Loanto the PRSC i s compensated for by increases inthe allocation to the health sector. 0 Annual procurement audits find that there are improvements each year. 0 The Annual Health Sector Reviewsassess the status o f implementation o f the Health Care Waste Management Plan. The following indicators are intendedto monitor project results: 0 The government's healthbudget(inclusive o f allocations to MOH, healthblock grantsto Districts and the NHIF)has increased to the equivalent o f US$9 per capita. 0 The proportion o fbirths attended by a skilledhealthworker is increased from 47% to 55%. 0 At least 60% of clients seeking care at ahealthfacility report to be satisfied. 0 The TB treatment completion rate (cure rate) is increased from 80% to 85%. 0 The percentage o fhealthfacilities with designated malaria drugs instock is increased from 25% to 50%. 0 The percent o f children with cough or fever who are takento a health facility increases from 67.5% (1999 DHS)to 80%. 0 Malnutrition (measured as weight for age) among children under five is decreased from 29% (1999 DHS) to 25%. 3. Project components Service delivery standards reflect global recommendations, and support a defined package o f cost-effective interventions which are expected to respondto the leading causes o f morbidity and mortality inTanzania (described above). The Second Phase o f the Health Sector Development Program continues to addresses the constraints to effectively implementingthese interventions - namely, sector financing, humanresources, logistics, management and information systems, quality assurance, decentralizationand the role of the private sector. Note that the 2003 Demographic and Health Survey has recently been completed and results will be available in January 2004. 5  Improving District Level Health Services 0 Quality o f health services will be addressedthrough integrating HIV/AIDS activities into service delivery at all levels, improving service agreements with non-governmental providers, identifying and employing non-monetary incentives to increase staff motivation, increasing accountability by publishingannual district health budgetsand performance data, using client satisfaction tools to assess quality o f service delivery, developing in-service training plans, implementingthe health care waste management plan, repairing primary health care facilities, and ensuringthat adequate technical and support capacity i s available to councils. 0 Necessary household and community-basedactions will be addressedthrough scaling-up and institutionalizing preventive actions such as the promotion o f insecticide-treated nets (ITNs) promotion, VitaminA supplementation, promotion o f exclusive breast-feeding and the seventeen community practices o f integrated management o f childhood illness (IMCI). 0 The financing gap inthe health sector will be reduced through strengthening the management o f user fees, community health funds, the drug revolving fund, and health insurance, as well as continuing to improve district planning and budgeting. 0 Equity of access to healthservices will be improvedthrough addressing the exemption systemfor the poor and vulnerable; monitoring the impact o f fees on the poor; and devising new resource allocation formulas for health block grants (government and donor-financed allocations) to districts. Community Health Fund Matching Grants: The CHF was initiated in 1995, and legislation now mandates its expansion nationwide. Households inCHF communities have the option o f paying fee for service or an annual membershipfee. Collections o f membership fees are matchedby the central government. The community then determines how the total funds will be utilized (e.g., procurement o f supplementary essential drugs to improve availability, rehabilitation o f health facilities, electrical installations, training inmanagement, planning and quality o f care to improve provider behaviors). The CHF i s intendedto expand community participation and empowerment, as well as mobilize local resources for health. InPhase I, the matching grants have been directly financed by the Bank Credit. This financing will continue under Phase I1only through FY04. Subsequently, the matching grants will be financed through the pooled funds (the "basket") or government budget. Strengthening the Management o f Secondarv & Tertiarv Hospital Care 0 Hospital management will be improved by developing a hospital manager cadre, mandating Hospital Strategic Plans and operationalplans, establishing Hospital Boards, and strengthening hospital financial management. 0 Quality will be improvedthrough repairs to facilities andpreventive maintenance; implementingthe health care waste management plan, and enhanced performance audits including monitoring o f service delivery outputs. 0 The impact o f HIV/AIDSon hospital staff (their increased workload andtheir own health) will be mitigatedthrough humanresource development strategies and integrating AIDS care at all levels. 6  Strengthening the Central Level Stewardship Role (standard setting, qualitv control, financing and human resource development for the sector) Regional Level Quality will be improved through the provision o f managerial and technical support to districts, strengthening the inspectorate function, performance audits, introducing a quality assuranceprogram (including client satisfaction assessment), supporting districts indata collection, data management and decision-making, strengtheningdistrict capacity for supportive supervision, and facilitating inter-district exchange o f experiences. Central Ministries Health financing will be bothincreased and made more efficient and sustainable addressed through improved budgeting,increasingthe government allocation for health, pooling external finances improving contract management and enhancing community voice and ownership incost sharing schemes. The Human Resource crisis will be addressedthrough long-term manpower planning; innovations to address distribution, motivation and retention o f staff (including defining explicitly the role o f Local Government Authorities (LGAs) inrelationto humanresources for health); and the more strategic use of Zonal Training Centers (ZTCs). Quality will be improved through audits; harmonizing technical management guidelines; standards for service agreement and contracting; accreditation o f health institutions (public and private); consultations/collaboration with civil society; and the development o f comprehensive integrated sustainable quality assurance schemes at health delivery points. a Monitoring and evaluation will be strengthenedthrough investingina minimumpackage o f indicators at district and facility levels and assessing health sector performance based on PRS indicators and measurable health sector performance profile indicators. 4. Lessons learned and reflected inthe project design Need for a comprehensive approach: Governments and donors have recognized that discrete projects exist inisolation, often lack government ownership, and impose an undue management burdenon the government. Fungibilityofresources also impliesthat whendonors focus on financing the "good" expenditures (e.g., primary care), government resources can then be redirected to less cost-effective interventions. Inlieu o f piecemeal projects, a more comprehensive approach i s called for, relying on a government-led sector strategy and program, focusing on building government systems and capacity (rather than capacity to manage only donor financing) and an agreed upon comprehensive financing framework. Focusing on the core functions o f government: The GOT recognizes that the Ministry o f Health cannot deliver quality health services to all Tanzanians. At the same time, there are more and more private sector providers who could make a greater contribution to health outcomes. The role o f the government inthe health sector will continue to shift away from service delivery to focus on stewardship and financing. At the same time, the M O H will strengthenits service agreements with Non-Governmental Organizations (NGOs), and the National Health Insurance Fundwill accredit more private providers to deliver services to members. 7  Lessons Learned inPhase Iwhich have informed Phase I1strategies and priorities 0 Management and technical capacities at district level have improved with intense capacity development, yet the shortages inhuman resources underminesthe system's capacity to improve service delivery. Humanresource strategies must be closely coordinated with civil service reforms, and more innovation will be requiredto stem the net loss o f health professionals. 0 Weak M&E leaves the government and its partners without a proper understanding o f the impact o f the sector development strategies. Improving the HealthManagement Information System (HMIS) and buildingdemand for information at all levels will be emphasized in Phase 11. 0 Without effective referral systems, quality improvements will be limited. Phase I1will prioritize belated reforms inhospital management. 5. Alternatives considered and reasons for rejection Specific Investment Project: A project focusing on a single disease or sub-sectoral challenge would be inconsistent with the TAS and the Health Sector Development Program, andunlikely to achieve sustainable impact uponthe MDGs. It i s also inconsistent with the Bank's regional strategy. The Sector-Wide Approach recognizes that (a) the government and key stakeholders must own and drive the development process to be successful and sustainable; (b) fragmented assistance to the sector resultedininconsistencies inpolicy advice, overlaps and financing gaps; and (c) external resources are fungible and thus that a proper expenditure program was more important than individual project financing plans. Inthis context, different alternatives to this project were considered and rejected. Supporting the SWAP through the PRSC immediately: The Strategic Framework for the Bank's Assistance to Africa describes an agenda whereby resource transfer for health and educationwill ultimately be through the PRSC. It i s recognized that strong sectoral programs are a precedent to usingthis approach. InTanzania, confidence inthe quality o fplanning, budgetingand budget execution has beenbuilding with government-defined Sectoral Strategies, Annual Reviews, MTEFand PERs. It is expected that the phasedapproach taken inthis project will mitigate concerns that a rapid transition could result in(a) a reduced total allocation for the sector; and (b) insufficient attention to the development o f sectoral capacity. C. IMPLEMENTATION 1. Partnershiparrangements The Tanzania Assistance Strategy and the February, 2003 Rome Declaration on Harmonization recommend that donors adopt joint actions, harmonized rules and procedures. The TAS makes specific reference to aid modalities, encourages capturing external assistance on-budget, and promotes the use o f pooled funds. Underthe 1999-2002 Program o f Work (POW), commendable achievements have beenmade regardingjoint planning and evaluationo f planned activities, as well as pooled/basket funds arrangements under the SWAp. The British, Dutch, Danish, Irish, Swiss and German governments pooled all or parts o f their financing to (a) finance central M O H procurements and activities that appear withinthe Medium-Term Expenditure Framework, and (b) provide grants to districts insupport o f non-personnel recurrent costs in district plans and budgets. Joint Reviewshave been successfully conducted since the start o f the 8  Program, culminating inthe fifth ReviewinApril 2003 where the Second Health Sector Strategic Plan was appraised. The adoption o f the SWAPhas broadenedthe interactions betweenthe MOH, M O F and PORALG(President's Office, Regional Administration and Local Government) andthe donor community. Pooling and non-pooling partners for the last three years have been funding one Strategic Plan and one annual Program o f Work. Joint disbursementsystems for financing central and district activities through the pooled account were developed, and are being employed by the M O H and PORALG. A memorandumo f understanding (MOU) was developed, signed and applied by GOT and pooling partners in2000. A new M O U i s being developed for Phase 11. The Health Sector Reform Secretariat under the Director of Policy and Planning (DPP) has assisted the DPP to effectively enhance donor and intersectoral coordination. Donor coordination has been further enhancedthrough (a) the SWAP Committee whose membership covers representatives from all partners inthe health sector, (b) the Basket FundingCommittee (BFC), and (c) the Joint Annual Reviews for the health sector. Several partners will continue to participate inpooled financing under Phase 11, namely the Danish, German, Irish,Dutchand Swiss governments and IDA (the Britishgovernment has recently shifted to general Budget support). The M O F has required pooling donors to use Government Exchequer systems. A pool o f funds has beencreated, with a holding account opened by M O F through the Exchequer system. Six of the partners(including the Bank) continue to follow one system o f planning, disbursement,procurement, implementation, monitoring and auditing. The Basket Finance Committee (BFC), established in 1999,has been steering operations o f the joint disbursement system. 2. Institutionalandimplementationarrangements Implementation o fthe SWAPwill continue to strengthennational systems and capacity. Common procedures and implementationmechanisms are progressively being strengthened. Pooled ("basket") financing mechanisms will continue to be used at both the central and district levels. Partners will provide funds through ajoint account and finance a higher percentage o f the total expendituresthrough this approach. The Project (APL Phase 11)will continue to strengthen the established joint disbursement, financial management, reporting, auditing, and procurement systems developed under Phase I. The 2003 PriceWaterhouseCoopers review o f Basket financing proposes areas for improvement, notably instreamlining guidelines for the district level use o f Basket funds with guidelines for the use o f government-financed District Block Grants for health, reducing the administrative burden o f managing the basket, and reducing disbursement delays. Commitments were made by the Basket Financing Committee at the May 2003 Joint Review to resolve these constraints. Proiect Oversight and Coordination: Responsibility for oversight and coordination o f program implementation rests with the Permanent Secretary o f the M O H (PS/MOH), inclose collaboration with the Permanent Secretary o f Regional Administration and Local Government (PS/PORALG). The Director o f Policy and Planning (DPP) o fthe M O H is responsible for day- to-day coordination and monitoring o f the Project/Program, closely cooperating with the MOH's 9  Chief Medical Officer (CMO) and PORALG's Director o f Local Government. The CMO and technical directors are responsible for project/program outputs. The Health Sector Reform Secretariat (HSRS) will continue to play the role o f a secretariat. The Chief Accountant o fthe M O H i s responsible for all accounting and financial management under the program, andthe Director for Administration and Personnel (DAP) for reviewing the procurement o f goods, works, and services. The DPP will also continue to oversee the management o f Bank funds outside the pooled funds, for which the HSRS Secretariat will coordinate day-to-day operations. The M O Hhas assigned a contact person withinthe Secretariat for the implementationfor IDA- fundedactivities, and one accountant to handle the financial operations and reporting ofthe Special Account. These arrangements have proven extremely successful over Phase I. The Sector-Wide Approach Committee, chaired by the PS/MOH, provides a forum for coordination o f all the donor-assisted activities/programs (bothjoint and parallel financing) in the health sector. The British,Danish, Dutch, French, German, Canadian, Irish,Japanese, Swiss and UnitedStates governments, as well as the UNagencies (WHO, UNICEF, UNDP), and the two multilateral Development Banks (IDA and AfDB) participate withinthis forum and organize their financing to the health sector withinthe government-defined program. As IDA financing moves to the PRSC, it will remain engaged inthe SWAPthrough this committee. The Basket Financing Committee (BFC), established under Phase I,will continue to meet quarterly to review the implementationprogress and expenditures, monitor achievements against performance indicators, review and approve workplans and budget, and approve release o f funds for the next quarter. The committee, co-chaired by the PS/MOH and the PS/PORALG, consists o f senior officials from MOF, MOH, and PORALG, as well as one representative from each donor contributing to the pool o f funds. A Memorandum o f Understanding (MOU) circumscribes the mode o f operation. A newM O U i s beingprepared which describes the agreed-upon procurement procedures, including the use o f World Bank procedures for all ICB. The Side Agreement, signedby GOT andthe Basket Partners captures the annual commitment o f funds to the Basket, and will provide the basis for IDA disbursements each year. The Joint Annual Review inMarch, preceded by a technical review, assesses actual expenditures and achievements over the year against the plans, and provides a forum for partners to review and agree on detailed implementationplans (including a procurement plan) for the coming fiscal year. The timing o f the annual review allows the review team to take into account indicative GOT allocation to the sector for the next three years under the MTEF, and enables the GOT to program confirmed donor support inthe GOT'S budget cycle. 3. Monitoring and evaluation of outcomedresults The Annual Health Sector reviews, the SWAPand BFC committees, and the annual review o f comprehensive plans and annual reports submittedby 113 district councils, as well as the annual reviewo fthe sectoral MTEFsand HSSP provide a framework for assessing implementation progress. Sectoral PERs are undertaken annually, and a "Health Sector Performance Profile" will be produced for the Joint Review. Quarterly progress reports are submittedby districts where nineteen indicators have been established to monitor progress inthe implementationo f the District Health Plans, andmost districts report on progress intheir quarterly reports. These indicators will continue to be usedto 10  measure the progress o f implementation o f Plans, andthe services delivered, and are intendedin Phase I1to better assist districts indefiningtheir local priorities. Impact, as well as implementation progress, are intendedto be assessedannually as part o f the Annual Review. Yet, despite Tanzania's impressiverecord o f Demographic and Health Surveys, two long-standing demographic sentinel surveillance projects (TEHIP and AMMP), quality research centers (NIMR and Ifakara), the Poverty Monitoring Master Plan, and well-established SWAPprocess, monitoring ofthe impact o fthe Health Sector Development Program remains extremely weak. The core list o f Performance Indicators for profiling sector development does not state all indicators inmeasurable terms, lacks baseline data and targets and i s not regularly reported upon. The result i s that the impact o fthe strategies i s assessed anecdotally. InPhase 11, the Bank will work with government and partners to develop a demand for quality information, and for tracking the success for sector strategies. 4. Sustainability There are three aspects o fthe project that support sustainability: Change from project approach to a sector-wide approach and gradual shift to budget support: Promoting a sector-wide approach inthe planning and financing o f the sector signals both the government and donors' willingness to do away with the fragmented approach prevalent under the traditional verticalized or balkanizedprojects, which has been shownto be unsustainable in the longrun, andto distort sector allocationpriorities. Focusing on government capacity: Rather than creating temporary, separate management entities (such as a PIU) which employ parallel systems, procedures and staff, the SWAp also focuses attention on developing and strengtheninggovernment systems and procedures (planning, budgeting, financial management, procurement), and civil service capacity. Budgetary reform, prioritization and rationalization: The Program supports the budgetary reform initiatives under the Medium-TermExpenditure Framework (MTEF). External resources for the health sector, most o f which were extra-budgetary, have been increasingly incorporated inthe MTEFto help clarify the realresource envelope for the sector. Reform initiatives supported under the Project and Program are intendedto enhance fiscal predictability and sustainability, as well as allocation efficiency inthe health sector. The sustainability o f investment costs (typically financed by donors) can also be better assessedunder the SWAp. 11  Risks RiskMitigation Measures 2iskRating To project development objective Health sector development Strong M&E, accompanied by targeted analytical .ow strategies do not lead to anticipated work will be supportedto continually assess impact, improvements inhealth outcomes and ensure that strategies are revised accordingly among the poor. duringannual reviews. HIV/AIDS morbidity and mortality The Tanzania M A P together with the MOHHIV/AIDS hbstantial cancels out reductions in Strategy (included inthe Strategic Plan supported by transmission and death due to other Phase 11)are expected to mitigate the impact o f communicable diseases HIV/AIDS. However. the risk remains substantial. To component results Government or donor commitment Engagement of a wide range o f stakeholders inthe JOW to the Programwanes continual revisiting o f strategies, together with the open sharing of evaluations (whether good or bad) i s intended to sustain support. Human resource constraints (vacant Maximize synergies with related government vloderate posts, skill mix, mal-distribution, strategies ( HSRP, RGW, CSRP); engagement by the incentives, etc. ) not adequately Bank through a sub-regional program o ftechnical addressed by GOT assistance in HRH;and priority beinggiven by MOH to identifyingstrategies suggests that this risk can be managed. Delayed disbursements to the health Closer adherence to the `health planning' process laid vloderate baskets down inthe Procedure Manuals-forthejoint Disbursement System for District Basket Fundand the Central Basket Fund. These lay down a detailed six month process which culminates with BFC approval of the health plans at the beginning o f the financial year. The "Side Agreement" to the 2003 Annual Review indicates a commitment by partners to reduce these delavs. Inadequate procurement capacity o f Capacity assessment to verify any weaknesses and vIoderate MOHand LGAs incorporate any action plan to mitigate these weaknesses, combined with close attention and suppon from Basket Partners will mitigate risk. Weak governance ( inadequate Publish information on finances, supplies at all vIoderate public participation, information, facilities and Council Health Management Teams accountability and transparency) (CHMTs), and monitor compliance and accelerate establishment o f Council Health Service Boards (CHSBs) Impact of HIV/AIDS in the sector HIV/AIDS interventions for health workers; substantial causes such increasedworkload and strengthening home-based care and the engagement o f personnel loss that staff cannot other actors through the MAP should help alleviate the deliver pressure on the sector. However, given prevalence, the riskremains substantial. 12  6. Loadcreditconditionsandcovenants Condition o f Disbursement 9 Nodisbursements will bemade intothe pooledfunds account untilaMOUhasbeenentered into among the Borrower, the Association andthe other Donors contributing to the Pooled Funds. Legal Covenants 9 The governmentwill organize ajoint Annual Reviewno later thanMarch31ofeachyear to review the progress o f implementation as well as a plan and budget for the subsequent year. 9 The governmentwill submitto IDAandother development partners at leasttwo weeks before each annualjoint review: (a) an annual report on implementationprogress, expenditures, and results o f any technical reviews; and (b) a draft MTEFfor the subsequent year. 9 Onaquarterly basis,the government will (a) submitto IDAandother development partners reports on implementation progress and expenditures, and (b) organize basket financing committee meetings for the review and approval o f activities to be financed through the basket the subsequent quarter. 9 Annual financial auditreports, carried out byanindependentauditor, willbe submittedto IDA and other development partners (inthe case ofthe pooled financing) within six months after each financial year. P. Annual external procurement audit reports will be submittedto IDA and other participating partners by 31December each year. Inaddition to the formal annual audits, ad-hoc procurement reviews may be conducted periodically. 9 The Borrower isexpectedto implementtheProjectinaccordancewiththe Project Implementation Plan (as comprised o fthe MTEF and the HSSP), the Memorandum o f Understanding and the Health Care Waste Management Plan. D. APPRAISAL SUMMARY 1. Economicandfinancialanalyses The economic analysis confirms that the rationale for the program remains valid based on demonstrated performance under Phase I,and identifies emerging challenges as the program evolves. P. Significant achievements were made insustaining the health budget as health expenditures grew faster (3 1.2 percent per year) relative to total government expenditures (17.5 percent per year), a reflection o fthe government's commitment. The government and its partners were also able to increase "within-budget" real per capita spendinginhealth (Tsh 1,993 in FYO1/02, compared to Tsh 1,180 inFY97/98, both in 1995 prices), a considerable achievement givenpopulation growth and inflation. 9 Budgetarydistortion andfragmentationofdonor support havebeendramatically reduced through efforts to achieve budget comprehensiveness and to reduce "off-budget" donor activities. 9 All 113districts nowreceive block grants. Institutionalizationandcapacity buildingfor fiscal decentralizationremain as challenges under Phase 11. P The policy underpinningsfor mobilizing alternative extra-budgetary resources have been strengthened through the enactment o fthe National Health Insurance Fundfor civil servants in 1999 andthe Community HealthFundlaw in2001. 13  The analysis demonstrates the continuing cost-effectiveness o f the chosen program approach (sector-wide, moving towards basket funding). The analysis also demonstrates commitment to prioritizing cost-effective interventions giventhe burdeno f disease, as reflected inthe larger proportion o f basket funds (more than 70 percent inFY00/01) spent on preventive and promotive health services. Lastly, the analysis highlightsthe likely benefits to be generated from Phase 11, but giventhe continuing (and ina few services, worsening) differentials inthe use o f services across wealth quintiles, the Bank will encourage the government assess benefit-incidence. Financial Analysis A review o fthe first three years o fMTEFwhich occurred underPhaseIshows strong improvements inresource allocation and fiscal decentralization: P The MTEFhas raised the share o f expenditures going to preventiveandpromotive care from 33 percent inFY97/98 to over 40 percent since FYOO/Ol,with a corresponding decline inthe share going to hospital services. P The share o fnon-wage healthexpenditures has risen, reducingthe lack o f suppliesand drugs. P As much as 46 percent o frecurrent health expenditures inFY01/02 was disbursed to regions and local authorities. However, capital expenditures continue to be highly centralized. Secondly, the financial analysis demonstrates continued appropriateness o f "basket funding" based on local experiences gained, and generally positive performance garnered inthe first years o f its execution. The initial problem o f under-spending have been addressed as government and partners became gain experience with the rules and procedures. Thirdly, the adverse fiscal impact o fprogram activities appears to be negligible, giventhat much o f the program i s coursed through the MTEFprocess. Fourthly, the implementation o f alternative resource mobilization programs have been strengthened through formal legislationand policy, and there continues to be strong popular support for them. The weak fee waiver and exemption systems inboth CHFs and cost sharing program will be addressed under Phase 11. 2. Technical The overall Program design and Phase I1Project design buildsupon lessons learned, as well as research and analysis inhealth systems, service delivery, medical and public health interventions, household/community behaviors and attitudes, (refer to Annex 12 for background documents). It responds to the leading causes o f morbidity and mortality inthe country. Service delivery guidelines reflect international standards (e.g., IMCI, malaria control, TB, PMTCT, VCT, antenatal care, EPI, provision o f micronutrients, etc.), and priority programs receive intensive support from both local and international partners. Tanzania has also been a prominent country within many global initiatives - including Global Alliance for Vaccine and Immunization (GAVI), Roll Back Malaria, IntegratedManagement o f Childhood Illness (IMCI), Stop TB and the Global Fundfor Malaria, AIDS and Tuberculosis. The country has a network o f 4380 dispensaries, 479 health centers, 180hospitals and 100 training institutions. About 90% o fthe populationhas less than 10 kmwalking distance to a health facility and about 75% less than 6 km (HBS 2002). Essential drugs are now available at all levels and the target i s to continue improve the district health services. However, provision 14  o f quality health services i s constrained by dilapidated infrastructure, shortage o f skilled staff and management capacity. The Project (Phase I1o fthe Program) supports the Second Health Sector Strategic Plan(HSSP). Grounded inthe Poverty Reduction Strategy (PRS), the HSSP was appraised and endorsed by all partners inApril, 2003. The HSSP describes roles and responsibilities for all levels o fthe system. The district health service component shall focus on quality service delivery withinthe context o f comprehensive district health planning. The hospital component will assure efficient quality referral services. The region shall assure availability o f supervisory and technical support to councils; and ensure adherence to policy and guidelines. The central ministrywill be responsible for development o f necessary policies and regulatory framework, tracking policy implementation, reform management, monitoring and quality control. The challenge for the HSSP i s to improve quality o f service deliverywith an emphasis -- among other critical interventions -- on maternal and child health services, nutrition, control o f malaria and HIV/AIDS. 3. Fiduciary Accounting systems and the related pillars o f internal control are already fully established within the M O H and PORALG. Competent staff with the experience o f running the previous Bank supported phase are being retained, while additional staff will also be hiredto strengthen the team. Some improvements may be introduced to the funds flow mechanisms as the system used during the first phase resulted inrepeated delays o f disbursements from the pooled funds (the basket). The government's PLATINUM/EPICOR informationmanagement system was used successfully for accounting for `basket' funds duringthe first phase, and will be retained for Phase 11. Payments requiringto be made ina foreign currency however typically been accounted for manually, even though the system i s capable o f reporting inany currency. Inthe past this has applied primarily to funds utilized outside the basket. The project will be required to produce Financial Monitoring Reports (FMRs). The Controller and Auditor General (CAG) o f Tanzania is the statutory auditor o fthe project. However, the law permitsthe C A G to subcontract some o f his statutory responsibilities to private audit firms, while retaining overall responsibility for the final product. DuringPhase I, PriceWaterhouseCoopers has been engaged to carry out some o fthese responsibilities. Beinga tried and tested system, albeit requiringa few modifications, it i s concluded that the present financial management arrangements meet the Bank's minimumrequirements for effective financial control at the project. 4. Social The positive social impact ofthe project i s enhanced by (a) its focus on women, children, and other vulnerable groups who expected to preferentially benefit from the health services to be supported; (b) its orientationtowards the financing and strengthening o f district and other peripheral health services; (c) the selection o f client satisfaction as an indicator o f success; the development o f the Client Charter; and (d) periodic stakeholder consultations through the annual review o f sector performance. 15  There is a risk that the poor and vulnerable are deniedaccess to care. This results from cost, distance, the behavior o f providers and cultural constraints. To mitigate these risks, the Second Health Sector Strategic Plan (i) focuses on actions at the household and community level; (ii) supports client satisfactionsurveys; and (iii) focuses on effectively implementing fee exemption procedures. The DHS i s stratified by socio-economic status to assess the equity o f health sector services and results. As cost sharingand contributions ofthe community increase, the needto protect vulnerable groups becomes critical so that they will not be denied access to health services. Exemption mechanisms and means testing underthe Cost SharingProgram and the Community Health Fundsneed to be continuously strengthened. The social costs of HIV/AIDSwill be addressed through the M A P project which runconcurrently with this project. The M A P project will also address AIDS orphans, support mitigation efforts including those by NGOs and community organizations. The long-term Health Sector DevelopmentProgram (first supported by PhaseIo fthis APL), was developed intensively with representatives o f the Government, NGOs, and other donors in order to be sure that the program i s adapted to, and consistent with, the needs o f those who will beresponsible for implementing it, especially the M O H line directors and PORALG. To better understand the status o fthe primary beneficiaries i.e., Tanzania households, especially women, children and other vulnerable persons, a large-scale household survey was conducted inthe mid- 1990s under the TanzaniaSocial Sector Review which informed the formulation o f Tanzania's Social Sector Strategy. Inaddition, several intervention-specific household evaluation and rapid rural appraisals were undertaken to generate beneficiary preferences on health service delivery and financing to be supported by the Project. These included: (a) an evaluation o fthe Cost Sharing Program based on a survey o f households and facility managers on how to strengthen the fee program; (b) two rapid rural appraisals and one quantitative assessment for the CHF, which analyzed its impact and problems, and provided recommendations on how to improve CHF management; and (c) a series o f consultations and sensitizationin 1997-99 by the Health Insurance Implementation Team with representatives o f employees, employers, trade unions, and providers on their willingness to participate and other specific design elements o f the NHIF. 5. Environment Phase I1i s similar to Phase Io fthe Program which was categorized as a "C" under the Environmental Assessment. Environmental assessment o f health operations has become more rigorous, and the Tanzania M A P was categorized as a "B" inJune 2003. Likethe MAP, this project will not be expected to generate any major adverse environmental effects, but because it will support the delivery ofhealth services, it will generate medical waste. Possible environmental risks include inappropriate handling and disposal o f hazardous medical waste, including sharp needles, and especially inadequate management o f the respective disposal sites inurbanor peri-urbanareas, where domestic andmedical waste may bemixedandwhere scavenging i s common. This project together with the MAP project will finance training o fhealthcare professionals, o f traditional birth attendants and traditional healers, and o f community workers delivering care to HIV/AIDSpatients and immunization. Such training will include instructionon appropriate 16  separation, transport and disposal o f hazardous medical waste. The project will buildon what the M A P has started infinancing the revision o f existing health sector guidelines on appropriate management o f hazardous medical waste at medical facilities and at disposal sites to include the relevant dispositions regardingHIVIAIDS, and other Medical Waste. It will also finance the development o f occupational safety guidelines for health care workers. A Health Care Waste Management Plan(HCWMP) has beenprepared, cleared by the World Bank Africa Safeguards Policy Enhancement Team (ASPEN), and disclosed in-country and at the World Bank InfoShop inJune 2003 duringthe MAPpreparation. Ithas beendisclosed again underthis project at the InfoShop prior to Appraisal. Inthe production ofthe HCWMP, interviews and consultations with a large number and variety o f stakeholders were conducted, including the Vice President's Office, city council members, district council members, dumpsite managers, health facility staff, community members, Ministry o f Healthofficials, Multinational (WHO, UNICEF) and bilateral partners, NGOs (e.g. Medicins sans Frontih-es) and private sector representatives. Inview o f the existing technological limitations related to the monitoring o f air quality and pollution, the HCWMP focuses on the reduction o f hospital waste and on developing sanitary landfills as opposed to incineration Inadditionto the HealthCare Waste Management Plan(HCWMP), a set o fNational Guidelines were developed. The training o f national staff inthese guidelines i s key inthe monitoring o f the implementation o f the HCWMP. With regardto the same technological limitations inthe monitoring o f undergroundwater, guidelines and indicators focus on the distance between pits and any source o f water. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [XI [ l Natural Habitats(OP/BP 4.04) [ I 1x1 Pest Management(OP 4.09) [ l [XI Cultural Property(OPN 11.03, being revisedas OP 4.11) [ I [XI Involuntary Resettlement(OP/BP 4.12) [ I [XI IndigenousPeoples (OD 4.20, beingrevisedas OP 4.10) 11 [XI Forests(OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [ l [XI ProjectsinDisputedAreas (OP/BP/GP7.60)* [I [XI Projectson International Waterways (OP/BP/GP 7.50) [ l [XI 7. Policy Exceptions and Readiness No policy exceptions are sought. Readiness: As this project supports the second phase o f an APL and a SWAP,implementation procedures have been established, and staff responsible for implementation are already inplace. Managementprocedures for pooled financing have been established under Phase I.The project supports the Second Health Sector Strategic Plan and accompanyingMTEF which were * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination ofthe parties' claims on the disputed areas 17  approved inMay 2003, and which commenced implementationinJune 2003. A Procurement Plan has been received andreviewedduring appraisal. 18  Annex 1: Countryand Sector or ProgramBackground TANZANIA: HealthSector DevelopmentProgramPhaseI1 Countryand Sector Context With estimated GDP per capita o fabout US$ 260, Tanzania is one ofthe poorest countries inthe world. It has a population o f about 35 million with a population growth rate o f 2.9 percent. Although real GDP growth has averaged more than 5% per year since the introduction o fthe PRSP, Tanzania remains ranked 160th inthe Human Development Index. Average life expectancy i s 49 years (down from 52 in 1990) and the total fertility rate remains highat 5.6 (although down from 6.2 in 1992). HNPRelated Millennium 1992 1999 (the 2003 DHS will be Development Goals completedin January2004) Malnutrition 28.8% 29.4% %of childrenunderweight (weight (DHS, 1992) (DHS, 1999) for age< 2 SD) Infant Mortality Rate 92 99 Number of deaths of children <12 (DHS, 1992) (DHS, 1999) monthsper 1,000 live births (113 for the poorest quintileand 88 live births for the wealthiest quintile) (DHS, 1999) Child Mortality Rate 141 147 (DHS, 1999) Number of deaths of children <5 (DHS, 1992) per 1,000 live births Matemal Mortality Ratio 134 Dares Salaam 37 Dares Salaam 5 1Hai District 30 Hai District Number of deaths due to pregnancy 179 Morogoro District 108 Morogoro District per 100,000 women of childbearing age (Sentinel Surveillance, 1992-3) (Sentinel Surveillance, 1999) Burden of Communicable Disease 5% o f adults who are HIV+ 8.1% of adults who are HIV+ (MOH/NACP, 1990) (MOWNACP, 1999) MalariaCase Fatality 2001 < 5 = 2.8% Malaria Case Fatality 2003 < 5= and >5= 3.5% (MOH/NMCP, 1990) 3.2% and > 5= 3.1% (MOH/NMCP, 1999) 11,753 TB cases (MOHNTLP, 1983) 61,063 TB cases and 63,048 cases (MOH/NTLP 2001 and 2002 respectively) More than 70 percent o f life years lost inTanzania are due to ten preventable diseases (including malaria, diarrhea, childhood pneumonia, AIDS, and perinatal/maternal conditions). National policies to address these problems are technically sound, and promising initiatives are being supported inthe areas of include integratedmanagement o f childhood illness (IMCI), behavior change communication, social marketing o f bednets, condom promotion, STD care, community- 19  based distribution o f contraception. Tanzania has also beena prominent country within many global initiatives - including GAVI, Roll Back Malaria, IMCI, Stop TB and the Global Fundfor Malaria, AIDS and Tuberculosis. Sector analysis' however continually suggests that the key constraints to achieving better outcomes are the capacity to finance, manage and deliver the resources and services to all levels o f service delivery. These systemic constraints relate to public expendituremanagement, financing, and the relationship betweenthe public and private health care sector, human resources for health, and utilization. The government has been a major provider and financier o f health services, running 41YOo f hospitals and 73% o f primaryhealth facilities (including parastatals). Voluntary organizations or NGOs (mostly religious) have beenan important partner, especially inrural areas; 19NGO hospitals operate as Designated District Hospitals (DDH). The government has for long been providing financial and human resources to NGO facilities. The role o f for-profit private providers i s still limited, but has beengrowing rapidly (particularly inthe urban areas) since re- legalization o f private practice in 1991. Although Tanzania created an extensive network o f health facilities that provides 90% o f the population with at least one health facility within 10km, shortage o f funds and weak management have plagued many public facilities with lack o f essential drugs and supplies as well as deteriorating infrastructure. In2000, the government provided only 29% o fthe finances requiredto maintainthe public health facilities. There is a need for the GOT to reprioritize the use o f its finite resources, rationalize the public health services, shift its role from a direct provider to a financier, and create greater NGO/private sector participation. Regional and district hospitals are administered by the Ministryo f Regional Administration and Local Government (PORALG), while each local authority (district councils, municipalities) i s responsible for the runningo f health centers and dispensaries inits own district/municipality, usingsubventions from the central government (through the PORALG) and their own revenues (e.g., local taxes). The M O H i s directly responsible only for the nationalheferral or specialized hospitals, various medical training schools, and national health programs (so-called "vertical programs"), as well as the training, appointments, and transfers o f medical officers and other specialized personnel. However, it i s still the M O Hthat has the overall technical responsibility on health matters. The Regional/Council HealthManagement Teams, though they are administratively under the PORALG, are "technically answerable" to the MOH. This system resultedindual responsibilities at the district-level, andthus unclear lines o f authority and accountability. Moreover, the past "decentralization" efforts did not provide real decision- making authority over use and allocation o f resources to the districts, which limitedthe districts' ability to manage their day-to-day affairs and be accountable for their outputs. Government Stratew In1999, the GovernmentofTanzania (GOT) embarked on aprogram ofhealth sector reform to focus on implementingthe essential and most cost-effective interventions andto transform financing, management and deliveryroles by emphasizing quality, empowerment o f local 'Technical Review o f Health Service Delivery at District Level, March, 2003; Draft Country Status Report, 2002. 20  authorities and the beneficiary, and greater use o f non-government agents. The Program aims to substantially shift roles and responsibilities withinthe sector, change the ways the sector i s managed and financed, and produce a more efficient and effective health care system. A three- phase, long-term Health Sector Development Program (HSDP) was developed by the government, together with key stakeholders and development partners. The overall purpose o f the Program (2000-201 1) is to improve access, utilization, quality, andfinancing of health services through increased efficiency and effectiveness in use and allocation of resources, to maximize impacts on health outcomes, especially among the poor, women, and children. Development partners provide financial support based on shared goals and priorities under a Sector-wide Program. In2000, the World Bank approved anAdaptable ProgramLoan (APL) to support the implementation o f this Program with three subsequentCredit agreements. Phase I(2000-2003) o f the Program focused on reforming the health sector and puttingthe systems inplace. Particular achievements were made indecentralization, institutional capacity and improved resource management. Based on the experience and lessons learned inPhase I,Phase I1(the proposed project) i s intendedto achieve improvements inthe provision o f quality health services through continuing to support the reforms, capacity development and improved management o f resources, while focusing on quality. Phase I11(2007-2011) will institutionalize output-based management, and instituteimproved systems that will ensure highquality healthcare to the Tanzanians and realize sustained improvements inhealth status. Credit 3380 has provided support to the first phase o f this reform program as described within the Program of Work (POW):July 1999-June2002. The initialPOW focused attention on: (1) providing acces.sible, quality cost-effective district health services; (2) providing back-up secondary and tertiary level referral hospital services to support primary health care; (3) redefining the role o fthe central Ministry o f Health as a facilitator o f health services, providing policy leadership and setting norms and standards; (4) definingthe appropriate role and mix o f public and private health care services and creating an enabling environment for sound development o f private health services; (5) addressing the challenges o f human resource development; (6) strengtheningthe requiredcentral support systems such as personnel, accounting and auditing, drugs and supplies, medical equipment,physical infrastructure, transportation and communication; (7) developing health care financing which i s sustainable, involves bothpublic and private funds as well as donor resources, and employs a broader mix o f options such as health insurance, community financing and user fees; and (8) withinthe sector- wide approach, restructuring the relationship betweenthe government and donors, developing and implementing common systems for planning, implementation, monitoring and evaluation. Progress to Date (progress over Phase I) The following table describes the status o f the Triggers set for moving from Phase Ito Phase 11. All ofthe triggers were determineto have beenachieved by May, 2003. The SecondHealth Sector Strategic Plan thus commenced with the new fiscal year inJune 2003. 21  Performance Trigger Means of Verification Status A healthsector programintegratedinto GOTbudgetiMTEF; Per the Public ExpenditureReview, 61% of GOT'SMTEF, with at least 50% of donor Sector Program the externalresources were "on-budget`'for resources for the healthsector reflectedin Documents FY03. the MTEF District-basedhealthplanningand Districthealthplans, As ofJuly 2003, all districts produce management systems and its financing Quarterly financial and comprehensiveplans andreceive grants throughblock grants,that are linkedto physicalprogress against these plans. outputsioutcomesandperformance, reports from districts, operationalandtestedin at least 30% of Audit reports the 114districts. Nationalguidelinesfor an Essential Guidelines for essential i)The nationalguidelines for an Essential Healthpackage completed, costed; healthpackage; training HealthPackagehavebeendevelopedand Districtmanagementteams trainedon it's report costingdone. use, andquality assuranceprogramfor ii)Trainingguidelineshavebeen basic servicesinplace. developedandusedinthe MPHprogramin MUCHS and selectedfunctioningZonal training centers.District leveltrainingis ongoing. A review andrevisionofthe planningguidesare warrantedinview of a) the needfor review o fthe basket restrictions for use of funds, andb) for inclusionofa minimumset of preventive nutritioninterventions. iii)Qualityassuranceprogram:Accessto drugs andtraininghave beenstrengthened. Further improvementsare dependent on stronger/supportivesupervisionfromthe regionallevel. NationalHIV/AIDS i) HIV/AIDs Policyinplace Fundestablishedand ii)TACAIDSestablishedtocoordinatea multi-sectoralresponse, strengthenedin operational national multisectoral response anda staff an fully functional. nationalMultisectoralStrategic Framework developed Commondisbursement,reporting, Successfbl FinancialManagementandreporting monitoringand evaluationsystems implementationof throughthe Platinumis inplacewith developedandtested. pilotjoint disbursement quarterlyreporting throughGOT systems; Quarterly reports. Quarterly financial and physicalreports. At least 75% ofthe PhaseIcredit Quarterly financial and As ofNovember20,2003 94.28% ofthe disbursedor committed. physicalreports. credit has beendisbursed. Inadditionto that reflectedabove, significant progresshasbeenmade acrossthe PhaseI components: District health services: Decentralization has been extended to all 113 districts inthe country, and Health Boards (one o f the tools o f strengthening decentralization) are beingrolled out to all 113 LGAs anddistrict hospitals. At lower level inthe health systemHealth Facility Committees are being established. All 113 District Councils now receive block grants for health from PORALG and from the pooled basket funds. District HealthPlans are developed and approved annually. Quarterly Reports describe implementation progress as well as detail expenditures. 22  Audits have been satisfactory. Improvementshave beennoted inquality o f council healthplans, dissemination and training on council planning guidelines, and indrug and commodity supply. Most importantly however, quality health services ingeneral are increasingly available at district level. A series of donor-financed district pilot interventions (TEHIP, AMMP, GTZ/Mbeya, GTZ/Tanga, and DANIDA inKagera and inDar es Salaam) are offering best practices in decentralization, essential healthpackage, integrated service delivery and quality assurance. These pilots have also contributed to improved district health planning, management, and data collection and analysis for planning and decision-making. Human resource development: Underpublic service reform, the M O H rationalized its work force through provision o f five-year human resource development planand the establishment o f staffing levels at all health service delivery units including health management structures. The Ministryhas put significant effort into the capacity building o f its staff, andthe improvement of the working environment. Training activities have been decentralized to the Zonal Training Centers, and management and technical capacities at district level improved over the past three years as a result o f intense capacity development at that level. Over FY02, PORALGwas asked to take proactive action to fill critical vacancies, and requested councils to submit vacant posts indifferent sectors inorder to obtain permission for recruitment from Civil Service commission. Permissionwas obtained, and some o f the vacant posts were filled but others are still vacant becausethe councils could not get people willing to work in certainlocalities. Support systems: Key performance indicators were agreed upon by MOH and Partners, and incorporatedinto the PRSP. Proposals for strengthening o f the HMISwere finalized. The M O H has started implementingsome o f the key proposals including transfer of personnelto HMIS. Drugand commodity availability improved at district levels. Inaddition, a unifiedcommodity management system was introduced that i s linkedto the Medical Stores Department (MSD) system. MSDhas improved the procurement and distribution o f drugs. Health care financing: significant progress has beenmade with the establishment of the National Health Insurance Fund, and expansiono fthe community health fund. Inpublic expenditure, allocations for district health services has increased relative to central ministry allocations. The government has introducedthe Medium-Term Expenditure Framework (MTEF) in 1998 for annual, rolling 3-year expenditure planning. The M O H contribution to the MTEF has improved each year. Those improvements are both evidenced within, and partly credited to, the annual PERs which have been taking place since 1998. A resource allocation formula for district basket funds has beendevelopedwhich aims at redirecting resources to mainpriorities inthe health sector. The formula gives priority (inaddition to population and poverty) to rural areas and areas with a highburdeno f disease. Public-private mix: The government passed a Bill on Practice o f Traditional Medicine, and private providers are beingaccredited to deliver care and drugs under the NHIF. 23  Common systems: There has beenwidespread adoption o f the Sector-Wide Approach, with most partners programming their support against the government-defined program, Annual Reviews which have improved inquality each year and expanded participation by stakeholders. Seven partnershave been providing support through basket funding, and have focused on strengthening government management systems (disbursement, financial management and procurement) rather thanemploying parallel systems. HIV/AIDS: The M O H incollaboration with partners and stakeholders completed development o fthe Health Sector HIV/AIDS Strategic Plan at end o f Feb 2003. Furthermore, HIV/AIDS priority issues have been integrated inthe Health Sector Strategic Plan 2003-2006. A circular to provide specific guidance to improve the HIVIAIDS component o f district plans was sent to all districts inthe country inMay 2002. A quality surveillance system i s now inplace inNational AIDS Control Program(NACP), including guidelines for second-generation surveillance and protocols for Ante-Natal Care (ANC) surveillance. ANC and behavioral surveillance are underway in6 regions. Targeted interventions include special programs for Adolescent Reproductive and Sexual Health (ARSH)through Behavior Change Communication (BCC) campaigns inpartnershipwith the private sector. NACP has achieved good regional STI control coverage through a complex program that has included training service providers, procuring and distributing drugs, and IEC/BCC interventions for different target groups. For blood safety, achievements include an HIV/AIDS/STD laboratory at NACP, training o f staff inall blood transfusing sites, provision o f testing materials to hospitals, development o f guidelines on appropriate use o f blood and screening o f blood inall hospitals. Voluntary Counseling and Testing (VCT) centers were established in 170 facilities; over 200 counselors were trained; and NACP established strong partnerships with voluntary agencies involved inquality VCT service provision. PMTCT i s ina pilot Phase infive public facilities inTanzania, and benefitingfrom intense research, resources and planning. Required guidelines, IEC materials, andtraining materials are beingdeveloped andpre-tested inpreparation for disseminationnationwide. Two activities built a foundation for a future drug access initiative for PLWA: a situation analysis to examine capacity o f the health system to take this on; and development o f guidelines for clinical management o f HIV/AIDS. NACP established an organized home-based care model inthe public sector and developed a training approach for district, health facility and community levels. Twenty-eight districts have Home Base Care (HBC) services; over 100providers and trainers were trained as TOTS;and close to 200 voluntary agencies, NGOs and Community Base Organizations (CBOs) are providing HBC services. Key RemainingChallenges Although the Second Strategic Plan describes challenges inall strategic areas, some particularly key challenges deserve mention here. HumanResources for Health: There i s a documented shortage o f both numbersand skills in district health staff. The public sector employment freeze has resulted inan aging workforce, andtraining institutions cannot produce sufficient staff to fillthe gap evenifthe positions were approved. Recruitment o f district staff lags and authorizations to fill vacant posts are not addressed in a uniform manner nationwide. Affecting the health sector across the board are 24  issues related to civil service, including poor motivation o f staff due to unclear personnel management systems and absence o f systematic incentive structures; understaffing; absence o f rational deployment of existing staff; low capacity o ftraining institutions; and poor working environment. Equally difficult i s the transition inmanagement the employment o f staff from Civil Service Department (CSD) to LGA. Duringthe transition period, there i s a sense o f too many organizations managingthe human resources o f health sector. The MOH and PORALG have not yet succeeded to establish workable systemthat would ensure filling vacant healthposts at health facilities. HMISremains a critical challenge. Despitesignificant investments,the information system does not produce reliable data. The situation analysis undertaken for the Second Health Sector Strategy identifies a number o f HMIS related issues: low capacities o f staff who use it; under- utilization; late reporting; excessive reporting requirementsfor data entry staff; and inadequate use o f data for planning and decision making. A task force on information systems and performance measurements has been established to look at this important area. Households and Communities Reaching households, changinghealth behaviors and improving care seeking behavior i s necessary to reduce malnutrition andreduce child mortality. Too many children still die at home. Reaching beyondthe district level to the community and householdi s a theme inPhase 11. Hospital Reform: Little progress was made over Phase I.Key priorities for Phase 11include introducing modern hospital management approaches, improving the referral system; building capacities among district, regional and other staff to contract, finance and monitor outsourced hospital services. 25  Annex 2: Major RelatedProjectsFinancedby the Bankand/or otherAgencies TANZANIA: HealthSector DevelopmentProgramPhaseI1 Latest Supervision Project i (PSR) Ratings I 7 (Bank-finance Implementation Bank-financed: Sector Issue Progress (IP) Ob'ective DO HIV/AIDS Tanzania Multisectoral S HIV/AIDS Project (Approved June, 2003, Effective 15, 2003) Health, Nutrition & Population Health & Nutrition Project S S I Cr. 2098-TA (closed 06/30/99) -4 Public Service Reform Public Service Reform Project S S I (Approved in 12/99, Effective March 21,2000) Social Fund Tanzania Social Action Fund I S Project (Approved Aug 2000, Effective November 9, 2000) Water and Sanitation Dar water Supply and S sanitation (Effective July 31, 2003) Poverty Reduction PRSC 1( Effective July 18, S S I 2003) Water Supply Urban water Supply project S (Effective May 6, 1997) Water and Sanitation Urban Sector Rehabilitation S project (Effective M a y 6, 997) Human Development Human Resource Development S project (Effective February 18, 1998) Human Development Health Sector development S Project Phase I( Effective September 29,2000 ,Closing date December 31,2003) Human Development Primary Education S Development Program (Effective January 2,2002) 26  Other development agencies DANIDA, DFID, GTZ/KFW, Ireland, Healthsector programsupport Netherlands, SDC AfricanDevelopmentBank HealthRehabilitationProject EuropeanUnion Netherlands,NORAD,USAID, WHO, NationalAIDS Control II STD ControlProject USAID, GTZ, CIDA, UNDP, UNFPA, Program/Supportto NGOs Development CooperationIreland, DFID, SDC, UNAIDS,GlobalFund, ILO, SIDA, GRA, GTZ, DevelopmentCooperation TB/LeprosyControlProgram Ireland,Netherlands, SDC, WHO Africare, GDS, GTZ, TEHIP, IntegratedManagemento f UNICEF, WHO ChildhoodIllness DFID, UNICEF,WHO NationalMalariaControl Danida, JICA, UNICEF,USAID EnhancedProgramfor Immunizations DFID, GTZ, NORAD,UNFPA, Reproductive health, maternal UNICEF,USAID, WHO & childhealth, familyplanning CIDA/TEHIP,DFID, GTZ, District-levelsupportprojects Development CooperationIreland, Netherlands, SDC, DANIDA, 27  Annex 3: ResultsFrameworkandMonitoring TANZANIA: HealthSector DevelopmentProgramPhaseI1 ResultsFramework PDO OutcomeIndicators Use of OutcomeInformation Achieve improvements in Infant Mortality Rate (IMR) Lack o f progress will result in the provision o f quality 0 Ratio o f the IMR o f the poorest recommended modifications to health services through quintile to the IMR o f the least poor sector strategy and/or analysis to continuing to support the quintile understand relationship between reforms, capacity 0 Under-five mortality rate the strategy and the outcomes. development and improved 0 Life expectancy at birth management o f resources, Total fertility rate 15-49 while focusing on quality. 0 0 Maternal Mortality IntermediateResults ResultsIndicators Use of ResultsMonitoring Improved District Level 0 The government's health budget per Progress will be assessedby Health Services capita government and partners at the 0 The proportiono f births attended by Annual Reviews (based on most Strengthenedthe a skilled health worker recently available data). Lack o f Management o f Secondary 0 Percentage of clients seeking care at anticipated progress will result in & Tertiary Hospital Care a health facility reportto be satisfied analysis o f obstacles to 0 The TB treatment completion rate implementation and Effective central and (cure rate) reconsideration o f assumed regional level support to The percentage o f health facilities linkages between quality, financing and 0 with designatedmalariadrugs instock inputs/processes and outcomes. human resources The percent o f children with cough or fever who are taken to a health facilitv 28  b E .C L cc .C C E cv 0 0 0 cz r z F \ 2 L m m 6L cv S it E a 4L L 0 0 8 '&c\1 O r E g0  Q\ 'CA 64 s g s g g s 3 m m m \o IA 00 m 00 c.l 0 cc,  L 3 m ,h L c  Annex 4: DetailedProjectDescription TANZANIA: HealthSector DevelopmentProgramPhaseI1 The project descriptionis derivedfrom the M O H Second Health Sector Strategic Plan2003- 2007. This Plan was appraised and endorsed by stakeholders at the Annual ReviewinApril, 2003. Phase I1o f this APL will support the first 4 years of the Strategic Plan. After that, the Bank's support for implementation o fthe Strategic Plan andthe associated MTEF will continue through the PRSC combined with knowledge transfer, policy advice, analysis, and monitoring o f both implementation and results. Strategic Framework Giventhe overall vision of "assuring quality health services accessible to all Tanzanians and responsive to their needs" the strategic framework focuses on health services delivery, primarily at district level, but also at secondary and tertiary hospitals. All the other inputsprovided through the regional level and the central ministriesinorder to implementthe national health policy are considered to be support to health service delivery. The district agenda shall focus on quality service delivery withinthe context o f comprehensive district healthplanning. The secondary and tertiary hospitals will assure efficient quality referral services and technical support to district hospitals. The region shall assure ready availability o f supervisory and technical support to councils; and ensure adherence to policy and guidelines. The central ministry agenda comprises developing the necessary policies and regulatory framework, tracking policy implementation, reform management, monitoring and quality control. The burdenon capacity buildingfor districts and the regions i s vested inZonal Training Centers incollaboration with the region within the Zone. To give impetus and credence to the reforms, community and household level production o f health shall be promoted duringthe current phase o f the Program. Inaddition to advocacy, increased emphasis shall be givento: politically visible elements such as rehabilitation measures, community ownership of dispensaries, health centers and community control o f local health funds, drugs and suppliesthrough facility governing committees accountable to the Council Health Service Boards (CHSB). Second Health Sector Strategic Plan3 The Strategic Planhas objectives and targets organizedunderthree components: district health services, secondary and tertiary hospitals, and central support. The emphasis o f the 2003-2006 strategic plan i s on "district healthservices" Component 1, where most o f the essential health services are provided close to the communities. One expectation o f Phase I1i s to improve significantly the quality of those essential health services, make Council Health Management Teams and district healthproviders more accountable to the local communities, and strengthen community ownership. Note: (i)activities are not startingfrom scratch; many are continuing or solidifying activities which commenced during Phase I;(ii)the project descriptionencompassesa program of work from July 2003-June 2008, whereas the Phase I1financing will support only three and a half years of this program (Jan 2004-Jun2007); and (iii) this is a as SWAP, the project descriptionencompassesall development activities inthe sector, not simply a set of activities to be financed by IDA. 32  Good quality o f health services delivered at the district level requires an efficient hospital referral system and an effective medical support function. This will be built and strengthenedunder component 2 "the secondary and tertiary hospitals". Both district health services and referral hospitals require the necessary policy, managerial, technical and logistical support to be provided by the central level. Component 3 "Central support" will assurethis through an effective regional level and a well focused central ministry. The main focus o f both levels will be to assure that the national health policy i s understood and implemented, supporting effective, equitable, accessible health services o f good quality. I.ImprovingDistrictLevelHealthServices 1, To improve the quality o f health services: Implement quality assuranceprogram (management, training, supervision) Emphasizingthe defined essential healthinterventions package through the council planning, budgetingand reportingprocess Integrate specified HIV/AIDS activities into service delivery at all levels: district hospital, health centers, dispensaries, ward and village level Enhance healthpromotion activities through multi-sectoral networking at district and Ward level, and increase advocacy for healthy householdand community behaviors through dispensary and healthcenters Include epidemics preparedness and response indistrict planning and management Environmental and occupationalhealthmanagement including health care waste management Improve Performance of Service Providers 0 Identify and test non-monetary incentives and staff benefits to increase staff motivation 0 Based upon the skills assessment which will be done at regional level, districts will develop humanresources in-service training plans 0 Strengthen approaches to service agreements (Le., contracting with NGOs and private sector) Improve Transparency andAccountability 0 Facilitate the establishment o f Health Facility Committees andthe Council Health Service Board 0 Increase accountability by publishingannual district health budgets and informing facilities about their annual budgets 0 Publish annual district healthperformance data, and discuss with health staff and communities 0 Employ client satisfaction tools to assess quality o f service delivery 0 Advocacyhformation on Health Sector Reform at villages and household level 2. To reduce the financing gap inthe health sector: 0 Strengthen management o f user fees, CHF, DRF and Health Insurance schemes 0 Facilitate community ownership o f Health Centers and dispensaries 3. To improve equity o f access to health services: Ensure that exemption system for the poor and vulnerable are implemented, and monitor impact o f fees on the poor 4. To improve equity o f resource allocation: Ensure fairness in resource allocation in terms o f equity. 33  11: Strengtheningthe Management of Secondary& Tertiary HospitalCare Human Resources 0 Inthe long-term, develop a discipline and a cadre ofhospital managers. For the medium- term, aim at initiating the process, and agree on an institutional framework. 0 Deal with issues o f staff motivation and staff retentionby creating innovative ways o f providing non-monetary incentives, and opportunities for enhanced benefits linkedto performance 0 Take measures to mitigate the burdenon hospital staff o f increased work and hazards relatedto HIVIAIDS Management Systems 0 Accelerate the establishment o f Hospital Boards and operationalize the legal framework to support this. 0 Require all hospitals to have Hospital Strategic Plans and operational plans 0 Develop efficient and systematic costs management systems for hospitals 0 Enhance performance audit including monitoring o f service delivery outputs 0 Ensure accountability and transparency checks with timely reporting Service Delivery 0 Deliver a package o f quality services, as defined by national norms and standards 0 Provide specific quality services for HIV/AIDS patients 0 Prevention, counseling and support to HIVIAIDS patients 0 Improve emergency and epidemics preparedness and response Facilities 0 Undertake infrastructure rehabilitationandpreventivemaintenance with a strong local participation element 111.Strengthening the CentralLevel StewardshipRole (standard setting, quality control, financing and human resource developmentfor the sector) At Regional Level To support quality of services at district level 0 Provide managerial and technical support to districts on quality service provision including emergency and epidemics preparedness and response 0 Enhance performance audit including monitoring o f service delivery outputs on a quarterly basis, introduce quality assurance o f district health services including client satisfaction assessment and accountability andtransparency checks 0 Facilitate inter-district exchange o f experiences 0 Support districts to strengthen data collection, data management and decision-making Strengthen Stewardship Responsibilities 0 Improve the performance o fthe inspectorate function 0 Comprehensively analyze skills and humanresource needs at district level, training needs assessment o f district, incollaboration with ZonesICenter At Central Ministries (MOH and PORALG) 1. To improve health financing, budgetingand the equitable allocation o fresources 0 Advocate for increased government allocation to health 34  0 Advocate to M O F for implementationo f the revised allocation formula for district financing (one reflecting health needs and poverty levels) 0 Support councils to make the exemption system for the poor andvulnerable effective 0 Reduce transaction costs and improve budget process through pool external finances to support the health sector 0 Provide support to strengthening management o f cost sharing, CHF and health insurance schemes 0 Improve allocation guidance provided under Comprehensive Council Planning Guidelines 2. To address the Human Resource crises: 0 Identify financing for staff incentive scheme, inparticular staff posted to rural locations Improve long-term manpower planning and invest ingreater production o f staff 0 Address distribution, motivation and retention o f staff through innovation 0 Institutionalize network o f Zonal Training Centers 0 Develop short-term capacity building and skills-based learning modules 0 Regular consultations/collaboration with professionalbodies, professional associations, private providers and civil society to enhance discipline, ethics, morality and attitudes o f health workers 3. To improve the quality o f health service delivery: Standards: definition and adherence 0 Nationally roll out quality standards and protocols 0 Introduce the Medical and Clinical Audits 0 Explore options for enforcement o f accreditationo f health institutions (public and private) 0 Develop comprehensive integrated sustainable quality assurance schemes at health delivery points Public-Private Partnerships 0 Define service agreement and contracting out modalities for use by councils and secondary and tertiary level hospitals Facilities 0 Rehabilitation and maintenance o f health infrastructure and equipment 4. To strengthen the delivery o f HIV/AIDS health services: 0 Assess humancapacity development considering the consequences o fthe epidemic on availability o f skilled human resources 0 Integrate HIV/AIDSprevention and care into all level o f health service delivery 0 Introduce and strengthenPMTCT and HAART initiatives at the relevant service levels 5. To integrate o f health services 0 Emphasize integrated service delivery through pre- and in-service training o f health staff 0 Set agenda and oversee integration process at all levels 0 Monitor and evaluate integration o f health services inthe councils 0 Develop and initiate legal instrumentsto enhance integration o f health services 0 Undertake operational research, and use the results to improve and strengthenintegration o f services incouncils 35  6. To strengthenmonitoring and evaluation: 0 Introduce performance audit including monitoring o f service delivery outputs at district and referral hospitals 0 Assess periodically health sector performance based on PRS and Health Sector profile as elaborated inthe Monitoring and EvaluationPlan for the Second Health Sector Strategic Plan. 0 M O H and partnersagree to refocus and invest ina "minimum information package" at district and facility levels. 7. To continue to support Sector Reforms: Decentralization 0 M O H and PORALGto harmonize/streamline planning guidelines 0 Strengthen and harmonize working modalities betweenM O H and PORALGthrough intensified networking and exchange o f information and plans. Inparticular MOH should ensure that adequate technical and support capacity i s available to councils 0 PORALG, CSD and M O Hto agree on the composition o f the RHMT; and PORALG to support an efficient regional health support function within the RS Role & Function of MOH 0 M O H will harmonize technical management guidelines 0 Linkingresearch andhealthinformationas evidence for policy reviews and development 0 Continue to support enacting/review/development o f legislative instruments 0 StrengthenM O H capacity for policy analysis with a gender focus. Public-Private Partnership 0 Improve contract management for key reform tasks Transparency andAccountability 0 Enhance communication campaign on health reforms -- including operationalization o f the "Clients' Charter" Human Resources 0 Strengthen Zonal Training Centers teamwork on continuing education including exploring how to increasingly apply distance learning 0 Strengthen supportive supervision on regular basis 8. To strengthen the provision o f logistical support: 0 Continue to improve the selection, financing, purchasing and distribution o f drugdmedical supplies 0 Support health management information system 0 Undertake improvements to the operations o ftransport and estate management functions 36  . Annex 5: ProjectCosts TANZANIA: HealthSector DevelopmentProgramPhaseI1 Project Cost By Component and/or Activity Local Foreign Total US$million US $million U S $million ImprovingDistrict Level Health Services 552.31 21.22 573.53 Strengthening the Managementof Secondary & 358.87 30.22 389.09 Tertiary Hospital Care Ensuring central level support to quality, financing andhumanresources TotalProiectCosts 911.18 5 1.44 962.62 TotalFinancingRequired 43-00 22.00 65.00 Projected Budget+ FY05 FY06 FY07 Ministry of JSD (million) Portion `OTAL USD IDA TOTAL USD IDA TOTAL IDA Health (million) Portion (million) Portion USD(million) Portion Recurrent 69.22 80.25 92.91 92.91 Development 3.45 2.01 4.99 5.47 5.47 Central Basket 4.60 4.51 4.60 10.00 4.60 5.00 4.60 5.0( Cost-sharing- 1.63 1.82 2.01 2.01 hospitals + National Health 3.15 2.01 Insurance Fund Government I 106.791 106.791 I 93.461 Recurrent 59.64 68.55 78.81 78.81 Development 1.63 1.82 2.01 2.01 Council Basket 16.59 4.51 33.17 20.00 34.17 10.00 35.16 Local 52.44 30.58 34.71 34.71 Government Community 2.96 2.01 Health Fund Total 133.26 Re ion/LGA Total 207.581 15.01 207.391 30.001 235.091 15.001 235.091 5.0( 37  Annex 6: ImplementationArrangements TANZANIA: Health Sector DevelopmentProgramPhaseI1 As established inthe Phase I,inorder to avoidparallel systems and foster national capacity and systems, the Project will not establish a special Project ImplementationUnitand existing structures and staff will be utilized. Apart from day-to-day implementationo f the Project/Program by the M O H departments and LGAs, the Project/Program will be managed and monitoredthrough quarterly Basket Financing Committee meetings that will involve senior management from M O H and PORALG, as well as donor representatives channeling funds through the Basket and the annualjoint review Responsibility for oversight and coordination o fprogram implementation will rest with the Permanent Secretary o f the M O H (PS/MOH), inclose collaboration with the Permanent Secretary, President's Office RegionalAdministration and Local Government (PS/PORALG). The Director o fHealthPolicy and Planning (DHHP) o fthe M O Hwill be responsible for day-to- day coordination and monitoring o f the Project, closely cooperating with the MOH's Chief Medical Officer (CMO) and PORALG's Director o f Local Government through the Health Sector Reform Secretariat. For quality assurance, the CMO will take responsibility for quantity and quality o f the outputs. The Health Sector Reform Secretariat (HSRS) will continue to play the role o f a secretariat. The Chief Accountant o f the M O H will be incharge o f overseeing all accounting and financial management under the project/program, andthe Director for Administration and Personnel for reviewingthe procurement o f goods, works, and services. Implementation will emphasize the development o f national systems and capacity through a sector-wide approach. Common procedures and implementationmechanisms will continue to progressively be established and adopted moving toward program support, whereby external funds will be channeled, to the extent possible, through the existing but enhanced GOT mechanismto support the Government's sector program mainly as budgetary support. The M O H and PORALGwill coordinate sector-wide planning and performance evaluation. Service delivery and implementationat district levels are the responsibility o fthe district management and facility managers, who are accountable to Local Government Authorities. Each council will develop a council Health Plan based on local needs andpriorities. To that end, pooled financing (or "basket financing") mechanisms will be usedat boththe central and district levels. Pooling partners will provide funds through ajoint account (a U S holding account inthe BOT) and finance a highpercentage o fthe total expenditures for common programs. The Project/Program will deepen and refine the established joint disbursement, financial management, reporting, auditing, andprocurement systems developed under Phase I. Several donors will continue to participate injoint financing (DANIDA, GTZ, Development Cooperation Ireland, Netherlands, SDC and IDA) with exceptional o f DFIDwho participated in Phase Iand has now moved to general budget support. A new Memorandum o f Understanding (MOU) will spell out common procedures on procurement, disbursement, cooperation and exchange o f information. While the operation o f the pooled funds will continue to be refinedand will grow substantially in size duringthis phase, IDA will also finance some limited activities inthe MTEF (2003/04) 38  outside the pooled funds (e.g., procurements started under Phase I, activities not yet the incorporatedinto the pooled funds such as the National Health Insurance and the central component o f the Community HealthFund). The management o f the IDA funds outside the pool will follow the conventional methodthrough a Special Account. A joint annual review inMarchevery year, preceded by a technical review, will assess actual expenditures and achievements over the year against the plans, and review the MTEF for the coming fiscal year, including financial audit for the previous year and the procurement audit as o f December 31 o f previous year. Pooling partners will agree with government on the level of annual contributions to the health basket through a side agreement. A procurement planderived from the approved MTEFwill be ready early during each fiscal year. 39  Annex 7: FinancialManagement TANZANIA: Health Sector DevelopmentProgram PhaseI1 A. Financial Management 1.Summary RiskAssessment: I Topic Risk Comments/ recommendations Assessment M L o w financial management capacity in general, mitigated by use o f established government IFMIS M Core staff are already inplace and experienced inworking with the previous phase o f the project. The improvement o f capacity and procedures will continue through Phase 11. M Because of low FMcapacity in the country Risk N Internal control framework and org structure well established. M I----- There i s an established banking structure with disbursement channels, however, delays o f disbursement o f government and basket funds persist. Staffing N The staff handling project financial matters have already been trained on EPICOR, the project IFMIS, and are reasonably qualified to carry out their tasks. Accounting N Policies and procedures already codified in a financial Policies and management manual, and internal control systems adequate. N/A No internal audit at the Droiect External Audit N Satisfactory arrangements M Quarterly, annual financial and other management reports are Reporting and produced for use by the relevant stakeholders. Reports may be refined to incorporate any lessons learnt during first phase. N Satisfactory Svstems M OverallRisk Medium II Overall, the systems, procedures and staffing of the project satisfy the Bank's minimum financial management requirements. However, the project still attracts a moderate risk rating primarily because o f the delays indisbursements o f basket funds under Phase I. 40  3. FinancialManagementAssessment CountryFinancialIssues The Tanzania Country Financial Accountability Assessment (CFAA) was carried out and completed inthe year 2001. The assessment concluded that while Tanzania had a "sound system o f formal rules for financial management and many o f these rules had beenrecently updated and strengthened, issues o f non compliance, limited execution, inadequate monitoring, insufficient capacity, and lack o f enforcement needed to be resolved". The country's financial accountability framework, and therefore financial management, would be considerably more effective andthe associated fiduciary risksmitigated, ifthese areas were strengthened. Although no formal `update' o f the CFAA has as yet been carried out, a significant improvement inpublic sector accountingand reporting systemhasbeenachieved inthe past two years. Most notably, the government has put inplace a sound financial management system, with the introduction o f a computerized IntegratedFinancial Management System (IFMS) now largely operational on all central government ministriesand some introduced successfully inthe Local Government Authorities. Also the enactment o fthe new Public Finance Act No. 6 of 2001, and the Public Procurement Act No. 3 of 2001. For the first time the annual public accounts o fthe government for FYO1/02 have beenproducedwithinthe statutory period. Inaddition, the government has undertaken a number of actions to strengthenthe accounting and financial reporting function within Ministries, Departments and Agencies (MDAs). These include: (a) finalization o f an operation and accounting procedures manuals; (b) implementing measures to control all commitments at central government level, including non-Local Purchasing Order (LPO) commitments; (c) Accounting Officers (AOs) have signed letters o f appointment and have receivedtraining intheir role and responsibilities according to the Public Finance Act; (d) AOs have now direct access to IFMS; and (e) Audit Committees have been established inall MDAs. The Local Government Reform Programme (LGRP) Progress report for the period o f July to December 2002, indicates that some steps have beenundertaken to strengthen the Local Government financial management systems. These include: (a) the assessment o f the financial management capacity inall districts Local Government Authorities (LGAs); (b) the use o f new guidelinesfor preparationo f development plans and budgets; and (c) use o f new chart o f accounts under the Government Financial Statistics (GFS) codes by all LGAs. The FinancialManagementSystem The point persons for the project inthe M O H are the officers ofthe Health Strategy Unit. Within the unit is anAccountant whose role has however beenreduced to handlingthe Bank related documentationfor those funds moving outside the basket. These are accounted for manually, with the government's IFMIS handling the balance o f the funds inside the basket. A separate Accountant i s responsible for the basket funds reporting and accounting. The bulk o fthe financing, which for this phase will go through the basket, is accounted for using the government's IFMIS. A separate Accountant i s responsible for the basket funds reporting and accounting. These financial management arrangements, whose key components are described further below, are adequate to meet the Bank's minimumrequirements for financial management for the project. 41  Computer Software Per above, the basket funds are accounted for usingthe Government's PlatinudEPICOR information management system (MOH), and a mixture of computerized and manually systems at PORALG. The users are o f the opinion that the system (EPICOR) is adequate for their accounting and reporting requirements. It i s however not used for USDtransactions, although reports can be produced inany other currency. Staff operating the system appear adequately trained although it would be important that all the regular upgrades to the software are received and staff undergo the necessary training. Expenditure outside the basket i s accounted for manually by the Health Strategy Secretariat, and Excel i s used for compiling the reports. While Excel, being a spread sheet package, has certain inherent weaknesses, the low volume o ftransactions going outside the basket, as well as the experienced staff handling the accounting means the risk associated with its continued use is adequately mitigated. Staffingof the AccountingFunction As already stated, inthe M O Hthere are two Accountants, one for basket funds (essentially the central basket), and the other for nonbasket funds. The nonbasket funds Accountant has not yet receivedEPICOR training. This should be organized early inthe newphase to strengthen the skills base o f the unit. PORALG uses its existing structures for accounting for the district basket. Progress in establishing a reliable accounting and reporting structure has however been slow, with all eighty two Local Government Authorities (LGAs) failing to produce clean audit reports. The situation was not aided by the fact that during Phase I, more than half o fthe LGAswere not yet computerized. The computerization process is ongoing, hence it i s expected that this area will continue to improve duringPhase 11. InternalControlsincludingpoliciesand procedures The financial accounting policies and procedures inplace are sufficient to ensure that the project complies with the relevant Bank policies (OP/BP 10.02). These include the establishment o f internal controls and proper accounting procedures which are documented inan Operational Manual from Phase I. Itis expected that this manualwill beupdated from timeto time, as the need arises. As was the case during the previous phase, and inline with government accounting, the project accounts for its transactions on a cash basis. InternalAudit The project does not have internal audits at the moment. The project is multiactivity, meaning that several payments are made for a relatively large number o f activities. To compliment the `payment authorization' controls that are inplace, it is desirable to introduce internal audits into the system. It is notedthat each ministryhas its own internal audit function. Formal arrangements need to be made with the Internal Audit departments inthe M O H and PORALGto include project specific assignments intheir annual plans. The Task Team will pursue this with government and partners. 42  FinancialReportingandMonitoring M O H and PORALGcoordinators will continue to maintain accounts for the Project and ensure appropriate accounting for the funds provided. Where necessary and based on lessons and experiences from the first phase, current reports may be refined as appropriate. Inaddition, the report formats shouldmeetthe requirementsoffinancial monitoring reports (FMRs). The project is responsible for designingthe appropriate FMRsandproducingthem (FMRs) on a quarterly or other agreed basis. Draft formats ofthe FMRshave beenreviewed and agreed at Negotiation. They have requiredonly slight modifications o f existingreports already produced on central and district expenditures(Le., adding a total budgetcolumn and strengthening the descriptive summary). Budgeting and Planning An adequate andthorough consultative process is inuse for the generation ofbudgets, usinga bottom up process, startingwith district plans, costing o f activities, and consolidation at PORALGand M O H level before submissionto the Ministry o f Finance. This i s an elaborate and broad-based process that i s supported by annual Public ExpenditureReviews supervised by the Treasury. FinancialManagementActionPlan Negotiation The format and content o f FMRswere agreed at Negotiations. FMRsproduced will essentially be a reporting tool untilsuch time that the quality o freporting is deemed sufficiently highto support replenishment requests. Financial Covenants The following covenants relate to financial matters: P The Government will cause the project to have its records, accounts and financial statements audited each year, commencing with the accounts for the year endingJune 2003. P The project will submit quarterly FMRs, starting with the first quarter after effectiveness. SupervisionPlan Progress o fproject implementation will be continuously monitored by the Task Team. FMRs will be reviewedon a quarterly basis by the field based FMS and Task Team Leader, and any results or issues will be followed-up uponpromptly. The project's audit reports will be reviewed and issues identifiedwill be followed up. The field based FMS will monitor the agreed action plan to ensure appropriate actions are beingimplementedby the project. ImplementationSchedule: The project will be implementedover a four-year period. 4. Audit Arrangements The Controller and Auditor General (CAG) o f Tanzania i s the statutory auditor o f the project. However, the law permits the C A G to sub contract some o f his statutory responsibilities to private audit firms, while retaining overall responsibility for the final product. DuringPhase I, PricewaterhouseCoopers was engaged to carry out some o fthese responsibilities. It i s expected 43  that the project will continue to be audited by auditors acceptable to the Bank, on terms acceptable to the Bank (based on the `terms o f reference' (TORS)o f the first phase o f the project). Audited financial statements for the project will continue to be sent to the Bank within six months o f the end of the financial year, accompanied by a detailed audit comments (management) letter. Audit ArrangementsAction Plan The MOUwill describe the selection process for the auditor, 44  Annex 8: Procurementand DisbursementArrangements TANZANIA: HealthSector DevelopmentProgramPhaseI1 Background-ProcurementReform The procurement system inTanzania has been under reform over the last three years based on the recommendationso fthe 1996 Country Procurement Assessment Report (CPAR). The Government enacted a Procurement Law inFebruary 2001 replacing all previous procurement legislation. The Act became effective on July 1, 2001. Intandem, the Government also issued the Regulations intwo parts: (a) Procurement of Goods and Works; and (b) Selectionand Employment o f Consultants. InmidNovember 2002, the Government issued a set of Standard BiddingDocuments (SBDs) comprising of: (a) Procurement of Goods through International Competitive Bidding; (b) Procurement o f Health Sector Goods; (c) Standard Request for Proposal; (d) Standard Pre-qualification document for procurement o f Works; (e) Procurement o f Works through National Competitive Bidding; and (f) Procurement o f Works, Smaller contracts. These documents were reviewedduring2003 CPAR and found to be consistent with good public procurement practice. The Public Procurement Act (PPA) covers procurement inbothcentral government and local government authorities. InMarch2003, President's Office Regional Administration and Local Government (PORALG) issuednew Regulations and a Procurement Manual which are consistent with the 2001 Procurement Act. One notable revision inthe newRegulations i s a change of composition o f the local government authority tender board which entirely removes the councilors from the procurement process. Inthe CPAR carried out in2003, the following are amongthe recommendations made: (a) establishing a Procurement Authority responsible for oversight o fpublic procurement; (b) decentralizing procurement to ministries, departments, and government agencies; (c) changing the legal framework to include private sector representatives inthe Public ProcurementAppeals Authority; and (d) replacing SuppliesOfficers with Procurement Specialists, a newposition in the civil service system. The final report, including all recommendations, was submitted to the Government by end o f April, 2003 for implementation. The Government has drafted an action plan to implement these recommendations. Use of Bank Guidelines Procurement of civil works and goods will be carried out inaccordance with the Guidelines: Procurement under IBRD Loans and IDA Credits (January I995 edition -revised January and August 1996, September 1997 and January 1999). Bank's Standard BiddingDocuments and Standard BidEvaluationForms for works and goods under International Competitive Bidding (ICB) will be used. Since the GOT has prepared Standard BiddingDocuments for procurement of works and goods under National Competitive Bidding(NCB), procurement o f works and goods under N C B will be carried out using these documents. Bank's Standard BidEvaluation forms will be used for N C B contracts with necessary modifications. Selection o f Consultants will be carried out inaccordance with the World Bank's Guidelines: Selection and Employment of Consultants by the WorldBank Borrowers (January 1997 edition - 45  revisedSeptember 1997,January 1999and May 2002). Bank's Standard Request for Proposals andevaluation forms will beusedwhere applicable. Advertising A General Procurement Notice (GPN) will be publishedinthe UNDevelopment Business (UNDB),Development Gateway's dgMarket, and inanational newspaper o fwide circulation upon Board Approval. The GPNwill list the goods, works and consulting services for which specific contracts are expected to be advertised. The Borrower will keep a roster o fthe responses received from the potential bidders interested inthe contracts. The GPN shall be updated annually for outstanding ICB and large consultancy services. Specific Procurement Notices (SPN) for goods and works to be procured under ICB and N C B and for consultant services will be publishedina national newspaper o f wide circulation and may also be advertised inthe UNDBand Development Gateway's dgMarket inorder to get the broadest interest possible from eligible bidders. For efficiency, such contracts may be advertised inthe "on-line version" o f UNDB. The date o fthe SPN should coincide with the date that the bidding documents are available for purchase by interested bidders. Large consulting services will be advertised inthe "on-line version" o fthe UNDB, Development Gateway's dgMarket and inan international or technical newspaper, inorder to seek expressions o f interest (EOI) prior to the preparation o f the shortlist. Copy o f this advertisement will be sent to those firms which responded to the expression o f interest for consulting contracts listed inthe GPN. It i s also encouraged to contact embassies and professional organizations. Requestfor EO1for other consulting services will be advertised ina national newspaper o f wide circulation. At least two weeks will be allowed for submission o f expression o f interest. Procurementcapacity A procurementcapacity assessment was carried out to assessthe capacity o fimplementing agencies which will be responsible for implementingthe project. This project i s the second phase o f a three-phased Program (2000 - 2011) financed through an Adaptable Program Loan (APL), the first Phasewill close at the end o f December 2003. Inaccordance with proposed implementation arrangements, procurement will be carried out at two levels: (a) Central by the M O H Headquarters and PORALG; and (b) local government district and municipal councils. This report entails the assessment carried out at the M O Hheadquarters; District Health Infrastructure Rehabilitation Unit (DHIRU) under Director o f Local Government o f PORALG; and three local government authorities. At the MOH, procurement will be under the Director o f Administration and Personnel (DAP) while at PORALG, DHIRUwill be responsible for selection o f civil works consultants. At local government council level, procurement will be carried out by the Finance Department withinthe council establishment. The procurement capacity assessment has revealed a need for strengtheningcapacity at these levels. At the MOH, day to day procurement of works and goods (withthe exception o fpharmaceuticals and medical supplies) and selection o f consultants financed under Phase I,and those financed exclusively by the Government funds i s currently carried out by two Senior Supplies Officers assisted by three Supplies Officers. The same staff will be responsible for procurement under Phase 11. The Senior Supplies Officers are familiar with boththe new Public Procurement Act (PPA) and IDA procurement procedures. The assessment has revealed that one o f the Senior Supplies Officer i s involved inprocurements o f the ongoing Phase Iprogram and has acquired 46  adequate experience inprocurement o f goods and selection o f consultancy services, but needs further experience inprocurement ofworks. BothSenior SuppliesOfficers have attended short courses on IDA procedures for procurement o f goods and works as well as selection o f consultants; but have not been exposed to procurement o f works. The Senior Supplies Officers and the Supplies Officers report directly to the DAP. The M O H also has a building section staffed with two civil engineers, one quantity surveyor and two architects. During implementation o f Phase 11, this section will coordinate with the DHIRUo f PORALG to provide sector norms including specifications and standards. Procurement o f pharmaceuticals and medical supplies i s performedby Medical Stores Department (MSD), which i s a semi- autonomous body under the MOH. Over the past nine years, M S D has strengthened its procurement capacity and gained experience through several International Competitive Bidding (ICB) tenders under the Health andNutritionProject that closed inJune 1999 and Phase I. Furthermore, MSD i s well staffed (key procurement staff include a Director o f Procurement, Procurement Manager and eight procurement specialists) and has good storage facilities and is equippedwith a fleet o ftrucks for delivery o f goods upcountry. Procurement records at MSD are kept manually and computerized. The Independent Procurement Review (IPR) carried out inDecember 2002 as part of Country Procurement Assessment Report (CPAR) indicated that generally the Procurement/Supplies Unit at the M O H i s under staffed. The report indicates that there was only one Procurement Officer and two assistants by the time o f carrying out o f the IPR. However, staffing levels have now improved, as indicated above. The IPR also indicated that there were poor recording and filling systems, and inadequate skills inprocurement and contract management. There have beenno significant improvements inthese areas to date. The Ministerial Tender Board (MTB) will be responsible for processing bids (i,e., approval o f the biddingdocuments, advertising, receipt and opening o fbids) as well as adjudicating contract award. Inaccordance with the new Public Procurement Act (PPA), which became effective July, 2001, the Secretary to the MTB i s supposed to be a Procurement Specialist within the ministry. Currently the Secretariat o f the MTB i s ledby one o f the Senior Supplies Officer, who reports to the DAP. The secretariat ofthe MTBhandles procurement of contracts financed exclusively by the Government funds as well as other development partners. InMarch2003, PORALGissuednewRegulations (i.e., procuremento f goods andworks; and selection o f consultants) and a Procurement Manual, consistent with the 2001ProcurementAct. Distribution o f these Regulations and Procurement Manual to the local government authorities commenced inJuly, 2003. Currently procurement inlocal government councils i s carried out by procurement/supplies unit under the Finance Department withinthe district/municipal council organizational structure. The local government authority tender boards (Municipal Tender Board or District Tender Board) are responsible for processing bids (i.e., approval o f the bidding documents, advertising, receipt and opening o f bids) as well as adjudicating contracts award. A common method o f procurement inthe districts is through shopping as noted during the IPR, though the assessment has ascertained that some districts have usedNational Competitive Bidding(NCB) on a few occasions. Further experience is requiredinthis area. Furthermore, district councils have no adequate experience inprocurement planning; preparation o f bidding documents; bidevaluation; and contract management and administration. Procurement filing 47  and record keepingsystems are also inadequate. Districts also needto buildcapacity inthis area. PORALGwill be responsible for coordination o f local government component, i.e., civil works component. This component will deal with rehabilitation o f Primary Health Care Facilities; and District and Regional Hospitals. The districts will be responsible for these infrastructure. Tanzania has 122 districts. PORALG will engage about 6 consultants - districts will grouped in at least 6 zones -to carry out the rehabilitation designand likely post-contract phase subject to consultant's performance during pre-contract phase. These consultants will also assist PORALG to buildprocurement and contract management capacities intheir respective districts. The DHIRUhas a qualified civil engineer and a Supplier Officer. The CivilEngineerhas adequate experience inprocurement and contract management. Inrecognition o fthe concerns expressed about recordkeeping, the government has submitted to IDA (November 7,2003 letter infile) an actionplan for improvingprocurementrecordkeeping. The most important aspect o f this Action Plan i s the development o f a standard check-list o f records by 2004 and the maintenance o f box files containing photocopied records withinthe Procurement Management Unito f the M O H for reference. ProcurementPlan The Borrower has drafted a detailed two-year procurement plan, and atentative planfor the remaining period. The procurement plan includes relevant information on all goods, works, and consulting services expected to be procured, andtheir estimated cost; procurement/selection method as well as timing inthe procurement/selection process. The overall procurement plan will beupdated on annual basis inconjunctionwithpreparationofthe Annual Work Program and Budget. ProcurementImplementationArrangements The implementing agencies are the central MOH; PORALG; and local government councils. Procurement to be carried out by the M O H will include general goods, and selection o f consultants. Selection o f civil works consultants will be the responsibility o f PORALG while procurement o f civil works will be done by districts. Procurement o f other goods (pharmaceuticals and medical supplies) will be done by the Medical Stores Department (MSD), a semi-autonomous body under the MOH. The program will continue to support the National Health Insurance Fund(NHIF) inorder to strengthen its structures at the national level. NHIFactivities to be supported by the program will be implementedthroughthe MOH. The programwill also continue to support the Community HealthFund(CHF) by financing capacity building and systems development through the M O H and providing matching grantsthrough councils to participating communities. ProcurementMethods Civil Works: The program will support rehabilitation o f dilapidatedhealth facilities at regional, district and primary levels across the country. A strategic plan for the rehabilitation o fthe primary health care facilities will be developedbefore civil works packages are completed. Civil works contracts costing more than US$ 500,000 equivalent per contract will be procured through International Competitive Bidding (ICB). Domestic Preference will be applicable to local 48  contractors bidding for contracts through ICB, although giventhe types o f works, ICB packages are not envisaged. Individual civil works costing less than US$ 500,000 equivalent will be procuredthrough National Competitive Bidding(NCB). Civil works costing less that US$ 50,000 equivalent per contract will be procured on the basis o f simplified bidding documents by soliciting quotations from not less than three (3) qualified domestic contractors, preferably more inorder to obtain at least three comparable offers. The invitation shall include a detailed description o f the works, including basic specifications, the required completion date, a basic form o f agreement acceptable to the Bank, and relevant drawings, where applicable. Inall cases the award shall be made to the contractor who offers the lowest price quotation for the required work, andwho has the experience and resources to complete the contract successfully. Goods: Goods to be procured includepharmaceuticals, vaccines, medical equipment and supplies, motor vehicles, motorcycles, office equipment and furniture. Goods estimated to cost US$200,000 equivalent and above per contract will beprocured through International Competitive Bidding(ICB). For exceptional cases (namely, vaccines), and with the Association's prior approval, LimitedInternational Bidding (LIB) may be employed. Individual contracts costing less than US$ 200,000 equivalent will be procured through National Competitive Bidding(NCB) procedures. Pharmaceuticals, medical equipment and supplieswith an estimated value o f less than US$ 30,000 equivalent may be procured from UNICEF, WHO, and other specialized agencies o fthe United Nations. Direct Contracting (DC) may be employed with prior approval o fthe Association for cases, such as procurement o fmedical equipmentor spare parts which mustbe compatible with existing equipment. Other goods with an estimated value o f less than US$ 30,000 equivalent may be procured through National and International Shopping or ,the UNDP Inter-Agency Procurement Services Office (IAPSO), based on comparing price quotations from at least three eligible suppliers in accordance with IDA Procurement Guidelines (paragraph 3.5 and 3.6) and June 9,2000 Memorandum Guidance on Shopping" issuedby the Bank. Requests for such quotations will " be inwriting, and will include time and place for delivery o fthe quotations, a clear description/ specification and quantity o f the goods; as well as requirements for delivery time, place for delivery o f goods, and installation requirements as appropriate. The request for quotations should be sent to at least three reputable suppliers, however it may be better to approach up to six suppliersbecause not all three suppliers may respond, so that at least three competitive quotations are received. Inthe case o f International Shopping, quotations should be solicited from at least three suppliers intwo different countries. Quotations will be opened and evaluated at the same time. Whenever possible goods o f similar nature, and ifneeded during same period, they should be grouped into packages o fUS$200,000 equivalent or more, so that they should be procured through ICB inorder to get value for money. Consultants'services andtraining: Consulting services requiredfor implementation ofthe program components, including studies, technical assistance, andthe supervision o f civil works, which require the recruitment o f consulting firms or individual consultants will be procured in accordance with the Bank's Guidelines for the Selectionand Employment o f Consultants by World Bank Borrowers. All Consulting services contracts (excluding assignments o f standard or routine nature, e.g. audits) above US$ 100,000 equivalent for firms will be awarded on the basis o f Quality and Cost-Based Selection (QCBS) method inaccordance with Part I1o f the 49  Guidelines. Shortlists for contracts costing less than US$ 200,000 equivalent may consist o f national firms only inaccordance with provision o f paragraph 2.7 o f the Guidelines provided that at least three qualified firms are available at competitive costs. However, ifforeign firms have expressed interest, they will not be excluded from consideration. Consulting services contracts o f standard or routine nature, e.g. audits, costing less than US$200,000 equivalent for firms will be awardedon basis of Least-Cost Selection (LCS) methodinaccordance with provision o f paragraphs 3.1 and 3.6 o f the Guidelines. Consulting services contracts below the threshold o f US$100,000 equivalent for firmsmaybe awarded onthe basis ofConsultants Qualifications (CQ) inaccordance with provision o f paragraphs 3.1 and 3.7 o f the Guidelines. Individual consultants will be selected inaccordance with Guidelines Part V. The selection o f UNagencies andNon Governmental Organizations (NGO) will be inaccordance with paragraphs 3.13 and 3.14 o f the Guidelinesand individual contract will be limitedto US$ 50,000 equivalent. Single Source Selectionmay be employed with prior approval o f the Association and will be in accordance with provision o f paragraphs 3.8 to 3.11o f the Guidelines. Simple consulting services may be awarded on basis o f Selection under a FixedBudget (SFB) method in accordance with provisions o f paragraph 3.1 and 3.5 o fthe Guidelines. Training Programsincluding workshops and study tours are geared toward buildingcapacity, information sessions and improving management skills. Training programs would be part o f the Project's Annual work plans and will be included inannual procurementplans. The annual training program (including proposed budget, agenda, participants, location o f training, and other relevant details) will be reviewedduringthe Joint Review. Prior Review Thresholds(Table B) All civil works contracts estimated to cost US$ 500,000 equivalent or more will be subject to IDA review inaccordance with the procedures inAppendix Io fthe Procurement Guidelines. All goods contracts: (a) estimated to cost US$200,000 equivalent or more; and (b) awarded under Directing Contracting (DC) method, will be subject to IDA review inaccordance with the procedures inAppendix Io f the Procurement Guidelines. Consultancy contracts with firms estimated to cost US$ 100,000 equivalent or more and consultancy contracts with individuals estimated to cost US$ 50,000 equivalent or more will be subject to IDA review inaccordance with the procedures inAppendix Io fthe Consultant Guidelines. Inaddition all consultancy contracts awarded under Single Source Selection (SSS) will be subject to IDA reviewinaccordance with the procedures inAppendix Io fthe Consultant Guidelines. Contracts which are not subject to prior reviewwill be selectively reviewedby the Bank during project implementation and will be governed by the procedures set forth inparagraph 4 o f Appendix Ito the relevant Guidelines. All documentationused for the procedures of contracting, recruitment o f consulting services, evaluation and award shall be retainedfor subsequent examination by auditors and IDA supervision missions. 50  Action Deadline Responsibility Six civil works consultants to provide hands on During program Borrower procurement and contract administration training to implementation district civil engineers Conduct procurement workshops/courses to M O H During program Borrower/IDA procurement staff involved inprocurement implementation Orientation workshops on the PPA, Local Government Withinsix months ofprogram BorrowerADA Regulations and Procurement Manual to councils implementation procurement staff and membersof local government tender boards. Conduct procurement workshops/courses to local Duringprogram Borrower/IDA government staff involved inprocurement process at all implementation levels. Finalize Detailedtwo years Procurement Plan By negotiations Borrower Prepare Internal Instructions articulating the PPA , Within one year of Borrower Regulations and Manual implementation Establishacceptable record keepingand filling systems 1Duringprogram Borrower implementation Frequency of procurement supervision missions: Onceevery six (6) months (including specialprocurementsupervisionfor post-review/audits). 51  Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method1 Expenditure Category Total Cost ICB NCB Other2 N.B.F. 1. Works 3.00 1.60 0.50 0.00 5.10 2. Goods 21.80 2.60 1.30 0.00 25.70 3. Services 0.00 0.00 16.40 0.00 16.40 4. Grants 0.00 0.00 4.50 0.00 4.50 5. Training and workshops 0.00 0.00 10.40 0.00 10.40 6. Operating costs 0.00 0.00 3.30 0.00 3.30 Total 24.80 4.20 36.00 0.00 65.00 l / Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. 21 Includes civil works and goods to be procuredthrough national shopping, consulting services, services of contractedstaff ofthe project management office, training, technical assistance services, and incremental operating costs relatedto (i) managingthe prqject, and (ii) re-lending project funds to local government units. Table B: Thresholds for Procurement Methods and Prior Review Expenditure Category Contract Value Procurement Contracts Subject to Threshold (US$) Method Prior Review (US$) 11.Works > 500,000 ICB All contracts +--- < 500,000 NCB Post review j 2. < 50,000 Quotation Post review Goods >200,000 ICBILIB All contracts <200,000 NCBILIB Post review. <30,000 NSIISIIAPSOIUN Agencies Post review All values DC All contracts 3. Consulting Services 1 Firms > 100,000 QCBSILCS All contracts < 100,000 CQ ILCSISFB Post review. All values sss All contracts I Individuals > 50,000 Individual All contracts < 50,000 Individual Post review All values sss All contracts 52  Table C: Allocation of Proceeds Expenditure Category Credit Amount in US$ Grant Amount in US$ million million FinancingPercentage Pooled funds 25.00 Such percentage o f expenditures financed pooled fund expenditures underthe Subprograms, as the Association may including civil works, determine for each Fiscal drugs, equipment, Year vehicles, training and associated materials, consultant services, operating costs and the CHF grants after FY04. Non-Pooled 4.00 90% o f local expenditures expenditures financed and 100% o f foreign under the Subprograms, expenditures including civil works, drugs, equipment, vehicles, training and associated materials, consultant services, operating costs (for FY03/04 MTEF only). Community Health 2.00 100% o f amounts FundMatching Grants disbursed for FY04 only Unallocated 34.00 Total Proiect Costs 40.00 25.00 All Disbursements and withdrawals will be subject to procedures detailed inthe World Bank Disbursement Handbook(1992 edition), the conditions o f the Development Financing Agreement(DFA) andthe procedures specified inthe DisbursementLetter. The proposed DFA Credit and Grant o f US$40.0 andUS$25.0 million respectively will be disbursedover four years with an expected Project Completion date o f June 30,2007 and a Closing Date o f December 31,2007. The proposed allocation o f Credit proceeds is shown inTable C Above. Use of statements of expenditures (SOEs): All applications to withdraw proceeds from the Credit account will be fully documented except for expenditures against contracts (a) with an estimated value o f US$ 500,000 each or less for works; (b) with an estimated value o f US$ 100,000 or less for consulting firms and goods; and (c) with an estimated value o f US$ 50,000 or less for individual consultants. Documentation supporting expenditures claimed against SOEs will be retained at the project and will be available for review as requested by IDA supervision missions and project auditors. Special Account (SA) To facilitate disbursemento f eligible expendituresfor works goods and services, GOT will open a Special Account ina commercial bank acceptable to IDA. The special account will be managed and administeredby MOH and will cover IDA'Sshare o f eligible expenditures. The 53  authorized allocation for the special account will be US$ 1.O million. Replenishment o f funds by IDA will be made uponproductionofevidence of satisfactory utilization ofthe advance, as reflected inthe SOE or infull documentation for payments above the SOE thresholds. Upon credit effectiveness or as needed, an amount o f US$500,000 (being 1/2 o f authorized allocation) will be deposited inthe Special Account. Subsequent deposits may be requested as needed. The special account i s intendedto be usedfor the nonpooled funds and CHF Grants for FY2004 only. To the extent possible, IDA'Sshare o f expendituresshould be paidthrough the special account, Replenishmentapplications should be submittedregularly, preferably monthly, after monthly bank statements are received and reconciled, with appropriate supporting documents for local and foreign expenditures as required. Only IDA'Sshare o f eligible expenditures will be paid through the special account. Pooled Funds Disbursementsfor pooled funds will be made semi annually via direct payment to the US Dollar Holding Account inthe Bank o f Tanzania, on the basis o f the Annual Work Program. 54  Annex 9: EconomicandFinancialAnalysis TANZANIA: HealthSector DevelopmentProgramPhaseI1 This Annex provides the economic and financial analyses o fPhase I1ofthe Tanzania Health Sector Development Program (HSDP). Boththe economic and financial analyses confirm the soundness o f moving towards Phase I1o f the program. The analyses also underscore the importance o f addressing emergingissues on sustainability and equity. Firstly, the rationale for the Program based on performance under PhaseIremains valid, (Le., strongjustification for government to improve budget sustainability and reducing budgetary distortion, reduce fragmentation o f donor support, and decentralize financing and management o f health services. Secondly, the economic analysis demonstrates the continuing cost-effectiveness o fthe chosen program approach (sector-wide, moving towards basket funding). Infact, there i s increasing global consensus that sector-wide approaches should be adopted as a standard for future assistance. Thirdly, the analysis highlightsthe likely benefits to be generated from Phase 11,but proposes a closer look at the likely incidence o f benefits from supported interventions, given continuing disparities inthe utilization o f essential health services across wealth quintiles. The financial analysis was made inthe context o fthe Medium-Term Expenditure Framework (MTEF)warrants support for moving towards PhaseI1ofthe program. First,a review o f Tanzania's budgetperformance under the first three years o f the MTEF and Phase Ishows strong achievements inresource allocationtowards preventive/promotive care, and decentralizing resources for health. These needto continue under Phase 11. Second, the financial analysis demonstrates the continued appropriateness o f "basket funding," based on local experiences gained, and generally positive performance garnered inthe first years o f its execution, where over 70 percent i s typically spent on preventive/promotive health. Third, the financial analysis confirms the continued government commitment to alternative financing sources, a key element inachieving financial sustainability inthe sector. However, PhaseI1will focus onthe weak fee waiver and exemption systems that could inhibitutilization o f services by the poor. EconomicAnalysis of PhaseI1 A. Review of ProgramRationale Some o f the Program's originaljustifications were to address four key sectoral constraints: the Government o f Tanzania's budgetunsustainability and distortion, fragmentation o f donor support, overcentralizedmanagement o f health services, and lack o f alternative extra-budgetary financing that can complement limitedbudget resources. A review o fthe project's performance inPhaseIreveals major achievements made ineachofthese areas. The work is by no means complete, and the continuing rationaleto focus on each o f these key areas remains justifiably strong. Rationalefor improving budget sustainability and reducing budgetary distortion: The key indicator for this area i s the integration o f health sector program into the MTEF, with at least 50% o f donor resources for the sector reflected init. The Joint HealthReviewinthe last week o f April 2003 provides documentationthat the health sector program ofwork has indeedbeen integrated into the MTEF, and that a majority (more than 50 percent) o f official development assistance inhealth i s now reflected inthe MTEF. For the first time, inFY03 the M O H and 55  PORALGjointly reviewedprogress inthe health sector within the context o f the Public ExpenditureReview (PER), the MTEF, andthe Poverty Reduction Strategy, thus constituting a step towards the full integration o f health sector planning, budgeting, monitoring, andreporting. As a reflection of budget sustainability, total health sector expendituresfrom bothgovernment and donors have grown substantially by an average o f 31.2 percent per year, from Tsh 53.2 billion inFY97/98 to Tsh 144.1 billioninFYO1/02 (Table 9-1). Most o f the increases were for the procurement o f essential drugs, supplies, and recurrent expenditures for preventive services. Significantly, the budget process has beenable to protect health spending from the erosion of inflation and an increasing population. Realper capita healthexpenditures grew significantly by 16.5 percent per year, more thantriple the 4.4 percent growth inreal per capita government spending. Per capita healthexpenditures currently stand at Tsh4,184 innominalterms (equivalent to US$4.77), or Tsh 1,993 in 1995 prices. As a result of these positivetrends, health expendituresas a proportion of GDP increased significantly from 1.1percent inFY97/98 to 1.4 percent inFYOO/Ol andto an estimated 1.8 percent inFYO1/02. Budgetary distortion i s beingreduced by a deliberate government effort to take account o f all foreign funded activities inorder to achieve budgetcomprehensiveness andto reduce "off- budget" health expenditures. "Off-budget" donor expenditures are notorious for distortingthe budget, as their recurrent cost implications are hiddenandrarely taken into account. "Off- budget" spendingalso tendnot to hewclosely to established budgetpriorities. Inhealth, althoughthe level of"off-budget" donor healthspendingcontinues to be large (an estimated Tsh 66.14 billion inFYO1/02), the annual rate of increase has slowed down since FY97/98 (11.7 percent per year), compared to the rates of growth inthe basket funds (71.8 percent per year inthe last two years of its operation) and inthe capital budget (118.2 percent per year). (See Table 9-2). The SWAPand MTEF processes have contributed to the increasing consolidation of foreign financing inthe health sector. 1Table 9-1: Trends inHealthExpenditures, FY97-98 to FYO1/02 Items IFY97198 FY98199 FY99/00 FYOO/Ol I I I 1FYO1/02 1Ave. YOgrowth 1 NominalGDP inTshbillion 4,703.5 5,571.6 6,432.9 I I7,267.1 8,186.3 14.9 Total governmentexpenditures (GE) in 677.3 819.0 939.2 1,039.2 1,285.3 17.5 Tsh billion Healthexpenditures(HE) inTshbillion 53.2 80.1 70.4 101.8 144.1 31.2 Per capitaGE inTsh, nominal 21,628 25,493 28,527 30,840 37,308 14.9 Per capita GE inTsh, real(1995 prices) 15,030 15,183 15,572 15,655 17,774 4.4 Per capitaHE inTsh, nominal 1,698 2,494 2,137 3,020 4,184 28.1 Per capitaHE inTsh, real(1995 prices) 1,180 1,485 1,167 1,533 1,993 16.5 Note: The table excludes off-budgetdonor expendituresas well as governmentextra-budgetaryresources(user fees, community health hndprepayments,andhealth insurance for civil servants). Sourcesof basic data: World Bank (2003); GOT AppropriationsAccounts; Africa DevelopmentIndicators. 56  Table 9-2: Trends inForeign Financing o f the Health Sector, FY97/98 to FYO1/02 Items IIFY97/98 FY98199 FY99100 FYOO/Ol FYO1102 Ave. 1 Actual IIActual II Actual 1IActual IIBudget 1Ia i x l HE % share of donor expenditures to off- 1 98.2 I 97.5 197.6 I 97.6 I100.0 I --- budget HE % share of donor expenditures to total in- 50.1 48.2 53.3 55.5 56.3 --- budget andoff-budget HE The 2003 Joint Review, however, raised concerns about the leveling off o f governmenthealth expenditures, noting that since the introduction o f basket funding, increases intotal health spendinghave come largely from the donors' basket funds. A large part o fthis problem can be traced to the government's inability to allocate enough resources for HIV/AIDS as it expected large resource infusion from the Global Fund(demonstrating the distorting effect o f externally earmarked funds on public expenditure). As external resources mostly for HIV/AIDS are expected to increase, fungibility between government and donor resources will continue to be a critical issue that the Program needs to address under Phase 11. Rationalefor reducingfiagmentation of donor support: The key indicator for this area i s the development and testing o f common disbursement(basket funding), reporting, monitoring and evaluation systems for use among cooperating partners and the government. Since FY99, the donor basket fund mechanism has been operational. As many as six donors are currently participating. The early problem o f underspendingthe basket funds (only 70% o f the Tsh 15.4 billionbudgeted inFYOl was spent) appear to have beensolved, as systems and staff were capacitated to utilize basket funds more expeditiously. Estimates for FY2001/02 indicate that pooled financing now accounts for 20.7 percent o f the recurrent budget. Rationalefor reducing centralization of management of health services: The key indicator in this area is the introductionin30% ofthe 114 districts o fdistrict-based healthplanning and management systems and financing through block grants linkedto outputs/outcomes and performance. Under Phase I, the government's decentralizationpolicy came into being, and following this, district healthplanning, financing, and management were introduced as planned inover 30 percent ofthe 114districts. However, althoughthis program benchmark has been reached, actual decentralizationo f resources to the districts has been uneven. The responsibility 57  for local staff hiringhas not beendelegated andthere was initial confusion about the role o f the Regional Secretariats inproviding technical and administrative support to the districts. As a result o f these shortcomings, central spendingon health continues to be substantial (54 percent o f total recurrent health expenditures inFYO1/02). Phase 11should aim to reduce this share further to accomplish the true intention o f fiscal decentralization, although some aims, such as authority over staff appointments are reliant on decisions outside o f the sector. Rationalefor strengthening alternative extra-budgetary resources: Tanzania made strong policy strides under Phase Ito generate additional resources for healthto complement its meager budgetary resources. It passedthe health insurance law for civil servants and launched the program in2000. It also officially adopted a national policy on community health funds leading to wider replication. The fee-based cost-sharing continued to be a well-established policy at all levels o f care. Thus, at a policy level, the government remains committed to the Program's rationale o f domestic resource mobilization through alternative financing mechanisms. However, as shown inthe FinancialAnalysis section, there remains critical implementation issues that need to be addressed under Phase 11. These include the sub-optimal number o f participants inthe CHFs, the decline inresources being generated under the cost sharing program, and actual or potential adverse equity impact of fees for health services. The equity impact o f cost-recovery programs i s particularly challenging since although there continues to be strong popular endorsement o f CHFs and the cost sharing program (Afro Barometer (2002) reports that 82 percent o f surveyedrespondents support user fees for healthto raise standards o f care, and a mere 16 percent want free care), there i s an equally strong concern about lack o f protection for the poor (e.g., Mubyazi, et al, 2000; Newbrander and Sacca, 1996). Cognizant o f this problem, the Joint Reviewhasproposed conducting a studyonhealthservice accessfor the poorest and the effectiveness of exemption and waiver mechanisms. O f particular concern are the "high-value'' health goods and services that vulnerable populations ought to use (e.g., insecticide-treated nets for malaria) but cannot because o f the initial highcost of their acquisition by poor households. A generalized price subsidy is not called for, since doing so provides negative incentives for production; the subsidy also tends to be captured more bythe better-off, as has beenshown inbenefit-incidence studies inAfrica (e.g., World Bank, 1995). Inthis regard, Tanzania has pioneered an innovative voucher program o f bednets for pregnant mothers under a social marketing program (Schellenberg, et al, 2001); funding for the voucher subsidy for a national scale-up o f the original pilot i s being supported by the Global Fund. This shows Tanzania's attempt to marry its resource-mobilization objectives with those of protection for the poor; it also shows that new infusion o f funds, such as those supported with Global Fundfinancing, neednot distort public-health priorities. B. Soundness of the ProgramApproach andProgramInterventions Recent global evaluations o f sector-wide approaches inthe health sector (e.g., Foster, Brown, and Conway, 2002; Foster, 2000; IHSD Ltd., 2001; World Bank, 2000; and World Bank, 2003) confirm the general soundness o f SWAps as a more cost-effective approach relative to existing alternative project mechanisms. SWAps address several public-finance problems engendered by stand-alone projects: the tendency o f many narrow vertical projects to balkanize a health system; the increasingmanagement burdenofmultiple donor projects for boththe recipient government 58  and participating donors; the fungibility o f donor vis-a-vis government resources; and the need for the government to set policy priorities rather than for donor projects to be usurpingthis role. SWAps also support and strengthen the MTEFprocess. Inthe case o f Tanzania, the SWAP program o f work is, ineffect, the centerpiece of the MTEF inthe health sector and the funding baskets (one central pool at MOH, and a district pool under PORALG) are well integrated into the government budgetingsystem. Although these benefits have not been quantified, it is clear from the Joint Review o fthe MTEF experience that the SWAp process inTanzania i s improving financial transparency, budget predictability, allocative efficiency, and program coherence. As a result o f these and similar positive SWAP outcomes, there i s a growing global consensus that sectorwide support should become the norm for donor funding (Foster, 2002). Phase I1will continue to fund priority preventive and promotive health services whose cost- effectiveness have been demonstrated globally. InTanzania, these "best buys" (e.g., child health, reproductive health, maternal health, and major infectious diseases such as HIV/AIDS and malaria) are being officially endorsed through the adoption o f an essential package o f health services whose recurrent costs the government and the SWAp partners have committed to support. Indeed, data from the use o f central basket funds reflect government's commitment to preventivehealth, with 71.2 percent o f FYOO/Ol spending going to preventive care. The use o f district basket fund i s also largely for first- and second-level care as no expenditure i s allowed for tertiary hospitals. C. ProjectBenefitsandBeneficiaries As is true of any sector-wide program design, the Program's benefits can be reckoned interms of (a) systems- and process-oriented benefits, e.g., better planning, organization, and management o f the health sector and its key players; and (b) household-oriented benefits, as reflected inbetter access and utilization o f health services and improved health status especially o f vulnerable groups. This analysis focuses on householdbenefits and the distribution o f these benefits across income or wealth quintiles. Equityinthe utilization of healthservices, however, remains a major problem. Available 1996 and 1999 data inTable 9-3 show that differentials inimmunization coverage betweenthe richest and the poorest households have not improved, and infact have worsened, as indicated by wideningricldpoor differences and ricWpoor ratios. Inequity is particularly pronouncedin delivery attendance by a medically trained persons. Slight improvements were recorded for services including medical treatment o f diarrhea and acute respiratory infection, use o f oral rehydration salts for children with diarrhea, and antenatal care for pregnant mothers. Table 9-3: Selected Health Service by Poorest and Richest Households, 1996 and 1999 59  renwl diarrheausingoralrehydrationtherapy Source: World Bank (Jan. 2003); Gwatkin, et a1(2000). Likewise, geographic differences continue to persist. The Joint Review notedthat recurrent spendinginhealth shows large and growing disparities across regions, andthe disparitiesare even more pronounced at the district level. The M O H i s aware o f these equity problems, and has developed a resource allocation formula that takes account o f population, geographic distance, and under-5 mortality. Phase I1will ensure that the newresource allocation formula i s implementedto achieve greater equity inper capita allocations across regions and districts, although reallocation will not be sufficient to resolve these inequities. Staff deployment, care- seeking behavior and provider attitudes also need to addressed. FinancialAnalvsis of Phase I1 A. The Medium-Term ExpenditureFrameworkUnderpinningthe Program A continuing thrust under PhaseI1is to increase financial prudence andmanagement inthe government's budgetary processes through the Medium Term Expenditure Framework (MTEF). P The MTEFwas introduced in 1999to Tanzania's budgetplanningprocess inorder to link policy, planning, and budgetingunder a three-year framework. A review o f the three-year experience shows the following (World Bank, 2003; World Bank, n.d.; Utz, 2003): P The MTEFhas improvedresource allocationfor priority sectors as definedinthe Poverty Reduction Strategy Paper. Expendituresfor social services as a proportion o f GDP increased from 3.5 percent inFY97 to 4.4 percent inFYOl and 4.2 percent inFY02 based on annualized expenditures for that fiscal year. P The MTEFhasparticularly benefitedthe healthsector. Since FY97/98, health expenditureshave grown at an annual average rate o f 31.2 percent, faster than the 17.5 percent growth inoverall government spending(See Table 9-4). This has allowed recurrent and capital health spendingto garner increasing shares o f the overall expenditure pie. Thus, the share o f health to total budgetary expenditures rose from 7.9 percent inFY97/98 to 9.8 percent inFYOO/Ol, and to an estimated 13.0 percent in FYO1/02. Interms ofallocative efficiency, the MTEFhas gradually raisedthe share o frecurrent health expenditures going to preventive and promotive care from 33.1 percent inFY97/98 to over 40 percent since FYOO/O1. The corresponding share o f hospital services has gone down as intended inthe program. The split betweenpersonnel emoluments andother charges is also inapositive direction, with a bigger share o f recurrent health expendituresbeing spent on other charges. The allocation betweenthese two items, however, needs to be monitored closely, giventhe dire circumstances that most health workers inAfrica are currently facing. 60  Fiscal decentralizationcontinues to be a major thrust under the MTEF and inthe health sector. The proportion o f recurrent health expenditures going to the regions and local governments increased from 44.5 percent inFY97/98 to 48.3 percent inFYOO/Ol andto an estimated 46.0 percent inFY01/02. However, decentralizingcapital spendinghas provento be a bigger challenge, as shown by non-increasing share o f investment expenditures going to regions and local governments. The MTEFhas also improved resource allocation inthe development budget. Development expenditures for the social sectors as a proportion o f GDP increased from 0.4 percent inFY98 to 0.8 percent inFYO1, and to 1.5 percent inFY02, based on annualized estimates for that fiscal year. The MTEFnow covers all ministriesand has become the unifying expenditureframework o f the broad Poverty Reduction Strategy Paper as well as each o fthe sectoral strategies. The Program's adherence to the MTEF process, therefore, i s expected to further enhance financial responsiveness and prudence inthe sector. Table 9-4: Performance under Tanzania's Medium-Term Expenditure Framework, FY97/98 to FYO1/02 Items FY97198 FY98199 FY99100 FYOOIO1 FYO1102 Actual Actual Actual Actual Budget Resource Mobilization YOoftotal health expenditures (HE) to GDP 1.1 1.4 1.1 1.4 1.8 YOof recurrent HEto recurrent GE 7.4 8.5 7.1 9.2 9.8 % of capital HEto capital GE 1.o 2.5 1.5 1.7 3.1 O hnftntal HEtn total GE 7.9 9.8 7.5 9.8 13.0 Note: The table excludes off-budget donor expenditures as well as government extra-budgetary resources (user fees, community health fundprepayments, and health insurance for civil servants). Sources o f basic data: World Bank (2003); GOT Appropriations Accounts; Africa Development Indicators. While the MTEFhas succeeded indramatically improving resource allocation favoring the social sectors, emerging issues and continuing challenges for the MTEF should be dealt with by the government and supported under Phase 11: ?.+ Budget executionproblems continue to cause lags and discrepancies incommitment and disbursement. The problem arises from a combination o f weak capacity, delays in counterpart funding, and the novelty o fthe pooled funding mechanism inthe social sectors. 61  The release o f funds through the IntegratedFinancialManagement System (IFMIS), a centralizedcomputerized systemintroduced a couple o f years ago, still results indelays. Inaddition, further decentralization offinancial resources continueto behampered by systems, management, and capacity problems. These issues are dealt with more extensively inthe Financial Management Analysis Annex. Historical andincremental budgeting continues to persist incertain areas, especially in the funding o f repairs and maintenance. The existing infrastructure network i s universally acknowledgedto be a patchwork and donors are concerned about the sustainability o f funding all its components. Yet, there i s strongjustification for making strategic upgrading, given the state o f infrastructure. The Joint Review proposes a wider consultation on the priority health infrastructure improvements needed to be undertaken. B. BasketFunding Basket funding was initiated by a group o f donors in 1999 and has since rapidly become an important financing mechanism for the government's recurrent budget. Actual expenditures from the basket funds reached Tsh 10.65 billion inFYOO, or about 12.4 percent o f total recurrent healthexpenditures inthe budget (See Table 9-2). By FYO1, the basket funds were already expected to total Tsh 22.6 billion, or 20.7 percent o f the total recurrent expenditures. The basket funds budgeted for FYO1/02 correspond roughly to US$0.75 per capita. The two baskets currently inplace finance earmarked transfers to the local councils to enhance the provision ofbasic services andto improve the quality oflocalhealth care (district basket); separate fundingi s set aside to support priority activities at the M O H (central basket). Available data show that out o f the Tsh 10.6 billion actually spent inFYOO/Ol,Tsh 7.5 billion (or 71.1 percent) were devoted to preventive services, and the rest were devoted to curative care (Tsh 2.05 billion or 19.3 percent), administration, and human resource development. Thus, use o f basket funds has reflected the partners' and government's priorities. For FY03/04, the pledged amounts for the basket funds are shown inTable 9-5. Table 9-5: Donor 5/2003 Statement o f Commitments for the Basket Funds, FY03/04 and FY04/05 Source: GOT and Donors' Side Agreement, Joint Review Basket funding continues to evolve. The following key issues have emerged and should be addressedunder Phase 11: P Transaction costs of administering the sector-wide programhaveto be reducedfurther. Towards this end, SWAp partners have agreed inprinciple to harmonize the guidelines 62  for comprehensive health planning, budgeting, reporting and procurement. A single audit > i s also proposed. The effects o f fungibility (government resources for key programs leveling off while donor funds are increasing) have to be minimized. This is being addressed inthe shift to the PRSC which will be contingent upongovernment allocationto the sector. Indeed, external financial commitments o f the SWAPpartners are beingmade contingent on such MTEF improvements. What requires further analysis and discussion i s the impact o fnew health initiatives and fundingmodalities (e.g., debt relief, the Global Fund, and the forthcoming Millennium Challenge Account o f the BushAdministration) on the SWAP process and on the MTEF. These large cash inflows could potentially distort what has beenachieved inPhaseIo fHSDP, andthus should be managed well under sound public- > finance principles. There are current rigidities inthe use o f basket funds at the local level. This arises from guidelines and procedures at the council level that place restrictions, or otherwise delay, the use o f basket funds. These local-council procedures should be reviewed, and made congruent with basket-donors' regulations on the use o f such funds. The funding of capital costs throughbasket-fundingmechanismhave to beplanned for carefully to avoid undue expansion o f the health network with its recurrent cost implications. The Joint Reviewhighlightedthe increasingneedto support capital costs, specifically, selective rehabilitation and equipmentreplacement. Itmight also be necessary to fund training inhuman resources inhealth, given the shortage inhealthworkers incertain areas. The Bank will help ensure that such investmentsconsider (a) the recurrent cost implications o f these investments, (b) the relationship o f each o f the investmentsto the provision o f priority essential health services, and (c) the geographic equity inthe distribution o f the investments. C. FiscalImpact of HSDP, Phase I1 Analysis o f the project's fiscal impact indicates the following: (a) N o incremental taxes are envisioned under HSDP Phase 11, but the decentralizationprogram, which i s proceeding apace, authorizes local governments to impose appropriate local taxes which may be used by devolved authorities for health services. N o data are available on the extent o f local taxation so far, and the use o f such revenues for health. Given the trend towards budgetary support for health at the local level, this i s an important area that should be looked into under Phase I1o f HSDP. (b) PhaseI1will continue to support wide-ranging cost-recovery programs. However, two o f these involve incremental subsidies. First, the government needs to make contributions, as employer o f civil servants, to the National Health Insurance Fund. Second, the government has committed to provide matching grants to the Community HealthFunds. As CHFs increase in numberand inmembership, the size ofthe matching grant will necessarily increase over time. However, government resources for NHIF contributions and CHF matching grants are expected to be affordable for the foreseeable future. D. Extra-Budgetary ResourceMobilization under HSDP To further enhance financial sustainability, HSDP Phase I1will continue to support a range o f financing schemes aimed at resource generation. These include the Cost Sharing Program, the Community Health Funds, andthe National HealthInsurance Fundfor civil servants. 63  User Fees and CostSharingProgram - Tanzania's Cost Sharing Program (CSP) gradually improved its performance from FY93 untilFY97. Duringthis period, total CSP revenues dramatically increased. Likewise, both the proportion o f CSP revenues to recurrent expenditures as well as nonsalary recurrent expenditures rose remarkably, peaking inFY97 at 5.8 percent and 13.4percent, respectively (See Table 9-6). Since then, however, the program's revenue performance has fallen. Recent estimates show that CSP revenues only account for 2.2 percent o f recurrent expenditures inhealth, and only 5.1 percent o f nonsalary recurrent expenditures in health. FY Cost SharingProgram % of CSP Revenuesto YOof CSP Revenuesto (CSP) Revenues TotalGOT Recurrent NonsalaryRecurrent (Tshmillions) Expenditures inHealth ExpendituresinHealth FY93194 260.9 0.9 1.9 FY94195 854.2 2.0 5.0 FY95/96 1,078.1 3.3 8.5 FY96197 1351.6 4.7 11.8 FY97198 2,435.2 5.8 13.4 FY98199 1,090.0 1.8 4.1 FY99100 1,500.0 2.6 7.7 FYOOIO1 1,860.0 2.2 5.1 based on original data contained inWorld Bank (2003). The flagging performance o fthe Cost Sharing Program is a concern. Falling revenues may arise from a number o f possibilities, including (a) deliberate relaxation o f the waiver and exemption policy, resultinginforegone revenues, (b) increasing leakage o f revenues through "corridor payments", a phenomenon already quantitatively estimated by Munga, Musau, and Ilomo (1998), as well as outright nonpayment by those who should pay, as documented by Newbrander and Sacca (1996), and (c) poor sustained supervision o f the program after World Bank Health and Nutrition Project closed. Concerns have also beenraised with respect to the appropriateness and effectiveness o f the current waiver and exemptionpolicy as a protection mechanism for the poor. Towards this end, Phase I1will support a study to analyze health service access to the poorest, and effectiveness o f cost-sharing exemption mechanisms. A still-underappreciated issue inTanzania is the lack o f facility incentivesto enforce the waiver and exemption policy appropriately. This arises because the value o f foregone waivers and exemptions are not paid back by the central government, i.e., any waiver or exemption i s "lost revenue" for the facility since it does not get reimbursed for the cost o f services provided to those beingwaived and exempted. Communityhealthfunds -Designed in 1995 and pre-tested inIgungaDistrict in 1996, Tanzania's community health funds (CHF) were rolled out to 9 more districts inthe late 1990s through the previous World Bank Health andNutrition Project andunder Phase Io f HSDP. The CHF Act o f 2001 established the national policy on the implementationo f these district-level, community-managed voluntary prepayment schemes for primary-care services for rural 64  households inthe informal sector. CHFs have now beenadopted ina total o f 45 varying degrees of implementation (Sendoro, et al, 2002). Although all schemes at present only utilize public health facilities, the long-term vision i s to include private providers as well. Beinga community program, each CHF sets its own prepayment contribution levels, user fee schedules for non- members, and exemptionrules for households that cannot pay the prepayment nor the user fee at point o f service. All revenues are collected at the community level, and a matching grant i s provided. Two evaluations have beendone, both quantitative (Chee, et al, 2002 on the Hanang CHF) and qualitative (Sendoro, et al, 2003), to assess the current status and prospects o f CHFs. On the positive side, ingeneral, existing CHFs have made significant progress inmeeting the main objectives o f the CHF Act. CHFs have mobilized significant levels o f resources, both from prepayments and user fees, from the community for health services (See Table 9-7). CHFs have also visibly improved the quality o fhealth services by easing drug and supply shortages inmany districts, providing solar power inunelectrifiedrural healthposts, rehabilitating buildings, and attracting qualified health staff to unstaffed facilities (Chee, et al, 2002). The decentralized structure o f CHFs has promoted community involvement, although not all leaders are equally active inall wards, and some ward health committees continue to be non-functional. The CHFs, however, continue to face daunting challenges. Membership remains low, ranging from 3 to 8 percent o f total households ineach district (Sendora, et al, 2003). Incertain districts, initial advocacy and community mobilization efforts resulted insteep increase inmembership (as high as 23 percent o ftotal households inHanang in 1998),but this has not been sustained and membershipdeclinedto 2 to 4 percent insubsequentyears (Chee, et al, 2002). This arises from a combination o f factors including inadequate advocacy, low level o f community awareness, underlyingpoor harvests that constrain households' ability to participate in CHFs, and continuing weakness o f financial management and accountability, which puts off potential members. Table 9-7: Total Collections o f Ten Community Health Funds, as o f April 2003 Source: Sendoro, J. et a1(April 2003). 65  Inaddition, CHFs engender equity issuesthat needto be dealt withmore purposively. Firstly, there are indications that after the introduction o f CHF fees in 1998, health service utilization declined through 2001. Informants notedthat the number o fpeople seeking care for minor illnesses have declined, some preferring to purchase medicines directly from pharmacies, or to self-treat. However, a significant part o f the decline was attributed to those who previously came to collect free drugs inthe centers for future use, or for selling at a profit (Chee, et al., 2002). Thus, the CHF/fee systemrationalizedcare better (improving efficiency), but it also hindered medically necessary utilization by those unable to pay the fee (worsening equity o f access). Secondly, most CHF memberscome from better-off households, andthey are more frequent users o f health services than non-members, e.g., 3,840 visits by members as opposed to 3,423 visits by non-members inHanangin2001 (Chee, et al, 2002). Thus, the benefits o fthe direct matching grant subsidy may be captured more by better-off households. Thirdly, CHF managers are concerned that the current CHF exemption policy is too broad and provides coverage to households that otherwise have the ability to pay (households inCHF communities either must pay the membership fee, pay fee for service or be given free membership). The broadness o f the exemption policy may explain poor membership (Le., significant free-loading), and thus reflects potential "leakage" o f currently uncollected CHF revenues. The three equity issues outlined above are interrelated and should be dealt with ina unifiedmanner under Phase I1o f HSDP. Social health insurance - Supported through Phase Io f the HSDP, the TanzaniaNational Health Insurance (NHI) FundLaw was enacted inDecember 1999 to provide coverage to civil servants. This was amended inDecember 2002 to include coverage o f employees o f local governments, the Tanzania Airports Authority, the Business Registration Licensing Authority, the office o fthe Government Chemist, and other parastatals and attached government offices. By April 2003, the NHIFalready had 167,780 membersand an estimated 727,962 beneficiaries. For FY03/04, membership is expected to top 230,000 and 1.2 million beneficiaries (NHIF, 2003). The program has accredited 3,4 15 health facilities (2,937 government and 478 missiodreligious facilities) since its inception inJuly 2001, and has paid annual costs o f treatments amounting to Tsh 1.2042 billion. Plans to make the program reachout to underserved areas and populations include the accreditation of more private hospitals and pharmacies inrural areas, the establishment o f zonal offices inDodoma, Tabora, Mbeya, Mtwara, and Moshi, and enrolling an estimated additional 85,000 memberso f local government workers. Despite lack o f national experience inlarge-scale social insurance, the NHIF appears to have been launched quite well, with difficulties limitedto the usual teething problems. Giventhe capacity constraints insocial insurance, over the medium-term, the NHIFBoard will need to deal with institutional strengthening issues. 66  REFERENCES ANNEX9 FOR 1. Afro Barometer (2002). Key FindingsAbout Public Opinion inAfrica. BriefingPaper No. 1. 2. Atim, Chris, Steven Grey, Patrick Apoya, Sylvia Anie, andMoses Aikins (2001). A Survey of Health Financing Schemes inGhana. Bethesda, Maryland, U.S.A.: Abt Associates. Partnership for HealthReformplusProject. 3. Chee, Grace, KimberlySmith, andAdolph Kapinga (2002). Assessment of the Community Health FundinHanang District, Tanzania. Bethesda, Maryland, U.S.A.:Abt Associates. Partnershipsfor HealthReform Plus Project. 4. Ilomo, Peter (1999). Tanzania Cost Sharing Programme: Performance and Prospects. Ministry o f Health, Cost Sharing ImplementationTeam. 5. Foster, Mick, Adrienne Brown, and Tim Conway (2002). Sector-Wide Approaches for Health Development: A Review of Experience. GlobalProgram on Evidencefor Health Policy. Geneva: World Health Organization. 6. Foster, Mick (2000). New Approaches to Development Cooperation: What Can We Learn from Experiencewith ImplementingSector-Wide Approaches? London, U.K.: OverseasDevelopment Institute. 7. Gwatkin, Davidson (May 2000). Socioeconomic DifferencesinHNP. World Bank. 8: IHSD Ltd. (2001). Sector-Wide Approaches for Health in a Changing Environment. Inter-AgencyGroup on Sector-wide Approaches for HealthDevelopment. 9. Mubyazi, G.M., J.J. Massaga, K.J. Njunwa, K.Y. Mdira, F.M. Salum, M.S. Alilio, and M.L. Kamugisha (2000). Health FinancingPolicy Reform inTanzania: Payment Mechanisms for Poor and Vulnerable Groups. Bethesda, Maryland, U.S.A.:Abt Associates. Partnership for HealthReformPlus Project. 10 Musau, Stephen, Samuel Munga, and Peter Ilomo (1998). SettingRevenue Targets for the Cost Sharing Programme inPublic Hospitals. Ministry of Health. Study fundedby BASICS Project. 11.NationalHealthInsuranceFund(NHIF) (2003). Implementation Report 2002/03. 12.Newbrander, William and StephenSacca (1996). Cost Sharing and Access to HealthCare for the Poor: Equity Experiences inTanzania. Boston, Massachusetts: Management Sciences for Health. Study fundedunder BASICS Project. 13. Sendoro, J.E., Ludovick Nduhiye, G. M.P. Mwembezi (2002). Report of Community Health FundEvaluation Workshop. Mwanza, 22-27 July 2002 and Morogoro, 4-9 August 2002. 14. Sendoro, J., LudovickNduhiye, and G.M.P. Mwembezi(2003). Community HealthFund Scheme: Implementation Status, 1996-2003. Ministry o f Health. 15. UnitedRepublic of Tanzania (2003). Tanzania Joint Health Review. Main Report. May 6. 16. Utz, Robert (n.d.). The Tanzanian MTEF: LinkingMTEFs to PRSP. World Bank slide presentation. 17. World Bank (1995). Poverty Analysis and the Incidence of Public Expenditures on Education. 18. World Bank (January 2003). Tanzania Country Status Report on Health and Poverty. Africa Region HumanDevelopment. 19. World Bank (n.d.). The Tanzania Experience of MTEFPlanning. Slide presentation. 67  Annex 10: SafeguardPolicyIssues TANZANIA: HealthSector DevelopmentProgramPhaseI1 EnvironmentalAssessment (OP/BP 4.01): As healthservices delivered under the Program will generate medical waste, OP/BP 4.01 is triggered. To mitigate potential harm caused by improper disposal o f medical waste, Health Care Waste Guidelines and a Management Plan (March 2003) have been prepared underthe HIV/AIDSproject, andwill be implementedunder the proposed project. The Health Care Waste Management Plan was disclosed inTanzania and at the Bank's Infoshop prior to appraisal. The Plan focuses on legislation and regulation; standardizing practices; collection, storage and disposal; capacity and management. Implementationo fthe Waste Management Plan does not anticipate any new construction or acquisition o f land. Guidelines on incinerators and waste pits imply adaptations to or replacement of existingfacilities that occupy existing sites on facility grounds. Insecticides are employed by the Ministryo f Health to treat bednets. The Malaria Control Program ensures that WHO guidelines regarding handling and disposal are followed. InvoluntaryResettlement(OP/BP 4.12): No new construction nor acquisition o flandis supported under Phase 11. Ifthis were to change duringthe course o fthe Project, OP/BP 4.12 would be triggered. 68  Annex 11: ProjectPreparationand Supervision TANZANIA: HealthSector DevelopmentProgramPhaseI1 Planned Actual PCNreview N/A N / A Initial PID to PIC October 1,2003 Initial ISDS to PIC October 1,2003 Appraisal October 27,2003 October 27,2003 Negotiations November 10-12,2003 November 10-12,2003 Board/RVP approval December 16,2003 Planned date of effectiveness January 10,2004 Planned date of mid-termreview NIA Planned closing date December 31.2007 Key institutions responsible for preparationof the project: Ministryof Health Ministry of Regional Administration and Local Government Bank staff and consultantswho worked onthe project included: Name Title Unit Julie McLaughlin Sr. Health Specialist AFTHl EmmanuelMalangalila Sr. Health Specialist AFTHl Wacuka Ikua Operations Officer AFTHl Oscar Picazo Sr. HealthEconomist AFTHD Christoph Kurowski YP - HumanResources for Health AFTHD Meera Shekar Sr. NutritionSpecialist AFTHD Chiyo Kanda Sr. Economist AFTHl (now, OPCIL) JonathanNyamukapa Financial Management Specialist AFTFM DonaldMneney Procurement Analyst AFTPC Mercy Sabai Senior Financial Management Specialist AFTFM RogatiKayani Lead Procurement Specialist AFTPC Muthoni Kaniaru Counsel LEGAF Mary Green ProgramAssistant AFHTl EvelyneKapya Program Assistant AFC04 Bank funds expendedto date on project preparation: 1. Bank resources: $38,000 2. Trust funds: $0 3. Total: $38,000 EstimatedApproval and Supervision costs: 1. Remaining costs to approval: $5,000 2. Estimatedannual supervision cost: $150,000 69  Annex 12: Documentsin the Project File TANZANIA: HealthSector DevelopmentProgramPhaseI1 > Project Appraisal Documentfor the First Phase of the Health Sector Development Program, May 10,2000 (Report No. 20337-TA) 9 TanzaniaHealthSector Development: StatementofDevelopment Policy, February25,2000 from Peter J. Ngumbullu, Permanent Secretary, Ministry of Finance, UnitedRepublic of > Tanzaniato James D. Wolfensohn, President, World Bank. Second Health Sector Strategic Plan (HSSP) July 2003-June 2006: Reforms towards delivering quality health services and client satisfaction, Final Draft, Ministry of Health, > Tanzania, April 2003 FinalTanzania Joint HealthReview Report The UnitedRepublic of Tanzania, Ministryof Health, 28- 30 April 2003 9 Annexes to theaboveReport:Annex 5: Summaryoftechnical report andrecommendations, Annex 6: Performanceindicators update, Annex 7: Milestones report 2002/03, Annex 8: PER Updatesummary, Annex 9: MTEF summary, Annex 11: Groupfeedback on HSSP, Annex > 12: Plan for the development of the private health sector Draft Country Status Reportfor Health January 2003 World Bank 9 Technical ReviewofHealthServiceDeliveryatDistrictLevel, March, 2003 9 FY03 HealthSectorExpenditureReview, PreparedbytheMOHPERTask Team, February 2003 9 NationalHealthInsuranceFund(NHIF) (2003). ImplementationReport2002/03, 9 Community HealthFundScheme: Implementation Status, 1996-2003. MinistryofHealth. > Sendoro, J., Ludovick Nduhiye, and G.M.P. Mwembezi (2003). UnitedRepublicof Tanzania(2003). TanzaniaJoint HealthReview. MainReport. May 6. 9 Indicators for PerformanceAssessment inthe context ofthe TanzaniaPoverty Reduction > Strategy, February, 2003 NationalHealth InsuranceFundand Community HealthFundLinkage to Accredited Drug Dispensing Outlets: Report Summary, A.D. Kiwara, Institute of Development Studies, > MuhimbiliUniversityCollege O f HealthSciences, March2003 PORALG, Review of the Councils HealthBasket by Price Waterhouse Coopers, Draft report, February 2003 9 Qualitative Evaluationofthe Community HealthFund(CHF) inIgungaDistrict, Tanzania, > 1999. >November 10,2003 Procurement Plan November 7, 2003 Letter to the World Bank from the Acting PermanentSecretary ofthe Ministry o f Health regarding government commitment to improve procurement record keeping. 70  Annex 13: Statementof Loansand Credits TANZANIA: HealthSector DevelopmentProgramPhaseI1 Differencebetween expected and actual Original Amount inUS$Millions disbursements ProjectID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm.Rev'd PO71014 2004 HIV/AIDS 0.00 0.00 0.00 0.00 0.00 71.82 0.00 0.00 PO67103 2003 Partic. Agr. Dev. and EmpowermentProj. 0.00 56.58 0.00 0.00 0.00 58.18 0.00 0.00 PO74072 2003 TZ PRSC1 0.00 100.00 0.00 0.00 0.00 135.13 0.00 0.00 PO59073 2003 DARWATER SUP & SANITATION 0.00 61.50 0.00 0.00 0.00 63.27 0.00 0.00 PO71012 2002 PrimaryEducation DevelopmentProgram 0.00 150.00 O"O0 0.00 0.00 55.65 -5.96 0.00 PO47762 2002 RURAL WATER SUPPLY 0.00 26.00 0.00 0.00 0.00 27.34 2.96 0.00 PO58706 2002 ForestConservationand Management 0.00 31.10 0.00 0.00 0.00 32.81 3.46 0.00 PO02797 2002 TZ SONGO SONGO GAS DEV. & 0.00 183.00 0.00 0.00 0.00 167.81 129.93 0.00 POWER GEN. PO73397 2002 Lower KihansiEnvironmental 0.00 6.30 0.00 0.00 0.00 5.78 1.64 0.00 Management P069982 2001 Regional Trade Fac.Proj. -Tanzania 0.00 15.00 0.00 0.00 0.00 11.88 3.60 0.00 PO65372 2001 SOCIAL ACTION FUND PROJECT 0.00 60.00 0.00 0.00 0.00 24.09 -5.44 0.00 PO60833 2000 PUBLIC SERV REF PROG 0.00 41.20 0.00 0.00 0.00 30.72 -10.67 0.00 PO58627 2000 HealthSector DevelopmentProgram 0.00 22.00 0.00 0.00 0.00 3.67 -4.80 0.00 PO57187 2000 FIDP I1 0.00 27.50 0.00 0.00 0.00 15.67 15.18 9.06 PO02822 2000 TANZANIA PSAC I 0.00 190.00 0.00 0.00 0.00 42.25 -15 1.20 0.00 PO49838 2000 PRIVATIZATION 0.00 45.90 0.00 0.00 0.00 31.44 22.94 0.00 PO50441 2000 RURAL& MICRO FINSVC 0.00 2.00 0.00 0.00 0.00 1.05 1.01 0.44 PO47761 1999 TAX ADMINISTRATION 0.00 40.00 0.00 0.00 0.00 24.61 21.58 0.00 PO02804 1998 AGRIC RESEARCH 0.00 21.80 0.00 0.00 0.00 3.50 3.99 0.00 PO02789 1998 HUMANRESOURCEDEV 1 0.00 20.90 0.00 0.00 0.00 1.64 0.27 0.00 PO38570 1997 TZ:RIVER BASINMGMSMAL 0.00 26.30 0.00 0.00 0.00 3.39 5.31 0.00 PO46837 1997 LAKE VICTORIA ENV. 0.00 10.10 0.00 0.00 0.00 3.20 -1.48 0.00 PO02753 1997 NAT EXT PROJP H I 0.00 31.10 0.00 0.00 0.00 1.96 4.36 -2.13 PO02758 1996 URBANSECTORREHAB 0.00 105.00 0.00 0.00 0.00 15.49 20.3 1 0.00 PO02770 1994 TZ ROADS I1 0.00 170.20 0.00 0.00 63.53 34.14 104.00 33.53 Total: 0.00 1,443.48 0.00 0.00 63.53 866.49 160.99 40.90 71  TANZANIA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2001 AEF 2000 Indust 1.60 0.00 0.00 0.00 1.60 0.00 0.00 0.00 1996199 AEF A&K Tanzania 0.08 0.00 0.00 0.00 0.08 0.00 0.00 0.00 1997 AEF Aquva Ginner 0.68 0.00 0.00 0.00 0.68 0.00 0.00 0.00 1998 AEF Blue Bay 1.29 0.00 0.00 0.00 1.29 0.00 0.00 0.00 2001 AEF BoundaryHi1 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 1996 AEF Contiflora 0.35 0.00 0.00 0.00 0.35 0.00 0.00 0.00 1998 AEF MajiMasafi 0.22 0.00 0.00 0.00 0.22 0.00 0.00 0.00 1996 AEF Milcafe 0.18 0.00 0.00 0.00 0.18 0.00 0.00 0.00 1994 AEF Moshi Lthr 0.00 0.19 0.00 0.00 0.00 0.19 0.00 0.00 2000 AEF Zan Safari 0.70 0.00 0.00 0.00 0.70 0.00 0.00 0.00 2002 Exim Bank 3.50 0.00 0.00 0.00 1.oo 0.00 0.00 0.00 1996 IHP 0.59 0.60 0.00 0.00 0.59 0.60 0.00 0.00 2000 IOH 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00 2000 NBC 0.00 10.00 0.00 0.00 0.00 3.44 0.00 0.00 1993 TPS (Tanzania) 4.81 0.87 1.04 0.00 4.81 0.87 1.04 0.00 1991197 TPS Zanzibar 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 1994195 TanzaniaBrewery 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Totalportfilio: 16.70 11.69 1.04 0.00 14.20 5.13 1.04 0.00 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommittment: 0.00 0.00 0.00 0.00 72  Annex 14: Country at a Glance TANZANIA: HealthSector DevelopmentProgramPhaseI1 Sub- POVERTY and S O C I A L Saharan Low- Tanzania Africa income Development diamond` ~ 2001 Population, mid-year (miiiions) 34.5 674 2,511 I GNi percapita (Atlas method, US$) 270 470 430 Life expectancy GNI (Atlas method, US$ biiiions) 9.4 317 1,069 I I T Average annual growth, 1995-01 +++ 1 Population (%) 2.5 2.5 1.9 I Laborforce (%) 2.5 2.6 2.3 GNI /I"* Gross primary M o s t recent estimate (latest year available, 1995-01) 1capita **%y enrollment Poverty (% of population beiownationaipo vertyiine) 35 Urban population (%of total population) 29 32 31 Life expectancyat birth (years) 44 47 59 infant mortality (per 1000live births) 93 91 76 Child malnutrition (360 fchiidren under5) 29 Access to imDrOVedwater source Access to an improvedwater source (%ofpopuiafion) 54 55 76 iiliteracy(%ofpopuiationage 159 24 37 37 Gross primary enroilment (%of scho oi-age population) 65 78 96 1 - --Tanzania Male 65 85 K13 Low-incomegmup Female 65 72 66 ~ KEY ECONOMIC RATIOS and LONG-TERM T R E N D S 1981 1991 2000 2001 1E c o n o m i c ratios. GDP (US$ billions) 5.5 5.0 9.1 9.3 Gross domestic investmentlGD P .. 26.3 V.6 15.8 Exports of goods and sewices1GDP 14.0 Kl.3 14.6 15.9 Trade Gross domestic savingslGDP 23.5 3.0 9.2 7.O Gross national savingslGDP 22.7 3.9 8.5 6.7 Current account balancelGDP 0.0 -8.5 -9.1 -9.2 Interest paymentslGDP 0.9 1.1 0.5 1.1 Total debt/GDP 0.0 232.3 81.9 66.2 Total debt servicelexports 31.2 38.7 14.2 21.1 Present value of debt/GDP 28.9 43.2 I 1 Present value of debtlexports 189.1 `07.0 I Indebtedness 1981-91 1991-01 2000 2001 2001-05 (average annualgrowth) GDP .. 3.4 5.2 5.6 5.8 ,--- Tanzania GDP percapita .. 0.6 3.0 2.9 3.6 1 - Lowincome gmuo e STRUCTURE o f the E C O N O M Y 1981 1991 2000 2001 Growth o f investment and G D P (Oh) (%of GDP) Agriculture 45.4 46.1 45.0 44.8 industry 13.2 8.9 15.7 15.8 Manufacturing Kl.6 9.0 7.5 7.4 Services 38.3 35.0 39.2 39.4 Private consumption 73.8 76.1 84.3 83.4 General government consumption P.7 18.9 6.5 9.6 Imports of goods and sewices 24.4 33.6 23.1 24.8 v---GDI -GDP I 1981-91 1991-01 2000 2001 Growth o f exports and imports (%) (average annuaigrowth) Agriculture .. 3.4 3.4 5.4 6o T industry 4.1 7.3 6.5 Manufacturing .. 3.4 4.8 5.0 Services 3.2 6.0 5.5 Private consumption 2.4 -0.9 3.1 General government consumption .... 3.6 5.0 6.6 Gross domestic investment .. -0.9 7.5 5.8 imports of goods and services 1.3 0.1 8.1 I -,--Exports -inports I 73  Tanzania PRICES and G O V E R N M E N T FINANCE 1981 1991 2000 2001 1 D o m e s t i c prices Inflation (56) (%change) Consumer prices 25.6 28.7 5.9 5.2 Implicit GDP deflator 28.1 7.4 6.7 Government finance (%of GDP, includes current grants) Current revenue 19.2 12.3 X3.6 11.4 96 97 98 99 00 Current budget balance -3.3 -0.2 -0.5 -0.7 Overall surplus/deficit -13.7 -1.7 -5.4 -4.2 m x _ x GOPdeflator -CPI T R A D E I 1981 1991 2000 2001 (US$ millions) Export and import levels (US$ mill.) Total exports (fob) 562 394 663 772 Coffee 165 77 84 57 Cotton 78 63 38 33 Manufactures 60 70 34 56 Total imports (cif) 1,111 1,276 1,592 1,726 Food X34 32 176 169 Fuel and energy 261 189 95 x)6 Capital goods 563 579 638 755 Export price index(895=W0) 103 75 130 136 95 96 97 98 99 00 Import price index(895=WO) 93 96 90 x)O I Exports imports Terms of trade (895=WO) la 77 143 136 B A L A N C E of P A Y M E N T S 1981 1991 2000 2001 (US$ millions) 1 Current account balance to G D P (%) Exports of goods and services 572 529 1,330 1.487 0 Imports of goods and services 1,192 1,569 2,094 2.316 Resource balance -619 -1,040 -765 -829 I -5 Net income 0 -185 -83 -44 -10 Net current transfers 5x) 408 18 15 (Ij Current account balance -1X3 -818 -830 -858 Financing items (net) 94 825 1.179 1,058 '-20 Changes in net reserves 16 -8 -348 -201 -25 Memo: Reserves including gold (US$ miiliOnS) 209 974 1.157 Conversion rate (DEC,local/US$) 8.2 219.2 800.4 876.3 E X T E R N A L D E B T and RESOURCE FLOWS 1981 1991 2000 2001 I (US$ millions) C o m p o s i t i o n of 2001 debt (US$ mill.) Total debt outstanding and disbursed 5,822 6,558 7,440 6,185 IBRD 210 208 11 8 IDA 319 1,434 2,593 2,568 Total debt sewice 179 207 198 331 iBRD 23 56 5 4 IDA 3 n 52 57 Composition of net resourceflows Official grants 67 685 709 Official creditors 524 170 111 a5 Private creditors 59 -9 Foreign direct investment 193 203 Portfolio equity D:5 C:341 World Bank program Commitments 91 334 329 360 1 A - IBRD E Bilateral Disbursements 98 181 131 75 B IDA - D other mltilateral - F Private Principalrepayments 8 43 37 40 C-IMF G Short-term --- 74  MAP SECTION