FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT

Transcription

1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD2201 Public Disclosure Authorized Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR7.4 MILLION (US$10 MILLION EQUIVALENT) IN CRISIS RESPONSE WINDOW RESOURCES TO THE REPUBLIC OF MOZAMBIQUE FOR A SOCIAL PROTECTION PROJECT February 27, 2017 Public Disclosure Authorized Social Protection & Labor Global Practice Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank s policy on Access to Information.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2017) Currency Unit = Mozambican Metical (MZN) MZN = US$1 US$ = SDR1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AF ASA CAS CCGC CERC CRW CTGC DFID DO ENSSB ESMF FEWSNET FM GoM GRS IDA INAS INGC MASA MGCAS MZN NGOs PAD PASD PASP PDO PIU PSSAS PSSB RPF RSR-TF SETSAN UNICEF WB WFP Additional Financing Advisory Services Analytics Country Assistance Strategy Coordinating Council for Disaster Management Contingent Emergency Response Component Crisis Response Window Technical Council for Disaster Management Department for International Development UK Development Objective Estratégia Nacional de Segurança Social Básica Environmental and Social Management Framework Famine Early Warning Systems Network Financial Management Government of Mozambique Grievance Redress Service International Development Association National Institute of Social Action National Institute for Disaster Management Ministry of Agriculture and Food Security Ministry of Gender, Children and Social Action Mozambique Metical Non-Governmental Organizations Project Appraisal Document Direct Social Support Program Productive Social Action Program Project Development Objective Project Implementation Unit Program of Social Action Services Basic Social Subsidy Program Resettlement Policy Framework Rapid Social Response Trust Fund Technical Secretariat for Food Security and Nutrition United Nations Children's Fund The World Bank World Food Program 2

3 Regional Vice President: Country Director: Senior Global Practice Director: Acting Practice Manager: Task Team Leader: Makhtar Diop Mark Lundell Michal Rutkowski Jamele Rigolini Eric Zapatero 3

4 MOZAMBIQUE SOCIAL PROTECTION PROJECT ADDITIONAL FINANCING (P161351) Table of Contents Additional Financing Data Sheet... 5 I. Introduction... 8 II. Background and Rationale for Additional Financing in the amount of US$10 million... 9 III. Proposed Changes IV. World Bank Grievance Redress Table of Annexes ANNEX I: RESULTS FRAMEWORK ANNEX II: DETAILED DESCRIPTION OF MODIFIED OR NEW PROJECT ACTIVITIES ANNEX III: REVISED ESTIMATE OF PROJECT COSTS ANNEX IV: SIMULATED IMPACTS OF ADDITIONAL FINANCING (AF) AND RESTRUCTURING

5 Mozambique Social Protection Project - Additional Financing ( P ) AFRICA GSP01 Basic Information Parent Parent Project ID: P Original EA Category: B - Partial Assessment Current Closing Date: Project ID: 30-Jun-2018 Basic Information Additional Financing (AF) P Additional Financing Type (from AUS): Restructuring, Scale Up Regional Vice President: Makhtar Diop Proposed EA Category: B-Partial Assessment Country Director: Senior Global Practice Director: Practice Manager/Manager: Team Leader(s): Mark R. Lundell Expected Effectiveness Date: 15-Mar-2017 Michal J. Rutkowski Expected Closing Date: 31-Dec-2020 Jamele Rigolini Report No: PAD2201 Eric Zapatero Larrio Borrower Organization Name Contact Title Telephone Ministry of Gender, Children and Social Action Danilo Momade Permanent Secretary danilomomadebay@g mail.com Project Financing Data - Parent ( MZ-Social Protection project-p ) (in USD Million) Key Dates Project Ln/Cr/TF Status P IDA Effecti ve Approval Date Signing Date Effectiveness Date Original Closing Date 28-Mar Apr Oct Jun-2018 Revised Closing Date 30-Jun-2018 Disbursements Project Ln/Cr/TF Status Currency Original Revised Cancelled Disburse d P IDA Effecti ve Undisbu rsed % Disburse d USD

6 Project Financing Data - Additional Financing Social Protection Project - Additional Financing ( P )(in USD Million) [ ] Loan [ ] Grant [ ] IDA Grant [X] Credit [ ] Guarantee [ ] Other Total Project Cost: Total Bank Financing: Financing Gap: 0.00 Financing Source Additional Financing (AF) Amount International Development Association (IDA) 0.00 IDA Credit from CRW Total Policy Waivers Does the project depart from the CAS in content or in other significant respects? Explanation No Does the project require any policy waiver(s)? Explanation No Bank Staff Name Role Title Specialization Unit Eric Zapatero Larrio Antonio L. Chamuco Elvis Teodoro Bernado Langa Team Leader (ADM Responsible) Procurement Specialist (ADM Responsible) Financial Management Specialist Sr Social Protection Specialist Senior Procurement Specialist Sr Financial Management Specialist 6 GSP07 GGO07 GGO26 José C. Janeiro Team Member Sr Finance Officer WFALA Mariana Margarita Montiel Alfredo Ricardo Zunguze Counsel Senior Counsel LEGAM Team Member Consultant Environmental Safeguards Specialist Andrea Vermehren Team Member Lead Social Protection Specialist GEN01 GSP01

7 Eden Gabriel Vieira Dava Nilsa Ricardina Joao Come Team Member Consultant Social Safeguards Specialist GSU07 Team Member Program Assistant AFCS2 Institutional Data Parent ( MZ-Social Protection project-p ) Practice Area (Lead) Social Protection & Labor Contributing Practice Areas Additional Financing Social Protection Project - Additional Financing ( P ) Practice Area (Lead) Social Protection & Labor Contributing Practice Areas Consultants will be required Consultants (Will be disclosed in the Monthly Operational Summary) 7

8 1. This Project Paper seeks the approval of the Executive Directors to provide an Additional Financing (AF) in an amount of US$10 million equivalent to the Republic of Mozambique for the Social Protection Project (P MZ), to be financed under the IDA Crisis Response Window The proposed additional credit would address the urgent needs of the population in the South of the country suffering from a prolonged drought, exacerbated by the El Niño phenomenon. To this end, the AF would provide cash transfers to 20,000 households over a 12-month period, as well as the necessary funding for communication, monitoring and project management. 3. Financing for this AF meets all the criteria for Crisis Response Window (CRW) financing as it is triggered by an exceptional catastrophic event affecting a large number of extremely poor people. Given the dire situation, the Government of Mozambique (GoM) declared a red alert 2 in the most drought-affected provinces (Tete, Sofala, Gaza, Manica, Inhambane and Maputo) aiming to scale up the drought response, and calling for urgent international assistance. The red alert was called after a rigorous impact assessment undertaken by United Nations (UN) agencies and validated by the GoM and Development Partners. The proposed AF is being processed under condensed procedures provided for by OP 10.00, paragraph 12: Projects in Situation of Urgent Need of Assistance and Capacity Constraints, due to the drought emergency. 4. In addition to the AF, and using existing project funds, the Social Protection Project will be restructured. The restructuring will entail: a. Expanding existing labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis. b. Revising the results framework indicators. c. Extending the closing date to enable a proper implementation of all Project activities including the AF. 5. The Project Development Objective (PDO) of the original Social Protection Project, which is to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system, would be maintained. The original key performance indicators will be maintained with some targets adjusted and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring. The project s original two components remain unchanged, and a third component will be added to accommodate the emergency financing. Financial Management (FM) and procurement arrangements will be adjusted to reflect the additional activities. An extension of the closing date of the original project to December 31, 2020 will be required. 1 Management informed the Executive Directors of its intention to allocate an indicative amount of USD30 million equivalent to support Mozambique in response to the impact of the drought caused by El Niño at a technical briefing on October 12, See the note entitled "IDA Crisis Response Window Support for Lesotho, Madagascar, Malawi, and Mozambique for an El Niño Drought Response" dated October 6, 2016 for additional information. 2 The Mozambique Government on April 12, 2016 declared a 90 days red alert period, that was later extended to March 2017, because of the severe drought affecting the southern and central regions of the country leaving about 1.5 million people at severe risk of food insecurity. 8

9 6. Mozambique is a low-income country affected by an important economic crisis. Despite rapid economic growth in the past two decades, in 2016, Mozambique s economic performance has decelerated to its slowest pace since 2009 and over half of Mozambique s 26 million population ( ) today is still poor and highly vulnerable. While poverty incidence has decreased from 68 percent in 1997 to 54 percent in 2003, more than half of Mozambicans still lived in poverty in Although, poverty is predominantly rural (57 percent), an additional 3.2 million poor people live in urban areas 5. Mozambique is currently facing a major financial crisis caused by the continued decline in commodity prices for key Mozambican exports, rising debt levels and the devaluation of the Mozambican currency, which is having a direct impact on poverty, food security and vulnerability of its population. Thus, poverty levels in the country are likely to increase. El Niño emergency 7. In addition to its economic crisis, Mozambique is currently facing a severe drought in the southern region and parts of the central region. The El Niño climatic event has caused the worst drought in 35 years in Southern Africa, and Mozambique has been among the most affected countries. So far, El Niño has produced two different impacts in Mozambique: low rainfall (drought) in the southern and central regions, and excessive rainfall (floods) in the northern region. The lack of rainfall has resulted in a severe shortage of water sources, including drying up of wells as the groundwater table lowers. 8. An estimated 1.5 million people are in need of emergency assistance in seven provinces. According to the Food Security and Nutritional Assessment 6 of the Technical Secretariat for Food Security and Nutrition (SETSAN), released in March 2016, the population affected in Maputo, Gaza, Inhambane, Tete, Manica, Sofala and Zambezia provinces includes more than 5.8 percent of the Mozambican population. The assessment showed a severe deterioration of food security since the previous assessment conducted in November , particularly in rural areas where a very high share of the population relies on farming or livestock for their livelihoods. The situation will put around 200,000 children at risk of severe malnutrition over the next 12 months Because of El Niño, cereal production in Mozambique has decreased by 11 percent compared to the last five-year average 9. The previous year s flooding (2014/15), followed by this year s drought has severely affected food production and food security in the country. Preliminary data from the Ministry of Agriculture and Food Security (MASA), as of 18 April 2016 indicates that the drought has resulted in the loss of about 875,818 ha of crops affecting 464,879 farmers in Manica, Sofala, Tete (in the central region) and Gaza (in the southern region) provinces. 10. Current food reserves at the household level are very low but markets are functioning. In much of the South, the poorest households have completely exhausted their food reserves while most did not even harvest at all. The majority of households in drought-affected areas continue to rely on market Data from last household survey, 2008/ Data on poverty and shocks estimated from Inquérito aos Agregados Familiares sobre Orçamento Familiar 2002/2003 and the Inquérito ao Orçamento Familiar 2008/ SETSAN. Ministry of Agriculture and Food Security. March, In November 2015, FEWSNET reported Minimal food insecurity outcomes (IPC Phase 1) will prevail throughout the country. 8 FEWSNET. Mozambique Food Security Outlook FEWSNET. Mozambique Food Security Outlook

10 purchases. The level of supply in local markets is below the average for this time of the year, particularly for staple foods from households farming, such as maize grain, cowpeas and beans. Other staple foods that are usually imported or processed, such as maize meal and rice, are adequately available. In the central region, while food availability is relatively better compared to the southern region, it is also below the last five years average. 11. Mozambique s lean season lasts from September to April, when the main harvest begins, and therefore there is no improvement in the food security situation foreseen in the coming months. The poor second harvest season (August-September 2016) production is contributing to even lower food availability and lower income from agricultural labor. As a result, more and more households are forced to engage in unsustainable self-employment activities, such as charcoal sales, leading to increasing competition and a rapid degradation of forest resources. At the same time, staple food prices remain extremely high, further constraining household purchasing power. According to FEWSNET 10, on average, from June to July 2016, maize grain prices increased by 11 percent. Overall, maize grain prices remain well above the five-year average by 177 percent on average and above last year s prices by 136 percent on average. July rice prices were on average about 70 percent above the five-year average and 66 percent above the prices for the same period last year. Large parts of the southern and central regions are already experiencing the effects of the lean season two months earlier as most households have exhausted their food stocks and are relying on market purchases with higher prices and significantly reduced incomes. Beyond the humanitarian response phase, poor households will need help to recover their livelihoods prior to the next lean season. 12. The GoM has extended the red alert declared in April 2016 until March 2017 in the most drought affected provinces (Tete, Sofala, Gaza, Manica, Inhambane and Maputo) aiming to intensify and expand the drought response, and calling for urgent international assistance. A Strategic Response Plan for drought emergency was prepared by the UN Humanitarian Country Team to assist 1.5 million people from April 2016 to April 2017, and to complement the Government efforts in the drought response. The GoM, through the National Institute for Disaster Management, is leading the response to the emergency, with support from humanitarian partners, including Non Government Organizations (NGOs), the UN and others donors. However, despite the efforts by a number of international organizations, the emergency response 11 falls short in providing the necessary support for the drought affected households. Rationale for the Additional Financing 13. The unprecedented scale of the drought caused crisis requires an effective and fast response. The AF would (i) respond to the needs of the poor and vulnerable through direct cash transfers; and (ii) set up the operational modalities for a responsive social protection system that can be scaled up in the event of a future crisis. 10 FEWSNET. Mozambique Food Security Outlook The scale of humanitarian assistance has grown since October 2016, from covering less than 50 percent of total needs, to now currently meeting approximately 66 percent, and is being carried out in all seven drought-affected provinces. However, there is no assurance that the required level of assistance through the peak of the lean season (December, January and February) will be adequate and timely. In addition, there is growing concern that the political-military conflict is constraining efforts to reach those in need in parts of Sofala, Manica, Tete, and Zambézia provinces. In early 2016, COSACA, a DFID-funded consortium of NGOs, began providing vouchers for some households affected by drought in Gaza province. As part of this overall assistance, WFP, with its available resources, estimates it will be able to provide food assistance for approximately 490,000 people from August 2016 to January 2017 in Maputo, Gaza, Inhambane, Manica, Sofala, Tete, and Zambezia provinces. Other organizations providing assistance include World Vision International, Food for the Hungry, German Agrarian Action, and the Red Cross, which will cover nearly 80,000 people, while UNICEF, in coordination with the Ministry of Health, is supporting efforts by the Government of Mozambique to supplement nutritional-enriched food for acutely malnourished children. 10

11 14. The Additional Financing would respond to the drought through the provision of direct (unconditional) cash transfers to 20,000 households in three of the most drought-affected districts, Mabalane, Chokwe and Massingir, in the southern region of the country. The three districts are among the priority districts targeted for humanitarian assistance by the INGC. The El Niño response will use existing delivery systems that are expected to serve as the building blocks for the consolidation of an adaptive social safety net system. These operational instruments, already developed under the Social Protection Project, would enable Government to (i) register beneficiaries and monitor the day-to-day implementation of the program and measure results and impact; (ii) provide timely subsidies to social protection beneficiaries in a transparent and accountable manner; and (iii) improve coordination with the other major programs of the social safety net. 15. The available and pledged resources for drought response fall well short of the funding needed. The total estimated funding required to implement the plan is US$204.3 million. To date, just over US$47 million (23 percent of the total needed) has been mobilized. Addressing this situation requires a multi-partner, multi-phased and programmatic response to recovery. The Government exhausted the 2016 emergency response budget of US$9.6 million in this emergency. Other actors, including the UN, bilateral development agencies and NGOs, have only managed to provide some assistance to around 66 percent of the affected population so far. 16. The AF builds on scalable systems to respond rapidly to urgent needs. Under the first Social Protection Strategy and with support from the Social Protection Project, National Institute of Social Action (INAS) managed to develop a targeting system, a social registry of beneficiaries, an improved payment system and a management information system, that would allow to scale up cash transfers rapidly in the affected areas. However, due to the unprecedented scale of the crisis, INAS will need additional financial support and technical assistance to roll out these delivery systems rapidly. 17. Furthermore, over time, the AF provides an opportunity to link the emergency response with a more resilience-oriented approach. The AF will cover the gap between the humanitarian response (coordinated by INGC) and the social safety net support provided by the INAS Social Assistance programs. The rationale is that after a short humanitarian response (food and in-kind support), beneficiary households would need to receive direct cash transfers over 12 months to maintain their consumption levels, restart their activities and progressively recover their levels of income prior to the crisis (as opposed to the benefits received from INGC during the humanitarian response period, where families face total food and income deprivation and need to be supported with higher levels of benefits). After the period of 12 months of unconditional cash transfers, households could then be directed to other existing social assistance programs (Productive Social Action Program, PASP, Basic Social Subsidy Program, PSSB, Direct Support Program, PASD, or Program of Social Action Services, PSSAS) according to those programs own entry criteria. Progress in Project Implementation 18. The Social Protection Project (P129524) of US$50 million equivalent was approved by the World Bank s Board of Directors on March 26, 2013 and became effective on October 7, The Project s closing date is June 30, The Project Development Objective (PDO) is to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system. Its beneficiaries are extremely poor households living in the poorest 40 rural districts and five urban municipalities in the country according to poverty maps. 19. The project has two main components in which considerable achievements have been reached in the last year: 11

12 i. Component 1: Institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy (US$13.05 million).this component aims at building permanent systems for the implementation of the National Basic Social Security Strategy (Estratégia Nacional de Segurança Social Básica ENSSB). To this end, it is building the capacity of the Ministry of Gender, Children and Social Action (MGCAS) and INAS for the implementation, monitoring, and evaluation of the Productive Social Action Program (PASP). To date, INAS has managed to develop the basic delivery systems for the implementation of social protection programs including (i) a poverty-based targeting methodology; (ii) a social registry of beneficiaries; (iii) an improved payment system; and (iv) a management information system that allows monitoring and evaluating implementation of programs. Under this component, the Project will continue to support the roll-out of the delivery systems, the project implementation unit, capacity building for the MGCAS and INAS, operational costs for the implementation of Component 2 (laborintensive public works) and the development of additional operational tools such as a grievance redress mechanism. ii. Component 2: Labor-intensive Public Works (US$36.05 million). Through this component, the Project is supporting poor beneficiaries selected using the targeting system in rural and urban areas, through the provision of timely and predictable supplemental income in return for their participation in labor-intensive public works activities. So far, INAS has managed to implement public works with 22,000 households (19,000 in rural areas and 3,000 in urban areas) and has initiated the registration process of an additional 77,000 households (62,000 in rural areas and 15,000 in urban areas). The total target for this component was 100,000 households (70,000 in rural areas and 30,000 in urban areas). 20. Progress towards achievement of the Project Development Objective has been rated moderately satisfactory or better since the project started. The rating for Implementation Progress was downgraded to moderately unsatisfactory in January 2016 due to the late start of activities under Component 2 of the Project (labor-intensive public works) and the delay in recruitment of key Project Implementation Unit (PIU) specialists, such as a field coordinator. The rating was upgraded in August 2016 when: (i) INAS strengthened the PIU of the project through the recruitment of additional staff; and (ii) the World Bank strengthened its technical assistance, including the assignment of a long-term consultant at INAS accompanying implementation of the project. As a result, of these measures, Project disbursements increased and are expected to increase further during the coming months through the implementation of the second round of cash transfers. The project is expected to continue satisfactorily. 21. The Restructuring of the Social Protection Project is necessary to intensify existing laborintensive public works in urban and rural areas affected by the current economic and climatic crisis. Due to exchange rate savings, the Project is able to expand the labor-intensive public works component to one additional urban municipality and 21 rural districts to cope with the impact of the ongoing economic crisis. Scope and design of Additional Financing 22. The AF would respond to the El Niño event through direct (unconditional) cash transfers to populations severely affected by drought in three districts of Gaza province (Mabalane, Chokwe and Massingir) in the southern region of Mozambique. As depicted in figure 1, the AF will support the transition from humanitarian response to social safety nets. The rationale is that after the INGC s humanitarian response, INAS, through the AF, will provide support through temporary cash transfers to the same beneficiaries of the humanitarian response. After these 12 months, as beneficiaries will be 12

13 registered in the social registry of beneficiaries, those eligible for Social Assistance Programs (PSSB, PASD PASP or PSSAS) could potentially be enrolled in those programs. Figure 1: From Humanitarian Response to Social Safety Net systems Humanitarian Response Direct Social Assistance Social Safety Nets Food and in kind assistance by INGC Lists of beneficaires established by district authorities Direct cash transfers Same beneficaries as Humanitarian response phase Social assistance Beneficiaries possibly redirected to relevant programs, according to program criteria 0-6 months 0-24 months 24 months or more From humanitarian to social safety nets 23. The Social Protection Project will include the following new component through the AF, implemented over an 18-month period: Component 3. Direct Cash Transfers (US$7.5 million). This component will provide essential support to households through direct cash transfers. Cash transfers would be made every two months for a period of 12 months to approximately 20,000 households. Monthly benefits would amount to MZN2,500 (approximately US$32 12 ) and would thus be slightly lower than food benefits received during the first months of the humanitarian response through the INGC (equivalent to MZN3,000), but higher than the benefits offered by Social Assistance Programs such as the PASP (MZN650) and the PSSB (MZN310 to MZN610) to their beneficiaries. Beneficiary households will use the cash transfers to progressively recover their levels of income and productivity prior to the crisis. During the intervention, beneficiaries will be registered in the social registry of beneficiaries and after the period of 12 months of Direct Cash Transfers, households could then be directed to other programs (PASP, PASD PSSB or PSSAS) according to those programs own entry criteria. 24. The AF will also provide financing to Component 1 of the Social Protection Project to cover administrative and systems building costs related to the introduction of the direct cash transfer modality. The component supports institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy (original US$13.05 million, plus US$2.5 million from the AF). The Direct Cash Transfers component will make use of the existing social protection delivery mechanisms developed under the Social Protection Project, including: (i) a social 12 Using a exchange rate of MZN80 per US$ dollar 13

14 registry of beneficiaries that would allow registering all AF beneficiaries and potentially referring them to other Social Assistance Programs after the intervention; and (ii) a Management Information System that will allow monitoring and evaluating the different interventions. However, additional funds will be dedicated to make sure that these delivery systems and INAS implementation capacity are properly adapted to the direct cash transfer response. The additional funds to be allocated to Component 1 will also be dedicated to build INAS capacity at central and local level and to strengthen the PIU through the recruitment of additional consultants that would enhance INAS implementation capacity for the activities planned under the AF. 25. As a response to the emergency, unconditional cash transfers will be implemented instead of scaling up public works in affected areas. The rationale for opting for unconditional cash transfers was based on several factors: (i) public works planning and implementation require strong technical capacity and needs more time to roll-out and this may delay the intended quick support to the people affected by the shock; (ii) public works need a higher amount of administrative costs and this would affect the number of beneficiaries that could be reached through the AF; (iii) payments for public works are more complex than for unconditional cash transfers as attendance to public works needs to be monitored, and this would jeopardize Government s capacity to deliver frequent and timely payments to beneficiaries; and (iv) drought-affected households would not necessarily comply with the entry criteria for public works (many of them can be labor-constrained). 26. The AF will make use of the following implementation parameters as agreed with the MGCAS, INAS and INGC: Geographical targeting. The Direct Cash Transfer component would be implemented in three districts, selected among the districts most affected by the drought caused by the El Niño phenomenon: Mabalane, Chokwe and Massingir, all of them in Gaza province. Household targeting. The INGC has determined, for the purpose of distributing food and first necessity items during the humanitarian phase, the number of households in each district that would be eligible for assistance. All beneficiaries selected by INGC for the humanitarian response in the selected districts will be eligible for the project and for the Direct Cash Transfers. Beneficiary enrollment. Beneficiary households would be registered at INAS social registry of beneficiaries and enrolled in the program by the local representatives of INAS based at the INAS delegation in Chokwe district at the time of the first payment. Cash payments will be made bi-monthly to the selected household (whenever possible to women) through a payment agency. A payment agency will be contracted through a limited bidding process and is expected to sign a contract with INAS before the start of the program. Communication and beneficiary outreach would be a key activity. Communication and outreach activities would aim at informing the general public and the potential beneficiaries about the program and its social accountability so that all stakeholders know their rights and responsibilities in participating in the program. Controls and Accountability. A simple complaint and grievance redress mechanism will be developed to ensure that the beneficiaries have channels for any eventual grievances, particularly on payment day. Implementation arrangements 14

15 27. INAS will be the implementing agency for the AF, as it is for the original Project, under the stewardship of the MGCAS. For the AF, INAS will collaborate and promote synergies with programs and interventions implemented by other institutions involved in disaster risk management and emergency response, such as the INGC, UN agencies and NGOs. 28. The emergency response will build on scalable systems to respond rapidly to urgent needs. The implementation of the emergency response will rely on some of the delivery systems and local institutional capacity that has been developed at INAS over the last years, including a targeting system, a social registry of beneficiaries and a management information system that would allow to scale up cash transfers rapidly in the affected areas. 29. INAS will hire additional experts for project implementation for at least 18 months. Under the parent Project, INAS already recruited experienced procurement, financial management, safeguards and operations officers that will support the emergency response. Additional experts will be hired specifically for the AF. The team of experts will at least include additional procurement and financial management specialists, a field operations officer, a payments specialist, a communications specialist, a grievance redress specialist and technicians to be based at district level. Restructuring of the parent Project (P129524) 30. The Social Protection Project will be restructured. The restructuring will include: (i) expanding labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis; (ii) revising the results framework to adjust targets and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring; and (iii) extending the closing date of the project to enable a timely implementation of the labor-intensive public works activities and the new activities under the additional financing. 31. The labor-intensive public works will be expanded to one additional urban municipality and 21 additional rural districts, reaching an additional 21,000 households. The 21 rural districts and one urban municipality where the Project will be expanded, are currently supported through Government funds, and the project will just top-up the current benefit amounts to compensate for annual inflation (see next paragraph). 32. Benefit amount. The current benefit amount for the labor-intensive public works component (MZN650 per beneficiary per month) will be gradually increased every year. In 2017, the benefit amount will be set at MZN1,000 per month and each year it will be increased by an additional 200 meticais (MZN1,200 in 2018 and MZN1,400 in 2019). Due to the financial crisis, the budget for social assistance has been frozen, so the Government has no financial capacity to increase the benefit amount for the program in these 21 rural districts and one urban municipality. Through the restructuring, the Project will assume the difference between the MZN650 currently paid by the Government and the new benefit amounts. 33. Roll out of Component 2. As part of the restructuring, the geographical roll out of component 2 (labor-intensive public works) has also been revised to accommodate the additional 21 rural districts and one urban municipality and 21,000 households. The timeline of the roll-out has also been revised to expand implementation to calendar year 2019 in order to be able to catch up with the delays accumulated in the Project. 15

16 Table 1: Geographical coverage for restructuring and additional financing Rural districts under parent Project Urban municipalities under parent project Rural districts after restructuring Urban municipalities after restructuring Rural districts under additional financing * 6 3 *The additional 28 districts are the result of: (i) 9 new districts created by Law in the geographical area covered by the parent project and (ii) 21 additional districts where the Project will be expanded. The one additional municipality where the project will be expanded is Mandjacazi. 34. Extension of the Closing date. The Social Protection Project (P129524) closing date will be extended from June 30, 2018 to December 31, 2020 to enable for the implementation of all activities under the Social Protection Project and the AF. More time is needed for the implementation of activities under Component 2 of the parent project, due to the delay accumulated in the three first years of implementation of the Project. The main reasons for the delay were related to: (i) late effectiveness of the project; (ii) the post-electoral period that was followed by important internal restructuring processes at Government level; (iii) complexity in building basic delivery systems (payments, registry and MIS); and (iv) INAS' limited capacity for project management at central and local level. Financial Management 35. The project s financial management (FM) arrangements are adequate and are not expected to change. The project will continue to make use of the same Designated Account (DA) in the Banco de Moçambique for receiving funds from IDA after which they will be transferred to the government s single treasury account (CUT). To facilitate disbursements and documentation of expenditures, the reporting on the use of funds will take place on a monthly basis through the submission of Statement of Expenditures. Quarterly Interim Financial Reports (IFR) within 45 days of the end of each calendar quarter will be provided in the same format to that being submitted for the original project. Project audit reports will be submitted to IDA within six months of the end of the year and the audits will be carried out in accordance with the International Standards on Auditing by the Supreme Audit Institution. 36. The flow of funds under the new Component 3 will follow those already established for Component 2 of the parent Project. 37. Financial audits. There will be one single audit that will cover the original Project and the AF. 38. Despite the decentralized and complex nature of INAS s FM system, and although some challenges remain, particularly at district level, INAS s FM capabilities continue to show some 16

17 improvements in terms of technical quality, planning, time management and coordination with shared responsibilities among all units, from central, provincial and district. 39. The overall project risk for FM is Substantial. There are no overdue audits, IFRs or other FM covenants and the proposed FM arrangements meet the minimum requirements for FM under OP/BP Procurement 40. Procurement arrangements remain the same as for the parent Project. Clearance was obtained from the Chief Procurement Officer for the use of the Procurement and Consultants Guidelines, in lieu of the Bank s New Procurement Framework. The procurement capacity of INAS is still adequate to implement the project and will not be impacted with the availability of additional funds from the AF as these funds will virtually all be spent on non-procurable activities related to cash transfer to affected communities and, therefore, the associated risk for procurement is Low. Anti-corruption 41. The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. Summary of Proposed Changes The proposed AF will provide direct (unconditional) cash transfers to about 20,000 households in three districts of Mozambique severely affected by the drought caused by El Niño phenomenon. In addition, the Parent Project will be restructured to (i) expand labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis; (ii) revise the results framework to adjust targets and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring; and (iii) extend the closing date of the project to enable a timely implementation of the labor-intensive public works activities and the new activities under the AF. The PDO will remain the same. The results framework has been updated to reflect the additional beneficiaries and new indicators have been added at PDO and intermediate levels to reflect the objectives of the AF. Finally, project costs, disbursement estimates and FM arrangements have been adjusted accordingly. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] 17

18 Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Project s Development Objectives Original PDO Development Objective/Results 18 PHHHDO The objective of the project is to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system. Change in Results Framework Explanation: PHHCRF The additional beneficiaries and new activities supported by the AF are reflected in the results framework. A set of PDO-level and intermediate indicators have been added to monitor the progress of the main activities proposed under the AF. See annex I for details. Compliance PHHHCompl Covenants - Additional Financing ( Social Protection Project - Additional Financing - P ) Source of Funds IDAW Finance Agreement Reference Section I.C.2 of Schedule 2 Description of Covenants The Recipient shall, not later than 60 days after the Effective Date, develop and adopt, in form and substance acceptable to the Association and following the guidelines set forth in the Project Date Due Recurrent Frequency Action August 10, 2017 Once

19 Implementation Manual, a grievance redress mechanism that encompasses transparent, timely and fair procedures that will allow people potentially affected by the Project to peacefully settle any possible grievance and will ensure that all complaints received from beneficiaries and other interested stakeholders related to any activity under the Project, are properly and timely addressed. Conditions PHCondTbl Source Of Fund Name Type IDAW Implementation manual Effectiveness Description of Condition The Additional Conditions of Effectiveness consist of the following, namely that the Direct Cash Transfers Manual have been adopted by the Recipient in a manner satisfactory to the Association. Source Of Fund Name Type IDAW Payment Agent Disbursement Description of Condition No withdrawal shall be made for under Categories (2) with respect of each selected District, until the pertaining Payment Agent referred to under Section I.C.2 of Schedule 2 of the Financial Agreement for each such District shall have been hired in a manner satisfactory to the Association. Risk PHHHRISKS Risk Category Rating (H, S, M, L) 1. Political and Governance Moderate 2. Macroeconomic Substantial 19

20 3. Sector Strategies and Policies Moderate 4. Technical Design of Project or Program Substantial 5. Institutional Capacity for Implementation and Sustainability Substantial 6. Fiduciary Substantial 7. Environment and Social Moderate 8. Stakeholders Substantial 9. Other Low OVERALL Finance Substantial PHHHFin Loan Closing Date - Additional Financing ( Social Protection Project - Additional Financing - P ) Source of Funds IDAW Proposed Additional Financing Loan Closing Date 31-Dec-2020 Loan Closing Date(s) - Parent ( MZ-Social Protection project - P ) Explanation: PHHCLCD The Social Protection Project (P129524) closing date would be extended from June 30, 2018 to December 31, 2020 to enable implementation of all activities under the Social Protection Project and the new component on Direct Cash Transfers in response to El Niño phenomenon. Ln/Cr/TF Status Original Closing Date Current Closing Date Proposed Closing Date IDA-5992 Effective 30-Jun Jun Dec-2020 Previous Closing Date(s) Change in Disbursement Estimates (including all sources of Financing)PHHCDE Explanation: The US$10 million will be disbursed over a period of 18 months and as reflected in the following table Expected Disbursements (in USD Million)(including all Sources of Financing) Fiscal Year FY 17 FY18 FY19 Annual Cumulative Allocations - Additional Financing ( Social Protection Project - Additional Financing - P ) Source of Fund Currency Category of Expenditure Allocation Proposed Disbursement %(Type Total) Proposed IDA USD Total:

21 IDAW USD Total: Change to Components and Cost Explanation: PHHCCC Components PHHHCompo The main adjustments to the Project components would be to add a third component to the Project focusing on implementation of direct cash transfers in selected provinces and districts affected by El Niño phenomenon. The majority of the funds from the AF would be dedicated to direct (unconditional) cash transfers in response to El Niño. Under a new Component 3: Direct Cash Transfers (US$7.5 million) essential support would be provided to households affected by the drought through direct cash transfers. Cash transfers would be made every two months for a period of 12 months to approximately 20,000 households. Monthly benefits would amount to MZN2,500 (approximately US$35). Beneficiary households will receive the cash transfers, to progressively recover their levels of income and productivity prior to the crisis. During the intervention, beneficiaries will be registered in the social registry of beneficiaries and after the period of 12 months of Direct Cash Transfers, households could then be directed to other programs (PASP, PASDPSSB or PSSAS) according to those programs own entry criteria. However, implementing an unconditional cash transfers operation on a large scale will also require consolidating and adapting some of the delivery systems (registry of beneficiaries, payment system, Management Information System (MIS), etc.) and strengthening INAS institutional capacity through the recruitment of additional experts at central and local level. Therefore, US$2.5 million of the AF funds would also be used for Component 1 (institutional strengthening), alongside some funds from the parent Project, with the objective of continuing to support the development and roll out of basic delivery systems including: (i) a social registry of beneficiaries; (ii) a Management Information System; (iii) a payment system; and (iv) a grievance and redress mechanism. The additional funds to be allocated to Component 1 will also be dedicated to capacity building of INAS staff at central and local level and to strengthen the PIU through the recruitment of additional consultants that would enhance INAS implementation capacity. In addition, the Project will be restructured to expand Component 2 activities (labor-intensive public works) to additional urban and rural areas. The expansion will be financed through existing Project funds (not the AF) and will be done through an expansion of the Project roll out plan to an additional one urban municipality and 21 rural districts, reaching an additional 21,000 households. The 21 rural districts and one urban municipality to which the Project will be expanded are currently supported through Government funds, and the project will just top-up the current benefit amounts to compensate for annual inflation. The benefit amount for Component 2 (MZN650 per beneficiary per month) will be gradually increased every year. In 2017, the benefit amount will be set at MZN1,000 per month and each year it will be increased by additional MZN200 (MZN1,200 in 2018 and MZN1,400 in 2019). The Government is currently financing the implementation of labor-intensive public works activities in 21 districts and one urban municipality using Government funds. As, due to the financial crisis, the budget for social assistance has been frozen, the Government has no financial capacity to increase the benefit amount for the program in these 21 districts and one municipality. Through the restructuring, the Project will assume the difference between the MZN650 currently paid by the Government and the new benefit amounts. 21

22 Current Component Name Institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy Labor-intensive Public Works Proposed Component Name Institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy Labor-intensive Public Works Current Cost (US$M) Proposed Cost (US$M) Action Revised No Change Direct Cash Transfers New Total: Other Change(s) PHHHOthC PHImplemeDel Implementing Agency Name Type Action Change in Implementation Schedule Explanation: PHHCISch Due to the Additional Financing and the extension of the closing date for the project, the roll out plan for the implementation of the Labor-Intensive Public Works component was modified. Economic and Financial Analysis Explanation: Appraisal Summary PHHASEFA PHHHAppS The nature of the project makes it difficult to conduct traditional cost-benefit analysis. In particular, valuing the benefits a poor household accrues from increased and stabilized consumption is not a straightforward exercise. For this reason, we chose to conduct an ex ante analysis that can provide some rough estimates of the expected impacts on poverty and inequality and help fine-tune specific design aspects that can enhance these impacts. Simulations were done to implement the AF in three drought-affected districts: Mabalane, Massingir and Chokwe. In these three districts, the duration of the intervention would be 12 months and each household would be enrolled for only one year. Each household would receive MZN2,500 per month during the 12 months of the intervention. Based on these parameters the expected impact would be the following: Benefit amount Table 2: Estimated impact of AF No. of Beneficiaries Poverty Rate Incidence Poverty Gap Index Total Budget Spent in US$ MZN2,500 20, % -7.98% 7,500,000 22