Action Fiche for NEPAL. DAC-code 11200, Sector: Basic Education

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1 Action Fiche for NEPAL 1. Identification Title/Number Total cost School Sector Reform (SSR), Nepal. DCI-ASIE/2009/21209 Total cost of the project : (approx.) Total EC Contribution: of which - EC: DFID Contribution (via transfer agreement : of which EUR will be used to cover the administrative overheads of the EC Aid method / Method of implementation - Total Donors Contribution: (approx.) Sector Policy Support Programme: - Sector budget support (centralised management) DAC-code 11200, Sector: Basic Education 2. Rationale and country context 2.1. Country context and rationale for SPSP Economic and social situation and poverty analysis A comprehensive peace treaty in 2006 and the Constituent Assembly elections in 2008 created conditions for a transition to democracy, peace and stability. Nepal progressed in reducing poverty incidence from 42% in 1996 to 31% in Life expectancy, infant and maternal mortality rates, and adult literacy improved, with gains in the MDGs. Nevertheless, Nepal is one of the poorest countries, with wide income disparities and poor access to basic services. Social exclusion and geographic disparities are a challenge. Nepal's HDI rank deteriorated to 145 th (out of 179 countries) in 2008 from 142 (out of 177) in National development policy The Three Year Interim Plan (2007/8-2009/10) and the National Development Strategy Paper (2010/ /13) incorporate the country's poverty reduction strategy and MDGs. The aim is to lower poverty level to 21.5% in the next 3 years. The TYIP puts emphasis on postconflict peace building, reconstruction and revitalization of the economy, with increased government expenditure on social and physical infrastructure development and reaching out to women, Dalits, Indigenous Janjatis, Madhesis and other disadvantaged. Education received 1 The total cost of the SSRP for a five year period is estimated at m. The GON will provide 1423 m for the programme. The EC will provide a total of 26,53 m, including 13,53 m provided to the EC by the DFID through a Transfer Agreement. In total, DPs will provide roughly 375 m... 2 Amount in euro of at 13/07/2009. This amount will be corrected once the actual amount is received by the Commission. 3 UNDP, 2007 and 2008 EN 1 EN

2 12.6% of the overall expenditure allocation in the TYIP, the second largest single sector. The SSRP is a central plank of the government's education sector initiatives Sector context: policies and challenges Sector Content and Main Features of the Program. School enrolments increased with gender parity, but drop outs and quality are a problem. The Government of Nepal has prepared a comprehensive School Sector Reform Program (SSRP) for the period SSRP aims to restructure and integrate the school education cycle from the currently fragmented system. The program aims to expand access, improve quality and student learning, institutionalize performance accountability, and improve effectiveness. In addition to basic education, SSRP includes early childhood education, secondary education, vocational training and adult literacy Sector Budget and Medium term financial perspectives. The cost estimated budget to implement SSRP during 2009/10 to 2013/14 is million Currently, about 17% of the government budget is allocated to Education, expected to rise to 18.6% of the budget by 2013/14. Development Partners (DPs) are envisaged to finance an average of 20% of the SSRP budget over the next five years. The GON share of SSRP is estimated at 72%, leaving a gap of roughly 7-8%, which is expected to be met through additional resource mobilization Coordination between GON and Development Partners. The key DPs engaged in the EFA program ( ) will also support SSRP. The good practices so far will continue, which include a 'sector wide approach', funding to the GON s own budget system, harmonization of donor funding, joint participation in program reviews and commitment to the Paris Declaration principles. A Joint Financing Arrangement has been established between the GON and all the DPs supporting the SSRP in a budget support mode Institutional Capacity. The EC's Capacity Development tranches for the EFA program extend to the first two years of the SSRP, whereby 5.5 m will be available for concrete interventions. DP funding for TA will also be linked to a results-oriented capacity development plan, which is under preparation. Existing institutional arrangements at central, regional and district level will be strengthened, including capacity of local community bodies Performance Monitoring. The Ministry of Education (MOE) will use a strengthened Education Management Information System for tracking progress of the program against its key goals and objectives. For the SSRP, the GON and the DPs have jointly developed a Results Matrix with Key Performance Indicators and arrangements for monitoring. In addition to EMIS based reports, additional studies are expected. Regular Financial Management and Audit Reports will be provided. Performance Audit Reports to be prepared once in two years Macroeconomic framework. The Economic and Social Survey of the Asia and the Pacific 4 provides a positive outlook to growth and development. GDP growth rate jumped to 5.6% in 2008 (from 2.6% in 2007). Budget discipline and macroeconomic stability was maintained. While inflation increased to 7.7 % in 2009 (6.4% in 2007), foreign exchange reserves stood at $2 billion 5. Revenue collection grew by 22.6% in 2008 (34% forecast in 2009) and will cushion Nepal from global downturn. Nonetheless, prolonged global recession will adversely affect revenues from exports and tourism, and overseas remittances Public Financial Management. An action plan for adequate public financial management, accounting and reporting is included in the Governance and Accountability 4 Economic and Social Commission for Asia and the Pacific, ESCAP, March IMF Article IV Consultation, May 2008 EN 2 EN

3 Action Plan (GAAP), covering timely fund release, financial controls at central, district and school levels and adequate procurement and audit practices. Reforms recommended by a recent PFM mission, such as an Integrated Financial Management Information System (IFMIS), capacity development of the Public Accounts Committee, the Office of the Auditor General, and the Financial Comptroller General's Office are being pursued by the GON Eligibility for budget support The DPs will use budget support modalities for the SSRP, which are now well established in education. Over 85% of the education budget from till is projected for SSRP and for P1 top priority status for budget allocation. Nepal maintained macroeconomic stability and prudent fiscal and monetary management despite the conflict and a conducive climate for a budget support operation is expected to continue. The Planning Commission, the Financial Comptroller General s Office (FCGO) and the Office of the Auditor General (OAG) participated in appraisal discussions. Spending priorities continue for pro-poor activities Lessons learnt External evaluation of EFA (March ) showed major enrolment increases and reduction of gender and caste/ethnic disparity. Incentives for school participation like scholarships worked well. School Management Committees were revitalized and managed schools. However, quality standards are lacking and teachers are still inadequate in numbers. Learning from these, the SSRP aims to put in place minimum enabling conditions for education provision, with concrete measures to improve classroom processes, training of teachers and tracking student achievements. Decentralization and empowerment will be further reinforced Complementary actions Supportive actions by UNESCO, JICA, USAID, and I-NGOs will help SSRP. The prospective support to the Nepal Peace Trust Fund will reinforce peace building at local levels through rehabilitation of school buildings and other structures destroyed by the conflict, and through community based initiatives for peace Donor coordination Donor coordination in education is a model. The Joint Financing Arrangement ensures that contributions of DPs are fully synchronized with GON budgeting and disbursed to a common account in the Treasury. GoN envisages the creation of a common and strategic approach to capacity development and for TA to be streamlined into a common fund. At the request of the GON, the EC will organize workshops on the Back Bone Strategy for Technical Cooperation. A Code of Conduct for the participation of a larger group in education is underway. 3. Description 3.1. Objectives The overall objective of the School Sector Reform Program (SSRP) is to contribute to poverty reduction and socio-economic development in Nepal by raising the education level of the population on an equitable basis. 6 Norad Evaluation Mission conducted by Cambridge Education Ltd and METCON Consultants with involvement of other DPs EN 3 EN

4 The specific objective of the SSRP is to increase access to and improve the quality of school education, particularly basic education (grades 1-8), especially for children from marginalized groups Expected results and main activities The overall expected result of the SSRP is improved sector performance and progress towards a more inclusive and efficient elementary education system with satisfactory quality. Expected educational results include increases in school enrolments, completion and student attainment. Expected social benefits include equalizing opportunity to quality education for girls and children from disadvantaged backgrounds and increased gender and social parity. Expected institutional benefits include higher capacity of national, district and community institutions in program planning implementation and monitoring, higher technical capacities to carry out education quality improvements and improved financial management. The main activities of the SSR program include (a) Increasing coverage of Early Childhood Education and Development; (b) Providing additional schools and classrooms; (c) Providing scholarships and incentives to girls and marginalized children; (d) Providing teacher training; (e) Providing grants to schools; (f) Updating of curriculum, textbooks and teaching guides for school education; (g) Providing continuing education and life long learning; and (h) providing work oriented vocational and technical education in secondary education Risks and assumptions Overall Program Readiness Risk entailing major policy changes and restructuring is addressed through a time-lined Policy Matrix and Results Matrix. The big Political risk of continuation of a stable government and peace is addressed through all political parties pledging support to school reform with no reversals expected. Potential financial risk of adequate financing has been addressed through the reduction of overall financial requirements to a more realistic scenario. Technical and Capacity risks of lack of adequate prioritizing and sequencing have been addressed through allocation of 60% of the development budget to basic education and strong capacity development. PFM Risks are mitigated through a clear cut PFM action plan included in the Governance and Accountability Action Plan developed for SSRP. Risks of externalities: Climate Change effects may negatively accelerate in the near future in a country like Nepal. School infrastructure, building sites and teachers awareness raising should in so far as possible be done in view of increasing climate resilience Stakeholders The Ministry of Education and Sports (MOES) provides strategic leadership. The Education Policy Committee will steer policy development. The Ministry of Local Development will support empowerment of local bodies. The Department of Education (DoE) and the District Education Offices (DEO) will carry out detailed field activities. The beneficiaries include School Management Committees, teachers and local communities who have prominent roles in improving education and the children, particularly the marginalized groups. The DPs are important stakeholders providing substantial resources and technical/professional support Crosscutting Issues The SSRP includes social and environmental safeguards, led by ADB and the WB. A range of measures to promote equity and inclusion is planned. Successful initiatives such as scholarships and incentives for the marginalized will continue. A Vulnerable Community Development Plan will ensure greater educational opportunities for the most vulnerable EN 4 EN

5 groups like Dalits, Ethnic Minorities, girls and disabled children. As described in other sections, a detailed Governance and Accountability Action Plan has also been prepared. Taking into consideration Nepal s evident exposure to the negative effects of climate change and the vulnerability of its social and economic structures in this context, particular emphasis should be placed on incorporating climate change awareness rising in the education curricula, through awareness raising and relevant climate risk management training. 4. Implementation issues 4.1. Method of implementation Direct centralised management through the signature of a Financing Agreement. The EC will provide Sector Budget Support (SBS) of M ( m from the DFID, managed through a Transfer Agreement of which EUR (2%) will be used to cover the administrative overheads of EC). The SBS will be channelled to the foreign exchange account created in the Nepal Rashtra Bank. The Joint Financing Arrangement (JFA) to be signed by DPs and the GoN, includes all aspects of financing, monitoring, reporting, review and evaluation Procurement and grant award procedures All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question Budget and calendar The total cost of the SSRP for a five year period is estimated at m. The GON will provide 1423 m for the programme. The EC will provide a total of 26 m, including 13,35 m provided to the EC by the DFID through a Transfer Agreement. In total, DPs will provide roughly 375 m. Table 1: EC Contributions to the SSRP in Euro ( 1= US $ 1.33; 1= GBP 0.89) Category breakdown 1. Sector Budget Support 2. Aministrative Overheads EC Contributio n Donors contribution GON contribution Total EC EC Contracting/ Paying Authority 7 Amount in euro of at 13/07/2009. This amount will be corrected once the actual amount is received by the Commission. 8 Amount equivalent in euro of at 13/07/2009. This amount will be corrected once the actual amount is received by the Commission. 9 This amount is expected to be provided by contributions from the Fast Track Initiative, other potential donors and International NGOs. EN 5 EN

6 3. Contingencies EC Total Type of Tranche Table 2: Possible Disbursement Scenario of EC funds to SSRP* Nepal Fiscal Year Commissio n Year Fixed tranche to SSRP Variable tranche to SSRP Year 1 ( ) 2010 (1 st Sem) Year 2 ( ) 2010 (2 nd Sem) Year 3 ( ) Year 4 ( ) Year 5 ( ) Total 9.0 m 7.0 m ** ** ** 16 m 2.0 m 3 m*** 3 m 2 m 10 m Total 9.0 m 9.0 m 3 m 3 m 2 m 26 m * Transfer agreement: The Commission is entrusted by DFID with the implementation of a contribution to this project for an amount of an equivalent of (representing approx euro) 1, in line with article 27.3 of DCI Regulation 1905/2006. The receipt of funds from DFID is made through the signature of a transfer agreement between the Commission and DFID. These funds are considered as revenue assigned to this project in the form of co-financing. ** Additional EC contributions from will be subject to new commitments from the next MIP, expected at 35 m and these could be in the form of a mix of fixed and variable tranches, to be agreed in a new FA. *** The variable tranche disbursement is introduced from Year 2 to give the GON time to stabilize implementation of a new and far reaching reform programme. The equivalent of (representing approx. 13,53 m) of the total commitment is subject to a suspensive condition of the signature by DFID of the transfer agreement. The operational duration of the program will be 60 months as from the date of signature of the Financing Agreement Performance monitoring and criteria for disbursement The SSRP will be governed by two joint reviews each year conducted by the GoN and DPs: An annual review meeting in April to discuss the Annual Work Plan and Budget (AWPB) for the next fiscal year; and an annual consultative meeting in December when the DPs review overall progress against the Key Performance Indicators. Two Flash Reports, using the 10 Amount equivalent in euro of at 13/07/2009. This amount will be corrected once the actual amount is received by the Commission. 11 Amount equivalent in euro of at 13/07/2009. This amount will be corrected once the actual amount is received by the Commission. EN 6 EN

7 Education Management Information System (EMIS) will provide updated information on the program. Three new instruments will provide stronger performance monitoring: a Policy Matrix that outlines key policy parameters that underpin the SSRP and regular monitoring of the continuation and further development of those policies a Results Matrix with Key Performance Indicators (KPIs) and arrangements for monitoring including sources of verification and frequency of reporting; (Annex A) a Governance and Accountability Action Plan (GAAP) which tracks progress in improving education service delivery and strengthening financial management and audit. The conditions for disbursement of all SBS tranches include: - Stability-oriented macroeconomic policy is in place allowing for the continued use of budget support - Satisfactory progress in the implementation of the Public Financial Management (PFM) improvement programme (within the Governance and Accountability Action Plan - GAAP) including timely provision of Financial Management Reports and Audit reports. - The overall strategy, policy and implementation foreseen in the SSR Plan is on track The conditions for disbursement of the variable tranches are a selection of the key Government actions agreed between Government and DPs in the Policy Matrix and progress in reducing the number of out of school children, particularly girls and marginalized groups. (See Annex B for an indicative description of the EC Tranche release criteria Evaluation and audit The JFA contains detailed stipulations concerning performance measurement, monitoring and reporting. A Mid-Term Review and final evaluation are foreseen. Financial Monitoring Reports (FMRs) will form the basis of disbursement by DPs. FMRs will be provided no later than 6 months after the end of the financial year. An annual audit of the financial reports carried out by the Office of the Auditor General of Nepal, will be provided no later than 8 months after the end of the fiscal year. External audits,, can be carried out by independent consultants recruited directly by the Commission in accordance with EC rules and procedures on specifically established terms of reference Communication and visibility The Government of Nepal is expected to undertake suitable initiatives through mass media campaigns to increase awareness of the program. Program activities, achievements and progress will be disseminated widely through the DOE website. Given the large number of donors, individual identification against actions is not expected. However, the size of the EC s contribution and support to capacity development initiatives will ensure EC visibility. The EC is expected to take a leadership role as a donor focal point in the near future. In addition, the EC will explore innovative and people-centric methods to spread awareness and visibility of the program at national and grassroots level and also at appropriate international level. EN 7 EN

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