The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) REPORT NO.: RES60135 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PK-BALOCHISTAN INTEGRATED WATER RESOURCES MANAGEMENT & DEVELOPMENT PROJECT APPROVED ON JUNE 28, 2016 TO ISLAMIC REPUBLIC OF PAKISTAN WATER SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Najy Benhassine Regional Director: Dina Umali-Deininger Practice Manager/Manager: Josses Mugabi Task Team Leader(s): Yoro Sidibe The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) ABBREVIATIONS AND ACRONYMS Acronyms Description CD Country Director ESIRT Environment & Social Incident Response Toolkit FCV Fragility, Conflict and Violence IDA International Development Association M&E Monitoring and Evaluation PDO Project Development Objectives PKR Pakistan Rupee RVP Regional Vice President US$ United States Dollar The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) BASIC DATA Product Information Project ID Financing Instrument P154255 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 28-Jun-2016 30-Apr-2024 Organizations Borrower Responsible Agency Islamic Republic of Pakistan Project Development Objective (PDO) Original PDO To strengthen provincial government capacity for water resources monitoring and management and to improve community-based water management for targeted irrigation schemes in Balochistan. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-58850 28-Jun-2016 31-Aug-2016 28-Nov-2016 30-Apr-2024 110.09 71.64 33.70 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The project was approved on June 28, 2016, and declared effective on November 28, 2016, with a total IDA financing amount of US$200 million. The Project Development Objective (PDO) is to strengthen the provincial government capacity for water resources monitoring and management and to improve community-based water management for targeted irrigation schemes in Balochistan. Schemes under the project are located in the Nari River Basin and the Porali River Basin. The project is structured around three components: (i) Component A- Institutions, Capacity, and Information; (ii) Component B- Water, Infrastructure and Management Investments; and (iii) Component C- Project Management and Technical Assistance. 2. The project was restructured with a cancellation of US$90 million equivalent on April 29, 2019, to adjust the scope to the then low capacity of the project implementing unit. Due to the extensive disruptions caused by the COVID- 19 pandemic, the Bank approved another restructuring on May 29, 2022, extending the project closing date from October 31, 2022 to April 30, 2024. 3. The PDO remains relevant to Balochistan. The interventions are aimed at improving the livelihoods of the rural poor in Balochistan including through local-level participation to build stronger and more resilient communities, and to drive improved management of water resources. The project implementation progress is rated moderately satisfactory. All procurement activities are completed. An estimated total of US$81 million (75 percent of the revised IDA credit) is committed in contracts. Progress towards the PDO is satisfactory. Major irrigation and water supply schemes have been completed bringing the number of project beneficiaries to 307,000 against an end of project target of 414,000. The total Irrigable command area with improved water management services currently stands at 23,140 hectares, against an end-of-project target of 26,275 hectares. About 80 percent of quality-assured hydrometeorology data from project basins is anticipated to be publicly available online by end of April 2024, against a target of 90 percent. 4. Project management, environmental and social safeguards and fiduciary performance are all rated moderately satisfactory, and there are no pending audit reports. Disbursements stand at US$71.64 million (68 percent of the revised IDA credit). However, in the past 18 months, project progress was hampered by (i) the 2022 floods which halted works in the Porali River Basin; (ii) repeated security incidents affecting works in the Nari River Basin. 5. The remaining activities needed to achieve the PDO include (i) Sibi town water supply scheme – civil works will be completed in December 2024, followed by two months of testing. The commissioning will thus be in February 2025; (ii) Khuzdar irrigation scheme - works will be completed in December 2024, followed by two months of testing—commissioning is expected in February 2025; and (iii) Nimmi and Gundacha irrigation Schemes – same timeline as the Khuzdar scheme. Completing these activities will bring the total number of beneficiaries to 417,00 (101% of the target). Thus, the project requires a 10-month extension of closing date to achieve its PDO fully. In addition, the project has an undisbursed IDA credit amount of US$34.4 million. The expected expenditure during the extension period, considering remaining payments for civil works, consultancies, goods, and operating costs, is US$22.5 million. There is currently US$13.3 million in the project’s Designated Account – meaning the project only requires an additional US$9.2 million to meet remaining payment obligations. The balance of the undisbursed credit (US$25million) is unlikely to be used. 6. In a letter dated February 27, 2024, the borrower requested the Bank to (i) extend the project closing date to allow the project to achieve its objectives, (ii) cancel US$$25 million of undisbursed IDA credit that is unlikely to be utilized during the extension period. The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) B. Rationale for Restructuring Cancellation 7. The US dollar has appreciated against the Pakistan Rupee by over 2.7 times since the approval of the project and by over 2.1 times since the first cancellation of US$90 million on April 29, 2019. As most project expenditures are in local currency, the project has realized savings estimated at US$25 million. The project will not be able to utilize this saving amount during the remaining implementation time. With the cancellation of US$25 million, the project will still be able to complete remaining payments for civil works, consultancies, goods, and operating costs, and achieve its PDO. Therefore, the cancellation will not affect the current scope of the project. Closing Date Extension 8. Despite the award of all procurement packages, external factors beyond the control of the project, have resulted in delays for major project works particularly in 2022 and 2023. With respect to works in the Porali River Basin, the project implementation was seriously hampered by massive floods in 2022 that caused significant destruction in the southern part of Pakistan, especially in Balochistan. The floods substantially damaged various water management infrastructures (weirs, protection bunds and canals) that were under construction under the project in the Porali River Basin. Furthermore, the flood waters remained stagnant in the project areas until February 2023 leading to major logistical disruptions, impeding the transport of equipment, material, and workers. An assessment subsequently conducted by the project estimated the flood return period at 1,000 years. It took time to assess the damages caused by the floods, propose updated designs, adjust contracts, and start the reconstruction. 9. With respect to works in the Nari River Basin, the project sites suffered repeated security incidents due to the general degradation of security in Balochistan in 2023. The explosion of crackers and improvised explosive devices on project sites has led to frequent suspension of works, especially for Nari Gorge and Sibi Water Town schemes, leading to delays. Appropriate safeguard processes were followed based on the Environment and Social Incident Response Toolkit (ESIRT) guidelines resulting in the preparation and implementation of a security management plan. Consequently, the provincial authorities have now reinforced the presence of security personnel around the project sites in sensitive areas which has paved the way for smooth continuation of project activities. 10. A 10-months extension of the project closing date is necessary to allow the completion of key ongoing irrigation schemes, on-farm water management works and Sibi town water supply scheme. It will allow the orderly completion of all works and the achievement of key reforms including the Balochistan Water Policy. Given the current progress and implementation schedules of the remaining project activities, it is expected that the undisbursed balance after cancellation (US$9.2 million) will be fully utilized during the requested extension period. II. DESCRIPTION OF PROPOSED CHANGES 11. The restructuring involves the following changes: (i) extension of project closing date from April 30, 2024 to March 1, 2025, (ii) partial cancellation of US$25 million of undisbursed IDA credit from the category goods, works, non-consulting services, consultants’ services and training, (iii) adjustment of components’ costs, (iv) reassessment of risks, (v) adjustment of end target dates of the results framework’s indicators and, (vi) update of the implementation schedule. The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) 12. The risks pertaining to (i) Political and Governance, (ii) institutional capacity for implementation and sustainability, (IiI) Stakeholders were downgraded to Substantial considering that the project’s current progress in achieving its development objective and the improved capacity of the project management unit. The Overall risk rating is downgraded based on the new overall level of residual risks. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Overall Risk Rating ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component A: Institutions, Component A: Institutions, 7.70 No Change 7.70 Capacity and Information Capacity and Information Component B: Water, Component B: Water, Infrastructure and Management 92.60 Revised Infrastructure and 67.60 Investments Management Investments Component C: Project Component C: Project Management and Technical 11.70 No Change Management and Technical 11.70 Assistance Assistance TOTAL 112.00 87.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-58850 Effective 31-Oct-2022 30-Apr-2024 01-Mar-2025 01-Jul-2025 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN Disburs IDA-58850- RESTRUCTUR ing&Re XDR 77,557,400.00 18,848,010.00 28-Feb-2024 58,709,390.00 001 ING, COST paying SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) Current Proposed IDA-58850-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GD,WK,NonCS,CS,TRNG 74,057,400.00 35,581,149.06 55,209,390.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: Matching Grants 0.00 0.00 0.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: IOC 3,500,000.00 945,573.00 3,500,000.00 100.00 100.00 Total 77,557,400.00 36,526,722.06 58,709,390.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  High  Substantial Macroeconomic  Substantial  Substantial Sector Strategies and Policies  Substantial  Substantial Technical Design of Project or Program  Substantial  Moderate Institutional Capacity for Implementation and  High  Substantial Sustainability Fiduciary  High  High Environment and Social  Substantial  Substantial Stakeholders  High  Substantial Other  High  High Overall  High  Substantial . The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) . Results framework COUNTRY: Pakistan PK-Balochistan Integrated Water Resources Management & Development Project Project Development Objectives(s) To strengthen provincial government capacity for water resources monitoring and management and to improve community-based water management for targeted irrigation schemes in Balochistan. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Strengthen provincial govt capacity for WRM and improve community-based water management. Irrigable command area with improved water 0.00 26,275.00 management services (Hectare(Ha)) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised Quality-assured hydro- met data from project basins publically available 0.00 0.00 10.00 30.00 50.00 70.00 90.00 90.00 in online data system (Percentage) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Direct project 0.00 0.00 100,000.00 200,000.00 414,000.00 beneficiaries (Number) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised Female beneficiaries 0.00 46.50 46.50 46.50 46.50 46.50 46.50 46.50 (Percentage) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Component A: Institutions, Capacity and Information Person-days of water management/planning 0.00 50.00 100.00 300.00 500.00 training for government staff. (Days) Active climate, streamflow and 0.00 0.00 0.00 0.00 43.00 groundwater monitoring stations. (Number) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 IWRM Reforms Roadmap Document endorsed by Not Prepared Completed the Cabinet. (Text) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised Component B: Water, Infrastructure and Management Investments Area provided with irrigation and drainage 0.00 0.00 0.00 10,000.00 30,000.00 50,000.00 services. (Hectare(Ha)) Water users provided with new/improved 0.00 0.00 50,000.00 150,000.00 250,000.00 irrigation & drainage services (Number) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised Percent Female 0.00 0.00 30.00 30.00 30.00 30.00 30.00 30.00 (Number) Operational water user associations created 0.00 20.00 30.00 30.00 30.00 and/or strengthened (number) (Number) Area of watershed restored/reforested 1,000.00 1,000.00 1,500.00 3,000.00 4,000.00 (Hectare(Ha)) The World Bank PK-Balochistan Integrated Water Resources Management & Development Project (P154255) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Number of community drinking water points 0.00 10.00 installed/rehabilitated (Number) Component C: Project Management and Technical Assistance Surveyed beneficiaries satisfied with project 0.00 50.00 80.00 implementation (Percentage) Rationale: Action: This indicator has Change of end target date in line with the project closing date extension been Revised IO Table SPACE