$ Report No: RES00393 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Building Resilient and Responsive Health Systems APPROVED ON 13-Mar-2024 TO Republic of Kenya Health, Nutrition & Population Eastern And Southern Africa Region Regional Vice President: Victoria Kwakwa Regional Director: Daniel Dulitzky Country Director: Keith E. Hansen Practice Manager: Francisca Ayodeji Akala Task Team Leader(s): Jane Chuma, Josine Umutoni Karangwa The World Bank Building Resilient and Responsive Health Systems (P179698) ABBREVIATIONS AND ACRONYMS BREHS Building Resilient and Responsive Health Systems E&S Environmental and Social GoK Government of Kenya KEMSA Kenya Medical Supplies Agency MoH Ministry of Health MoU Memorandum of Understanding PDO Project Development Objective PMT Project Management Team POM Project Operations Manual The World Bank Building Resilient and Responsive Health Systems (P179698) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P179698 Building Resilient and Responsive Health Systems Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Kenya Approval Date Current Closing Date 13-Mar-2024 30-Jun-2029 Environmental and Social Risk Classification (ESRC) Moderate Organizations Borrower Responsible Agency Republic of Kenya Ministry of Health @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective To improve utilization and quality of primary healthcare services and strengthen institutional capacity for service delivery. Disbursement Summary (in USD million) i The World Bank Building Resilient and Responsive Health Systems (P179698) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD -- -- -- 0 IDA 200.00 0.00 196.54 0.00 Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Building Resilient and Responsive Health Systems (P179698) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................3 IV. DETAILED CHANGE(S) ...............................................................................................................................................3 The World Bank Building Resilient and Responsive Health Systems (P179698) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The Building Resilient and Responsive Health Systems (BREHS) project which aims to “improve utilization and quality of primary healthcare services and strengthen institutional capacity for service delivery”, was approved by the World Bank Board of Executive Director on March 13, 2024. The project seeks to achieve its project development objective (PDO) by (a) strengthening institutional capacity for health service delivery towards achieving universal health coverage and (b) improving utilization of quality health services at primary care level. 2. The original Effectiveness date was August 1, 2024, and upon request from the Government of Kenya (GoK) through a letter dated July 15, 2024, was extended to October 1, 2024, to allow sufficient time to fulfill all effectiveness conditions. As of September 12, 2024, the status of the conditions of effectiveness is described below: (a) The following conditions of effectiveness have been met: (i) the Recipient has established a dedicated Project Management Team (“PMT”), with adequate resources and facilitation, key staff holding such qualifications and under terms of reference acceptable to the Association, such staff include a project manager, Project components coordinators, assistant coordinators, a monitoring and evaluation specialist, at least one dedicated specialist for each of social risks and environmental risks management and any other technical and fiduciary specialists as may have been agreed with the Association and as further detailed in the Project Operations Manual (POM); (ii) the Association is satisfied that the Recipient has maintained an adequate refugee protection framework; (iii) the Recipient has prepared, consulted upon, adopted and publicly disclosed the Environmental Social and Management Framework, the Vulnerable Groups Planning Framework, the Medical Waste Management Plan, the Stakeholder Engagement Plan and the Labor Management Procedures; (iv) the Recipient has assessed the security risks of the Project and included measures to mitigate such security risks in the POM; (v) the Kenya Medical Supplies Agency (KEMSA) has assigned an environmental and social (E&S) risks management focal person to maintain coordination and support E&S implementation of the Project; and (vi) the Recipient has prepared and adopted the POM in form and substance satisfactory to the Association, in accordance with the provisions of Section I.C.1(b)ii of Schedule 2 to this Agreement. (b) The following condition of effectiveness have not yet been met: (i) the Recipient and the Project Implementing Entity have executed a Subsidiary Agreement in accordance with Section I.B of Schedule 2 to this Agreement; and (ii) Receipt by the Association of a legal opinion confirming, on behalf of the Recipient that the agreements have been duly authorized by, executed and delivered on behalf of the Recipient, and is legally binding on the Recipient in accordance with their terms. 3. The Government has submitted a restructuring request dated August 23, 2024, to amend the Financing Agreement. More specifically, the Ministry of Health (MoH) and KEMSA have confirmed that no funds will be sent directly from the National Treasury to KEMSA. Rather, most project funds under sub-component 1.1 (Institutional and operational reforms to enhance efficiency and transparency of KEMSA) will be utilized at the MoH level, and as a result, a Memorandum of Understanding (MoU), rather than a Subsidiary Agreement, is the appropriate legal agreement under their domestic framework to set out the legal obligations of the Recipient and KEMSA for the Project. As a result, reference Page 1 The World Bank Building Resilient and Responsive Health Systems (P179698) to a subsidiary agreement, including as a condition of effectiveness, will be removed from the Financing Agreement. In its place, the Financing Agreement will require the Recipient to enter into an MoU with KEMSA, satisfactory to IDA, not later than 90 days after the Effective date and prior to the provision of any funds and/or the financing of any activities implemented by KEMSA under the Project. II. DESCRIPTION OF PROPOSED CHANGES 4. The level 2 restructuring proposes to amend the Financing Agreement to allow the signing of a Memorandum of Understanding between MoH and KEMSA in place of a Subsidiary Agreement. 5. The effectiveness condition at Section 5.01(b) of the Financing Agreement for “the Recipient and the Project Implementing Entity [to] have executed a Subsidiary Agreement in accordance with Section I.B of Schedule 2 to this Agreement” will be deleted. Section IB of Schedule 2 will be amended to require the Recipient to enter into an MoU with KEMSA, satisfactory to IDA, not later than 90 days after the Effective date and prior to the provision of any funds and/or the financing of any activities implemented by KEMSA under the Project. 6. Other provisions in the Financing Agreement that reference the Subsidiary Agreement shall also be amended. Summary of Performance of E&S Risk Compliance The project is not yet effective. The project is so far compliant with the E and S requirements. Describe any E&S issues and impacts associated with the change in project design. Identify and describe any potential large scale, significant and/or irreversible impacts. Describe any potential indirect and/or long-term impacts due to anticipated future activities in the project areas. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. Describe measures taken by the borrower to address E&S policy issues. Provide an assessment of borrower capacity to plan and implement the measure described. Identify key stakeholders and describe the mechanism for consultation and disclosure on E&S policies, with an emphasis of potentially affected people. Page 2 The World Bank Building Resilient and Responsive Health Systems (P179698) @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Legal Covenants Yes Loan Closing Date Extension No Conditions Yes Loan Cancellations No Development Objective No Reallocations No Summary Description No Financial Management No (Operation Abstract) Legal Operational Policies No Procurement No MFD/PCE No Institutional Arrangement No Results No Implementation Schedule No Risks No Implementation Modalities No Disbursements Estimates No Disbursements Arrangements No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? No Page 3 The World Bank Building Resilient and Responsive Health Systems (P179698) Last approved as part of PAD Data Sheet (Approval) on 13-Mar-2024 Is this project Private Capital Enabling (PCE)? No Last approved as part of PAD Data Sheet (Approval) on 13-Mar-2024 LOANS ENVIRONMENTAL & SOCIAL Environmental & Social Assessment According to the E/S Specialist are there changes proposed to the operation’s design that No would impact the Bank’s E&S assessment?” LEGAL Legal Covenants Loan/Credit/TF Description Status Action Section I.A.2 of Schedule 2. Not later than three (3) months after the Effective Date, the Recipient shall establish and thereafter maintain throughout the implementation of the Project, a Project steering committee - to be chaired by the Principal Secretary for SDPHS and comprising, amongst others, of Principal Secretary for The National Treasury, Principal IDA-75170 Not yet due No Change Secretary for Immigration and Citizen Services, CEO of Council of County Governors, and the Solicitor-General - with mandate, powers and resources satisfactory to the Association (“Project Steering Committee’ or “PSC”), as detailed in the Project Operations Manual. The PSC shall be responsible for providing general advisory in the implementation of the Project. Section I.E.2 of Schedule 2. The Recipient shall prepare and furnish to the IDA-75170 Association not later than September 30 of Not yet due No Change each Fiscal Year during the implementation of the Project (beginning in calendar year Page 4 The World Bank Building Resilient and Responsive Health Systems (P179698) 2024), a consolidated work plan and budget containing inter alia: (i) all activities proposed to be implemented under the Project during the following Fiscal Year; (ii) a proposed financing plan for expenditures required for such activities, setting forth the proposed amounts and sources of financing therefor and disbursement schedule; and (iii) the training plan for such period. Section I.E.5 of Schedule 2. Without limitation on the provisions of this Section, the Recipient shall prepare and IDA-75170 furnish to the Association the first proposed Not yet due No Change annual work plan required under the Project not later than one month after the Effective Date. Section II.2 of Schedule 2. Not later than thirty (30) months after the Effective Date, the Recipient shall, in conjunction with the Association, carry out a mid-term review of the Project (the “Mid- term Review”), covering the progress achieved in the implementation of the Project. To this end, the Recipient shall prepare - under terms of reference satisfactory to the Association - and furnish to the Association not less than three (3) months prior to the beginning of the Mid- term Review, a report integrating the results IDA-75170 Not yet due No Change of the Project’s monitoring and evaluation activities, on the progress achieved in the carrying out of the Project during the period preceding the date of such report, and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objective of the Project during the period following such date. Following the Mid-term Review, the Recipient shall act promptly and diligently in order to take, or cause to be taken, measures recommended to ensure the efficient completion of the Project and Page 5 The World Bank Building Resilient and Responsive Health Systems (P179698) the achievement of the objective as well as any corrective action deemed necessary by the Association to remedy any shortcoming noted in the carrying out of the Project in furtherance of the objective of the Project. The Recipient shall enter into a Memorandum of Understanding with the Kenya Medical Supplies Authority (KEMSA), satisfactory to IDA, not later than ninety (90) IDA-75170 Not yet due New days after the Effective date and prior to the provision of any funds and/or the financing of any activities implemented by KEMSA under the Project. Conditions Type Description of Conditions Action The Association is satisfied that the Recipient has an Effectiveness No Change adequate refugee protection framework. The Recipient and the Project Implementing Entity have Effectiveness executed a Subsidiary Agreement in accordance with Marked for Deletion Section I.B of Schedule 2 to this Agreement. The Co-financing Agreement has been executed and delivered and all conditions precedent to its Effectiveness effectiveness or to the right of the Recipient to make No Change withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. The Recipient has prepared and adopted the Project Operations Manual (“POM”) in form and substance Effectiveness satisfactory to the Association, in accordance with the No Change provisions of Section I.C.1(b)ii of Schedule 2 to this Agreement. The Recipient has established a dedicated Project Management Team (“PMT”), with adequate resources and facilitation, key staff holding such qualifications and under terms of reference acceptable to the Association, such staff to include a project manager, Project Effectiveness No Change components coordinators, assistant coordinators, a monitoring and evaluation specialist, at least one dedicated specialist for each of social risks and environmental risks management and any other technical and fiduciary specialists as may have been Page 6 The World Bank Building Resilient and Responsive Health Systems (P179698) agreed with the Association and as further detailed in the POM. The Recipient has prepared, consulted upon, adopted and publicly disclosed the Environmental Social and Management Framework, the Vulnerable Groups Effectiveness No Change Planning Framework, the Medical Waste Management Plan, the Stakeholder Engagement Plan and the Labor Management Procedures. The Recipient has assessed the security risks of the Effectiveness Project and included measures to mitigate such security No Change risks in the POM. KEMSA has assigned an environmental and social risks management (E&S) focal person to maintain Effectiveness No Change coordination and support E&S implementation of the Project. This Agreement shall not become effective until evidence satisfactory to the Bank has been furnished to the Bank that the Financing Agreement has been Effectiveness No Change executed and delivered and all conditions precedent to its effectiveness (other than effectiveness of this Agreement) have been fulfilled. Page 7