The World Bank Transforming Health Systems for Universal Care (P152394) REPORT NO.: RES38960 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE APPROVED ON JUNE 15, 2016 TO REPUBLIC OF KENYA HEALTH, NUTRITION & POPULATION AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Carlos Felipe Jaramillo Regional Director: Dena Ringold Practice Manager/Manager: Ernest E. Massiah Task Team Leader(s): Jane Chuma, Toni Lee Kuguru The World Bank Transforming Health Systems for Universal Care (P152394) ABBREVIATIONS AND ACRONYMS FM Financial Management GFF TF Global Financing Facility Trust Fund GoK Government of Kenya MoH Ministry of Health MTR Midterm Review PDO Project Development Objective PHRD Policy and Human Resources Development UHC Universal Health Coverage CERC Contingency Emergency Response Component The World Bank Transforming Health Systems for Universal Care (P152394) BASIC DATA Product Information Project ID Financing Instrument P152394 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 15-Jun-2016 30-Sep-2021 Organizations Borrower Responsible Agency Kenya National Treasury Ministry of Health Project Development Objective (PDO) Original PDO The project development objective is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. Current PDO The project development objective is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-58360 15-Jun-2016 04-Jul-2016 29-Sep-2016 30-Sep-2021 150.00 62.00 84.00 TF-A2561 15-Jun-2016 04-Jul-2016 29-Sep-2016 30-Sep-2021 40.00 21.73 18.27 TF-A2792 15-Jun-2016 04-Jul-2016 04-Jul-2016 30-Jun-2020 1.10 .46 .64 The World Bank Transforming Health Systems for Universal Care (P152394) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. The Transforming Health Systems for Universal Care Project (THS-UCP) includes a credit for an equivalent of US$150.0 million (Credit IDA-5836-KE; P152394) approved on June 15, 2016, an additional US$40.0 million grant from the Global Financing Facility (GFF) Trust Fund (TF0A2561) approved on April 27, 2016, and a US$1.1 million grant from the Japan Policy and Human Resources Development Fund (PHRD) (TF0A2792) approved on June 7, 2016. The Project became effective on September 29, 2016. The Project closing date is September 30, 2021. The project development objective (PDO) is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. 2. A Level II restructuring (Report No: RES32133) was carried out in May 2019 after the Mid-Term Review (MTR) held from March 25 - April 5, 2019 and introduced project design adjustments aimed at addressing implementation bottlenecks and aligning the project activities with the Government of Kenya’s (GoK) Universal Health Coverage (UHC) agenda, including a reallocation of US$14 million from Component 3.1 to Component 2.3. 3. The Project has been under implementation for about 3.5 years. The April 2019 MTR confirmed (i) the alignment between project implementation and its PDO, which remains achievable by the end of the Project; (ii) the adequacy of the three components for the achievement of the PDO; and (iii) the relevance of the Project's indicators (Results Framework). The progress towards achievement of PDO is considered Moderately Satisfactory (MS), and although 3 out of the 4 PDO- level indicators and 6 out of the 8 intermediate results indicators were achieved or surpassed Year 2 targets, the progress towards implementation was downgraded at the last ISR (Seq. No: 7, filed June 23, 2019) to Moderately Unsatisfactory (MU) due to: (i) the low disbursement (less than 30 percent overall at mid-term point); and (ii) the “MU” ratings for project management, procurement and financial management. Financial Management rating remains MU as most of the key actions agreed on in previous missions have not been addressed which include: (i) reconcile counties expenditure for the period up to March 2019 to ensure that the balances are accurate; (ii) ensure that imprests management complies with the Public Finance Management Act, and (iii) address questionable expenditures. 4. As of December 2019, the Project had disbursed US$83.3 million, 45 percent of the total financing: US$61.52 million out of US$150.0 million from the IDA credit and US$21.40million out of US$41.1 million from the GFF Trust Fund and US$461,161 out of US$1.1 million from the PHRD Trust Fund. 5. This Restructuring Paper seeks approval for a restructuring to include a Contingent Emergency Response Component (CERC) in the Project. Integrating a CERC into the project allows the country to rapidly access a portion of its The World Bank Transforming Health Systems for Universal Care (P152394) undisbursed International Development Association (IDA) balance to address immediate financing needs in the event of a crisis and/or emergency. B. RATIONALE FOR RESTRUCTURING 6. The proposed project restructuring is in response to the request of the GoK dated October 12, 2019, to include a CERC in the Project. 7. East Africa is uniquely vulnerable to and bears a large burden of emerging infectious diseases and endemic zoonoses. In Kenya, multiple hazards – including disease outbreaks (such as anthrax, rabies, Rift Valley Fever, Leishmaniasis, and Dengue Fever), droughts, floods, landslides, and other climate-related events – have contributed to an increased momentum to strengthen mechanisms to manage disasters, pandemics, and other risks. A series of disaster- related policies and plans have been prepared by the GoK to manage and control public health emergencies. These include, but are not limited to, the National Disaster Response Plan, a National Emergency Response Plan and Standard Operating Procedures, and the Disaster Risk Management Strategic Plan—as well as establishing several mechanisms to support disaster response, pandemic preparedness, and inter-sectoral coordination between human and animal health. 8. Integrating a CERC in the project will allow the country to rapidly access a portion of its undisbursed IDA balance to address immediate financing needs in the event of a crisis and/or emergency. Furthermore, a CERC will strengthen the level of country preparedness and eliminate the need for time-consuming restructuring in the immediate aftermath of a crisis when the Client is in urgent need of quick liquidity. The availability of such immediate financing is critically important in: (a) supporting the Client in the initial response; (b) helping to coordinate the early recovery phase from an emergency; and (c) bridging the gap to longer-term recovery and reconstruction phases. A CERC can be used for other immediate and emerging risks, such as natural and man-made disasters, conflicts, epidemics and economic shocks. II. DESCRIPTION OF PROPOSED CHANGES 9. The Level II restructuring proposes the following changes to the project: (a) adding a component on CERC; and (b) reallocation of funds. 10. Component 4: Contingent Emergency Response Component: (US$1 Million). This CERC is included in the Project in accordance with Investment Project Financing (IPF) Policy, paragraphs 12 and 13, for situations of urgent need of assistance. There is a moderate to high probability that during the life of the Project Kenya will experience an epidemic or outbreak of public health importance or other disaster which causes a major adverse economic and/or social impact (e.g. Ebola), which will result in a request to the Bank to support mitigation, response, and recovery in the counties affected by such an emergency. To trigger this component, the government needs to declare an emergency or provide a statement of fact justifying the request for the activation of the use of emergency funding. In addition to the funds allocated to this component, the government may request the Bank to re-allocate undisbursed project funds to support response and reconstruction. If the Bank agrees with the determination of the disaster/emergency, and associated response needs, this component would allow the government to request the Bank to utilize the following resources: (i) the funds allocated for the component; and (ii) draw resources from the unallocated expenditure category and/or re-categorize and reallocate financing from other project components to cover emergency response and recovery costs. An Emergency Response Operations Manual will be prepared by the Client as a condition of disbursement and annexed to the Project’s Operations Manual. It will detail financial management, procurement, safeguards and any other necessary implementation arrangements. Disbursements would be made against a positive list of critical goods or the procurement of works, and consultant services required to support the immediate response and recovery needs. The Client will begin drafting the The World Bank Transforming Health Systems for Universal Care (P152394) CERC Operations Manual immediately and will have it approved by the Bank to ensure that the CERC is in place as soon as possible in the event that an emergency occurs during the implementation of the Project. 11. Reallocation of Funds. Proposed changes include the reallocation of funds in the amount of US$1 million from IDA credit allocated to Project components 2 and 3 to component 4 (CERC) to address the immediate needs in case of emergency. The reallocation will be carried out as per Table 1 below: TABLE 1. PROJECT COST/IDA CREDIT BY COMPONENT (US$, MILLIONS) Total Project IDA Original IDA 1st Restructuring Proposed Revised Components Cost Allocation Allocation Reallocation Reallocation 1. Improving Primary Health 150.0 115.0 115.0 - 115.0 Care Results 2. Strengthening Institutional 15.1 9.0 23.0 (-0.4) 22.60 Capacity 3. Cross-county/ Intergovernmental 26.0 26.0 12.0 (-0.6) 11.4 Collaboration and Project Management 4. CERC - - - 1.0 1.0 Total 191.1 150.0 150.0 150.0 12. The proposed new component and reallocation of funds do not affect PDO achievement and corresponds to a Level II restructuring. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ The World Bank Transforming Health Systems for Universal Care (P152394) Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Improving Primary Health Care Improving Primary Health Care 150.00 150.00 Results Results Strengthening Institutional Strengthening Institutional 29.10 29.10 Capacity Capacity Cross-county and Cross-county and Intergovernmental Intergovernmental Collaboration, 12.00 12.00 Collaboration, and Project and Project Management Management TOTAL 191.10 191.10 OPS_DETAILEDCHANGES_REALLOCATION _TABLE The World Bank Transforming Health Systems for Universal Care (P152394) REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-58360-001 | Currency: XDR iLap Category Sequence No: 1A Current Expenditure Category: Performance Grants, part A1 74,130,000.00 12,154,884.37 74,130,000.00 81.00 81.00 iLap Category Sequence No: 1B Current Expenditure Category: Performance Grants, part B2 850,000.00 0.00 850,000.00 100.00 100.00 iLap Category Sequence No: 2A Current Expenditure Category: GDS,NCS,CS,TRG,OC,A2,B1 excpt B1bi 12,570,000.00 7,888,533.43 11,845,200.00 54.00 54.00 iLap Category Sequence No: 2B Current Expenditure Category: GDS,NCS,CS,TRG,OC,B1bi 0.00 0.00 0.00 0.10 0.10 iLap Category Sequence No: 2C Current Expenditure Category: Goods under Part B1(c) (iv) of the Project 9,880,000.00 0.00 9,880,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GDS,WKS,NCS,CS,TRG,OC part C 8,470,000.00 1,589,904.53 8,470,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: New Category for CERC 0.00 0.00 724,800.00 100 Total 105,900,000.00 21,633,322.33 105,900,000.00 . The World Bank Transforming Health Systems for Universal Care (P152394)