Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6595-MOZ MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE AMOUNT EQUIVALENT TO SDR 66.3 MILLION TO MOZAMBIQUE FOR A HEALTH SECTOR RECOVERY PROGRAM NOVEMBER 7, 1995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (August 1995) Currency Unit = Mozambican Meticais US$1.00 = Mt 10,210 Mt 1.00 US$ 0.0001 FISCAL YEAR Government Fiscal year = January 1 to December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy FY Fiscal Year GACOPI Gabinete de Coordenacao de Projectos de Investimento (Investment Projects Coordination Unit) GDP Gross Domestic Product GOM Government of Mozambique HDF Rural Health Development Fund HEALTH I Health and Nutrition Project HIV Human Immuno-deficiency Virus ICB International Competitive Bidding IDA International Development Association IFC International Finance Corporation MCH Maternal and Child Health Care MHS Mozambican National Health Policy and Strategy MOH Ministry of Health NCB National Competitive Bidding PTIP Plano Trienal de Investimentos Publicos (Triennial Public Investment Program) SCC Systematic Client Consultation SDR Special Drawing Rights FOR OFFICIAL USE ONLY REPUBLIC OF MOZAMfflQUI HEALTH SICTOR RECOVERY PRQGRAM PROGRAM AND CREDIT SUMMARY Borrower: Republic of Mozambique Implementing Agency: Ministry of Health (MOH) Beneficiaries: Primarily women and children living in rural areas through increased coverage and improved quality in the health system. Health staff through the implementation of the Health Manpower Development Plan and improved working conditions. Amount: Program: 355.7 million; IDA: SDR 66.3 million (US$ 98.7 million equivalent) Terms: Standard IDA terms with 40-year maturity Commitment Fee: 0.50 percent on undisbursed balances beginning 60 days after signing less any waiver Financing Plan: See Schedule A Poverty Category: Program of Targeted Interventions Economic Rate of Return: Not applicable. Program design based on cost-effectiveness Staff Appraisal Report: 14373 Map: IBRD 26934 Project ID: MZ-PA-1792 Ths document has a restricted distribution and may be used by recipients only in the performance of their I official duties. Its contents may not otherwise be disclosed without World Bank authorization. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MOZAMBIQUE FOR A HEALTH SECTOR RECOVERY PROGRAM I. I submit for your approval the following memorandum and recommendation on a proposed development credit to the Republic of Mozambique for SDR 66.3 million, the equivalent of US$ 98.7 million, on standard IDA terms, with a maturity of 40 years, to help finance a Health Sector Recovery Program. The government and the beneficiaries will provide US$ 116.5 million and other donors will provide US$ 140.4 million. 2. Country Background. With a population of about 17 million, mostly rural and poor, subject to periodic drought and just emerging from nearly two decades of internal warfare, Mozambique is generally regarded as one of the world's greatest development challenges. Yet Mozambique has the potential to change from its present situation. There are substantial prospects for economic development in the country if investment is allowed to flow towards economic opportunity. The potential returns to increased investment in human capital in Mozambique are enormous in terms of improvements in social welfare and as stimuli to economic growth. The absolutely low starting point of Mozambique, in terms of basic social indicators and access to and quality of social services, indicates that the marginal dollar, wisely spent, can yield high returns. Peacetime has made it possible for the government to reestablish effective communication with the population in areas formerly cut off by the war and to collaborate with communities in the planning and implementation of programs intended to help them to improve their lives. 3. Sector Context. Mozambique has a typical pre-transitional epidemiological pattern. Infant mortality rate stands at about 162 per thousand and child mortality rate at 283. Total fertility rate is 6.5 with no indications of change. As in most sub-saharan countries, the main health problems in Mozambique are infectious and parasitic diseases, particularly diarrhea, acute respiratory infection, measles, tuberculosis, malaria, pneumonia and child malnutrition. Among adults a principal cause of morbidity and mortality (as indicated by hospital data) is tuberculosis. Recently available facility-based data indicate that the spread of HIV infection is still limited but rapidly on the increase (as the incidence of tuberculosis would suggest). 4. One of the most impressive achievements of the Mozambican government during the years following Independence was the expansion of health services delivery, particularly at the basic levels. Between 1975 and 1988, the number of operating health posts increased nearly three-fold, from 326 to 933, while the number of health centers more than doubled from 100 to 210. The bulk of these facilities were constructed in rural areas. However, civil war destroyed or closed nearly half of the first level health care network. Adverse security conditions also discouraged staff from staying in rural areas. In 1982, more than 90 percent of districts had a Tecnico de Medicina (a mid-level health worker able to manage district health finances, diagnose and treat most health problems, and even perform limited surgery), and 42 percent had a doctor. Population to health worker ratios rose substantially over the course of the decade. In 1979, on average there were 38,000 inhabitants per doctor in the country, as compared to 45,000 in 1988. In Zambezia, one of the most war-ridden areas, this ratio increased from 183,000 inhabitants per doctor in 1979 to more than 500,000 per doctor in 1988. After nearly two decades of civil war, a peace agreement was signed in October 1992. The strategy of the government continues to - 2 - emphasize expansion of basic health care delivery, particularly to the rural areas, while also focusing on improvements in quality at all levels. 5. Through a series of policy adjustments which began in 1991, the following principles have been affirmed as the basis for the Mozambican National Health Policy and Strategy: (a) maximizing the benefits from the use of available resources; (b) fairness in distributing resources and equity in the access to health care across regions and social groups; (c) freedom of users to choose their health care providers; (d) co- existence of public and private sector; and (e) building on achievements and on lessons it has learned in the National Health Service's areas such as primary health care and essential drugs. 6. Program Objectives. Within the above framework, the objectives set for the health sector are: (a) to reduce mortality, morbidity and suffering, especially among high risk groups such as women, children and all those displaced due to the war and natural disasters; (b) to keep primary health care as the basis for the provision of good quality and sustainable health care and make it accessible to the majority of the population; (c) to develop the technical and managerial capacity of the Ministry of Health (MOH) for planning, implementing and evaluating health care and support services. 7. Health sector objectives are to be achieved through an increase in health coverage of the population from the present 40 percent level to 60 percent by the turn of the century, with better quality of services provided. 8. Program Description. Through the coordination of all major donors and the government, the Program, which encompasses all activities of the MOH, will finance a five-year time slice of the National Health Strategy. In accordance with the sector's strategy, teams from the MOH have defined objectives and identified and prepared the various components, under the overall coordination of the MOH's Planning Directorate. The Program will address the following areas: (a) resumption of and improvement in the quality of health services provided to yield a higher level of services as the sector recovers, by: (i) rehabilitating and expanding the network of first level health facilities; (ii) rehabilitating and expanding the network of rural hospitals and rehabilitating the network of provincial and central hospitals; (iii) strengthening laboratory facilities in hospitals and health centers; (iv) assuring stability in the provision of medical supplies, pharmaceuticals and laboratory reagents; (v) supporting a national maintenance strategy in the sector; (vi) supporting an institutional nutrition program for severely malnourished children and for in-patients; and (vii) supporting general provincial operations for health. (b) improvement of sector institutions, support services and sub-national health management systems by: (i) establishing policies and procedures and expanding storage capacity aimed at improving the supply system for medical supplies and pharmaceuticals; (ii) strengthening the provincial health management system, in coordination with decentralization of functions to the provinces; (iii) improving the sector's information system; and (iv) enabling national implementation of the Program, including the development of sector policy and systematic evaluations of the Program based on comprehensive consultations with ultimate clients. - 3 - (c) development of human resources capacity, by: (i) implementing a time-slice of the Health Manpower Development Plan; (ii) developing the national capacity for health personnel training; (iii) promoting continuing education of health workers; and (iv) enhancing university medical and health science training. 9. The IDA credit will concentrate on financing the following activities: (a) in health services delivery: (i) (re)construction of health centers and posts through a Rural Health Development Fund, (ii) reconstruction of rural hospitals including staff housing, (iii) rehabilitation of laboratories, and (iv) pharmaceuticals, medical supplies and incremental operating costs; (b) in institutional support: (i) warehouses for pharmaceuticals and medical supplies, (ii) TA for development of information systems, and (iii) TA for strengthening capacity to implement investment activities at the provincial level; and (c) in human resources development: (i) implementation of health training courses, (ii) rehabilitation of training institutes, and (iii) support of rural internships through the Faculty of Medicine of the Eduardo Mondlane University. 10. Program Financing. The Program is designed to finance a five year time-slice of the National Health Strategy. Financing for the first three years of the program is based on firmer commitments, whereas the last two years have only partial funding to-date. Alternative scenarios of government commitment to the health sector have been developed. Under the base case scenario, the government will contribute approximately US$ 116 million, of which some US$ 98 million is recurrent expenditures. An increasing share of the local contribution will come from cost recovery, particularly in pharmaceuticals. All major donors operating in the sector, in association, have committed to finance, on a parallel basis, an estimated sum of about US$ 239 million (IDA included). The amount of IDA financing, US$ 98.7 million, is based on the financing commitments of government given the level of anticipated non-IDA donors' financing. If the Program is implemented at an accelerated rate, donor support including IDA would be reassessed with the objective of maintaining commensurate support. If, on the other hand, the Program experiences implementation delays or if co-funding or counterpart funding is not forthcoming, the Program could be scaled down at the mid-term review. I1. Rationale for an Integrated Sector Program. The Health Sector Recovery Program initially was prepared as a regular investment project with narrow objectives and scope. During project preparation, the MOH, IDA and other donors concluded that the implementation of yet another individual project (adding to a list of over 120 current health projects) would impose a heavy burden on the capacity of the ministry. Moreover, the project would have perpetuated the provincial fragmentation of external assistance to the country. Also, because the IDA credit would have to be justifiable on its own, the project would inevitably focus on the types of sector activities which IDA finds most appealing but which are not necessarily the highest priorities for the sector given existing commitments by other donors. The result would have been an unbalanced program, full of financial gaps in important activities which are usually neglected or avoided by donors. Even if we had produced a successful insular project, our impact would have been small, as is the case with some other such projects in the sector. Even the impact of the resulting sector program, the sum of all these insular projects, might well have been small, despite a sound sector strategy which has been developed over a period of over five years in a continuous and active dialogue with all major donors. For these reasons, the government expressed enthusiastic support for the integrated sector approach and the MOH took charge in the development of the integrated sector Program. 12. Program Implementation and Monitoring. The Program will be implemented, at the central level, by the section of the Planning Directorate responsible for the implementation of all projects in the health sector (GACOPI) and at the provincial level by strengthened Provincial Departments of Planning and Finance. No new agencies will be created. The emphasis is on shifting project management to lower - 4 - tiers of government and toward greater accountability for implementation processes. Community participation in the design (through systematic client consultation methodologies) and execution of health facilities' construction and other health services should yield greater efficiency and accountability in service delivery. 13. As the implementation of the "integrated" Health Sector Recovery Program gradually shifts from a project basis to an approach centered along activity lines, supervision processes will also be increasingly undertaken along activity groupings. Supervision missions and supervision instruments (e.g., financial audits) as well as procurement and disbursement practices and other common procedures will be organized so as to minimize their demand on scarce implementation capacity in the MOH. Program supervision and monitoring will benefit from the largely untapped potential for delegating supervision of particular activities to relevant donors. This should move toward linking supervision by donors to government's own internal review processes, reduce the number of donor missions and help change the focus of assistance and government planning towards sector strategies rather than segmented projects. 14. Monitoring procedures will focus on progress and impact of the MOH's Program, measured against specific targets and actions set in the five year rolling Program. This program of expenditures has been built to reflect government commitments to the health sector in the national investment program and recurrent budget. Detailed implementation plans will be reviewed and revised each year throughout the Program life. Program reports will be designed to meet MOH information needs for decision-making, to fulfill the reporting requirements of donors and to ensure coherence with overall MOH strategy. Progress will be measured against key indicators for inputs (e.g., share of health in the public budget, level of IDA disbursements, number of facilities built), outputs (e.g., vaccination coverage, drugs availability) and outcomes (e.g., infant, child and maternal mortality, fertility rate and patient satisfaction). Areas of special focus, in keeping with the MOH's strategy, will include (i) progress in assuring equitable access by the population to a basic package of health services (with adequate quality), (ii) coverage indicators, and (iii) compliance of staffing with national norms. 15. Fiscal Stability. To succeed, an integrated sector operation such as the Health Sector Recovery Program must be implemented in a fiscally sustainable environment. What this means is not only that the Program should be affordable by the government budget, but that the resulting budget should be consistent with the restoration of macroeconomic stability, albeit in the context of long-term economic growth. While significant progress has been achieved in reducing the fiscal deficit after grants, this has to date been done mainly by increasing the mobilization of grants. To promote future fiscal sustainability and reduce aid dependency, it is important to reduce the fiscal deficit before grants through increased revenues and rationalization of investments. A key component of the government's program to raise revenues is the reform of customs announced at the March 1995 Consultative Group Meeting; another important factor is the introduction of a value-added tax over the medium-term. Rationalization of the investment program is being achieved through the development of integrated sectoral investment programs that are consistent with sectoral priorities and available future recurrent funding. Besides increased efficiency in the use of external resources, the development of such programs should generate savings in technical assistance. Fiscal space for budget rationalization is also being generated by significant reductions in military expenditures. In total, the fiscal deficit before grants would fall from about 30 percent of GDP in - 5 - 1994 to less than 15 percent by 1999. This level would be consistent with the expected reduction in Mozambique's aid dependency over the medium to long-term and sustained economic growth.' 16. Program Sustainability. The MOH explicitly designed the National Health Sector Strategy and Program to deliver a cost-effective package of basic health services. The eventual sustainability of services is enhanced by emphasis on basic rural facilities, with rural hospitals for referral services, appropriate training and use of mid-level health personnel, redeployment of existing resources, provision of generic essential medicines, community participation and cost recovery, and strengthened management support and supervision. Efficiency will also be enhanced by greater budget flexibility introduced by the integrated sector approach. However, in spite of the government's concurrent commitment to increasing levels of funding for the sector, foreseeable economic growth in Mozambique indicates that external support will be necessary to sustain health and other services for some years beyond the time slice financed by the IDA credit. 17. Despite the significant expansion in services expected to be achieved through the Health Sector Recovery Program, recurrent costs induced by investment in health facilities are expected to rise by less than 2 percent per year. This modest increase reflects the heavy weight given to rehabilitation and upgrading of existing structures which are already staffed. The overall number of health personnel is expected to remain effectively at the present level, i.e., growing less than 5 percent during the Program life. Moreover, a significant share of civil works (e.g., construction of warehouses) is likely to yield net savings of recurrent resources. The financing of incremental recurrent costs directly linked to infrastructure expansion/upgrading will be covered by increases in the sector budget, while costs linked to improvements in the quality of services will be mostly built into the overall cost of the Program and largely financed by donors on a declining basis over time (e.g., maintenance, supervision activities, transportation, etc.). An increasing share of cost recovery will help ensure long term stability of local resources. 18. IDA financing of incremental recurrent costs amounts to about US$ 8.5 million (excluding pharmaceuticals) and represent less than 5 percent of the Programs's total recurrent expenditures (excluding pharmaceuticals). If we include pharmaceuticals, the share of IDA's recurrent expenditures financing is still only about 10 percent of the total. The share of IDA in recurrent expenditures declines over the life of the Program as the government takes on an increasing share of financing of the Program. IDA financing of recurrent expenditures concentrates on medical supplies, fuel, maintenance inputs and laboratory reagents (as well as pharmaceuticals). IDA funds are not being allocated for salaries of MOH staff. 19. The government made a significant upfront commitment to raise health expenditures ( by about 40 percent in 1995) signaling increased priority to the sector. During the next five years, the share of health in the budget will grow but only slightly as overall resources remain very constrained. The annual increase in the sector's recurrent expenditures to be financed by the government is estirnated at 4 percent IAlthough economic growth will increasingly come from private sector activity, at present nearly fifty percent of GDP comes from government investment and consumption. Therefore, it is crucial that public expenditures be transparent and reflect the priorities laid out by the government. The Triennial Public Investment Program (PTIP) is the instrument used by government to account for and rationalize medium-term investment decisions. Since its inception in 1992, the PTIP has been continuously improved to better plan and control all investment activity outside the private sector (i.e., including donor support) and to identify recurrent expenditures which are often built into investment projects. In parallel, off-budget recurrent expenditures have gradually been integrated (or at least accounted for) in the budget. Financing of the 1994-96 PTIP comes largely from donors, who contribute about 80 percent of the total. - 6 - between 1996 and 2000, compounded on the sharp initial 1995 increase. This figure translates into an increase in recurrent public spending from about US$ 0.80 per capita in 1995 to about US$1. 10 per capita by the year 2000. Despite an estimated modest growth in overall public recurrent expenditures between now and the end of the century (averaging less than 2 percent p.a.), the share of health in the overall recurrent budget will increase slightly from about 6.2 percent in 1995 to 6.9 percent in 2000. The health sector investment budget is also anticipated to grow at 4 percent p.a. during the life of the Program, compared to 3 percent p.a. for the overall investment budget. 20. Lessons of Experience. Design of the proposed Program has benefited greatly from the application of lessons learned in the Health and Nutrition Project (Health I). At the time of Health I's effectiveness, most of its components were at early stages of preparation, few terms of reference for consultants and few procurement documents had been prepared, and much of the costing was still tentative. This led to an extended period of document preparation during implementation and delayed activities supported by Health I. In contrast, the preparation of the Health Sector Recovery Program has involved extensive planning and completion of tender documents preparation. Recognition of the importance of reliable and direct communication with the Bank led to the establishment of All-in-1 communications with the MOH, which are now being upgraded and expanded. Flexibility to reallocate funds during annual reviews according to implementation performance will also help to improve implementation and permit greater responsiveness to borrower needs and to the changing national situation. 21. Rationale for IDA Support. IDA's Country Assistance Strategy (CAS), which is being presented jointly with this operation, stresses the need for investment in human resources as a key instrument in the country's development strategy. The objective of the CAS is to support the government's program for poverty reduction through sustainable economic growth. In doing so, the CAS focuses particularly on the medium term development efforts directed toward human resources development and economic growth. Economic growth is fundamental to poverty reduction in Mozambique, because the country is too poor to rely only on redistributive policies for sustained poverty reduction. How growth is achieved will also affect poverty. In Mozambique, a poverty reducing growth pattern will involve a shift of resources and opportunities toward human resources and the rural areas where the poorest populations live. Recent government policy will facilitate this as the marked decrease in military expenditures releases resources for increases in the recurrent budgets for health and education services. Moreover, IDA has already provided assistance in the development of the government's strategy for health and is in a position to provide technical advice which is not readily available in the country. Finally, it is also important to note that this Program is being used as an umbrella for the integration of nearly all donor activity in the sector. 22. Implementation Strategy with Agreed Actions. As condition for board presentation, the government submitted to IDA a Letter of Sector Development Policy and a draft of the Program Implementation Manual with a detailed Program Implementation Plan. Disbursement of IDA funds will be conditioned for Civil Works under the Rural Health Development Fund on (a) establishment and staffing of a maintenance and construction monitoring unit in each of at least two provincial directorates of health, which will be the first provinces to directly administer the Fund; and (b) on development of a client consultation strategy. Assurances were obtained during negotiations that the govermnent will: (a) develop a strategy and plan of operation for reproductive health and carry out a fertility and contraceptive prevalence survey by June 30, 1997 and furnish the results to IDA for review; (b) develop a strategy and plan of operation for AIDS control by June 30, 1997; (c) develop guidelines and plan of operation for medical waste disposal by January 31, 1997; (d) develop guidelines and plan of operation for a maintenance strategy for equipment and infrastructures of health and training facilities by January 31, 1997; (e) conduct with IDA and other donors comprehensive annual Program Implementation Reviews - 7 - aimed at: (i) documenting progress toward objectives; (ii) identifying and removing obstacles to Program implementation; (iii) re-costing disbursement categories to ensure adequate financing levels; and (iv) re- progranmming to ensure responsiveness to changes in government priorities, within the objectives of the Program, submitting to IDA and other donors a progress report containing, inter alia, an annual work program and supporting budget estimates four weeks prior to these reviews; (f) carry out procurement using standard bidding and contract documents for all activities financed by IDA and according to procurement arrangements set out in the Staff Appraisal Report; (g) adopt Program reporting, auditing and monitoring procedures acceptable to IDA, and the timely preparation and submission of annual financial reports, and of external audits within nine months from the end of each fiscal year; and (h) allow the Ministry of Health-designated officials to sign all contracts with a value of US$ 250,000 or lower. 23. Environmental Aspects. The Program has been determined to be Category C. The MOH will develop medical waste disposal guidelines to be adopted in every health unit constructed by the Program; financing for an evaluation of the status of hospital waste disposal is provided in the Policy Development component. Moreover, proper sanitary conditions will be introduced in every health unit and solar energy technology in every rural health center/post financed by the Rural Health Development Fund. Since most health units built by the Program consist of small structures, and since most civil works in large structures involve rehabilitation rather than expansion, negative environrnental outputs due to construction are expected to be negligible. No environmental analysis has been prepared for this Program. 24. Program Objective/Poverty Categories. This operation is included in the Program of Targeted Interventions. Human resources development is at the core of the poverty reduction strategy for Mozambique. The health sector strategy proposed for funding under this Program focuses on rural services provision and preventive and basic health care, which typically serve the poorest segment of the population. The Program is largely aimed at the reconstruction of the rural health system, particularly in districts heavily affected by the war. Through the (re)construction of health centers and health posts, the Health Development Fund of the Program aims to bring health services to the least serviced areas of the country, which are also the poorest. The emphasis on basic and preventive care, which underscores the National Health Strategy, ensures that components aimed at improving pharmaceuticals and medical supplies and health staff training will concentrate on services which are primarily geared to the needs of the poor. 25. Participatory Approach. Program preparation was carried out by staff of the MOH with intensive consultation with donors and NGOs. The value of this consultative process was recognized by all parties and is presently an integral part of the modus operandi of the MOH. Sub-projects financed under the Rural Health Development Fund will require the involvement of local communities in the design, construction and maintenance of infrastructures. Moreover, a strategy for systematic client consultation is being developed for the whole sector and is a condition for disbursement of IDA funds. 26. Benefits. The main benefits of the Program will be increased coverage and quality of health services and increased equity in access to services with a shift of resources toward rural areas and a basic package of health care. The main beneficiaries of improved basic facilities will be women and children as the primary users of first level health care through MCH-related programs. MOH staff morale and performance are expected to benefit from improved training, working conditions and incentives to which the Program would contribute. Efficiency of the health services system is also expected to improve with increased skills and the shift of human resources toward rural areas, the base levels of the system, and the relatively under-served Northern provinces. The Program will generate important external benefits by assisting the MOH in the coordination and implementation of projects undertaken by all donors. The Program is designed to achieve high gains in health status with the available resources. Because the Program contains a diverse set of components to provide improved management, logistical efficiency, and - 8 - rehabilitation of facilities, as well as components directly increasing health status, it is not possible to obtain precise estimates of the economic benefits. The sector strategy, on which the management, logistics and rehabilitation components are focused, however, is the delivery of an appropriate basic package of services. An economic analysis of the contents of the basic package demonstrated that they are appropriate to the burden of disease in Mozambique; for example the package focuses inter alia on the treatment of children with acute respiratory diseases, malaria and diarrhea diseases which cost only from US$ 0.15 to US$ 0.75 per life year saved and emphasizes primary and secondary levels of care in rural areas. The Program is cost effective in reducing the nation's burden of disease. 27. Risks. The main risk of the Program is the MOH's potential difficulty to implement fully parts of the sector's extensive program, leading to bottlenecks and inefficient service provision. To address this risk, the Program has been designed to support the improvement of management capacity in the MOH and aims to coordinate donors' activities so that implementation constraints are alleviated. Moreover, the Program's concentration of financing in non-civil works is an attempt to reduce pressure in the area of infrastructure implementation, which has proved to be one of the main obstacles to the early implementation of the Health and Nutrition Project. As for human resources development, the MOH has limited capacity to manage training resources. To mitigate this problem, training activities and capacity improvements will continue to be carefully timed and outputs modestly estimated based on recent past experience. Finally, experience from the Health and Nutrition Project has also shown tender document preparation to be one of the most stringent constraints to the successful implementation of a health project in Mozambique. In order to assure Program implementation success, from the start, the MOH has undertaken an unprecedented effort to prepare tender documents for all major procurement packages prior to Program appraisal. 28. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. James Wolfensohn President Washington, D.C. November 7, 1995 Attachments 9- Schedule A Page I of 2 REPUBLIC OF MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM ESTIMATED PROGRAM COSTS AND FINANCING PLAN Table I: Estimated Costs (US$ million, including taxes and contingencies) Local Foreign Total Health Services Delivery 108.1 148.2 256.2 Health Facilities Development 21.1 60.5 81.6 Rural Health Development Fund 7.7 23.1 30.7 Laboratories Strengthening 0.2 2.4 2.6 Pharm. & M. Supplies Program Stabilization 0.3 25.3 25.7 National Maintenance Program 2.2 2.3 4.5 Institutional Feeding Program 1.3 9.1 10.4 General Provincial Operations 75.2 25.5 100.8 Institutional Support 47.3 16.3 63.5 Supply System Improvement 0.6 3.0 3.5 Provincial Health Manag. Improvement 2.8 6.1 8.9 Health Info. System Improvement 0.9 1.5 2.5 Program Management 42.2 5.4 47.6 Human Resources Development 21.5 14.4 35.9 H.M.D. Plan Implementation (Formal 14.9 2.3 17.2 Training) Training Capacity Improvement 3.0 9.3 12.3 In-Service Training Improvement 2.5 0.1 2.6 Faculty of Medicine 0.5 0.1 0.6 Training Operations 0.6 2.6 3.1 Total 176.8 178.9 355.7 l - 10 - Schedule A Page 2 of 2 Table II: Financing Plan (US$ million, including taxes and contingencies) Source of Financing Local Foreign Total Gov't of Mozambique 104.6 11.9 116.5 Donors 32.7 107.7 140.4 IDA 39.5 59.2 98.7 Total 176.8 178.9 355.7 -11- Schedule BI Page 1 of 3 REPUBLIC OF MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM Cost Effectiveness Analysis Cost Effectiveness of Selected Children's Interventions at the Primary Level of Care/a Unit Cost per Life Years Cost per life Intervention Saved Years Saved Cost per Life Year Saved for a Treated Child: (US$) (US$) Treatment of Children with Pneumonia 1.19 6.46 0.18 Rehydration Therapy 1.18 7.75 0.15 Treatment of Children with Malaria 0.83 3.88 0.21 Overall Cost per Life Year Saved:/b Treatment of Children with Pneumonia 1.19 1.62 0.74 Rehydration Therapy 1.18 2.71 0.43 Treatment of Children with Malaria - 0.83 1.36 0.61 2 - Notes: /a A comple list of nterventions and their cost effectiveness is provided in page 2 of this schedule. Detailed tables setting out the assumptions and calculations for effects and costs are summarized in the SAR. /b Taking into account difficulty of access to a health unit In addition to the focus on cost effective interventions, the Program is expected to yield substantial reductions in cost per life year saved. For example, the combined impact of increased coverage and improved quality of services (including better sector management) is estimated to reduce the cost per life year saved for treatment of children with respiratory diseases, malaria and diarrhea diseases by about 55%. Overall risk: Small. Even if the rate of implementation of the infrastructure expansion program is 50% slower than predicted, the cost per life year saved is still reduced by nearly 20%. Beneficiaries: Primarily women and children living in the rural areas. The Program will extend health services coverage to over 1.5 million additional women and one million additional children. The quality of health services available will be improved for an average of about nine million people covered by the health system. Nature of Benefits: The main benefits of the Program will be increased coverage and quality of health services and increased equity in access to services with a shift of resources toward rural areas and a basic package of health care. Key Performance Indicators: Indicators used to monitor Program performance include: (i) recurrent expenditures in the health sector; (ii) share of health posts adequately staffed; (iii) share of first level health units adequately stocked with essential drugs; (iv) vaccination coverage for DPT; (v) equity in services provision among provinces; (vi) infant mortality; (vii) maternal mortality; and (viii) client satisfaction with health services (page 3 of this schedule provides details on performance indicators). - 12 - Schedule B1 Page 2 of 3 Cost-effectiveness by Level of Care Unit cost Unit cost Life- I per per per years ife year Description of intervention Target population Intervention beneficiary saved' saved' USS USS I. Community-based interventions ARI C Mother's education on respiratory infections <5. two infants per mother 0.26 0.13 0.32 0.40 CV C Tobacco legislation/warning: national program 10% total population 15.873 0.010 0.03 0.31 DD C Construction of pit latrines, per household <5 7.19 1.80 5.43 0.33 DD C Safe water supply, per household <5 13.50 3.38 5.43 0.62 HIV C AIDS education program > 15, but all ages affected 0.49 0.24 0.15 1.67 HIV C Condom distribution for general public (per couple) 94% > 15 AIDS. all syphil. /e 13.06 6.53 6.04 1.08 MAL C Impregnated bednets, per household <5 8.18 4.09 2.26 1.81 NF C School-based vitamin A/iodine/deworming program school age, 5-14 1.37 1.37 12.67 0.11 PM C Outreach farily planning services women > 15 + newborns at risk 7.28 7.28 6.83 1.07 2. Primary level ARI I Trearnent of children with pneumonia < 5 1.19 1.19 6.46 0.18 Cl I EPI immunization <5 13.26 13.26 12.27 1.08 DD I Rehydration therapy <5 1.18 1.18 7.75 0.15 MAL I Treatment of children with malaria <5 0.83 0.83 3.88 0.21 NF I Growth surveillance and treatment of mild PCM <5 5.89 5.89 3.88 1.52 PM I TBA prenatal and delivery care newborns, mothers 19.19 19.19 4.05 4.74 3. Secondary level ARi 11 Trearment of children wirs pneumonia <5 1.27 1.27 6.46 0.20 ARI 11 Treatment of adults and children over five >5 1.76 1.76 0.74 2.38 Cl 11 Treatment of measles complications <5 /d 29.38 29.38 10.05 2.92 CV 11 Hypertensive medication and consultation >45 25.22 25.22 2.43 10.36 CV 11 Use of aspirin in pre-existing CVD >45 18.95 18.95 0.87 21.80 DD 11 Rehydration therapy <5 1.45 1.45 7.75 0.19 HiV 11 Screening blood for transfusion 6% of > 15 AIDS cases/e 23.58 23.58 10.30 2.29 HIV 11 Treatment of STDs > 15 10.87 10.87 2.71 4.01 IN] II Hospital treatment for severe injury serious injuries 209.50 209.50 3.27 64.08 MAL [I Treatment of children with malaria <5 1.62 1.62 3.88 0.42 MAL 11 Treatment of children with severe maiaria <5 17.38 17.38 3.88 4.49 NF 11 Hospital treatment of severe PCM <5 severely malnour. 40.58 40.58 5.17 7.85 PM 11 Normal prenstal and delivery care at health centers newborns, mothers 37.38 37.38 5.06 7.38 PM 11 Hospital treatment of complications newborns, modters 64.65 64.65 8.86 7.30 TB 11 Modified short-course treatment TB cases 166.48 166.48 7.71 21.59 4. Tertlary/quaternary care ARI III/IV Treatment of children with pneurnonia < 5 1.36 1.36 9.04 0.15 ARI IIUIV Treatment of adults and children over five >5 1.86 1.86 1.03 1.80 AR] IIUIV Treatment of children with severe pneumonia (IP) <5 20.34 20.34 12.66 1.61 ARI III/IV Treatment of adults with severe pneumonia UP) >5 20.34 20.34 3.10 6.57 Cl III/IV Treatmentofmeaslescomplications <5 /d 31.73 31.73 14.07 2.26 CV III/IV Treatment of Rheumatic Fever < 15 17.24 17.24 2.58 6.68 CV IIIIV Treatment of stroke or heart attack >45 135.58 135.58 0.70 194.89 DD III/IV Rehydration therapy <5 1.64 1.64 10.85 0.15 DD III/IV Hospital treaEment of severe cases <5 25.86 25.86 12.66 2.04 HIV III/IV Screening blood for transfusion AIDS from blood transf 23.59 23.59 14.42 1.64 HIV III/IV Treatrnent of STDs > 15 14.96 14.96 3.80 3.94 HIV III/IV Trearment of AIDS patients AIDS patients 126.42 126.42 n/a n/a INJ IIItIV Hospital treatment for severe injury serious injuries 217.72 217.72 4.58 47.57 MAL II[IV Treatment of children with malaria <5 4.09 4.09 5.43 0.75 MAL IIIJIV Treatment of children with severe malaria < 5 20.05 20.06 5.43 3.70 NF III/IV Hospital treatment of severe PCM <5 severely malnour. 46.45 46.45 7.23 6.42 PM IIII/V Normal prenartal and delivery care at hospita,l newborns, mothers 38.65 38.65 8.86 4.36 PM III/IV Hospital treatment of complications newborns, mothers 70.01 70.01 12.40 5.65 TB3 III/lV In-hospital short-course treatment TB cases 312.12 312.12 10.80 28.91 Methodology: The years of life lost from premature death were calculated using age specific mortality rates by disease and a life table giving life expectancy by age cohort. The age specific mortality pattern for SSA used in the WB Global Burden of Disease cxercise was adapted to Mozambique. Key inputs were tailored to Mozambique were the mortality from HIV seroprevalence. maternity, malaria. nutritional deficiencies, and injuries, in addition to fertility, and the population age structure. Intervention costa were estimated from project information as well as adaptation of previous studies. Costa were estimated from separate line items for overhead, wages, equipment, drugs and supplies. Detailed tables setting out the assumptions and calculations for effecrs and costs are available in the project files and are summarized in the SAR. This is the [cost perl life year saved for those teated (i.e. not taking into account difficulty of access to a health unit). LIST OF KEY INDICATORS FOR MONITORING AND EVALUATION I No R I N D INDICATORS || Present Target for Methodology Section in Frequency of _____________________________________________________ jj Value Year 2001 Charge measurement Pre-input Indicators______ _______________ t Government recurrent expenditures in the Health Sector in USD (million) Coordinator DPES 16.1 18.8 DPES DNPC I ycar Input Indicators _____ ____ 2 Proportion of health posts staffed with Health DIS non-trained personnel only 30% 0% Information DNPC I year _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~~~~~~~ ~~~~~~~~~~Systemj 3 Proportion of first level health facilitis proprly stocked with Essential _ Facility based Dep. Farm _ Drugs Program kits 40% 80% survey DNS 2 year Output Indicators 4 Vaccination coverage with DPT 3rd dose Health DIS _ 55% 80% Information DNPC 1 year 5 Mozambique's Equity Index* from the Operational Planning Exercise Operational DNPC 8 * Planning Teams I year Outcome Indicators 6 Infant mortality rate (per 1000 live births) Community DNSIDNPC 162 120 survey 3 years 7 Maternal mortality rate (per 100,00 pregnancies) Community DNS/ 1100 690 Survey DNPC 3 years 8 Client satisfaction with health services per level of facility; proportion of Community DNS/ interviewed responding positively 39%** 75% survey DNPC 3 years *The equity index calculates the ratio of availability and accessibility of basic services in the best and least served populations within each province. The value 8 represents a national average of the provincial values. The indicator allows the program to focus on the provinces with the highest inequity. The national target for the year 2000 is still being discussed within the MOH. ** Small urban survey in Maputo, 1994. -14- Schedule B2 Page 1 of 1 REPUBLIC OF MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM Financial Summary (US$ million) 1996 1997 1998 1999 2000 Project Costs: Investment Costs 30.8 38.8 43.3 44.3 22.5 Recurrent Costs 40.6 37.9 38.5 28.6 30.4 Total 71.4 76.7 81.8 72.9 52.9 Financing Sources: Percentages IDA 20.1 26.6 31.2 33.5 26.5 Other Donors 50.5 44.3 40.5 32.8 25.1 Government 29.4 29.1 28.3 33.7 48.2 Total 100.0 100.0 100.0 100.0 100.0 Note: Recurrent Costs include salaries which are entirely financed by the government and other donors. IDA finances less than 10% of recurrent costs (excluding pharmaceuticals IDA's share falls to less than 5%) - 15 Schedule C Page 1 of 2 REPUBLIC OF MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM Table HI: Procurement Arrangements (US$ million, including taxes and contingencies) Category ICB NCB Shopping Consult. Training Other NFA Total Civil Works 15.8 0.6 11.2 63.7 91.3 (14.1) (0.6) (10.0) (24.7) Inv. Goods/I 15.9 0.6 0.1 14.9 31.5 (15.7) (0.6) 0.1 (16.4) Pharmaceuticals/2 19.1 6.0 25.1 (19.1) (19.1) Ope Costs/Consumb/3 1.8 2.4 5.9 104.1 114.2 (1.0) (2.4) (5.0) (8.4) Consultants' Services 13.7 22.8 36.5 (13.7) (13.7) Training 16.5 3.8 20.3 (16.5) (16.5) Salaries 36.6 36.6 Total 50.8 3.0 2.5 30.2 17.1 251.9 355.7 IDA (48.9) (2.2) (2.5) (30.2) (15.0) (98.7) % of IDA Total 71.4 3.2 3.6 21.9 100.00 (Excluding Cons. Services & Trng.) ICB: International competitive bidding NCB: National Competitive Bidding NFA: Not Financed by the Association (IDA) N.B. Figures in parentheses are amounts financed by IDA /1 Equipment, vehicles and furniture /2 Includes drugs, medical supplies and laboratory reagents /3 Includes travel, fuel, office supplies, maintenance supplies, and some medical kits - 16 - Schedule C Page 2 of 2 Table IV: Allocation and Disbursement of IDA Credit (US$ mnillion) Category IDA Amount % of Expenditure Civil Works: 100% of foreign Rural Health Dev. Fund 8.6 and 90% of local Otlher 12.4 expenditures Investment Goods 15.5 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 70% of other local expenditures Pharmaceuticals and Medical 18.0 100% of foreign Supplies expenditures and 90% of local expenditures Operating Costs/Consumables 7.9 90% in years 1 and 2 and 70% thereafter Consultants' Services 12.9 100% Training 15.6 100% Unallocated 7.8 Total 98.7 Table V: Estimated Disbursements of IDA Credit (US$ million) l___________ FY96 FY97 FY98 FY99 FY00 FY01 Annual 7.1 17.4 23.0 25.0 19.2 7.0 Cumulative 7.1 24.5 47.5 72.5 91.7 98.7 umulative % 7.2% 24.8% 48.1% 73.5% 92.9% 100.0% - 17 - Schedule D Page 1 of 1 REPUBLIC OF MOZAMBIQUIE HEALTH SECTOR RECOVERY PROGRAM TIMETABLE AND KEY PROCESSING EVENTS (a) Time taken to prepare: 26 months (b) Prepared by: The Ministry of Health assisted by IDA2 and other donors (c) First Bank/IDA mission: December 1992 (d) Appraisal mission departure: February 12, 1995 (e) Date of negotiations: September 18-26, 1995 (f) Planned date of effectiveness: January 2. 1996 (g) List of relevant PCRs/ICRs and PPARs: None 2 Task Team: Ricardo Silveira (Sr. Economist, Task Manager), Kees Kostermans (Public Health Specialist), Eugene Boostrom (Sr. Public Health Specialist) and %.quim Durao (Financial Analyst). - 18 - Schedule E Page l of 3 AFRVP - Africa Regional Office AF1OR * Southern Africa Department AF1C2 - COUNTRY OPERATIONS 2 Status Of Bank Group Operations In MOZAMBIQUE PFDBR25 - Summary Statement Of Loans and IDA Credits (LOA data as of 9/30/95 - MIS data as of 11/01/95) By Country Country: MOZAMBIQUE Amount in US$ million (Less cancellations) Loan or Fiscat Undis- CLosing Credit No. Year Borrower Purpose Bank IDA bursed Date Credits 5 Credits(s) closed 240.07 C19070-MZ 1988 MOZAMBIQUE EDUC. 1 15.90 1.48 12/31/95 C19490-MZ 1989 MOZAMBIQUE URBAN REHAB 60.00 10.72 12/31/95 C19890-MZ 1989 MOZAMBIQUE HEALTH & NUTRITION 27.00 10.58 12/31/95(R) C20330-MZ 1989 MOZAMBIQUE HSEHOLD EGY CREDIT 22.00 13.45 12/31/97(R) C20650-MZ 1990 MOZAMBIQUE TRNS.REH.(BEIRA CORR 40.00 17.77 06/30/96 C20660-MZ 1990 MOZAMBIQUE ECONOMIC & FINANCE M 21.00 8.10 12/31/97 C20810-MZ 1990 MOZAMBIQUE INDUSTRIAL ENTERPRIS 50.10 48.70 12/31/97 C20820-MZ 1990 MOZAMBIQUE SMALL AND MEDIUM-SCA 32.00 16.15 12/31/96 C21750-MZ 1991 MOZAMBIQUE AGRI.REHAB.&DEV 15.40 11.66 06/30/99 C22000-MZ 1991 MOZAMBIQUE EDUCATION 11 53.70 41.98 04/30/97 C23370-MZ 1992 MOZAMBIQUE AGR.SER. REHAB. 35.00 32.80 12/31/00 C23740-MZ 1992 MOZAMBIQUE FIRST ROAD & COASTAL 74.30 56.11 06/30/98 C23840-MZ(S) 1992 MOZAMBIQUE ECON. RECOVERY CR. 180.00 18.63 12/31/95(R) C24360-MZ 1993 MOZAMBIQUE CAPACITY BUILDING(HU 48.60 46.61 06/30/99 C24370-MZ 1993 MOZAMBIOUE LEG & PUB SEC. CAPAC 15.50 14.83 06/30/99 C24540-MZ 1993 MOZAMBIQUE MAPUTO CORRIDOR 9.30 8.44 12/31/98 C24790-MZ 1993 MOZAMBIQUE RURAL REHABILITATION 20.00 20.21 12/31/98 C24870-MZ 1993 MOZAMBIOUE FOOD SECURITY 6.30 5.81 02/28/98 C25300-MZ 1993 MOZAMBIQUE LOCAL GOVERNMENT EN 23.20 20.54 03/31/98 C25990-MZ 1994 MOZAMBIQUE 2ND ROAD AND COSTAL 188.00 171.90 06/30/01 C26070-MZ 1994 MOZAMBIQUE FINANCE SECTOR CAPAC 9.00 8.64 06/30/00 C26280-MZ(S) 1994 MOZAMBIQUE SERC 200.00 116.75 08/30/97 C26290-MZ 1994 MOZAMBIQUE GAS ENGINEERING(ENGY 30.00 28.85 06/30/00 TOTAL number Credits = 23 1,176.30 730.70 TOTAL**- 1,416.37 of which repaid TOTAL held by Bank & IDA 1,416.37 Amount sold of which repaid TOTAL undisbursed 730.70 Notes: Not yet effective ' Not yet signed ' Total Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits. (R) indicates formally revised Closing Date. (S) indicates SAL/SECAL Loans and Credits. The Net Approved and Bank Repayments are historical value, all others are market value. The Signing, Effective, and Closing dates are based upon the Loan Department offical data and are not taken from the Task Budget file. MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM STATEMENT OF IFC INVESTMENTS As of July 31, 1995 (In millions US Dollars) - Original Gross Commitments - Held Held Unds. Fiscal Years Obligor Type of Business IFC IFC Ptpnt. Totals by by Include. Committed Loan Equity IFC Ptpnt. Ptpnt. 1987 CompanhiaAgro-Industrial Food and Agribusiness 2.74 - - 2.74 1.24 1988 a/ XAI XAI Energy - 7.75 - 7.75 - 1993 Hoteis Polana Limitada Tourism 3.50 - - 3.50 2.98 Total gross commitments b/ 6.24 7.75 - 13.99 Less cancellations, terminations, repayment & sales 2.02 7.75 - 9.77- Total commitments now held c/ 4.22 - - 4.22 4.22 - Pending commitments AEF - Bonar .30 - - .30 AEF - Maputo Coke 1.00 .30 - 1.30 AEF - RDB 1.20 - - 1.20 Total pending commitments 2.50 .30 - 2.80 Total commitments held and pending commitments 6.72 .30 - 7.02 Total undisbursed commitments - - - 0.00 a/ Investments which have been fully canceled, terminated, written-off, sold, redeemed, or repaid. b/ Gross commitments consist of approved and signed projects. c/ Held commitments consist of disbursed and undisbursed investments. tI Pz - 20 - Schedule E Page 3 of 3 REPUBLIC OF MOZAMBIQUE HEALTH SECTOR RECOVERY PROGRAM Disbursement Performance The Bank's portfolio in Mozambique is fairly large and includes 24 ongoing operations. While some improvement in project implementation has been recorded, the Government's limited capacity to implement projects remains a major issue. One of the issues observed in project implementation is slow disbursement, i.e., slower than originally anticipated in the SARs. The overall disbursements (as of September 30, 1995) were about 32% of the approved credits. The major generic problems in disbursements are (a) procedures at the Bank of Mozambique and at the Ministry of Finance; and (b) lack of trained procurement and disbursement staff at implementing agencies. Disbursements are also slowed by deficiencies in project design including overoptimistic assumptions about implementation capacity. To remedy these problems, a number of procurement and disbursement workshops have been carried out and Bank disbursement and procurement officers have visited Mozambique periodically to help improve processes at implementing agencies and at the Bank of Mozambique and the Ministry of Finance. The only IDA credit to the health sector (Health and Nutrition Project) was restructured in 1994 and is now performing well, having disbursed about 60% of the credit. MAP SECTION IBRD 26934 , LAIRE TANZANATN AWGOAX COMOOkO,jS5~ 8 t TANZANIA w Palma ZII%bA97b jDGSA _ Mueda -z C SWAZLAND ' \ CABC. SFoRuTl TO \DELGADO _ \ @ ~~~~~~~~~~~~~~PEMBA MALAWI I LICHINGA NASS,A Mantepuez E ZAMBlA \ Lilongw\ - Nacalo TETEN PULA Mocombique Songa M locu TETE ~ ZAMBEZIA Macubao To Hc-irore - Ha rare a Horarc )MAIi':.4 CajM QUELIMANE MOZAMBIQUE ZIMBABWE S Gorongosa HEALTH SECTOR ZIMBABWE 0 RECOVERY PROGRAM zCHIM1 50) *(,)BEIA PAVED ROADS J.BEIRA -.-- RAILROADS / *~ INTERNATIONAL AIRPORTS ± OTHER AIRPORTS To ,odeoo -- - PORTS OF REGIONAL IMPORTANCE T. R.d-ng. LOCAL PORTS g SELECTED TOWNS ®( PROVINCE CAPITALS \ \ ' ,4HAiwiAv1 BA*NE <*) NATIONAL CAPITALS PROVINCE BOUNDARIES K t . INTERNATIONAL BOUNDARIES INHAMBANE SOUTH Massigir, AFRICA >c 0 ia -o s00 200 30 OI I J > XAI-X(AI KILOMETERS t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~The bOIndrorls. colors. denomin,,tot.or and =na otheR,mlormOhotn t 1 ~~~~.nnmurr~~~~~~ sltomnn~~~~h o- ms. mop do nor imply. on me~ oTh ofTeW,dgnytG-P, : - 2j , rMAPUTO Ony IO o,t RI Iepn stnos of ont ,O P, o naY endO,Semet t SWAZILAND o orccrtnnceo(nych ('Mbabane MAPlJTO 11/7/1995 _wxm cix u 1351 T IR F .7 N'. .- - 1 :- - [ I : a. : - - ' . - - : -- I