Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD2201 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR7.4 MILLION (US$10 MILLION EQUIVALENT) IN CRISIS RESPONSE WINDOW RESOURCES TO THE REPUBLIC OF MOZAMBIQUE FOR A SOCIAL PROTECTION PROJECT February 27, 2017 Social Protection & Labor Global Practice Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2017) Currency Unit = Mozambican Metical (MZN) MZN70.42254 = US$1 US$1.35883 = SDR1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing ASA Advisory Services Analytics CAS Country Assistance Strategy CCGC Coordinating Council for Disaster Management CERC Contingent Emergency Response Component CRW Crisis Response Window CTGC Technical Council for Disaster Management DFID Department for International Development – UK DO Development Objective ENSSB Estratégia Nacional de Segurança Social Básica ESMF Environmental and Social Management Framework FEWSNET Famine Early Warning Systems Network FM Financial Management GoM Government of Mozambique GRS Grievance Redress Service IDA International Development Association INAS National Institute of Social Action INGC National Institute for Disaster Management MASA Ministry of Agriculture and Food Security MGCAS Ministry of Gender, Children and Social Action MZN Mozambique Metical NGOs Non-Governmental Organizations PAD Project Appraisal Document PASD Direct Social Support Program PASP Productive Social Action Program PDO Project Development Objective PIU Project Implementation Unit PSSAS Program of Social Action Services PSSB Basic Social Subsidy Program RPF Resettlement Policy Framework RSR-TF Rapid Social Response Trust Fund SETSAN Technical Secretariat for Food Security and Nutrition UNICEF United Nations Children's Fund WB The World Bank WFP World Food Program 2 Regional Vice President: Makhtar Diop Country Director: Mark Lundell Senior Global Practice Director: Michal Rutkowski Acting Practice Manager: Jamele Rigolini Task Team Leader: Eric Zapatero 3 MOZAMBIQUE SOCIAL PROTECTION PROJECT – ADDITIONAL FINANCING (P161351) Table of Contents Additional Financing Data Sheet .................................................................................................................. 5 I. Introduction .............................................................................................................................................. 8 II. Background and Rationale for Additional Financing in the amount of US$10 million ........................... 9 III. Proposed Changes ................................................................................................................................. 17 IV. World Bank Grievance Redress ............................................................................................................ 27 Table of Annexes ANNEX I: RESULTS FRAMEWORK .............................................................................................................................. 28 ANNEX II: DETAILED DESCRIPTION OF MODIFIED OR NEW PROJECT ACTIVITIES ................................................. 37 ANNEX III: REVISED ESTIMATE OF PROJECT COSTS ................................................................................................ 42 ANNEX IV: SIMULATED IMPACTS OF ADDITIONAL FINANCING (AF) AND RESTRUCTURING .................................. 43 4 Mozambique Social Protection Project - Additional Financing ( P161351 ) AFRICA GSP01 Basic Information – Parent Parent Project ID: P129524 Original EA Category: B - Partial Assessment Current Closing Date: 30-Jun-2018 Basic Information – Additional Financing (AF) Additional Financing Project ID: P161351 Restructuring, Scale Up Type (from AUS): Regional Vice President: Makhtar Diop Proposed EA Category: B-Partial Assessment Expected Effectiveness Country Director: Mark R. Lundell 15-Mar-2017 Date: Senior Global Practice Michal J. Rutkowski Expected Closing Date: 31-Dec-2020 Director: Practice Jamele Rigolini Report No: PAD2201 Manager/Manager: Team Leader(s): Eric Zapatero Larrio Borrower Organization Name Contact Title Telephone Email Ministry of Gender, Children Permanent danilomomadebay@g Danilo Momade +258 844033981 and Social Action Secretary mail.com Project Financing Data - Parent ( MZ-Social Protection project-P129524 ) (in USD Million) Key Dates Approval Effectiveness Original Revised Project Ln/Cr/TF Status Signing Date Date Date Closing Date Closing Date Effecti P129524 IDA-52260 28-Mar-2013 19-Apr-2013 07-Oct-2013 30-Jun-2018 30-Jun-2018 ve Disbursements % Disburse Undisbu Project Ln/Cr/TF Status Currency Original Revised Cancelled Disburse d rsed d Effecti P129524 IDA-52260 USD 50.00 50.00 0.00 7.84 36.87 15.68 ve 5 Project Financing Data - Additional Financing Social Protection Project - Additional Financing ( P161351 )(in USD Million) [ ] Loan [ ] Grant [ ] IDA Grant [X] Credit [ ] Guarantee [ ] Other Total Project Cost: 10.00 Total Bank Financing: 10.00 Financing Gap: 0.00 Financing Source – Additional Financing (AF) Amount International Development Association (IDA) 0.00 IDA Credit from CRW 10.00 Total 10.00 Policy Waivers Does the project depart from the CAS in content or in other significant No respects? Explanation Does the project require any policy waiver(s)? No Explanation Bank Staff Name Role Title Specialization Unit Eric Zapatero Larrio Team Leader Sr Social Protection GSP07 (ADM Specialist Responsible) Antonio L. Chamuco Procurement Senior Procurement GGO07 Specialist (ADM Specialist Responsible) Elvis Teodoro Financial Sr Financial GGO26 Bernado Langa Management Management Specialist Specialist José C. Janeiro Team Member Sr Finance Officer WFALA Mariana Margarita Counsel Senior Counsel LEGAM Montiel Alfredo Ricardo Team Member Consultant Environmental GEN01 Zunguze Safeguards Specialist Andrea Vermehren Team Member Lead Social GSP01 Protection Specialist 6 Eden Gabriel Vieira Team Member Consultant Social Safeguards GSU07 Dava Specialist Nilsa Ricardina Joao Team Member Program Assistant AFCS2 Come Institutional Data Parent ( MZ-Social Protection project-P129524 ) Practice Area (Lead) Social Protection & Labor Contributing Practice Areas Additional Financing Social Protection Project - Additional Financing ( P161351 ) Practice Area (Lead) Social Protection & Labor Contributing Practice Areas Consultants (Will be disclosed in the Monthly Operational Summary) Consultants will be required 7 1. This Project Paper seeks the approval of the Executive Directors to provide an Additional Financing (AF) in an amount of US$10 million equivalent to the Republic of Mozambique for the Social Protection Project (P129524 – 5226MZ), to be financed under the IDA Crisis Response Window.1 2. The proposed additional credit would address the urgent needs of the population in the South of the country suffering from a prolonged drought, exacerbated by the El Niño phenomenon. To this end, the AF would provide cash transfers to 20,000 households over a 12-month period, as well as the necessary funding for communication, monitoring and project management. 3. Financing for this AF meets all the criteria for Crisis Response Window (CRW) financing as it is triggered by an exceptional catastrophic event affecting a large number of extremely poor people. Given the dire situation, the Government of Mozambique (GoM) declared a red alert2 in the most drought-affected provinces (Tete, Sofala, Gaza, Manica, Inhambane and Maputo) aiming to scale up the drought response, and calling for urgent international assistance. The red alert was called after a rigorous impact assessment undertaken by United Nations (UN) agencies and validated by the GoM and Development Partners. The proposed AF is being processed under condensed procedures provided for by OP 10.00, paragraph 12: Projects in Situation of Urgent Need of Assistance and Capacity Constraints, due to the drought emergency. 4. In addition to the AF, and using existing project funds, the Social Protection Project will be restructured. The restructuring will entail: a. Expanding existing labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis. b. Revising the results framework indicators. c. Extending the closing date to enable a proper implementation of all Project activities including the AF. 5. The Project Development Objective (PDO) of the original Social Protection Project, which is “to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system�, would be maintained. The original key performance indicators will be maintained with some targets adjusted and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring. The project’s original two components remain unchanged, and a third component will be added to accommodate the emergency financing. Financial Management (FM) and procurement arrangements will be adjusted to reflect the additional activities. An extension of the closing date of the original project to December 31, 2020 will be required. 1 Management informed the Executive Directors of its intention to allocate an indicative amount of USD30 million equivalent to support Mozambique in response to the impact of the drought caused by El Niño at a technical briefing on October 12, 2016. See the note entitled "IDA Crisis Response Window Support for Lesotho, Madagascar, Malawi, and Mozambique for an El Niño Drought Response" dated October 6, 2016 for additional information. 2 The Mozambique Government on April 12, 2016 declared a 90 days “red alert� period, that was later extended to March 2017, because of the severe drought affecting the southern and central regions of the country leaving about 1.5 million people at severe risk of food insecurity. 8 6. Mozambique is a low-income country affected by an important economic crisis. Despite rapid economic growth in the past two decades, in 2016, Mozambique’s economic performance has decelerated to its slowest pace since 2009 and over half of Mozambique’s 26 million population (20143) today is still poor and highly vulnerable. While poverty incidence has decreased from 68 percent in 1997 to 54 percent in 2003, more than half of Mozambicans still lived in poverty in 20094. Although, poverty is predominantly rural (57 percent), an additional 3.2 million poor people live in urban areas5. Mozambique is currently facing a major financial crisis caused by the continued decline in commodity prices for key Mozambican exports, rising debt levels and the devaluation of the Mozambican currency, which is having a direct impact on poverty, food security and vulnerability of its population. Thus, poverty levels in the country are likely to increase. El Niño emergency 7. In addition to its economic crisis, Mozambique is currently facing a severe drought in the southern region and parts of the central region. The El Niño climatic event has caused the worst drought in 35 years in Southern Africa, and Mozambique has been among the most affected countries. So far, El Niño has produced two different impacts in Mozambique: low rainfall (drought) in the southern and central regions, and excessive rainfall (floods) in the northern region. The lack of rainfall has resulted in a severe shortage of water sources, including drying up of wells as the groundwater table lowers. 8. An estimated 1.5 million people are in need of emergency assistance in seven provinces. According to the Food Security and Nutritional Assessment6 of the Technical Secretariat for Food Security and Nutrition (SETSAN), released in March 2016, the population affected in Maputo, Gaza, Inhambane, Tete, Manica, Sofala and Zambezia provinces includes more than 5.8 percent of the Mozambican population. The assessment showed a severe deterioration of food security since the previous assessment conducted in November 20157, particularly in rural areas where a very high share of the population relies on farming or livestock for their livelihoods. The situation will put around 200,000 children at risk of severe malnutrition over the next 12 months8. 9. Because of El Niño, cereal production in Mozambique has decreased by 11 percent compared to the last five-year average9. The previous year’s flooding (2014/15), followed by this year’s drought has severely affected food production and food security in the country. Preliminary data from the Ministry of Agriculture and Food Security (MASA), as of 18 April 2016 indicates that the drought has resulted in the loss of about 875,818 ha of crops affecting 464,879 farmers in Manica, Sofala, Tete (in the central region) and Gaza (in the southern region) provinces. 10. Current food reserves at the household level are very low but markets are functioning. In much of the South, the poorest households have completely exhausted their food reserves while most did not even harvest at all. The majority of households in drought-affected areas continue to rely on market 3 http://data.worldbank.org/country/mozambique 4 Data from last household survey, 2008/2009 5 Data on poverty and shocks estimated from Inquérito aos Agregados Familiares sobre Orçamento Familiar 2002/2003 and the Inquérito ao Orçamento Familiar 2008/2009. 6 SETSAN. Ministry of Agriculture and Food Security. March, 2016. 7 In November 2015, FEWSNET reported “Minimal food insecurity outcomes (IPC Phase 1) will prevail throughout the country�. 8 FEWSNET. Mozambique Food Security Outlook. 2016 9 FEWSNET. Mozambique Food Security Outlook. 2016 9 purchases. The level of supply in local markets is below the average for this time of the year, particularly for staple foods from households’ farming, such as maize grain, cowpeas and beans. Other staple foods that are usually imported or processed, such as maize meal and rice, are adequately available. In the central region, while food availability is relatively better compared to the southern region, it is also below the last five years average. 11. Mozambique’s lean season lasts from September to April, when the main harvest begins, and therefore there is no improvement in the food security situation foreseen in the coming months. The poor second harvest season (August-September 2016) production is contributing to even lower food availability and lower income from agricultural labor. As a result, more and more households are forced to engage in unsustainable self-employment activities, such as charcoal sales, leading to increasing competition and a rapid degradation of forest resources. At the same time, staple food prices remain extremely high, further constraining household purchasing power. According to FEWSNET10, on average, from June to July 2016, maize grain prices increased by 11 percent. Overall, maize grain prices remain well above the five-year average by 177 percent on average and above last year’s prices by 136 percent on average. July rice prices were on average about 70 percent above the five-year average and 66 percent above the prices for the same period last year. Large parts of the southern and central regions are already experiencing the effects of the lean season two months earlier as most households have exhausted their food stocks and are relying on market purchases with higher prices and significantly reduced incomes. Beyond the humanitarian response phase, poor households will need help to recover their livelihoods prior to the next lean season. 12. The GoM has extended the red alert declared in April 2016 until March 2017 in the most drought affected provinces (Tete, Sofala, Gaza, Manica, Inhambane and Maputo) aiming to intensify and expand the drought response, and calling for urgent international assistance. A Strategic Response Plan for drought emergency was prepared by the UN Humanitarian Country Team to assist 1.5 million people from April 2016 to April 2017, and to complement the Government efforts in the drought response. The GoM, through the National Institute for Disaster Management, is leading the response to the emergency, with support from humanitarian partners, including Non Government Organizations (NGOs), the UN and others donors. However, despite the efforts by a number of international organizations, the emergency response11 falls short in providing the necessary support for the drought affected households. Rationale for the Additional Financing 13. The unprecedented scale of the drought caused crisis requires an effective and fast response. The AF would (i) respond to the needs of the poor and vulnerable through direct cash transfers; and (ii) set up the operational modalities for a responsive social protection system that can be scaled up in the event of a future crisis. 10 FEWSNET. Mozambique Food Security Outlook. 2016 11 The scale of humanitarian assistance has grown since October 2016, from covering less than 50 percent of total needs, to now currently meeting approximately 66 percent, and is being carried out in all seven drought-affected provinces. However, there is no assurance that the required level of assistance through the peak of the lean season (December, January and February) will be adequate and timely. In addition, there is growing concern that the political-military conflict is constraining efforts to reach those in need in parts of Sofala, Manica, Tete, and Zambézia provinces. In early 2016, COSACA, a DFID-funded consortium of NGOs, began providing vouchers for some households affected by drought in Gaza province. As part of this overall assistance, WFP, with its available resources, estimates it will be able to provide food assistance for approximately 490,000 people from August 2016 to January 2017 in Maputo, Gaza, Inhambane, Manica, Sofala, Tete, and Zambezia provinces. Other organizations providing assistance include World Vision International, Food for the Hungry, German Agrarian Action, and the Red Cross, which will cover nearly 80,000 people, while UNICEF, in coordination with the Ministry of Health, is supporting efforts by the Government of Mozambique to supplement nutritional-enriched food for acutely malnourished children. 10 14. The Additional Financing would respond to the drought through the provision of direct (unconditional) cash transfers to 20,000 households in three of the most drought-affected districts, Mabalane, Chokwe and Massingir, in the southern region of the country. The three districts are among the priority districts targeted for humanitarian assistance by the INGC. The El Niño response will use existing delivery systems that are expected to serve as the building blocks for the consolidation of an adaptive social safety net system. These operational instruments, already developed under the Social Protection Project, would enable Government to (i) register beneficiaries and monitor the day-to-day implementation of the program and measure results and impact; (ii) provide timely subsidies to social protection beneficiaries in a transparent and accountable manner; and (iii) improve coordination with the other major programs of the social safety net. 15. The available and pledged resources for drought response fall well short of the funding needed. The total estimated funding required to implement the plan is US$204.3 million. To date, just over US$47 million (23 percent of the total needed) has been mobilized. Addressing this situation requires a multi-partner, multi-phased and programmatic response to recovery. The Government exhausted the 2016 emergency response budget of US$9.6 million in this emergency. Other actors, including the UN, bilateral development agencies and NGOs, have only managed to provide some assistance to around 66 percent of the affected population so far. 16. The AF builds on scalable systems to respond rapidly to urgent needs. Under the first Social Protection Strategy and with support from the Social Protection Project, National Institute of Social Action (INAS) managed to develop a targeting system, a social registry of beneficiaries, an improved payment system and a management information system, that would allow to scale up cash transfers rapidly in the affected areas. However, due to the unprecedented scale of the crisis, INAS will need additional financial support and technical assistance to roll out these delivery systems rapidly. 17. Furthermore, over time, the AF provides an opportunity to link the emergency response with a more resilience-oriented approach. The AF will cover the gap between the humanitarian response (coordinated by INGC) and the social safety net support provided by the INAS Social Assistance programs. The rationale is that after a short humanitarian response (food and in-kind support), beneficiary households would need to receive direct cash transfers over 12 months to maintain their consumption levels, restart their activities and progressively recover their levels of income prior to the crisis (as opposed to the benefits received from INGC during the humanitarian response period, where families face total food and income deprivation and need to be supported with higher levels of benefits). After the period of 12 months of unconditional cash transfers, households could then be directed to other existing social assistance programs (Productive Social Action Program, PASP, Basic Social Subsidy Program, PSSB, Direct Support Program, PASD, or Program of Social Action Services, PSSAS) according to those programs’ own entry criteria. Progress in Project Implementation 18. The Social Protection Project (P129524) of US$50 million equivalent was approved by the World Bank’s Board of Directors on March 26, 2013 and became effective on October 7, 2013. The Project’s closing date is June 30, 2018. The Project Development Objective (PDO) is “to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system.� Its beneficiaries are extremely poor households living in the poorest 40 rural districts and five urban municipalities in the country according to poverty maps. 19. The project has two main components in which considerable achievements have been reached in the last year: 11 i. Component 1: Institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy (US$13.05 million).This component aims at building permanent systems for the implementation of the National Basic Social Security Strategy (Estratégia Nacional de Segurança Social Básica – ENSSB). To this end, it is building the capacity of the Ministry of Gender, Children and Social Action (MGCAS) and INAS for the implementation, monitoring, and evaluation of the Productive Social Action Program (PASP). To date, INAS has managed to develop the basic delivery systems for the implementation of social protection programs including (i) a poverty-based targeting methodology; (ii) a social registry of beneficiaries; (iii) an improved payment system; and (iv) a management information system that allows monitoring and evaluating implementation of programs. Under this component, the Project will continue to support the roll-out of the delivery systems, the project implementation unit, capacity building for the MGCAS and INAS, operational costs for the implementation of Component 2 (labor- intensive public works) and the development of additional operational tools such as a grievance redress mechanism. ii. Component 2: Labor-intensive Public Works (US$36.05 million). Through this component, the Project is supporting poor beneficiaries selected using the targeting system in rural and urban areas, through the provision of timely and predictable supplemental income in return for their participation in labor-intensive public works activities. So far, INAS has managed to implement public works with 22,000 households (19,000 in rural areas and 3,000 in urban areas) and has initiated the registration process of an additional 77,000 households (62,000 in rural areas and 15,000 in urban areas). The total target for this component was 100,000 households (70,000 in rural areas and 30,000 in urban areas). 20. Progress towards achievement of the Project Development Objective has been rated moderately satisfactory or better since the project started. The rating for Implementation Progress was downgraded to moderately unsatisfactory in January 2016 due to the late start of activities under Component 2 of the Project (labor-intensive public works) and the delay in recruitment of key Project Implementation Unit (PIU) specialists, such as a field coordinator. The rating was upgraded in August 2016 when: (i) INAS strengthened the PIU of the project through the recruitment of additional staff; and (ii) the World Bank strengthened its technical assistance, including the assignment of a long-term consultant at INAS accompanying implementation of the project. As a result, of these measures, Project disbursements increased and are expected to increase further during the coming months through the implementation of the second round of cash transfers. The project is expected to continue satisfactorily. 21. The Restructuring of the Social Protection Project is necessary to intensify existing labor- intensive public works in urban and rural areas affected by the current economic and climatic crisis. Due to exchange rate savings, the Project is able to expand the labor-intensive public works component to one additional urban municipality and 21 rural districts to cope with the impact of the on- going economic crisis. Scope and design of Additional Financing 22. The AF would respond to the El Niño event through direct (unconditional) cash transfers to populations severely affected by drought in three districts of Gaza province (Mabalane, Chokwe and Massingir) in the southern region of Mozambique. As depicted in figure 1, the AF will support the transition from humanitarian response to social safety nets. The rationale is that after the INGC’s humanitarian response, INAS, through the AF, will provide support through temporary cash transfers to the same beneficiaries of the humanitarian response. After these 12 months, as beneficiaries will be 12 registered in the social registry of beneficiaries, those eligible for Social Assistance Programs (PSSB, PASD PASP or PSSAS) could potentially be enrolled in those programs. Figure 1: From Humanitarian Response to Social Safety Net systems Humanitarian Response Direct Social Assistance Social Safety Nets Food and in kind assistance by Direct cash transfers Social assistance INGC Same beneficaries as Beneficiaries possibly redirected Lists of beneficaires established by Humanitarian response phase to relevant programs, according to district authorities program criteria 0-6 months 0-24 months 24 months or more From humanitarian to social safety nets 23. The Social Protection Project will include the following new component through the AF, implemented over an 18-month period:  Component 3. Direct Cash Transfers (US$7.5 million). This component will provide essential support to households through direct cash transfers. Cash transfers would be made every two months for a period of 12 months to approximately 20,000 households. Monthly benefits would amount to MZN2,500 (approximately US$3212) and would thus be slightly lower than food benefits received during the first months of the humanitarian response through the INGC (equivalent to MZN3,000), but higher than the benefits offered by Social Assistance Programs such as the PASP (MZN650) and the PSSB (MZN310 to MZN610) to their beneficiaries. Beneficiary households will use the cash transfers to progressively recover their levels of income and productivity prior to the crisis. During the intervention, beneficiaries will be registered in the social registry of beneficiaries and after the period of 12 months of Direct Cash Transfers, households could then be directed to other programs (PASP, PASD PSSB or PSSAS) according to those programs’ own entry criteria. 24. The AF will also provide financing to Component 1 of the Social Protection Project to cover administrative and systems building costs related to the introduction of the direct cash transfer modality. The component supports institutional strengthening and capacity building to support the consolidation of the National Basic Social Security Strategy (original US$13.05 million, plus US$2.5 million from the AF). The “Direct Cash Transfers� component will make use of the existing social protection delivery mechanisms developed under the Social Protection Project, including: (i) a social 12 Using a exchange rate of MZN80 per US$ dollar 13 registry of beneficiaries that would allow registering all AF beneficiaries and potentially referring them to other Social Assistance Programs after the intervention; and (ii) a Management Information System that will allow monitoring and evaluating the different interventions. However, additional funds will be dedicated to make sure that these delivery systems and INAS’ implementation capacity are properly adapted to the direct cash transfer response. The additional funds to be allocated to Component 1 will also be dedicated to build INAS’ capacity at central and local level and to strengthen the PIU through the recruitment of additional consultants that would enhance INAS implementation capacity for the activities planned under the AF. 25. As a response to the emergency, unconditional cash transfers will be implemented instead of scaling up public works in affected areas. The rationale for opting for unconditional cash transfers was based on several factors: (i) public works planning and implementation require strong technical capacity and needs more time to roll-out and this may delay the intended quick support to the people affected by the shock; (ii) public works need a higher amount of administrative costs and this would affect the number of beneficiaries that could be reached through the AF; (iii) payments for public works are more complex than for unconditional cash transfers as attendance to public works needs to be monitored, and this would jeopardize Government’s capacity to deliver frequent and timely payments to beneficiaries; and (iv) drought-affected households would not necessarily comply with the entry criteria for public works (many of them can be labor-constrained). 26. The AF will make use of the following implementation parameters as agreed with the MGCAS, INAS and INGC:  Geographical targeting. The “Direct Cash Transfer� component would be implemented in three districts, selected among the districts most affected by the drought caused by the El Niño phenomenon: Mabalane, Chokwe and Massingir, all of them in Gaza province.  Household targeting. The INGC has determined, for the purpose of distributing food and first necessity items during the humanitarian phase, the number of households in each district that would be eligible for assistance. All beneficiaries selected by INGC for the humanitarian response in the selected districts will be eligible for the project and for the Direct Cash Transfers.  Beneficiary enrollment. Beneficiary households would be registered at INAS social registry of beneficiaries and enrolled in the program by the local representatives of INAS based at the INAS delegation in Chokwe district at the time of the first payment.  Cash payments will be made bi-monthly to the selected household (whenever possible to women) through a payment agency. A payment agency will be contracted through a limited bidding process and is expected to sign a contract with INAS before the start of the program.  Communication and beneficiary outreach would be a key activity. Communication and outreach activities would aim at informing the general public and the potential beneficiaries about the program and its social accountability so that all stakeholders know their rights and responsibilities in participating in the program.  Controls and Accountability. A simple complaint and grievance redress mechanism will be developed to ensure that the beneficiaries have channels for any eventual grievances, particularly on payment day. Implementation arrangements 14 27. INAS will be the implementing agency for the AF, as it is for the original Project, under the stewardship of the MGCAS. For the AF, INAS will collaborate and promote synergies with programs and interventions implemented by other institutions involved in disaster risk management and emergency response, such as the INGC, UN agencies and NGOs. 28. The emergency response will build on scalable systems to respond rapidly to urgent needs. The implementation of the emergency response will rely on some of the delivery systems and local institutional capacity that has been developed at INAS over the last years, including a targeting system, a social registry of beneficiaries and a management information system that would allow to scale up cash transfers rapidly in the affected areas. 29. INAS will hire additional experts for project implementation for at least 18 months. Under the parent Project, INAS already recruited experienced procurement, financial management, safeguards and operations officers that will support the emergency response. Additional experts will be hired specifically for the AF. The team of experts will at least include additional procurement and financial management specialists, a field operations officer, a payments specialist, a communications specialist, a grievance redress specialist and technicians to be based at district level. Restructuring of the parent Project (P129524) 30. The Social Protection Project will be restructured. The restructuring will include: (i) expanding labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis; (ii) revising the results framework to adjust targets and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring; and (iii) extending the closing date of the project to enable a timely implementation of the labor-intensive public works activities and the new activities under the additional financing. 31. The labor-intensive public works will be expanded to one additional urban municipality and 21 additional rural districts, reaching an additional 21,000 households. The 21 rural districts and one urban municipality where the Project will be expanded, are currently supported through Government funds, and the project will just top-up the current benefit amounts to compensate for annual inflation (see next paragraph). 32. Benefit amount. The current benefit amount for the labor-intensive public works component (MZN650 per beneficiary per month) will be gradually increased every year. In 2017, the benefit amount will be set at MZN1,000 per month and each year it will be increased by an additional 200 meticais (MZN1,200 in 2018 and MZN1,400 in 2019). Due to the financial crisis, the budget for social assistance has been frozen, so the Government has no financial capacity to increase the benefit amount for the program in these 21 rural districts and one urban municipality. Through the restructuring, the Project will assume the difference between the MZN650 currently paid by the Government and the new benefit amounts. 33. Roll out of Component 2. As part of the restructuring, the geographical roll out of component 2 (labor-intensive public works) has also been revised to accommodate the additional 21 rural districts and one urban municipality and 21,000 households. The timeline of the roll-out has also been revised to expand implementation to calendar year 2019 in order to be able to catch up with the delays accumulated in the Project. 15 Table 1: Geographical coverage for restructuring and additional financing Urban Rural districts municipalities Urban Rural districts under parent under parent Rural districts municipalities under additional Project project after restructuring after restructuring financing 40 5 70* 6 3 *The additional 28 districts are the result of: (i) 9 new districts created by Law in the geographical area covered by the parent project and (ii) 21 additional districts where the Project will be expanded. The one additional municipality where the project will be expanded is Mandjacazi. 34. Extension of the Closing date. The Social Protection Project (P129524) closing date will be extended from June 30, 2018 to December 31, 2020 to enable for the implementation of all activities under the Social Protection Project and the AF. More time is needed for the implementation of activities under Component 2 of the parent project, due to the delay accumulated in the three first years of implementation of the Project. The main reasons for the delay were related to: (i) late effectiveness of the project; (ii) the post-electoral period that was followed by important internal restructuring processes at Government level; (iii) complexity in building basic delivery systems (payments, registry and MIS); and (iv) INAS' limited capacity for project management at central and local level. Financial Management 35. The project’s financial management (FM) arrangements are adequate and are not expected to change. The project will continue to make use of the same Designated Account (DA) in the Banco de Moçambique for receiving funds from IDA after which they will be transferred to the government’s single treasury account (CUT). To facilitate disbursements and documentation of expenditures, the reporting on the use of funds will take place on a monthly basis through the submission of Statement of Expenditures. Quarterly Interim Financial Reports (IFR) within 45 days of the end of each calendar quarter will be provided in the same format to that being submitted for the original project. Project audit reports will be submitted to IDA within six months of the end of the year and the audits will be carried out in accordance with the International Standards on Auditing by the Supreme Audit Institution. 36. The flow of funds under the new Component 3 will follow those already established for Component 2 of the parent Project. 37. Financial audits. There will be one single audit that will cover the original Project and the AF. 38. Despite the decentralized and complex nature of INAS’s FM system, and although some challenges remain, particularly at district level, INAS’s FM capabilities continue to show some 16 improvements in terms of technical quality, planning, time management and coordination with shared responsibilities among all units, from central, provincial and district. 39. The overall project risk for FM is Substantial. There are no overdue audits, IFRs or other FM covenants and the proposed FM arrangements meet the minimum requirements for FM under OP/BP 10.00. Procurement 40. Procurement arrangements remain the same as for the parent Project. Clearance was obtained from the Chief Procurement Officer for the use of the Procurement and Consultants Guidelines, in lieu of the Bank’s New Procurement Framework. The procurement capacity of INAS is still adequate to implement the project and will not be impacted with the availability of additional funds from the AF as these funds will virtually all be spent on non-procurable activities related to cash transfer to affected communities and, therefore, the associated risk for procurement is Low. Anti-corruption 41. The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. Summary of Proposed Changes The proposed AF will provide direct (unconditional) cash transfers to about 20,000 households in three districts of Mozambique severely affected by the drought caused by El Niño phenomenon. In addition, the Parent Project will be restructured to (i) expand labor-intensive public works to urban and rural areas affected by the current economic and climatic crisis; (ii) revise the results framework to adjust targets and indicators added at the PDO and intermediate outcome level to reflect the results expected from the proposed AF and the restructuring; and (iii) extend the closing date of the project to enable a timely implementation of the labor-intensive public works activities and the new activities under the AF. The PDO will remain the same. The results framework has been updated to reflect the additional beneficiaries and new indicators have been added at PDO and intermediate levels to reflect the objectives of the AF. Finally, project costs, disbursement estimates and FM arrangements have been adjusted accordingly. Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] 17 Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Development Objective/Results PHHHDO Project’s Development Objectives Original PDO The objective of the project is to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system. Change in Results Framework PHHCRF Explanation: The additional beneficiaries and new activities supported by the AF are reflected in the results framework. A set of PDO-level and intermediate indicators have been added to monitor the progress of the main activities proposed under the AF. See annex I for details. Compliance PHHHCompl Covenants - Additional Financing ( Social Protection Project - Additional Financing - P161351 ) Source of Finance Description of Funds Agreement Date Due Recurrent Frequency Action Covenants Reference The Recipient shall, not later than 60 days after the Effective Date, develop and adopt, Section I.C.2 of in form and August 10, IDAW Once Schedule 2 substance 2017 acceptable to the Association and following the guidelines set forth in the Project 18 Implementation Manual, a grievance redress mechanism that encompasses transparent, timely and fair procedures that will allow people potentially affected by the Project to peacefully settle any possible grievance and will ensure that all complaints received from beneficiaries and other interested stakeholders related to any activity under the Project, are properly and timely addressed. Conditions PHCondTbl Source Of Fund Name Type IDAW Implementation manual Effectiveness Description of Condition The Additional Conditions of Effectiveness consist of the following, namely that the Direct Cash Transfers Manual have been adopted by the Recipient in a manner satisfactory to the Association. Source Of Fund Name Type IDAW Payment Agent Disbursement Description of Condition No withdrawal shall be made for under Categories (2) with respect of each selected District, until the pertaining Payment Agent referred to under Section I.C.2 of Schedule 2 of the Financial Agreement for each such District shall have been hired in a manner satisfactory to the Association. Risk PHHHRISKS Risk Category Rating (H, S, M, L) 1. Political and Governance Moderate 2. Macroeconomic Substantial 19 3. Sector Strategies and Policies Moderate 4. Technical Design of Project or Program Substantial 5. Institutional Capacity for Implementation and Sustainability Substantial 6. Fiduciary Substantial 7. Environment and Social Moderate 8. Stakeholders Substantial 9. Other Low OVERALL Substantial Finance PHHHFin Loan Closing Date - Additional Financing ( Social Protection Project - Additional Financing - P161351 ) Source of Funds Proposed Additional Financing Loan Closing Date IDAW 31-Dec-2020 Loan Closing Date(s) - Parent ( MZ-Social Protection project - P129524 ) PHHCLCD Explanation: The Social Protection Project (P129524) closing date would be extended from June 30, 2018 to December 31, 2020 to enable implementation of all activities under the Social Protection Project and the new component on Direct Cash Transfers in response to El Niño phenomenon. Status Original Closing Current Closing Proposed Closing Previous Closing Ln/Cr/TF Date Date Date Date(s) IDA-5992 Effective 30-Jun-2018 30-Jun-2018 31-Dec-2020 Change in Disbursement Estimates (including all sources of Financing)PHHCDE Explanation: The US$10 million will be disbursed over a period of 18 months and as reflected in the following table Expected Disbursements (in USD Million)(including all Sources of Financing) Fiscal Year FY 17 FY18 FY19 Annual 0.30 7.00 2.70 Cumulative 0.30 7.30 10.00 Allocations - Additional Financing ( Social Protection Project - Additional Financing - P161351 ) Disbursement %(Type Source of Category of Allocation Currency Total) Fund Expenditure Proposed Proposed IDA USD 0.00 0.00 Total: 0.00 20 IDAW USD 10.00 100.00 Total: 10.00 Components PHHHCompo Change to Components and Cost PHHCCC Explanation: The main adjustments to the Project components would be to add a third component to the Project focusing on implementation of direct cash transfers in selected provinces and districts affected by El Niño phenomenon. The majority of the funds from the AF would be dedicated to direct (unconditional) cash transfers in response to El Niño. Under a new Component 3: Direct Cash Transfers (US$7.5 million) essential support would be provided to households affected by the drought through direct cash transfers. Cash transfers would be made every two months for a period of 12 months to approximately 20,000 households. Monthly benefits would amount to MZN2,500 (approximately US$35). Beneficiary households will receive the cash transfers, to progressively recover their levels of income and productivity prior to the crisis. During the intervention, beneficiaries will be registered in the social registry of beneficiaries and after the period of 12 months of Direct Cash Transfers, households could then be directed to other programs (PASP, PASDPSSB or PSSAS) according to those programs own entry criteria. However, implementing an unconditional cash transfers operation on a large scale will also require consolidating and adapting some of the delivery systems (registry of beneficiaries, payment system, Management Information System (MIS), etc.) and strengthening INAS’ institutional capacity through the recruitment of additional experts at central and local level. Therefore, US$2.5 million of the AF funds would also be used for Component 1 (institutional strengthening), alongside some funds from the parent Project, with the objective of continuing to support the development and roll out of basic delivery systems including: (i) a social registry of beneficiaries; (ii) a Management Information System; (iii) a payment system; and (iv) a grievance and redress mechanism. The additional funds to be allocated to Component 1 will also be dedicated to capacity building of INAS’ staff at central and local level and to strengthen the PIU through the recruitment of additional consultants that would enhance INAS’ implementation capacity. In addition, the Project will be restructured to expand Component 2 activities (labor-intensive public works) to additional urban and rural areas. The expansion will be financed through existing Project funds (not the AF) and will be done through an expansion of the Project roll out plan to an additional one urban municipality and 21 rural districts, reaching an additional 21,000 households. The 21 rural districts and one urban municipality to which the Project will be expanded are currently supported through Government funds, and the project will just top-up the current benefit amounts to compensate for annual inflation. The benefit amount for Component 2 (MZN650 per beneficiary per month) will be gradually increased every year. In 2017, the benefit amount will be set at MZN1,000 per month and each year it will be increased by additional MZN200 (MZN1,200 in 2018 and MZN1,400 in 2019). The Government is currently financing the implementation of labor-intensive public works activities in 21 districts and one urban municipality using Government funds. As, due to the financial crisis, the budget for social assistance has been frozen, the Government has no financial capacity to increase the benefit amount for the program in these 21 districts and one municipality. Through the restructuring, the Project will assume the difference between the MZN650 currently paid by the Government and the new benefit amounts. 21 Current Component Proposed Component Current Cost Proposed Action Name Name (US$M) Cost (US$M) Institutional Institutional strengthening and strengthening and capacity building to capacity building to 13.05 15.55 Revised support the consolidation support the consolidation of the National Basic of the National Basic Social Security Strategy Social Security Strategy Labor-intensive Public Labor-intensive Public 36.95 36.95 No Change Works Works Direct Cash Transfers 0.00 7.50 New Total: 50.00 60.00 Other Change(s) PHHHOthC PHImplemeDel Implementing Agency Name Type Action Change in Implementation Schedule PHHCISch Explanation: Due to the Additional Financing and the extension of the closing date for the project, the roll out plan for the implementation of the Labor-Intensive Public Works component was modified. Appraisal Summary PHHHAppS Economic and Financial Analysis PHHASEFA Explanation: The nature of the project makes it difficult to conduct traditional cost-benefit analysis. In particular, valuing the benefits a poor household accrues from increased and stabilized consumption is not a straightforward exercise. For this reason, we chose to conduct an ex ante analysis that can provide some rough estimates of the expected impacts on poverty and inequality and help fine-tune specific design aspects that can enhance these impacts. Simulations were done to implement the AF in three drought-affected districts: Mabalane, Massingir and Chokwe. In these three districts, the duration of the intervention would be 12 months and each household would be enrolled for only one year. Each household would receive MZN2,500 per month during the 12 months of the intervention. Based on these parameters the expected impact would be the following: Table 2: Estimated impact of AF Total Budget No. of Poverty Rate Poverty Gap Spent in Benefit amount Beneficiaries Incidence Index US$ MZN2,500 20,000 -12.20% -7.98% 7,500,000 22 Similar simulations were carried out for the restructuring of the project. Taking into account the new roll out plan described in Table 1 (paragraph 33). Households in rural areas would participate for four months per year in public works, while households in urban areas participate for six months per year and all would stay for three years in the program. The benefit amount would be gradually increased starting from 1,000 MZN in 2017, 1,200 MZN in 2018 and 1,400 MZN in 2019. The poverty impact is given in Table 3 below. Table 3: Estimated impact of Component 2 Number of Poverty Poverty Rate beneficiaries Rate Poverty Incidence Poverty Gap Benefit amount Incidence Gap Index (Beneficiaries) (Beneficiaries) Gradual Increase (MZN1,000; 1,200 and 1,400) 121,000 -1.18% -0.59% -37.91% -19.77% Rationale for public sector financing: The Project has the potential to (i) respond to the prolonged drought caused by the El Niño phenomenon in various parts of the country and (ii) strengthen the social protection system by linking the emergency response with a more resilience-oriented approach. In addition, the AF complements World Bank engagement with the Government of Mozambique to increase the resilience of communities to natural disasters by complementing activities implemented under the Social Protection Project (P129524) and the Emergency Resilient Recovery Project (P156559). Public financing is crucial to cover the financing gap for the emergency response to El Niño phenomenon that has affected over 1.5 million people in several provinces of the country. Public financing would also strengthen the social protection system through the development of adequate delivery systems that would allow in the future to rapidly scaling up social protection interventions in the event of a crisis. Private sector is only expected to be engaged in supporting the development of delivery systems (payment system for instance), and therefore cash transfers to respond to urgent needs of people affected by the drought, and not covered by other humanitarian or development actors, will need to be financed by the public sector. Value added of Bank's support. The World Bank is funding the Social Protection Project (P129524) currently under implementation to put in place the building blocks of a social safety net system. The AF will partially build on the achievements of this Project. Furthermore, the World Bank has gained a large experience in Mozambique and other countries in the Region supporting vulnerable populations to recover from droughts and other climatic events and to increase their resilience, including the Social Safety Net Project (P160554) in Madagascar or the Drought Recovery and Resilience Project in Malawi (P161392). The unprecedented scale of unmet needs requires an additional financial and institutional support as the financial crisis and El Niño event have clearly overwhelmed national response capacities in Mozambique. World Bank’s global expertise in this type of project gives the Government of Mozambique assurance that the activities being planned are comprehensive, pragmatic and will yield results in terms of responding to the urgent needs of populations affected by the drought and building an adaptive social protection system. Technical Analysis PHHASTA Explanation: The following technical aspects are noteworthy related to the proposed AF: Geographical targeting. The “Direct Cash Transfer� component would be implemented in three districts, 23 selected among the districts most affected by the drought caused by the El Niño phenomenon: Mabalane, Chokwe and Massingir, all of them in Gaza province. The geographical areas for the AF have been selected jointly between the MGCAS, INAS, INGC and the World Bank because (i) they were among the priority districts targeted for assistance by the INGC, and (ii) they all belong to the same province and are relatively close to each other, thus facilitating the expeditious implementation of the direct cash transfer program. Household targeting. The INGC has determined, for the purpose of distributing food and first necessity items during the humanitarian phase, the number of households in each district that would be eligible for assistance. All beneficiaries selected by INGC for the humanitarian response in the selected districts will be eligible for the project and for the Direct Cash Transfers. The actual list of households in each district was established by local authorities, under the overall supervision and approval of the district administrator (the higher government representative at the district level). Those lists of households will be made available by the INGC to INAS, together with the digitalized lists of the same households established by the NGOs in charge of food distribution. The enlisted households will then be enrolled under the direct cash transfer component at the start of the program. In each of the three districts, all the households previously targeted by the district authorities for assistance by INGC will be selected to receive the cash transfers. The total number of households in the three districts amounts to 20,000. The three selected districts have very high poverty rates (Mabalane: 40 percent; Massingir 92 percent and Chokwe 44 percent), so it is expected that a large number of beneficiary households of the direct cash transfer intervention could be eligible as well for social assistance programs after this intervention. Beneficiary enrollment. Beneficiary households would be registered at INAS social registry of beneficiaries and enrolled in the program by the local representatives of INAS based at the INAS delegation in Chokwe. For the registration of households in the social registry of beneficiaries, socio- economic data will be collected for all of them. Beneficiaries will be given a beneficiary card or similar instrument (SIM card, etc.) that they will need to present to verify their identity on the payment day. INAS staff will also be present on payment day, and help with complaints and updates in family situations (e.g. if a beneficiary household leaves the area, etc.). After the intervention, those beneficiaries eligible for PSSB, PASP, PASD or PSSAS could be enrolled in these programs. Cash payments will be made bi-monthly to the selected household (whenever possible to women) through a payment agency. Payments would be made at a location close enough to the residence of the beneficiary households (not more than one hour on foot). A payment agency will be contracted through a limited bidding process and is expected to sign a contract with INAS at the start of the program. Communication and beneficiary outreach would be a key activity. They would aim at not only informing the general public and the beneficiaries of the program and its social accountability so that beneficiaries and other stakeholders know their rights and responsibilities in participating in the program. The outreach would also transmit basic messages regarding human development (nutrition, school attendance, parenting, health/vaccination etc.), financial planning, and productive investments. These communication activities are an important part of project implementation as they will ensure that the program produces a value added beyond the smoothing of consumption through the cash transfers. INAS will develop a specific communication strategy and will motivate and empower the beneficiaries to become active agents of their well-being. Controls and Accountability. A simple complaint and grievance redress mechanism will be developed to ensure that the beneficiaries have channels for any eventual grievances, particularly on payment day. Social Analysis PHHASSA 24 Explanation: The project is designed to address various social issues faced by poor Mozambican households, including: (i) insufficient capacity to cope with idiosyncratic climate or economic shocks; (ii) gender inequality; (iii) little access to basic social services such as education, sanitation, health, water and energy; and (iv) lack of access to financial resources and credit facilities. The AF is expected to provide eligible households with timely and predictable cash transfers that would allow them to smooth their consumption and invest in productive assets that are likely to have been lost during the emergency period. Initial social and environmental screening of AF activities shows that the project is not expected to generate significant adverse social impacts, but rather enhance positive social benefits to the beneficiary districts, including to targeted local and poor communities and families. The AF will invest in social responsibility and participation by putting in place a grievance redress mechanism for the AF to ensure that the beneficiaries have channels for any complaints, particularly on the targeting of the project and on payment day. In addition, INAS would ensure intensive communication and information about the program implementation features so that beneficiaries and other stakeholders know their rights and responsibilities in participating in the program and know the way forward after the response. The parent Project is classified as a category-B project. Land appropriation and restriction of access to resources or livelihoods is not expected, as the small-scale public works under Component 2 are likely to take place on existing roads or within existing infrastructure, hence leading to little-to-no physical resettlement in rural and urban areas. However, to ensure proper handling of land acquisition and/or loss of assets or access to assets due to project related activities, the World Bank operational policy on Involuntary Resettlement (OP/BP 4.12) is triggered. Moreover, because details of the public works activities are unknown at this stage, and to ensure viable mitigation measures are adopted for a timely and effective management of any such impacts, the Borrower prepared a Resettlement Policy Framework (RPF) that sets forth the principles the Borrower will follow to ensure compliance with OP 4.12. The RPF, was elaborated based on extensive public consultation and a fully participatory approach that ensure that all key stakeholders, at central, provincial and local levels were duly consulted and their concerns considered in the design of the RPF. The restructuring of the Project does not change this part of the appraisal summary. Beyond safeguards, the project, through Components 1, 2 and 3, aims at mainstreaming gender dimensions to ensure that fair and transparent mechanisms are put in place to select and compensate the beneficiary districts, poor households and individuals (common targeting system, single registry of beneficiaries, systematic payment system, communication campaign to ensure effective outreach, etc.). According to the census data, the share of female population in the three targeted districts for the additional financing is 57 percent, which suggests that an important share of the project beneficiaries will be women. This is due to the fact that a large number of men in these three districts migrate to South Africa to work in the mining sector. From the lists already obtained by INAS (provided by INGC) for the humanitarian response, 56 percent of the selected households are headed by women. As the main objective of the cash transfer is to smooth consumption and to invest in the recovery of productive assets, the Project will deliver the cash, when possible, to the women in the households as there is evidence that women tend to manage food resources at household level better than men and prioritize spending on children welfare. The first years of implementation of the labor-intensive public works component have shown it to be an effective mechanism to reduce gender inequalities in rural and especially urban areas. The share of female headed household supported by the project is 54 percent considering urban and rural areas as a whole, but it reaches 76 percent in urban areas. The adoption of a new modality of public works (inclusive public 25 works, funded by a Rapid Social Response-Trust Fund) substituting infrastructure-oriented public works by the implementation of community services has given very good results in terms of female participation (over 90 percent of beneficiaries were women) and services directly benefiting vulnerable women (community daycare centers, nutrition and vaccination campaigns, family planning and birth delivery in clinics, etc.). The Government and the World Bank agreed to integrate this modality of inclusive public works under the restructuring, which is likely to reduce gender inequalities further. Environmental Analysis PHHASEnvA Explanation: The Social Protection Project has been categorized as B in relation to social and environmental safeguards and has triggered two safeguard categories: Environmental Assessment (OP/BP 4.01) and the Involuntary Resettlement Policy (OP/BP 4.12). Considering the expected positive impacts of the project on the environment and gender, as well as its potentially minor negative impacts through, for example, small scale infrastructure rehabilitation, the risk rating for safeguards is rated as moderate. The Additional Financing does not change this part of the Appraisal Summary. The proposed AF is modest in scope and the safeguards category B rating will remain unchanged. No new environmental risks are expected to arise and the AF is not foreseen to trigger any new safeguard policies. The project’s ESMF and was revised and re-disclosed to cover this AF. The restructuring of the Project will not bring any changes to social and environmental safeguards as the restructuring will only scale up activities in new districts, but the menu of public works will remain unchanged. During the first years of implementation of the parent project, safeguards implementation has gradually improved. Currently, a full time safeguards specialist is dedicated to the project and gets assistance from two additional INAS staff in charge of monitoring safeguards implementation at the local level. Risk PHHASRisk Explanation: The overall risk remains Substantial. The Fiduciary risk is Substantial as INAS has still not outsourced the payment of cash transfers to beneficiaries. As a mitigation measure, Government and the World Bank agreed that a payment agency will be contracted through a limited bidding process and is expected to sign a contract with INAS at the start of the program. As a complementary mitigation measure, INAS and the World Bank agreed that the project will hire an internal auditor to be based at central level and a financial management specialist and an accountant to be based at INAS’ delegation level to make sure that payments and project related expenses are properly executed and accounted for. The risk related to the Technical design of the Project is substantial, because even though the AF only introduces a component of direct cash transfers, it adds an additional layer to the tasks to be carried out by the implementing agency. As a mitigation measure, a group of consultants including FM and procurement specialists, payments specialists, communication specialists and social workers will be recruited to help with implementation of activities. Macroeconomic, Institutional Capacity for Implementation and Sustainability and Stakeholders risks remain Substantial. The Macroeconomic risk relates to the country still emerging from the recent political and economic crisis that has put to the test many of its institutions for good governance and accountability. Institutional capacity remains weak as has been experienced through the implementation of the parent 26 Project. Delivery systems are still not fully operational, implementation processes are poorly decentralized and INAS’ human resources at the central level lack support in specific areas like M&E. Mitigation measures to this risk will be (i) allocate additional funds to the institutional strengthening component; (ii) define and recruit a team of specialists to support the implementation of the AF; (iii) concentrate the direct cash transfer intervention in only three districts; and (iv) keep the technical design of the direct cash transfer component as simple as possible. The risk for Stakeholders relates to funding being provided by other donors (DFID and WFP) that could result in fragmented interventions that in turn would entail a risk of duplication. To mitigate that risk, INAS and the World Bank are carrying out coordination meetings with other actors involved in the emergency and the post-emergency response including INGC, DFID, WFP, World Vision and CARE. 42. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. 27 Annex I: Results Framework Project Development Objectives Original Project Development Objective - Parent: The objective of the project is to provide temporary income support to extremely poor households and to put in place the building blocks of a social safety net system. Results Core sector indicators are considered: Yes Results reporting level: Project Level Project Development Objective Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Revised Direct project beneficiaries Number Value 0.00 22707.00 141000.00 Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 Comment With the additional financing, additional 20,000 households will be supported through unconditional cash transfers. Through the restructuring of the project, additional 21,000 households will be supported through labor- intensive public works 28 New Direct Project beneficiaries of Number Value 0.00 20000.00 Direct Cash Transfers Sub Type Date 15-Mar-2017 31-Dec-2020 Breakdown Comment New AF indicator Revised Female beneficiaries Percentage Value 0.00 75.00 50.00 Sub Type Supplemental Revised Percentage of Beneficiaries Percentage Value 0.00 0.00 75.00 from the poorest two quintiles Date 07-Oct-2013 31-Dec-2015 31-Dec-2020 in rural areas Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Percentage of Beneficiaries Percentage Value 0.00 0.00 75.00 from the poorest two quintiles Date 07-Oct-2013 31-Dec-2015 31-Dec-2020 in urban areas Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Percentage of Beneficiaries that Percentage Value 0.00 100.00 70.00 receive the full amount of the Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 transfer for Labor-Intensive Public Works Comment The indicator has been revised to reflect a later closing date, but keeps same 29 target Revised Percentage of payments made Percentage Value 0.00 25.00 70.00 within the month they are due Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 for Labor-intensive Public Works Comment The indicator has been revised to reflect a later closing date, but keeps same target New Percentage of payments within Percentage Value 0.00 70.00 the month they are due for Sub Type Date 15-Mar-2017 31-Dec-2020 Direct Cash Transfers Breakdown Comment This indicator has been broken down for the additional financing to measure the effectiveness of the operation and the effectiveness of outsourcing the payment of subsidies Revised Percentage of beneficiaries Percentage Value 0.00 100.00 95.00 registered in the Single Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 Registry of Beneficiaries Comment The indicator has been revised to reflect a later closing date, but 30 keeps same target Intermediate Results Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target New Percentage of payments done Percentage Value 0.00 0.00 60.00 by a third party for Labor- Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 intensive Public Works Comment New Percentage of payments of the Percentage Value 0.00 80.00 Direct Cash Transfers done by Sub Type Date 15-Mar-2018 31-Dec-2020 a third party Breakdown Comment Revised Percentage of direct Percentage Value 0.00 0.00 5.00 beneficiaries of Labor- Date 07-Oct-2013 23-Aug-2016 16-Mar-2018 intensive Public Works participating in complementary Comment This is indicator activities was disaggregated by rural and urban areas and it has been merged into one single indicator. Due to the complexity of this activity, reaching 5 percent of the direct beneficiaries (6,000 households) would already be an important 31 target Revised Social Services Mapping Number Value 0.00 0.00 1.00 Completed and Updated Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Direct Public Works Program Number Value 0.00 2770.00 9000.00 Beneficiaries in Urban Areas Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 Comment Although the Project will be expanded to one additional urban municipality, the total number of urban beneficiaries will decrease because the design of the program has a much more complex implementation in urban areas and it has proved to be more effective in rural areas Revised Direct Public Works Program Number Value 0.00 19937.00 112000.00 Beneficiaries in Rural Areas Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 32 Comment Through the restructuring of the project, additional 42,000 households will be targeted in rural areas, because the program has proved to be more effective in these areas Marked for Percentage of direct Percentage Value 0.00 0.00 40.00 Deletion beneficiaries participating in Date 07-Oct-2013 23-Aug-2016 29-Jun-2018 complementary activities groups in rural areas Comment This indicator has been merged into one with the indicator measuring the percentage of direct beneficiaries participating in complementary activities in urban areas Marked for Percentage of wages over total Percentage Value 0.00 0.00 70.00 Deletion subproject cost Date 07-Oct-2013 31-Dec-2015 29-Jun-2018 Comment This indicator is misleading, because a higher share of the budget used for 33 wages does not always mean a more effective intervention, as it can happen (as it is currently happening) that the budget that is supposed to be used for operational costs (supervision) and equipment is not used leading to a lower quality of implementation of public works Revised Number of PWP subprojects Number Value 0.00 120.00 800.00 completed Date 07-Oct-2013 24-Aug-2016 31-Dec-2020 Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Percentage of projects that Percentage Value 0.00 10.00 30.00 include measures for reducing Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 natural disaster risks or increasing climate resilience, Comment The indicator based on INGC criteria has been revised to reflect a later closing date, but keeps same target 34 Revised Percentage of households Percentage Value 0.00 100.00 60.00 registered in the SRB with Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 complete information not older than 3 years Comment The indicator has been revised to reflect a later closing date. The review period for the information in the SRB has been modified from 2 to 3 years, because this is the time when beneficiaries are expected to graduate out of the program and therefore their socio-economic data need to be revised Revised Percentage of INAS Percentage Value 0.00 0.00 90.00 delegations in areas of project Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 implementation fully connected and regularly sending Comment The indicator information through the MIS has been revised to reflect a later closing date, but keeps same target Revised Percentage of Districts with Number Value 0.00 0.00 30.00 grievance and redress system Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 35 operational Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Percentage of complaints and Percentage Value 0.00 0.00 50.00 appeals resolved in a timely Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 manner Comment The indicator has been revised to reflect a later closing date, but keeps same target Revised Completed Process Evaluations Number Value 0.00 0.00 1.00 Date 07-Oct-2013 23-Aug-2016 31-Dec-2020 Comment The number of process evaluations has been reduced to 1 as spots checks are already providing operational information on processes 36 Annex II: Detailed description of Modified or New Project Activities 1. The proposed Additional Financing (AF) will introduce a new “Direct Cash Transfer� component to the existing project, to support drought-affected households in three selected districts in Gaza province in the Southern region of Mozambique. 2. The proposed AF will therefore expand the scope of the project to enable the Government of Mozambique (GoM) to respond to the prolonged drought caused by the El Niño phenomenon in various parts of the country. In this type of slow-onset disaster, which creates longer-term social and economic crises in affected areas, it would not be sufficient to provide households with short-term and seasonal cash-for-work opportunities, as provided by PASP. Furthermore, those drought-affected households would not necessarily comply with the entry criteria of PASP, or of other safety nets such as the PSSB, and the benefit levels and mode of delivery of those benefits under those programs would not be adequate in this kind of emergency situation. The ongoing drought has deprived affected households from producing for their daily consumption/subsistence and compromised their well-being in terms of health, and nutrition outcomes. In addition, its continuation over a medium term period has also likely led households to take children out of school (given school fees and opportunity costs) and sell assets and capital which normally they could have used to start their livelihood activities once the drought ceases. In this situation, it is essential to provide households with income support in the short and medium term, and help them move towards recovery and enable them to resume their livelihood activities. 3. The proposed AF will provide essential support to households affected by the drought through direct cash transfers. Cash transfers would be made every two months for a period of 12 months to approximately 20,000 households. Monthly benefits would amount to MZN2,500 (approximately USD 3213) and would thus be slightly lower than food benefits received during the first 3 months of humanitarian response through the INGC (equivalent to MZN3,000), but higher than the benefits offered by PASP and PSSB to their beneficiaries. The rationale is that beneficiary households would receive cash transfers in a phase when they need to maintain their consumption levels and restart their activities and progressively recover their levels of income prior to the crisis (as opposed to the benefits received during the 2 or 3 months of humanitarian response, when families face total food and income deprivation and need to be supported with higher levels of benefits). After the period of 12 months of Direct Cash Transfers, households would then be directed to other programs (PASP, PASD,PSSB or PSSAS) according to those programs own entry criteria (see figure 1). 4. The program would target 3 districts among the worst drought-affected in the country. Those districts, Mabalane, Chokwe and Massingir, are among the districts that have been declared priority for food assistance by the INGC for the humanitarian response phase. In addition, as the Direct Cash Transfers is a new type of intervention for INAS and the funds are only sufficient to cover 20,000 households, it was agreed that the districts would all belong to the same province. This would ease implementation process, in particular the management and coordination of payments and the progressive introduction of a payment system to be outsourced to specialized payment agencies. 5. Beneficiary households would be the same as those targeted for INGC food assistance during the humanitarian response period. The INGC determines the number of families to be supported in each district affected by emergencies, in this case by the drought caused by El Niño. The 13 Exchange rate of MZN80 per US dollar 37 district authorities, under the leadership of the district administrator (the highest government authority in the district) then establishes the lists of affected households in each district and in the Comunas and localidades worst affected. The food assistance provided by the INGC is then distributed by World Food Program (WFP) or NGOs to the selected beneficiaries. The lists of beneficiaries in the three districts will be communicated to INAS by the INGC, and crossed with the computerized lists established by WFP and the NGOs and used to provide food assistance until March 2017. The same beneficiaries who are currently receiving this food assistance will be selected to participate in the “Direct Cash Transfer� program and receive cash transfers for 12 months. All beneficiary households will therefore be selected before the start of the proposed AF. Figure 1: From Humanitarian to Social Safety Nets Humanitarian Response Direct Social Assistance Social Safety Nets Food and in kind assistance by Direct cash transfers Social assistance INGC Same beneficaries as Beneficiaries redirected to Lists of beneficaires established Humanitarian response phase relevant programs, according to by district authorities program criteria 3 to 5 months 12 months 24 months or more From humanitarian to safety nets 6. The emergency response will build on scalable systems to rapidly respond to urgent needs. In this sense, the implementation of the emergency response will rely on some of the delivery systems and local institutional capacity that has been developed at INAS over the last years. Under the first Social Protection Strategy and with support from the Social Protection Project, INAS managed to develop a targeting system, a social registry of beneficiaries and a management information system, that would allow to rapidly scale up cash transfers in the affected areas. INAS also recruited experienced procurement, financial management, safeguards and operations officers that will support the emergency response together with additional experts that will be hired specifically for the additional financing. However, due to the unprecedented scale of the crisis, INAS will need additional financial support under Component 1 of the project and technical assistance to roll out these delivery systems rapidly and at national scale. 7. INAS would register beneficiary households in each district. Beneficiary households would be enrolled in the program by staff of INAS based at the INAS delegation covering the three selected 38 districts. INAS would provide also beneficiaries with information on the program, and accompany them throughout the implementation of the program. They will be present on payment day, and help with complaints and updates in family situations (e.g. if a beneficiary household leaves the area, or does not collect its benefits for more than two consecutive months, etc.). 8. Cash payments would be made through a payment agency hired by INAS. A number of potential payment agencies (banks, mobile phones companies, etc.) will be identified and invited to bid in a restricted bidding process. The payment agency is expected to be identified and its contract ready by the time the program becomes effective (tentatively May 2017), so that beneficiaries can start receiving their benefits as soon as possible after enrollment. 9. Communication and outreach activities regarding all aspects of the proposed AF will be carried out by INAS and MGCAS. They would aim at not only informing the general public and the beneficiaries of the program and its social accountability, but also transmitting important messages regarding human development (nutrition, school attendance, parenting, health/vaccination etc.), financial planning, and productive investments. These will be intensified over time to ensure that the program produces a value added beyond the smoothing of consumption (through regular cash transfers). A specific communication strategy would be developed by INAS and would motivate and empower the beneficiaries to become active agents of their well-being. 10. Participation of beneficiaries and social accountability will be key aspects of program implementation. Activities will be implemented with intensive participation and constant consultation of and feedback by beneficiary households. A grievance and redress mechanism will be developed and adopted that encompasses transparent, timely and fair procedures that will allow people potentially affected by the Project to peacefully settle any possible grievance and will ensure that all complaints received from beneficiaries and other interested stakeholders related to any activity under the Project, are properly and timely addressed. 11. Procurement arrangements remain the same as for the Parent Project. Clearance has been sought from the Chief Procurement Officer for the use of the Procurement and Consultants Guidelines in lieu of the Bank’s New Procurement Framework, which was granted on December 12, 2016. The procurement capacity of INAS is still adequate to implement the project and will not be impacted with the availability of additional funds from the AF as these funds will mainly be used for non-procurable activities related to providing cash transfer to affected populations. 12. Financial management arrangements. The project’s FM arrangements remain adequate and in general not expected to change in the short-term; it will continue to make use of the same Designated Account (DA) in the Banco de Moçambique for receiving from IDA after which funds will be transferred to the government’s single treasury account (CUT). To facilitate disbursements and documentation of expenditures, the reporting on the use of funds will take place on a monthly basis through the submission of Statement of Expenditures. Quarterly Interim Financial Reports (IFR) will be submitted within 45 days of the end of each calendar quarter in same format being submitted for the original project. Project audit reports will be submitted to IDA within six months of the end of the year and the audits will carried out in accordance with International Standards on Auditing, by the Supreme Audit Institution, the Tribunal Administrativo, and incremental costs of the audit will need to be set aside by the project 39 Figure 2. The Flow of IDA Funds World Bank Banco de Mozambique Direct Payment upon Request of the INAS DA (USD) CUT (MZN, USD, EUR, ZAR) INAS Expenditure Units (both Central and Provincial) Suppliers/Service Providers Financial Institution Agent 13. Activities under Component 1 of the project will be funded directly from INAS headquarters, and INAS will make these payments from the Single Treasury Account (CUT) through the e-SISTAFE. The necessary supporting documentation of project expenditures under this component will be submitted to INAS’s Department of Audits and Finances (DAF), which will then process payments to be made directly to the providers of goods and services financed by this Credit. 14. Component 2 will finance the cash benefits paid to participants in the labor-intensive public works program, as well as associated goods and services, and the training and workshops provided as complementary activities. INAS will make these funds available to its delegations and to the district administrations through e-SISTAFE 15. Component 3 will finance the cash benefits paid to participants and the payments of direct cash transfers to beneficiaries will be made by a financial institution acceptable to IDA. Funds will be transferred from CUT through e-SISTAFE to a payment agent for each district and municipality of a selected financial institution on the basis of quarterly activity plans prepared by INAS. This payment agent will have overall responsibility for paying the beneficiaries and the providers of the goods to be used in the public works. The details of the duties and responsibilities of the selected payment agent will be documented in the Project implementation manual. 16. Despite the decentralized and complex nature of INAS’ FM system, and although some challenges remain, particularly at district level, INAS’s FM capabilities continue to show some improvements in terms of technical quality, planning, time management and coordination with shared responsibilities among all units, from central, provincial and district. 17. Procurement arrangements remain the same as for the parent Project and will use the Procurement and Consultants Guidelines, in lieu of the Bank’s New Procurement Framework. The 40 procurement capacity of INAS is still adequate to implement the project and will not be impacted with the availability of additional funds from the AF. 18. Safeguard arrangements. The AF will finance unconditional cash transfers and no safeguards impacts are expected to be associated with this intervention. An Environmental and Social Management Framework (ESMF) and a Resettlement Policy Framework (RPF) have been developed by the Borrower that include an environmental and social checklist as well as an environmental and social screening form to be used by all local governments to screen subprojects and develop site-specific safeguards instruments (ESIA/ESMP and/or RAP14) prior to their implementation. Moreover, the ESMF provides also environmental and social clauses to be included in bidding documents as well as in contractors contracts for consideration during project implementation. The essence of both the ESMF and RPF has been captured under the Project operations manual that includes a negative list of activities, materials and inputs that could not be financed under the project. The client has recruited a full-time Safeguards specialist to provide support to safeguards monitoring and implementation for the Project. Two Government-staff focal points have been trained at the implementing agency and they are in charge of training the districts officers where the project is implemented and to monitor the proper use of the safeguards instruments developed under the project. 14 Environmental and Social Impact Assessment (ESIA); Environmental and Social Management Plan (ESMP) and Resettlement Action Plan (RAP) 41 Annex III: Revised estimate of Project Costs Mozambique Social Protection Project –Summary of Project Costs Current Amount (US$ AF (US$ Project Component million) million) 1. Institutional Strengthening 13.1 15.6 1.1. Systems and capacity for the ENSSB 4.6 4.6 1.2. Capacity building for the PASP 8.5 8.5 1.3 Capacity Building for Direct Cash Transfer response 0 2.5 2. Labor-intensive public works 36.2 36.2 2.1. Labor-intensive public works in rural areas 22.8 22.8 2.1.1 Complementarity activities rural areas 1.7 1.7 2.2. Labor-intensive public works in urban areas 11.1 11.1 2.2.1 Complementary activities in rural areas 0.6 0.6 3. Direct Cash Transfers 0 7.5 Total baseline costs 49.3 59.3 Contingencies 0.7 0.7 Total project costs 50 60 42 Annex IV: Simulated Impacts of Additional Financing (AF) and Restructuring15 Additional Financing 1. The AF would respond to the drought through the provision of direct cash transfers in 3 districts in the southern regions of the country. The AF will target three districts, Mabalane, Massingir and Chokwe, which have been severely hit by the El Niño. Each beneficiary household will receive the direct cash transfers for 12 months starting in 2017. 2. Simulations have been conducted by using different levels of benefit amount and total number of beneficiaries:  Scenario 1: 16,500 households are targeted in these three districts and receive MZN2,000 per month for 12 consecutive months. 16,500 households represent the number of beneficiary households selected by INGC for the humanitarian response in these three districts.  Scenario 2: 16,500 households are targeted, each receiving MZN2,500 per month for 12 consecutive months. 16,500 households represent the number of beneficiary households selected by INGC for the humanitarian response in these three districts.  Scenario 3: 20,000 households are targeted in these three districts where each household receives MZN2,000 for 12 consecutive months. This scenario increases the number of beneficiaries to 20,000 to try to maximize the amount of the AF (US$10m).  Scenario 4: 20,000 households are targeted in these three districts where each household receives MZN2,500 for 12 consecutive months. This scenario increases the number of beneficiaries to 20,000 to try to maximize the amount of the AF (US$10m). 3. The impact of these transfers on poverty rates and poverty gap index is given in Table 1. Table 1: Poverty Impact of Emergency Funds No. of Poverty Rate Poverty Gap Total Budget Beneficiaries Incidence Index Spent (US$) Scenario 1: Benefit MZN2,000 16,500 -10.18% -5.99% 4,950,000 Scenario 2: Benefit MZN2,500 16,500 -11.03% -6.75% 6,187,500 Scenario 3: Benefit MZN2,000 20,000 -11.35% -7.04% 6,000,000 Scenario 4: Benefit MZN2,500 20,000 -12.20% -7.98% 7,500,000 4. Table 1 shows that the impact on poverty increases as we increase the benefit amount and the number of beneficiaries. In scenario 1 and 2, the number of beneficiaries is kept constant and only 15 The simulations presented in this note were prepared using data derived from the Inquérito ao Orçamento Familiar 2008/2009, the most recent set of household data available. Consumption aggregates were inflated using changes CPI from 2008 and 2017, 2018 and 2019. Food based poverty line was used which was MZN13.6 per day in 2016. It was adjusted for 2017-2019 using CPI adjustments. For budget calculations, an exchange rate of US$1 = MZN80 was used. 43 the benefit amount is raised from MZN2,000 to MZN2,500. The impact on poverty rate and poverty gap index increases by almost 1 percent. However, if the benefit amount increases from MZN2,000 to MZN2,500 and coverage from 16,500 households to 20,000 households, the poverty rate decreases by more than 1 percent and so does the poverty gap index as compared to the scenario with benefit amount of MZN2,000 covering 16,500 households. 5. The recommended option is the fourth scenario where each household receives MZN2,500 per month for 12 consecutive months and the total coverage in the three districts is 20,000 households. Apart from the poverty impact, the amount represents 70 percent of the food basket and hence a significant support for households that need to recapitalize their productive assets after two consecutive years of severe drought. 6. The fourth option is also fiscally feasible as it maximizes the 10 million budget with 25 percent of the administrative costs and a maximum impact on poverty. Project restructuring 7. The Social Protection Project will be restructured to support the scale up of existing labor- intensive public works and activities in urban and rural areas affected by the current economic and climatic crisis. The Project will be scaled up to additional one urban municipality and 21 rural districts, reaching additional 21,000 households. 8. Two scenarios were simulated having the same geographical (districts and municipalities) and individual coverage (number of beneficiaries) and roll out plan, but different benefit amounts. 9. For both scenarios, the proposed roll out plan is the following: Table 2. Proposed roll out plan for Project Restructuring 2013 2014 2015 2016 2017 2018 2019 Rural districts 0 0 37 37 70 70 70 Urban districts 0 0 3 3 6 6 6 Total 0 0 21,000 21,000 121,000 121,000 121,000 10. Scenario 1: benefit amount equal to MZN650 per month. PASP beneficiaries receive MZN650 per month for four months in rural areas and for six months in urban areas every year. The total number of beneficiaries starts with 22,000 in 2016 but will increase to 121,000 households starting 2017. 11. Scenario 2: increased benefit amount (Proposed Scenario). Keeping the same beneficiary numbers and roll our plan as in scenario 1, PASP beneficiaries’ benefit in scenario 2 will gradually increase from MZN650 in 2016, to MZN1,000 in 2017, to MZN1,200 in 2018 and to MZN1,400 in 2019. 12. The impact on poverty rates and poverty gap index for both scenarios is given in Table 3. 44 Table 3: Poverty Impact of Additional Financing Poverty Poverty Rate Rate Poverty Incidence Poverty Gap Benefit amount Incidence Gap Index (Beneficiaries) (Beneficiaries) MZN650 -0.54% -0.30% -20.86% -11.56% Gradual Increase (1,000, 1,200 and 1,400) -1.18% -0.59% -37.91% -19.77% 13. As shown in Table 3, if we increase the amount of benefits gradually while keeping the number of beneficiaries constant, there is a higher impact on depth and level of poverty where poverty rate decreases by 1.18 percent as compared to 0.54 percent. Similarly, the severity of poverty represented by Poverty Gap Index, goes down by 0.59 percent as compared to 0.30 percent. 14. Other than the macro impact on poverty, the higher benefit amount provides better support to households on a micro level as well. From the household survey data, the average monthly consumption of poor households is MZN2,719. The benefit amount of MZN650 only covers 24 percent of the total consumption of poor households whereas in the proposed plan, the higher benefit amount of MZN1,000, MZN1,200 and MZN1,400 covers 27, 44 and 52 percent respectively of the total household consumption of poor households. To get a deeper understanding of what that amount accounts for, it is important to look at the amount of money required to buy the minimum food basket. In this case, MZN650 is enough to buy only 18 percent of the food basket for a household with an average size of 4.5 members. In comparison, a higher benefit amount of MZN1,000 – 1,400 will cover approximately 28-39 percent of the food basket. With MZN650, the support to households is almost insignificant so the recommended option is to gradually increase the benefit by MZN200 per year starting at MZN1,000 in 2017. 45