$ Report No: RES00906 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF Climate Resilience Multi-Phase Programmatic Approach APPROVED ON 25-Jun-2019 TO Democratic Socialist Republic of Sri Lanka Urban, Resilience and Land Global Practice South Asia Region Regional Vice President: Martin Raiser Regional Practice Director: Pankaj Gupta Division Director: David N. Sislen Practice Manager: Abhas Kumar Jha Task Team Leader(s): Elad Shenfeld, Natasha Chapplow The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) ABBREVIATIONS AND ACRONYMS CRes MPA Climate Resilience Multiphase Programmatic Approach CERC Contingency Emergency Response Component CRI Corporate Results indicator IA Implementation Agency IRI Intermediate Results Indicator PDO Project Development Objective PrDO Program Development Objective The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P160005 Climate Resilience Multi-Phase Programmatic Approach Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Sri Lanka Approval Date Current Closing Date 25-Jun-2019 31-Dec-2026 Original EA Category Full Assessment (A) (PAD Approval Package-25 Jun 2019) Organizations Borrower Responsible Agency Democratic Socialist Republic of Sri Lanka Ministry of Irrigation @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Current Development Objective To improve: (i) warnings of high impact weather and hydrological hazards; and (ii) Kelani Basin multi-purpose water infrastructure for climate resilience. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD 92.00 16.51 75.49 17.95 IDA -- -- -- 0 i The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate MULTIPHASE PROGRAMMATIC APPROACH (MPA) Multiphase Programmatic Approach (MPA) Program Development Objective Original MPA Program Development Objective (Approved as part of Restructuring on 28-Jun-2024) The Program Development Objective (PrDO) of this MPA is to increase the number of people and assets protected against flood risk in priority river basins. Current MPA Program Development Objective (Approved as part of Restructuring on 27-Jun-2024) The Program Development Objective (PrDO) of this MPA is to increase the number of people benefiting from improved weather and flood warnings, and multi-purpose water infrastructure for climate resilience. Proposed MPA Program Development Objective Multiphase Programmatic Approach (MPA) Status (Public Disclosure) Status and Key Decisions (Public Disclosure) The implementation of the first phase of the Climate Resilience Multiphase Programmatic Approach experienced delays resulting from the COVID-19 pandemic and economic crisis. Following a recent restructuring and increased implementation support, the project progress has been accelerated. Current projections suggest that the program and project development objectives may be on track to be achieved if the recent effort is maintained. Pending completion of envisaged tasks and continuous improvement of project progress, the next phases of the program could be developed and contribute to the overall program objective of increasing the number of people benefiting from improved weather and flood warnings, and multi-purpose water infrastructure for climate resilience. @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................5 IV. DETAILED CHANGE(S) ...............................................................................................................................................5 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Program and Project Status 1. The Climate Resilience Multiphase Programmatic Approach (CRes MPA) aims to protect people and assets of Sri Lanka against climate and disaster risks. The project was approved by the Board in June 2019. The first restructuring was completed in 2021, prior to project effectiveness, in response to the Government’s request to reduce the scope and loan amount. Limited progress followed, largely due to the impacts of the COVID-19 pandemic and the subsequent economic crisis in Sri Lanka. Following a slow start and low disbursement levels, a second restructuring occurred in May 2023, followed by a third restructuring in May 2024. These adjustments, combined with hands-on implementation support, helped improve implementation. However, overall progress remains slower than expected due to persistent implementation delays experienced since project approval. In November 2024, the newly elected government reaffirmed its national commitment to the CRes MPA, placing renewed emphasis on advancing the program’s objectives and underscoring their importance for Sri Lanka’s resilience agenda. 2. The MPA has continued to demonstrate momentum, particularly from 2024 onwards, but the project remains in problem status as of the latest MTR. As of March 2025, disbursement stands at only US$16.51 million, representing 18% of the total US$92 million loan amount for Phase 1. The MTR mission conducted in March 2025 highlighted the need for further restructuring to lift the project out of problem status and align implementation with the remaining timeline for achieving the Program and Project Development Objectives (PrDO/PDO). The overall risk rating remains High, with a review planned in the next ISR following restructuring. Safeguards performance is rated Satisfactory, reflecting the project’s compliance with applicable environmental and social requirements, timely implementation of mitigation measures, and proactive engagement with stakeholders. There are no outstanding audits, and financial management remains Satisfactory, with timely submissions and compliance with legal covenants. Procurement performance is rated Moderately Unsatisfactory, due to delays and quality issues. To address this, the Government has committed to: (i) dividing packages into smaller lots; (ii) reducing scope where needed; and (iii) running procurement tasks in parallel with preparation activities. The Bank continues to provide HEIS and regular support to accelerate implementation and improve procurement outcomes. B. Rationale 3. The project restructuring will refocus and prioritize activities and simplify the results framework to support accurate and timely evaluation of progress. The restructuring responds to the Government’s request and centers around three core changes: a) Partial Cancellation and Reallocation Across Components: Page 1 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) i. Adjustment in Component 2 Scope: The construction of the Ambatale Salinity Barrier will be deferred to the next phase of the MPA. This leads to the cancellation of the funds currently allocated for the related civil works, while retaining them within the overall MPA envelope. ii. US$5 million is reallocated from Component 2 to Component 5 to accommodate urgent rehabilitation works related to irrigation and stormwater management infrastructure. b) Simplification of the PDO and Results Framework: Adjustments to the PDO and results indicators are made to better reflect the outcomes of project interventions and to align targets with modifications to some activities. II. DESCRIPTION OF PROPOSED CHANGES D. Partial Cancellation of Proceeds and Reallocation Across Components 4. Under Component 2, the current allocation of US$16 million for construction cannot be utilized within the project timeline. As such, deferring the construction activity of the Ambatale Salinity Barrier enables the cancellation of the funds currently allocated to this component, while preserving the flexibility to reallocate these resources within the overall MPA envelope as needed. 5. A reallocation of US$5 million in uncommitted funds is proposed from Component 2 to Component 5 to finance additional needed rehabilitation works related to irrigation and stormwater management infrastructure, to be utilized until the end of the Project. These activities aim to further enhance flood resilience in priority areas. Component 5, which was introduced during the second restructuring, continues to demonstrate strong implementation performance and absorptive capacity. The proposed reallocation will allow the project to address emerging infrastructure needs while directly contributing to the achievement of the PDO. The allocation of US$ 5 million to Component 5 includes US$ 2.3 million and US$ 2.7 million from sub-components 2.1 and 2.2 respectively. E. Simplification of the PDO and Results Framework 6. Within this fourth project restructuring, adjustments are proposed to the PDO, and results indicators, while the overarching Program Development Objective of the MPA remains unchanged. The proposed revision to the PDO aims to better reflect the Project’s core focus at its current stage. These changes are intended to support more streamlined, effective, and continuous results monitoring aligned with the Project’s current scope. This restructuring proposes to revise the results indicators and the PDO, with respective additions, deletions, and changes to PDO-level indicators and intermediate results indicators (IRIs) described and explained in Table 1. In summary, the changes are the following: (i) revision of the PDO to better reflect the project’s current focus on institutional capacity for disaster risk management and climate adaptation; (ii) updates to PDO-level indicators and refinement of the associated Page 2 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) targets; and (iii) revisions to IRIs to reflect implementation progress, scale-up of infrastructure works, and refocusing of design and training activities. Revised Project Development Objective (PDO): To improve capacity for disaster risk management and climate adaptation. Replacing: To improve: (i) warnings of high impact weather and hydrological hazards; and (ii) Kelani Basin multi-purpose water infrastructure for climate resilience. Indicator Name Target PDO-level Indicators REVISED: Enhanced capacity for hazard At least two aspects of hazard monitoring, severe weather monitoring, severe weather forecasting, and emergency forecasting, and emergency management management systems are improved [equipment, personnel, facilities, and/or information management system]) REVISED: People benefiting from 440,000 People climate resilient infrastructure DELETED: People with enhanced resilience to climate risks; People benefiting from new Salinity Barrier IRIs Component 1: Forecasting and Early Warning of High Impact Weather, Floods, and Landslides REVISED: Government professionals 100 Government Professionals trained for forecasting and early warning REPLACED: Government professionals 50 Government Professionals trained for flood forecasting and early warning REVISED: Operation centers 3 Centers [currently 4] modernized at Implementing Agencies. DELETED: Decision Support System Yes Established DELETED: Disaster and emergency 20 Plans preparedness plans developed for Divisional Secretariats Component 2: Flood Risk Mitigation Investments in the lower Kelani basin REVISED: Length of irrigation and 125 km [currently 50 km] storm-water infrastructure improved DELETED: Ambatale Salinity Barrier 100 Percent Constructed REVISED: Climate resilient designs 2 designs ready for construction for improved flood risk reduction infrastructure in Kelani basin Page 3 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) REPLACED: Detailed design for the Completed construction of Wee Oya reservoir in Kelani River basin completed. Page 4 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Development Objective Yes Loan Cancellations Yes Results Yes Reallocations Yes Disbursements Estimates Yes Loan Closing Date Extension No Components Yes Financial Management No Safeguard Policies Triggered No Procurement No ISDS No Institutional Arrangement No MFD/PCE No Implementation Schedule No Risks No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No DDO No Clients No Appraisal Summary No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) DEVELOPMENT OBJECTIVE (DO) Development Objective The Project Development Objective of the first phase is to enhance the capacity of the Government to deliver improved weather and climate forecasting and early warning; and to reduce flood risks in the lower Kelani basin (between Hanwella and Kaduwela). Current Development Objective (Approved as part of Restructuring Package on 27-Sep-2021) To improve: (i) warnings of high impact weather and hydrological hazards; and (ii) Kelani Basin multi-purpose water infrastructure for climate resilience. Proposed New Development Objective Page 5 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) To improve capacity for disaster risk management and climate adaptation COMPONENTS Current Current Proposed Proposed Cost Action Component Name Cost (USD) Component Name (USD) Component 1: Forecasting Component 1: Forecasting and and Early Warning of High Early Warning of High Impact 43,500,000.00 No Change 43,500,000.00 Impact Weather, Floods and Weather, Floods and Landslides Landslides Component 2: Flood Risk Component 2: Flood Risk Mitigation Investments in 28,500,000.00 Revised Mitigation Investments in the 7,500,000.00 the lower Kelani basin lower Kelani basin Component 3: Project Component 3: Project 4,000,000.00 Revised 3,000,000.00 Management Management Component 4: Contingent Component 4: Contingent Emergency Response 0.00 No Change Emergency Response 0.00 Component (CERC) Component (CERC) Component 5: Improving Component 5: Improving climate resilience and climate resilience and maintenance of irrigation 17,000,000.00 Revised 22,000,000.00 maintenance of irrigation and and storm water storm water infrastructure infrastructure TOTAL 93,000,000.00 76,000,000.00 COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Cancellations Value Loan/Credit/ Current Cancellation New Status Currency Date of Reason Trust Fund Amount Amount Amount Cancellation Page 6 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) for Cancellati on BORROWE R'S IBRD-89960- Disbursi 92,000,000.0 16,000,000.0 REQUEST USD 01-Apr-2025 76,000,000.00 001 ng 0 0 FOR COUNTRY REASONS Reallocations IBRD-89960-001 Cancellations (if any): New Allocation: Currency: USD 16,000,000.00 76,000,000.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 Gd,wks,NCS,CS,IOC,T 60,500,000.00 8,851,755.25 65,500,000.00 100.00 100.00 r under Part 1; 2(A) Gds,wks, under Part 18,000,000.00 0.00 0.00 100.00 100.00 2.1; 2(B) Gds,CS,NCS,IOC,Tr 8,770,000.00 536,855.89 6,070,000.00 100.00 100.00 Parts2.2,2.3,2.4,2.5,3 ; 2(C) NCS,CS,IOC un P2.1 of 4,500,000.00 35,948.21 4,200,000.00 100.00 100.00 the Prjct; 3 Emergency 0.00 0.00 0.00 100.00 100.00 expenditures; FRONT END FEE; 230,000.00 230,000.00 230,000.00 0.00 0.00 5 PREMIUM FOR 0.00 0.00 0.00 0.00 0.00 CAPS/COLLARS; Total 92,000,000.00 76,000,000.00 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Implementation Start Date Operation Closing Date 25-Jun-2019 31-Dec-2026 Page 7 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) Projected Date for Full Disbursement 30-Apr-2027 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 25 Jun 2019) FY2019 0.00 0.00 0.00 FY2020 15,247,350.00 0.00 0.00 FY2021 26,599,240.00 0.00 0.00 FY2022 44,162,290.00 0.00 580,000.00 FY2023 81,985,080.00 2,800,000.00 2,791,276.41 FY2024 111,892,950.00 2,200,000.00 2,216,497.88 FY2025 30,113,090.00 13,000,000.00 10,692,948.00 FY2026 0.00 23,000,000.00 0.00 FY2027 0.00 35,000,000.00 0.00 Page 8 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) RESULTS COUNTRY: Sri Lanka Climate Resilience Multi-Phase Programmatic Approach @#&OPS~Doctype~OPS^dynamics@restrannexpolicyandresult#doctemplate PDO Indicators by PDO Outcomes Improved warnings of high impact weather and hydrological hazards Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year People who can take action to 15,000.00 Dec/2021 449,856 02-Apr-2025 449,856 02-Apr-2025 3,500,000.00 Dec/2026 protect their lives, livelihood, and property based on early warnings (Number of people) People who can take action to 7,650 Dec/2021 442,506 02-Apr-2025 442,506 02-Apr-2025 1,785,000 Dec/2026 protect their lives, livelihood and property based on early warnings – Female (Number) Improved performance of risk-based 10 Feb/2019 10 02-Apr-2025 10 02-Apr-2025 66 Dec/2026 warning (Percentage) New Enhanced capacity for hazard 0 Apr/2025 0 02-Apr-2025 2 Dec/2026 monitoring, severe weather Comments on achieving targets Target: at least two aspects of hazard monitoring, severe weather forecasting, and emergency management forecasting, and emergency systems are improved [equipment, personnel, facilities, and/or information management system] management (Number) Improved Kelani Basin multi-purpose water infrastructure for climate resilience Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Community members benefitting 0 Jan/2023 305,000 02-Apr-2025 305,000 02-Apr-2025 240,000 Dec/2026 from irrigation and storm water Page 9 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) irrigation improvement activities (Number of people) New People benefiting from climate 0 Apr/2025 0 02-Apr-2025 440 Dec/2026 resilient infrastructure (Number (Thousand)) Intermediate Results Indicators by Components Component 1: Forecasting and Early Warning of High Impact Weather, Floods and Landslides Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Government professionals trained for 0 Dec/2021 65 02-Apr-2025 65 02-Apr-2025 100 Dec/2026 forecasting and early warning (Number of people) 0 Dec/2021 1 02-Apr-2025 1 02-Apr-2025 4 Dec/2026 Operation centers modernized at implementing agencies (Number) Comments on achieving targets NBRO's operation center has been modernized. Decision support system established No Dec/2021 No 02-Apr-2025 No 02-Apr-2025 Yes Dec/2026 (Yes/No) Disaster and emergency 0 Dec/2021 0.00 02-Apr-2025 0.00 02-Apr-2025 20 Dec/2026 preparedness plans developed for Divisional Secretariats (Number) Component 2: Flood Risk Mitigation Investments in the lower Kelani basin Revised Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year ReviseClimate resilient designs ready No Dec/2021 0.00 02-Apr-2025 0.00 02-Apr-2025 Yes Dec/2026 for construction for improved flood risk reduction infrastructure in Kelani basin (Number) Grievances addressed (Percentage) 0 Dec/2021 100 02-Apr-2025 100 02-Apr-2025 100 Dec/2026 Page 10 The World Bank Climate Resilience Multi-Phase Programmatic Approach (P160005) Component 5: Improving climate resilience and maintenance of irrigation and storm water infrastructure Revised Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Length of irrigation and storm-water 0.00 Jan/2023 79 02-Apr-2025 79 02-Apr-2025 100 Dec/2026 infrastructure improved (Kilometers) Page 11