The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Strengthening Fiscal and Financial Stability Project (P161048) EAST ASIA AND PACIFIC | Mongolia | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2017 | Seq No: 7 | ARCHIVED on 23-May-2022 | ISR51346 | Implementing Agencies: Mongolia, Ministry of Finance Key Dates Key Project Dates Bank Approval Date: 09-Jun-2017 Effectiveness Date: 11-Sep-2017 Planned Mid Term Review Date: 30-Jan-2020 Actual Mid-Term Review Date: 15-Apr-2020 Original Closing Date: 31-Jan-2022 Revised Closing Date: 30-Apr-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to contribute to the Government of Mongolia’s efforts to strengthen fiscal and financial stability and improve the quality of expenditure management. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Component A: Strengthening Macroeconomic and Fiscal Management:(Cost $2.71 M) Component B: Improving the efficiency of Public Financial Management:(Cost $3.80 M) Component C: Enhancing Financial Sector Stability:(Cost $2.85 M) Component D: Strengthening of the Social Protection System:(Cost $2.00 M) Component E: Project Management and Monitoring:(Cost $0.64 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions The Project was restructured in November 2021 as requested by the MOF to extend the project implementation period until April 30, 2023.The restructuring also enabled revision to the initial funds allocation to each component to ensure implementation of the core activities supporting critical reforms and revisions to one of the PDO result indicators (Component C) and two intermediate result indicators (Components B and D). Regarding the project’s result framework, good progress has been recorded to date with seven (7) out of the twelve (12) intermediate result indicators fully achieved, three (3) are partially achieved and the remaining two (2) on-track. For those not yet achieved, progress has been recorded in advancing them and, in some cases, the prerequisite work/actions required for achieving indicator was completed. More details on the current status of the project result framework with references on the pending intermediate and PDO level result indicators can be found in the result section of this report. 5/23/2022 Page 1 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) With regard to the overall project implementation, despite the COVID-19 related challenges, the project made steady progress in the implementation of a number of activities planned since the project was restructured. While a slight slowdown in the project disbursement rate was evidenced until the second semester of 2021, some improvements were recorded since then. As of March 31, 2022 , approx. 72% of the total project amount was disbursed and around 83% is committed.  Component A: Despite COVID 19 pandemic, steady progress has been documented under the component including: i) a Social Accounting Matrix-based Computable General Equilibrium model was developed to estimate how the country’s economy might react to changes in tax policy or other external factors in the field of international trade; ii) comprehensive financial analysis on the activities of state-owned enterprises has been completed and presented to the Cabinet. Based on the assessment, the Government of Mongolia has issued special resolution 345, 2021 to lay out a plan to improve the transparency and governance of SOEs; iii) Most of the legislations and rules in connection with the customs reform and trade facilitation have been approved by the Parliament, and iv) a console API application to automatically register the official exchange rate data of the BoM in the DMFAS system was developed and launched.  Component B: A number of essential advancements were achieved under the component, including the rollout of the Integrated Payroll System (IPS) for budgeting purposes, which was a major milestone realized in 2021. The system roll-out to 4,190 central and local budget entities in 21 aimags and Ulaanbaatar city has been successfully completed and capacities of these entities have been strengthened to operate the IPS. Also, additional developments to the FISCAL Program in 2021 have enabled portfolio managers to make annual budget proposals and monthly budget allotments in real-time, thus reducing the technical burden on budget officers. Furthermore, results-based fiscal planning as part of the expenditure reform is being introduced with the support of the project by starting with the health sector in 2021 following with the education, culture, public sports, child protection and employment programs from 2022.  Component C: Steady but uneven implementation progress has been recorded across the different supported activities. Slow progress in procurement is a source of concern on the digital payout system for DICOM. In addition, the WB mission team emphasized the need for government to clarify the DBM’s future role in supporting its economic policy to inform any support going forward. The reported unsatisfactory financial condition of DBM limits its ability to effectively fulfil its policy mandate or attract new funding from capital debt markets.  Component D: The mission noted that the total annual disbursement for the component nearly doubled in 2021 as compared to 2020. The project activities were intensely focused on finalizing the draft social insurance and social welfare bills to be discussed first by the Cabinet, and then to be submitted to the Parliament. Out of two intermediate results indicators for Component D, one has been achieved (the Cabinet submitted the revised social insurance laws to the Parliament in October 2021) and another intermediate indicator (submitting social welfare draft laws to the Parliament) has progressed well (the revised social welfare laws were submitted to the Cabinet in November 2021). A series of intra-ministerial and external stakeholder consultations were undertaken on draft social insurance and social welfare laws. Further, public awareness raising activities to communicate the rationale and/or directions of proposed policy changes, have started. Most of the important consultancy tasks, supported by the project, have progressed well and several trainings were completed successfully. The project’s financial management arrangements continue to be satisfactory. The latest project IFRs for 2021 Q4 were received by the Bank on time and no issues were noted upon review (next one due by May 15). Annual audit of the project’s FY2020 financial statements yielded an unqualified opinion. No issues were noted in the management letter. Mongolian National Audit Office has contracted an audit company to perform the FY2021 financial audit for the project and the audit contract was finalized in December 2021. The project procurement practices continue to adhere to the related Bank's rules and procedures with a few areas highlighted for improvements to help accelerate project implementation. In this regard, the Project Implementation Unit (PIU) has doubled its efforts in uploading and updating the relevant information and supporting documents in STEP and managing all approval process through the system. Information about procurement of the project has also been consistently recorded in the Glass Account, ODAMIS systems, and the project's official website. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Substantial Moderate Moderate Macroeconomic Substantial Substantial Substantial Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Low Low Low 5/23/2022 Page 2 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Institutional Capacity for Implementation and Moderate Moderate Moderate Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Low Low Low Stakeholders Low Low Low Other Low Low Low Overall Moderate Moderate Moderate Results PDO Indicators by Objectives / Outcomes Aggregate expenditure deviation is contained within 15% and commitment controls in place IN01138791 ►Aggregate deviation of expenditures is reduced to 15% or less and commitment controls are in place. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Aggregate deviation is 3.7% as of December 31, 2021. Commitment Aggregate expenditure Aggregate deviation is Aggregate deviation is control pilots have deviation is contained >15% and no Value 5.8% and no commitment been conducted in the within 15% and commitment controls in controls in place second half of 2021 commitment controls in place after some delays due place to GFMIS configurations. Date 13-Oct-2017 31-Dec-2020 31-Mar-2022 31-Mar-2023 The indicator is updated annually but it will be measured at the end of the project taking the average of Comments: three years. Aggregate poverty-targeted social welfare support going to the poorest 20% is increased. IN01138792 ►Aggregate poverty-targeted social welfare support going to the poorest 20% is increased (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2016: 17 50.00 30.70 2022: 25.5 Date 13-Oct-2017 31-Dec-2020 31-Mar-2022 31-Jan-2022 Indicator measured in MNT (billions) Comments: Regulatory framework for the financial sector improved. IN01138780 ►Regulatory framework for the financial sector improved as measured by the number of new or revised legal acts submitted to the Parliament (Number, Custom) 5/23/2022 Page 3 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 8.00 10.00 Date 30-Sep-2021 30-Sep-2021 31-Mar-2022 30-Apr-2023 Intermediate Results Indicators by Components Component A: Strengthening Macroeconomic and Fiscal Management IN01138793 ►Component A1: Fully operational comprehensive revenue forecasting model and financial model for mega-projects. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 13-Oct-2017 29-Jan-2021 31-Mar-2022 31-Dec-2022 Partially achieved: In line with the changes in tax package laws, the various revenue forecasting models (e.g., CIT, VAT, PIT, Royalty, Customs duty) have been developed and used since FY 2019. Financial Comments: model for mega projects is under development. Preliminary version of the model has been created for large scale mining projects. IN01138797 ►Component A2: Government Debt management strategy and action plan are updated and approved by MoF. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 13-Oct-2017 31-Jan-2020 31-Jan-2020 31-Jan-2022 Achieved. Parliamentary Resolution no. 55 of May 30, 2019. Comments: Component B: Improving the efficiency of Public Financial Management IN01138794 ►Component B1: The upgraded GFMIS version 7 is operational and customized web services are developed to improve performance, functionality, and integration of the system. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The GFMIS version 7 Version 7 of Free is operational and Current version of the Balance (GFMIS) has Current version of the configuration and GFMIS is not integrated web services available Value GFMIS does not have connection with other and reporting is done in enabling integration of web services. systems through web stand-along systems. key systems e.g. the services are partially IPS. completed. Date 13-Oct-2017 29-Jan-2021 31-Mar-2022 31-Dec-2022 Partially achieved: The GFMIS version 7 is operational and configuration and connection with other systems through web services (Generic Web Services) are partially completed. Detailed testing of the Comments: commitment and obligation module has been completed and is ready for use. 5/23/2022 Page 4 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) IN01138798 ►Component B2: Policy document on budget control and risk management is drafted and approved by MoF. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 13-Oct-2017 31-Jan-2020 31-Jan-2020 31-Jan-2022 Achieved: Within the framework of the project, the following documents were approved by the MOF (Decree 291, 2019.12.27): i. Risk management policy; Comments: ii. Risk Committee charter; iii. Risk management regulation; Risk management training materials under ISO-31000, the international standards of risk management. IN01138800 ►Component B3: Public outreach activities on proposed changes to legislation conducted. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 2 at the end of the Value 0.00 3.00 3.00 project life Date 13-Oct-2017 29-Jan-2021 29-Jan-2021 31-Jan-2022 In accordance with the Law on Legislation Acts, public outreach activities were organized per se, collected and analyzed the data of the public opinion poll; Consolidated report of submitted suggestions from the Comments: public opinion poll and responses regarding how they were included in the revised draft version of the package law and summarized data report regarding the outcome of the public opinion poll was prepared. IN01138801 ►Component B4:The PIM Guideline for regulating the procedures and responsibilities of PIM project strategy/planning, appraisal, selection/prioritization and budgeting developed. and endorsed by MoF. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value Yes Yes Yes Yes Date 31-Jan-2020 31-Jan-2020 31-Jan-2020 31-Jan-2022 Achieved : The Finance Minister approved the regulation and methodology for PIM (project strategy/planning, appraisal, selection/prioritization, and budgeting) by Decree 295 of Finance Minister in Comments: December 2018. IN01138802 ►Component B1. An Integrated Payroll System (IPS) is developed, tested, and rolled out to strengthen budget control, accountability, and discipline. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Partially developed and Partially developed and Partially developed Fully developed and Value rolled out. rolled out. and rolled out. operational. Date 30-Sep-2021 30-Sep-2021 31-Mar-2022 30-Apr-2023 Partially achieved: The IPS is being developed involving 4,190 (100% of the expected SOEs) state and local entities and enabled the monitoring of the salary expenditures, which account for more than 20 Comments: percent of current state budget expenditures. Two additional modules are under development and will be rolled out by the end of this year and will be fully operational by 2023. 5/23/2022 Page 5 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Component C: Enhancing Financial Sector Stability IN01138795 ►Component C1: Financial Sector Medium-term Development Strategy: 2017-2025 is prepared and submitted to Parliament. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Yes Yes Yes Date 13-Oct-2017 26-Nov-2018 26-Nov-2018 31-Jan-2022 Achieved: The Ministry of Finance, the Bank of Mongolia and the Financial Regulatory Commission jointly formulated a “Financial Sector Medium-term Development Strategy: 2017–2025” national program Comments: and it was approved by the Government resolution # 299 on October 3, 2017 and submitted to the Parliament right after. IN01138803 ►Component C5 Operational macro-prudential framework designed and web-based database system operationalized. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No Yes Yes Date 13-Oct-2017 29-Jan-2021 31-Mar-2022 31-Jan-2022 Achieved: A new unit responsible for macroprudential policy design and implementation has been established within the Monetary Policy Department of the BoM. The BoM operationalized 2 models which Comments: design and analyze different simulation scenarios of potential shocks to the banking sector. IN01138804 ►Component C3. Digital payout system to deal with different sized banks designed, acquired, and implemented to enhance DICOM effectiveness (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 25-Oct-2021 25-Oct-2021 31-Mar-2022 30-Dec-2022 On track. The procurement for the development of the reimbursement system at the DICOM is pending Comments: but in progress. Component D: Strengthening of the Social Protection System IN01138796 ►Component D1: Amendments for social insurance legislation in line with the State Policy on Pension Reform (2015-2030) are submitted to the Parliament. (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No Yes Yes Date 13-Oct-2017 29-Jan-2021 31-Mar-2022 30-Dec-2022 Achieved. The revised social insurance laws was submitted to the Parliament in October 2021. Comments: IN01138799 ►Component D2: Revised Social Welfare Law draft, which mandates consolidation of the existing social welfare programs, has been submitted to the Parliament for approval (Yes/No, Custom) 5/23/2022 Page 6 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 30-Sep-2021 30-Sep-2021 31-Mar-2022 30-Jun-2022 On track. The revised draft of the Social Welfare law, which proposed consolidating some of the Comments: programs and benefits, was submitted to the Cabinet in November 2021. Performance-Based Conditions Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P161048 IDA-60840 Effective USD 8.20 8.20 0.00 5.86 2.46 70% P161048 IDA-60850 Effective USD 3.80 3.80 0.00 3.91 0.00 100% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P161048 IDA-60840 Effective 09-Jun-2017 05-Jul-2017 11-Sep-2017 31-Jan-2022 30-Apr-2023 P161048 IDA-60850 Effective 09-Jun-2017 05-Jul-2017 11-Sep-2017 31-Jan-2022 30-Apr-2023 Cumulative Disbursements 5/23/2022 Page 7 of 8 The World Bank Implementation Status & Results Report Strengthening Fiscal and Financial Stability Project (P161048) Restructuring History Level 2 Approved on 08-Nov-2021 Related Project(s) There are no related projects. 5/23/2022 Page 8 of 8