World Bank Document · Mechanized and other I&D systems rehabilitation: most of the mechanized...

The World BankTAJIKISTAN SECOND PUBLIC EMPLOYMENT FOR SUSTAINABLE AGRICULTURE AND WATER RESOURCES MANAGEMENT PROJECT (P133327)

REPORT NO.: RES31886

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

TAJIKISTAN SECOND PUBLIC EMPLOYMENT FOR SUSTAINABLE AGRICULTURE AND WATER RESOURCES MANAGEMENT PROJECT

APPROVED ON NOVEMBER 29, 2012

TO

MINISTRY OF FINANCE

WATER

EUROPE AND CENTRAL ASIA

Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc

Senior Global Practice Director: Guang Zhe ChenPractice Manager/Manager: David Michaud

Task Team Leader: Bobojon Yatimov

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ABBREVIATIONS AND ACRONYMS

ALRI Agency on Land Reclamation and IrrigationGAFSP Global Agriculture and Food Security ProgramMEWR Ministry of Energy and Water ResourcesPAMPII Second Public Employment for Sustainable Agriculture and Water Resources ManagementPMU Project Management UnitWRM Water Resources Management


BASIC DATA

Product Information

Project ID Financing Instrument

P133327 Investment Project Financing

Original EA Category Current EA Category

Partial Assessment (B) Partial Assessment (B)

Approval Date Current Closing Date

29-Nov-2012 28-Feb-2020

Organizations

Borrower Responsible Agency

Ministry of Finance Ministry of Finance,FVWRMP PMU,Agency for Land Reclamation and Irrigation

Project Development Objective (PDO)

Original PDOThe project development objectives are to (i) provide employment to food insecure people through the rehabilitation of irrigation and drainage infrastructure, (ii) increase crop production in response to improved irrigation and drainage infrastructure, and (iii) support the development of improved policies and institutions for water resource management, as a means to improve food availabilityand food access for low-income people in poor rural areas supported by the project.

Current PDOThe project development objectives for PAMP II are to: (i) provide access to temporary employment to food-insecure people through the rehabilitation of irrigation and drainage infrastructure, (ii) increase yields of selected crops in response to improved irrigation and infrastructure, and (iii) strengthen the capacity of Tajikistan to introduce integrated water resource management. By improving food access and food availability these measures improve the food security of low-income people in the poor rural areas supportedby the project.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing

Ln/Cr/Tf Approval Signing Effectiveness ClosingNet

Commitment Disbursed Undisbursed

IDA-56970 22-Jun-2015 07-Aug-2015 04-Dec-2015 28-Feb-2020 6.60 2.08 4.56


IDA-D0810 22-Jun-2015 07-Aug-2015 04-Dec-2015 28-Feb-2020 5.40 5.45 0

IDA-H8230 29-Nov-2012 05-Feb-2013 03-May-2013 28-Feb-2020 18.00 16.54 0

TF-13997 05-Feb-2013 05-Feb-2013 05-Feb-2013 28-Feb-2020 27.90 25.15 2.75

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?No

I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

1. This paper is prepared in support of the request of the Government of Tajikistan for reallocation of the grant proceeds under the IDA Grant №H8230 and GAFSP Grant №TF013997 for the Second Public Employment for Sustainable Agriculture and Water Resources Management Project. The original financing for the project in the amount equivalent to US$45.9 million was approved under these two grants on November 29, 2012 and became effective on May 3, 2013. Since then the PAMPII was restructured twice. First, a subsequent project expansion, through AF PAMPII (P154327) equivalent of US$12.0 million, was approved by the Board on June 22, 2015 and subsequently became effective on December 4, 2015. Second project restructuring was approved on November 11, 2015 in response to the disastrous floods, which hit Tajikistan in July of the same year. The restructuring largely affected the IDA (№H8230) and GAFSP (№TF013997) grant funds with US$4.2 million reallocated for financing of the activities related to the restoration of flood control works in Khatlon, a minor rehabilitation of existing irrigation schemes for the people in GBAO and replenishment of fuel stock used by the government agencies in carrying out the emergency response activities. 2. The project progress towards the project development objectives (PDO) and implementation progress (IP) have been assessed as satisfactory by the Bank during the last implementation support mission. As of June 01, 2018, project disbursements are well on track with 76 percent of funds already disbursed from the project accounts. Disbursements under original project i.e. from the GAFSP grant funds accounted for 85 percent, IDA grants 99 percent and under additional financing (IDA loans and grants) 45 percent respectively.

3. In its 5th year of implementation the project is on track to achieving the PDO and intermediate indicators with the most indicators for physical (including emergency) works estimated at 70-90 percent of completion, capacity building support activities underway to all the targeted WUAs and other critical activities to be completed within the next year of the project implementation, as summarized in the paras below. The project is expected to intensify its efforts in implementation of the institutional and policy support component (Component B) following the significant progress made in launching the Package B and C for support to the MEWR and ALRI. The remaining project period will be largely dedicated to completion of interventions under additional financing provided through a previous restructuring, as well as focus on implementation of institutional support activities envisaged under the original financing.


4. Progress by components and status of the key remaining activities:

Component A: Public Works and Rehabilitation of Irrigation and Drainage Infrastructure

Public works program: all the public works financed out of GAFSP grant funds have been completed with more than 18,620 beneficiaries provided with temporary employment opportunities through cleaning of 3,570 km of tertiary irrigation canals on the territory of 10 districts of Khatlon region. Public works activities are also progressing per the schedule in the districts of Additional Financing – with Vahdat, Danghara and Qumsangir districts targeted in the season 2017-2018.

Mechanized and other I&D systems rehabilitation: most of the mechanized works planned under the original financing have been either completed or nearing the finalization stage. Remaining activities include (i) procurement of machinery for irrigation sector in support of the ALRI and recently established WUAs; (ii) installation of the priority water measurement infrastructure; (iii) completion of rehabilitation works on the selected pumping stations; and (iv) completion of the ongoing and planned contracts for mechanized cleaning and rehabilitation of irrigation canals and drains.

Emergency restoration of community irrigation system works: the lower Tebalai flood channel restoration works were carried out under 4 principal construction contracts, corresponding to four contiguous reaches of the channel. While works covering the three lower reaches of the flood channel had been completed, works under the final (fourth) contract, covering the uppermost reach of the flood channel are ongoing. All other emergency interventions in Hamadoni and Shughnon districts introduced as part of the emergency response after the Second Restructuring in 2016 were completed.

Component B: Assistance in WRM, including Technical Assistance for Policy and Institutional Reform

National level policy, legislative and institutional formulation: The National-level Policy, Legislative and Institutional Formulation sub-component Package A was implemented by the French company, BRLi. Following a no-cost contract extension to June 30, 2017, the contractor continued to revise reports in response to extensive comments provided by the PMU and completed all five task reports in October 2017. Draft legislation documents developed under the Part B1 have been finalized and submitted for internal review and endorsement of the Government.

River Basin Planning: procurement of Consulting Services required to support Kofarnihon River Basin planning and management (Package B-MEWR) and Irrigation system management in Kofarnihon River Basin (Package B-ALRI) have been completed. The last package on provision of Consulting Services for development of the Water Information System is ongoing. There are ongoing construction works for establishment of the RBO offices and facilities for the ALRI both in Lower- and Upper-Kofarnihon Basin.

Development and strengthening irrigation and drainage institutions: satisfactory progress had been reported previously in establishing new WUAs and strengthening the existing ones through provision of goods, works and trainings. The remaining activities under this sub-component include: (i) continuation of the ongoing capacity building program targeting WUAs; (ii) completion of GIS mapping


in Lower Kofarnihon river basin and inventory of irrigation infrastructure; (iii) procurement of the required goods for the remaining WUAs; (iv) construction of the offices for the remaining WUAs; and (v) rehabilitation of selected priority on-farm irrigation infrastructure.

Component C: Project Management

Financial management: the financial management arrangements at the PMU, including accounting and reporting, internal control procedures, planning and budgeting, external audits, funds flow, organization and staffing arrangements are considered moderately satisfactory.

Procurement Management: is being conducted according to the plan and is progressing satisfactorily to the Bank. Majority of the planned procurement of goods and works have been completed with two large goods packages, 8 works and three small consulting assignments remained to be procured.

Environmental and social safeguards: the project also continues to display highly satisfactory progress in complying with environmental management procedures. All the necessary site specific EMPs and EMP checklists for the new sub-projects are completed on time and in line with the GEMP provisions. The specialists in central office and district engineers on the key environmental issues is well established and the Client’s overall Environmental Assessment capacity is high.

5. The proposed restructuring is for the reallocation of grant proceeds under original financing - IDA Grant №H8230 and GAFSP Grant №TF013997, since these are now found to be hindering appropriate and timely expenditure and disbursement approvals and authorizations. The project implementation planning and budgeting for the activities financed from IDA and GAFSP grant funds has been markedly impacted by the following factors stemming from the cumbersome financing structure of the project including financing percentages across six expenditure categories and adverse effects of internal and external factors briefly described below:

(a) SDR/USD exchange rate changes. IDA Grant (№H8230) funding availability is specified in SDR while all project implementation planning and budgeting is undertaken in USD. Some significant negative impacts on overall project budgetary planning and funding availability have resulted from continued variable exchange rate fluctuations and significant net depreciation of the SDR against the USD. The SDR/USD exchange rate losses under the IDA Grant are estimated at US$1.45 million. Hence, some of the critical activities planned for financing under the H823-TJ cannot be completed without the proposed reallocation.

(b) USD/TJS exchange rate changes. Conversely, project funding availability for intervention activities dominated by expenditures incurred in TJS, predominantly under the Category 1 and Category 6 financed fully out of GAFSP Grant (№TF013997) has been quite positively impacted by a continuous steadily trending depreciation of the TJS against the USD.

(c) Additional Financing and Mid-Term Review Adjustments. The PAMPII financing arrangements were adjusted at the time of Additional Financing to their current status. Some unexpected expenditures have also arisen from the addition to the project scope of a number of previously unconsidered items subsequently identified as important for sustainability. These items have included (i) repairs to the Yovon


district irrigation flow conveyance tunnel, (ii) replacement of deficient groundwater monitoring wells for drainage system and water quality assessments, (iii) provision of flow measurement devices at key irrigation system locations, (iv) replacement of a major irrigation pumping station pipeline in Panj district, (v) undertaking of a Tebalai river upper catchment flood management study to complement lower flood channel restoration works for the protection of Kulob city, and (vi) extended institutional development support in the areas of geographic information systems and infrastructure inventories. The budget impacts of most of these unexpected expenditures were quantified and addressed at the time of the mid-term review and will need to be formally accounted for in the restructuring process. About one year later, after detailed mid-term budgetary reviews at the end of 2016, several further prospective budgetary constraints were identified, leading to corresponding implementation plan and budget reallocation adjustments between the activities within the components. While these were undertaken without recourse to project restructuring, a need for restructuring was noted then as a potentially needed future action.

(d) Financing Framework. The PAMPII financing framework is rather complex, involving financing instruments with two different currencies, six expenditure categories for original financing and financing percentages for each category, all of which are specified in the financing agreements, has greatly complicated budgetary and financial management.

II. DESCRIPTION OF PROPOSED CHANGES

6. The team has reviewed the requested reallocation and worked with PMU to document currently available project funds in the designated accounts. As all allocated funds under the IDA Grant №H8230 has been disbursed and mostly documented, the requested in the letter of the Ministry of Finance allocations were also adjusted based on assessment of the remaining scope of activities and actual funds available under both financing proceeds. The proposed adjustments are not large in the context of the overall project, they require changes of the specific details incorporated into the financing agreements, leading therefore to the currently proposed further project restructuring.

7. The proposed changes to the Disbursement Categories can be summarized as following:

Category 1. All the activities under the Category 1 financed exclusively out of GAFSP Grant have been essentially completed with a budgetary surplus of 1.71 million USD (25%). The main reason for this surplus has been the favorable USD/TJS exchange rate changes. The primary input to the works has been local manual labour, paid in TJS originating from USD funds exchanged at rates that were far more beneficial than the assumed rate. The savings from the Category 1 will be reallocated to the Category 2 under the same Grant.

Category 2. Large-scale irrigation and drainage system mechanized and other non-manual repair and rehabilitation works are well advanced and can be readily completed, but the projected budgetary deficit for this category under the IDA Grant is estimated at US$0.88 million (10%).

Category 3. Flood damage repair and mitigation works have now all been essentially completed with no budgetary surplus or deficit amounts.


Category 4. The projected budgetary deficit under the Category is estimated at US$1.39 million (17%). This deficit arises from the IDA Grant SDR/USD exchange rate losses and additional included consultancy services corresponding to the additional works, studies and programs incorporated into the project.

Category 5. Building and other works plus training programs in support of institutional development initiatives are well progressed and are expected to continue quite intensively over the remaining period of the project. The projected budgetary surplus for this category is US$0.44 million (39%). This surplus is due to the favorable USD/TJS exchange rate changes, given that the works and programs are predominantly executed with local inputs and resources paid for in TJS that originate from USD funds exchanged at rates far better than the assumed one. The IDA Grant financing contribution has been significant and therefore the unfavorable SDR/USD exchange rate changes have had an impact; however, this is heavily outweighed by the favorable USD/TJS exchange rate changes, particularly because IDA Grant financing has ceased with substantial planned expenditures remaining in this category.

Category 6. Projected budgetary savings in incremental operating costs incurred for project management amount to US$0.12 million (9%).

8. GAFSP Grant funding reallocations are proposed for all categories except Category 3. They are summarized as follows:

Current according to the Grant Agreement (TF013997), USD million

Proposed reallocation and changes in percentages of expenditures to be

financed, USD million

Cat

egor

y N

o.

Allocated Disbursed Available Current, % Reallocation Proposed Change, %1 6.87 5.16 1.71 100 (-1.71) 5.16 1002 8.90 8.22 0.68 53.29 + 0.18 9.08 54.273 1.68 1.58 0.11 28.05 0.00 1.68 28.924 7.98 6.65 1.33 62.69 + 2.12 10.10 70.855 1.14 0.64 0.49 50.00 (-0.36) 0.78 54.826 1.33 1.10 0.23 100 (-0.23) 1.10 100

27.90 23.35 4.55 27.9

9. All allocated funds under IDA grant has been disbursed to the designated accounts with a small outstanding amount (SDR 82, 572.65) to be documented and closed in a short. The proposed reallocations under the IDA grant agreement is mainly to cover overdrafts under categories 2 and 3 as summarized in the table below:

Current according to the Financing Agreement (IDA H8230), SDR million

Proposed reallocation and changes in percentages of expenditures to be

financed, SDR million

Cat

egor

y N

o.

Allocated Disbursed Available Current, % Reallocation Proposed Change, %1 0.00 0.00 0.00 0.00 0.00 0.00 0.002 5.06 5.39 (-0.33) 46.71 + 0.34 5.40 45.73


3 2.80 2.90 (-0.10) 71.95 + 0.10 2.91 71.084 3.10 2.87 0.23 37.31 (-0.16) 2.94 29.155 0.74 0.46 0.28 50.00 (-0.28) 0.45 45.186 0.00 0.00 0.00 0.00 0.00 0.00 0.00

11.70 11.62 0.08 11.70

10. All the proposed changes, although mainly affecting the GAFSP Grant, will lead to the corresponding changes in the original financing percentage changes for both IDA and GAFSP Grant funding. Financing percentage breakdown aspects are summarized as follows:

IDA Grant H823-TJ (%) GAFSP Grant TF013997 (%)Category No. Current Proposed Change Current Proposed Change1 0.00 0.00 0.00 100 100 0.002 46.71 45.73 0.98 53.29 54.27 - 0.983 71.95 71.08 0.87 28.05 28.92 - 0.874 37.31 29.15 8.16 62.69 70.85 - 8.165 50.00 45.18 4.82 50.00 54.82 - 4.826 0.00 0.00 0.00 100 100 0.00

11. These changes also affect the current accounting arrangements, which will need to follow the proposed financing percentages under both IDA and GAFSP Grant funding agreements. Upon complete disbursement of IDA grant funds, any further expenditures under the project shall be financed in full by the GAFSP grant funds only. Therefore, current accounting arrangements will also need to be adjusted under project to maintain proposed financing percentages according to the amended agreements.

12. No changes are foreseen for IDA Grant № D081-TJ and IDA Credit № 5697-TJ. It is considered that with the proposed reallocations a satisfactory completion of the PAMPII interventions and a good final achievement of the corresponding implementation targets and project objectives will be attainable.

III. SUMMARY OF CHANGES

Changed Not Changed

Reallocation between Disbursement Categories ✔

Change in Implementing Agency ✔

Change in DDO Status ✔

Change in Project's Development Objectives ✔

Change in Results Framework ✔


Change in Components and Cost ✔

Change in Loan Closing Date(s) ✔

Cancellations Proposed ✔

Change in Disbursements Arrangements ✔

Change in Disbursement Estimates ✔

Change in Overall Risk Rating ✔

Change in Safeguard Policies Triggered ✔

Change of EA category ✔

Change in Legal Covenants ✔

Change in Institutional Arrangements ✔

Change in Financial Management ✔

Change in Procurement ✔

Change in Implementation Schedule ✔

Other Change(s) ✔

Change in Economic and Financial Analysis ✔

Change in Technical Analysis ✔

Change in Social Analysis ✔

Change in Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_REALLOCATION _TABLE

REALLOCATION BETWEEN DISBURSEMENT CATEGORIES

Current Allocation Actuals + Committed Proposed Allocation Financing %(Type Total)

Current Proposed

IDA-H8230-001 | Currency: XDR

iLap Category Sequence No: 1 Current Expenditure Category: Works under PART A(1)

0.00 0.00 0.00 0.01 0



5,060,000.00 5,391,941.93 5,400,000.00 45.73


2,800,000.00 2,903,580.51 2,910,000.00 71.08

iLap Category Sequence No: 4 Current Expenditure Category: GO, CS and NON-CS

3,100,000.00 2,868,738.41 2,935,000.00 29.15

iLap Category Sequence No: 5 Current Expenditure Category: Works under PART B, TR

740,000.00 453,166.50 455,000.00 50.00 45.18

iLap Category Sequence No: 6 Current Expenditure Category: IOC

0.00 0.00 0.00 0.01 0.00

Total 11,700,000.00 11,617,427.35 11,700,000.00

TF-13997-001 | Currency: USD


6,867,206.00 5,159,799.71 5,160,000.00 100.00 100


8,900,000.00 8,222,591.22 9,080,000.00 54.27


1,680,000.00 1,573,347.79 1,680,000.00 28.05 28.92

iLap Category Sequence No: 4 Current Expenditure Category: GO, CS, NON-CS(incl. fuel)


7,980,000.00 6,654,730.47 10,100,000.00 70.85

iLap Category Sequence No: 5 Current Expenditure Category: Works under PART B, TR

1,139,657.00 642,425.30 780,000.00 50.00 54.82

iLap Category Sequence No: 6 Current Expenditure Category: IOC

1,333,137.00 1,093,731.08 1,100,000.00 100.00 100.00

Total 27,900,000.00 23,346,625.57 27,900,000.00

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