Zimbabwe - Governance and Institutional Strengthening ... · PMC Project Management Committee ......
Transcript of Zimbabwe - Governance and Institutional Strengthening ... · PMC Project Management Committee ......
AFRICAN DEVELOPMENT FUND
ZIMBABWE
GOVERNANCE AND INSTITUTIONAL STRENGTHENING PROJECT
(GISP)
OSGE/GECL
November 2013
TABLE OF CONTENTS
Acronyms and Abbreviations
Currency Equivalents
Fiscal Year
Weights and Measurement
Grant Information
Project Summary
Results-based Logical Framework
Project Timeframe
I - STRATEGIC THRUST & RATIONALE
1.1 Project Linkages with Country Strategy and Objectives
1.2 Rationale for Bank’s Involvement
1.3 Donors Coordination
II – PROJECT DESCRIPTION
2.1. Project Components
2.2 Technical Solution Retained and Other Alternatives Explored
2.3 Project Type
2.4 Project Cost and Financing Arrangements
2.5 Project’s Target Area and Population
2.6 Participatory Process for Project Identification, Design and Implementation
2.7 Bank Group Experience, Lessons Reflected in Project Design
2.8 Key Performance Indicators
III – PROJECT FEASIBILITY
3.1 Economic and Financial Performance
3.2 Environmental and Social Impacts
IV – IMPLEMENTATION
4.1 Implementation Arrangements
4.2 Financial Management, Disbursement and Audit
4.3 Procurement Arrangements
4.4 Monitoring and Evaluation
4.5 Governance
4.6 Sustainability
4.7 Risk Management
4.8 Knowledge Building
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal Instrument
5.2. Conditions Associated with Bank’s Intervention
5.3. Undertakings
5.4 Compliance with Bank Policies
VI – RECOMMENDATION
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LIST OF TABLES
Table 1 Project Timeframe
Table 2 Project Components
Table 3 Project Alternatives Considered and Reasons for Rejection
Table 4 Project Cost Estimates by Component and Subcomponent
Table 5 Sources of Financing
Table 6 Project Cost by Category of Expenditure by Component and Subcomponent
Table 7 Expenditure Schedule by Year
Table 8 Lessons Learned from Previous Operation and Other Analytical Reports
Table 9 Implementation Schedule
Table 10 Risk and Mitigation Measures
Appendices
Appendix I. Zimbabwe Comparative Socio-Economic Indicators
Appendix II. Table of ADB’s Portfolio in the Country
Appendix III. Key Related Projects Financed by Other Development Partners
Appendix IV. Summary of Public Expenditure and Financial Accountability
Appendix V. Analytical Work and Underpinnings
Appendix VI. Map of Zimbabwe
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Acronyms and Abbreviations ACBF African Capacity Building Foundation
ADF African Development Fund
AfDB African Development Bank
CIFA Country Integrated Fiduciary Assessment
COMESA Common Market for Eastern and Southern Africa
DfID Department for International Development
FSF Fragile States Facility
GDP Gross Domestic Product
GISP Governance and Institutional Strengthening Project
GOZ Government of Zimbabwe
IMF International Monetary Fund
MDGs Millennium Development Goals
MoFED Ministry of Finance and Economic Development
MoMMD Ministry of Mines and Mining Development
MTP Medium Term Plan
PFM Public Financial Management
PMC Project Management Committee
PMU Project Management Unit
PSC Project Steering Committee
RBZ Reserve Bank of Zimbabwe
SADC Southern Africa Development Community
SMP Staff Monitored Program
STERP Short Term Emergency Recovery Program
UNDP United Nations Development Program
UNICEF United Nations International Children’s Emergency Fund
USAID United States Agency for International Development
ZAADDS Zimbabwe Accelerated Arrears Clearance, Debt and Dev. Strategy
ZEPARU Zimbabwe Economic Policy Analysis and Research Unit
Zim-Asset Zimbabwe Agenda for Socio-Economic Transformation
ZIMFUND Zimbabwe Multi-donor Trust Fund
ZIPAM Zimbabwe Institute of Public Administration and Management
ZIMSTAT Zimbabwe National Statistics Agency
ZANU-PF Zimbabwe African National Union – Patriotic Front
Currency Equivalents As of 21 October 2013
1 UA = USD 1.52017
Fiscal Year
1st January – 31
st December
Weights and Measurements
1 metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
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Grant Information
Client’s information
RECIPIENT: Republic of Zimbabwe
EXECUTING AGENCY: Ministry of Finance and Economic
Development
Financing plan
Source Amount (UA) Instrument
ADF1
5.2 Million
Grant
TOTAL COST 5.2 Million Grant
Timeframe - Main Milestones (expected)
Concept Note approval
October 2013
Appraisal October 2013
Project approval December 2013
Effectiveness February 2014
Mid-term Review June 2015
Completion December 2016
Last Disbursement June 2017
1 The Board of Directors approved, on 6
th November 2013, the use of the 50 percent of the performance-based
allocation (Ref: ADB/BD/WP/2013/142 and ADF/BD/WP/2013/115
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Project Summary Paragraph Topics covered
Project
Overview
Program name: Governance and Institutional Strengthening Project (GISP).
Geographic scope: Entire country
Implementation timeframe: 2014-2016
Project cost: UA 5.2 million
Expected Outcomes and Outputs: The expected outcomes are: (a) Enhanced effectiveness in
internal control and transparency in public procurement; and (b) Increased transparency in mining
revenue and effectiveness in banking supervision and stability. This will be achieved through the
following output level results: (i) Strengthened competition, value for money and control in
procurement; (ii) Strengthened internal audit functions; (iii) Increased transparency in the mining
sector; and (iv) Enhanced core banking system of the Reserve Bank of Zimbabwe. Project direct
beneficiaries: The project will strengthen the capacity of key institutions responsible for public
finance and economic management namely: the Ministry of Finance and Economic Development
(MoFED), the State Procurement Board (SPB), the Reserve Bank of Zimbabwe (RBZ), the
Ministry of Mines and Mining Development (MoMMD), the Zimbabwe Institute of Public
Administration and Management (ZIPAM), and the Zimbabwe Economic Policy Analysis and
Research Unit (ZEPARU). The indirect beneficiaries are the general population of Zimbabwe, and
the private sector who will also benefit from (a) a more transparent and competitive public
procurement practice, (b) improved internal control in public expenditure, (c) effective banking
supervision for a more stable financial sector, and (d) improved transparency in the management of
the mining sector which will attract investment and thereby increase government revenue for
infrastructure and better service delivery.
Needs
Assessment
The decade of economic decline which preceded the growth has severely compromised public
sector governance and capacity to deliver core functions. This has also negatively impacted the
Public Finance Management (PFM) system and institutional capacity through economic decline,
hyperinflation, and brain-drain. The Country Integrated Fiduciary Assessment (2012) report has
identified a range of weaknesses in the PFM system including the areas of procurement and
internal audit. In addition, the Procurement Capacity Building Need Assessment also highlights the
need to strengthen the institutional framework and capacity development targeted at procuring
entities and oversight bodies. Another major effect of the Zimbabwe’s economic collapse was
systemic weakening of key institutions due to dilapidated and outdated IT equipment, and weak
working system. The recent assessment shows that the RBZ requires robust information and
communication technology (ICT) systems to perform its mandate especially relating to national
payments, financial sector stability and production of national statistics to formulation and
implementation of credible macro-economic policies. Moreover, the 2012 Mining Sector Policy
Study has identified the main challenges and constraints facing the mining sector and recommends
measures for strengthening mining sector policies, institutions and procedures. In this regard,
Government has requested the Bank to provide additional capacity building support which was the
basis to design and prioritize interventions under this project.
Bank’s Added
Value
The project builds upon previous and on-going Bank supported PFM reforms and complements
other Development Partners’ interventions in Zimbabwe. The Bank’s added value in supporting
this project derives from a number of factors. First, the Bank’s previous experience in the country
(e.g. the range of interventions under the FSF Pillar III, and the ZimFund), and other operations
(audit, procurement and extractive industries governance) in Regional Member Countries have
generated lessons learned which have been incorporated into the project design. Second, the
presence of the Country Office has enabled a strong understanding of the political context and
technical issues which enriched the operational design. Third, the Bank enjoys support from
authorities as an African institution that is mandated to take a lead role in the country’s re-
engagement with the international community. And also having common implementation
arrangement for two Bank-supported public sector capacity building projects reduce the transaction
cost on government and the Bank.
Knowledge
Management
The project will contribute to knowledge building through skills and knowledge transfer from
consultants, training providers, upgrading systems (e.g. core banking systems) and research;
supplemented by experience sharing visits and partnership arrangements with peer institutions in
the region. The Bank will capture and disseminate knowledge and experience through sharing the
findings of supervision missions, progress reports, and the Project Completion Report. Lessons
learned and experience gained will be available to inform future operations. The provision of a
geological equipment and core banking system will expand the knowledge of nationals in mineral
resources and functions of the financial sector. The Bank will capture and disseminate knowledge
through M&E, and Project Completion Report.
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VII. Results-based Logical Framework Country and project name: Zimbabwe: Governance and Institutional Strengthening Project (GISP) Purpose of the project : To Improve transparency and effectiveness in public finance and economic management
RESULTS CHAIN
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/ MITIGATION
MEASURES Indicator (including CSI)
Baseline Target
IMP
AC
T
Contribute to economic recovery and inclusive service delivery through strengthened public sector governance
GDP growth 4.4% (2012) 6% average (2017) Zim-Asset progress IMF report AfDB/AEO
Assumption: Maintain the multi-currency regime Risk#1: Macroeconomic instability. Mitigation: GOZ’s renewed commitment to prudent fiscal & monetary policy; continued implementation of the country’s development strategy. Enhanced efforts to maintain dialogue and support to the country to remain on track with the implementation of the debt and arrears clearance strategy and reform actions agreed under the SMP.
Assumption: No further restructuring of government ministries.
Risk 2: Implementation capacity constraints. Mitigation: PMU in place to manage and coordinate project implementation. Additional capacity building under the project. The Bank will continue undertaking capacity building initiatives and implementation support and supervision mission
Risk 3: Fiduciary risk. Mitigation: Project support will improve fiduciary environment. PMU capacity and complemented by the use of third party (ACBF) to administer the special account. Compliance with the Bank’s procurement of goods and services, annual audit reports and continues training.
CPIA score 2.23 (2012) 2.75 (2017)
OU
TCO
MES
Outcome 1: Enhanced effectiveness in internal audit and transparency in public procurement
PEFA PI 19 (Competition, value for money and control in procurement)
D+ (2012) P1-19 = C+ (2016)
PEFA self- assessment (2016)
PEFA PI 21 (Effectiveness of internal audit)
C+ (2012) PI-21 = B+ (2016)
Outcome 2: Improved transparency in mining revenue and effectiveness in banking supervision and stability
Disclosure of the mining sector revenue
Budget statement (2012)
2016 budget statement includes mining revenues from the largest companies
Budget Statements
Reduction in Non-performing loan
10% (2012) 5% (2016) RBZ annual report
Increase in Liquidity ratio 36% (2012) 40% (2016)
Component 1: Improved Transparency in Public Finance
OU
TPU
TS
Output 1.1 Strengthening competition, value for money and control in procurement
Legal framework revised
PPA act 1999
Revised Procurement Act submitted to Cabinet (2015)
PFM progress report Supervision report Audit committee periodic reports
Staff trained 5 in 2013 300 staff received procurement training incl. at least 90 females (2016)
Procurement Report published
None 2 procurement audit reports published (2015 and 2016)
Output 1.2 Strengthening internal audit functions
Audit committees established
None 24 Audit committee established in 24 line ministries (2016)
Staff trained 10 in 2013 250 internal auditors received training incl. 60 are females (2016)
Manuals and Guidelines published
Draft 2013 Internal audit manual and treasury instruction published (2015)
Component 2: Increasing Transparency and Capacity in Economic Management
Output 2.1 Increased transparency in the mining sector
Policy document submitted to Cabinet
Draft policy in 2013
Revised Mining and mineral acts submitted to Cabinet (2015)
Progress reports Supervision report RBZ Annual Report
Geological survey published None 1 Geological survey report published (2016)
Economic sector work published
None 5 mining sector studies published (2015/ 2016)
Output 2.2 Enhanced core banking system of the Reserve Bank of Zimbabwe
IT upgrade and installation operational
IT systems outdated in 2013
Updated GLOBUS version installed (2015). Internal network installed (2015).
Component 3: Project Management Support
Output 3.1: Improved project implementation and coordination
a) Annual audit report and quarterly progress submitted b) PEFA self-assessment report
a) None (b) 2012 CIFA
a) Annual audit and quarterly report submitted b) PEFA report by 2016
Progress reports Supervision report
AC
TIV
ITIE
S
COMPONENTS
Staff Training and Professional Development Programs
Technical Assistance for systems design and manual preparations
Procurement and Supply of IT equipment
Installation and upgrade IT systems, and network
Technical assistance to review legislations
Monitoring and evaluation, staff training, audit, and PEFA assessment
Input ADF Grant : UA 5.2 million Implementation support and supervision support
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Table 1: Project Time Frame/Implementation Schedule
Zimbabwe: Governance and Institutional Strengthening Project
Activities/Years
2013 2014 2015 2016 Action by
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Project Processing and Management
Grant approval AfDB
Signing Protocol of Grant Agreement AfDB & GoZ
Project Effectiveness and Launching AfDB & GoZ
Supervision and Monitoring AfDB
Mid-term Review AfDB
Project Completion Report AfDB & GoZ
Component 1: Improved Transparency in Public Finance
A. Procurement of Good GoZ
B. Training GoZ
C. Technical Assistance GoZ
Component 2: Increasing Transparency and Effectiveness in
Economic and Sector Management GoZ
A. Procurement of Goods GoZ
B. Training GoZ
C. Technical Assistance GoZ
Component 3: Project Management Support GoZ
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Box 1: National Development Priorities:
Infrastructure development;
Human development and poverty reduction;
Employment creation;
Entrepreneurship and investment promotion;
Maintaining macroeconomic stability;
Good governance and combating corruption;
Prudent/Transparent natural resource
management;
ICT and science and technology; and
Gender mainstreaming.
Source: MTP, 2011-2015
REPORT AND RECOMMENDATION OF THE MANAGEMENT TO THE BOARD OF
DIRECTORS ON A PROPOSED GRANT TO ZIMBABWE FOR THE GOVERNANCE
AND INSTITUTIONAL STRENGTHENING PROJECT
Management submits the following Report and Recommendation on a proposed ADF Grant for
UA 5.2 million to the Republic of Zimbabwe to finance the Governance and Institutional
Strengthening Project (GISP).
I. STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Country Strategy and Objectives
1.1.1 The proposed operation is aligned with
the Country’s Medium Term Plan (MTP, 2011-
2015), and Zimbabwe Agenda for Socio-
Economic Transformation (Zim-Asset, 2013 -
2018). The overarching goal of the Plan is to reduce
poverty, create jobs, maintain macroeconomic
stability and restore the economy. To achieve this
objective, the Government has identified nine
priority areas including governance and natural
resource management (Box 1). The operation is
designed specifically to address governance, and
natural resource management which are critical for the implementation of the country’s
development plan. Following the election of the ZANU-PF party in the July 31st harmonised
election, the new administration embarked on the process of updating the MTP and formulated a
new plan known as the Zimbabwe Agenda for Socio-Economic Transformation for the next five
years. Zim-Asset aims to achieve sustainable development and social equity anchored on
indigenisation, empowerment and employment creation (Technical Annex A).
1.1.2 The project is also consistent with the Country’s Public Financial Management
(PFM) Improvement Roadmap (Draft, 2013-2015), and the 2013 Fiscal Policy Priorities.
The PFM improvement roadmap provides a comprehensive framework on which to base further
development assistance to ensure that the interventions are coordinated, and aligned with the
national priorities. The first priority and target of the roadmap is to establish core PFM functions
to strengthen financial compliance and control. The policy priorities for 2013 budget include
reducing financial sector vulnerability, dealing with infrastructure deficit, and natural resource
governance. The proposed project will contribute to the implementation of PFM roadmap and
policy priorities by focusing on (a) audit and procurement, (b) transparency in the mining sector
and (c) banking sector stability.
1.1.3 The project is firmly anchored in the objectives and priorities of the Zimbabwe
Country Brief (2013-2015). The Country Brief highlights the need to deepen and consolidate
Bank’s support for capacity building in the areas of Audit, Procurement, Reserve Bank of
Zimbabwe, and Mining Sector Development. By focusing on PFM, Financial Sector Stability
and Mining Sector Governance, the proposed operation is consistent with the Bank’s Strategy
(2013-2022), Governance Strategic Action Plan (Draft, 2013-2018), and ADF-12 operational
priorities. The project addresses the focus areas of support outlined in the Bank’s Strategy for
Enhanced Engagement in Fragile States (capacity building and economic management). It is also
aligned with the Bank’s Regional Strategy Paper for Southern Africa (2011-2015) and
particularly with Pillar II - strengthening institutional capacity of the Reserve Bank of Zimbabwe
will facilitate the financial transactions and integration initiatives within Southern Africa
Development Community (SADC).
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1.2 Rationale for Bank’s involvement
1.2.1 Although it was on the path to middle income status in the 1980s and much of the
1990s, Zimbabwe has since suffered from protracted fragility induced by recurrent cycles
of political and economic crises. The decade of significant economic decline (1999-2008)
severely compromised basic service delivery, public sector governance, infrastructure
maintenance and the investment climate for private sector. This has also negatively impacted the
PFM system and institutional capacity through economic decline, hyperinflation, and brain-
drain. However, during the past four years, relative political stability, the adoption of a multi-
currency regime and economic reforms generated vigorous economic growth. In this regard,
Zimbabwe requires capacity building support to sustain the gains registered in economic
management.
1.2.2 The Bank has taken a lead role to support the country’s re-engagement with the
international community. The Bank has been given unique mandate of taking leadership in
economic policy advice and dialogue to sustain reform implementation and the momentum
attained during the life of the Government of National Unity. The Government also signed-off a
Staff Monitored Program (SMP) with the IMF in June 2013 to support the country’s reform
program and re-engagement with the international community to resolve the outstanding debt
arrears. The new government has recently confirmed its commitment to the SMP. The proposed
operation will, thus, provide targeted technical assistance critical for effective implementation of
reform programs supported under the SMP.
1.2.3 The proposed operation will consolidate the previous and on-going Bank’s
intervention in PFM. Previous Bank’s interventions under FSF Pillar III have enabled the Bank
to deliver technical assistance in the areas of debt management, information technology, and
statistics. The Bank’s on-going Capacity Building for Public Finance and Economic
Management (CBPFEM) Project2 aims to strengthen capacity in accounting, debt management,
public sector investment program, revenue management, and statistics. To achieve the strategic
objective of PFM reform, the proposed operation complements CBPFEM by focusing on internal
audit and procurement to strengthen financial compliance and control, and also to ensure the
existing PFM legal and regulatory framework is fully enforced to deliver fiscal stability and
improved service delivery.
1.2.4 The Country Integrated Fiduciary Assessment (CIFA, 2012) examined public
financial management and procurement systems in Zimbabwe (Technical Annex A.2). The
report noted some progress with the introduction of a medium term expenditure framework, and
the electronic Public Financial Management (PFM) systems. A new Public Financial
Management Act came into effect in 2011. The report has identified a range of weaknesses in the
PFM system including in the areas of procurement and internal audit (Box 2), which are the basis
to design and prioritise interventions under this project. In response to the CIFA findings and
recommendations, the Government has developed a PFM reform roadmap that present a broadly
credible program for improvement. The Procurement Capacity Building Need Assessment and
Capacity Development Plan also highlight the need to strengthen the legal and institutional
framework and procurement capacity targeted at procuring entities and oversight bodies.
Through well-targeted institutional capacity building intervention, this project will make a
significant contribution to addressing institutional and human capacity constrains in internal
audit and public procurement.
2 Approved by the Board of Directors on 5
th December 2012, Ref: ADF/BD/WP/2012/59
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Box 2: Key challenges in Public financial management
The Country Integrated Fiduciary Assessment (CIFA) report indicated that the present internal audit function in
Government is characterized by a number of constraints including: (i) inadequate resources to implement
planned internal audit activities; (ii) limited auditing skills; (iii) inadequate capacity to effectively audit
procurement transactions; (iv) absence of internal auditing manuals and guidelines, and (v) inability to
systematically follow up management responses and audit recommendations. It recommends that internal audit
departments must be strengthened at Ministry level with an appropriate oversight function overseeing their
work. Establishment of Audit Committees (a requirement of the Public Finance Management Act) must also be
speeded up. Internal auditors must be assisted to gain membership of the Institute of Internal Auditors, and
invest in professional development of internal auditors.
The Country Procurement Assessment Review (CPAR) and other diagnostic reports have identified a number of
challenges, including: (i) deviations and omission in the Public Procurement Act and regulations in comparison
to international best practices (ii) lack of standard bidding documents and manuals, (iii) institutional capacity
constraints in the State Procurement Board and Procuring Entities, and (iv) limited procurement information for
decision making. In addition, a capacity needs assessment identified areas for technical assistance including
support to legal and regulatory reform, strengthening the capacity of State Procurement Board, and professional
development of procurement officers across government.
1.2.5 The Reserve Bank of Zimbabwe (RBZ) is implementing measures to further
enhance the financial sector stability and reduce vulnerabilities. Recent bank failures
highlighted persistent vulnerabilities in the financial sector stemming from weak capitalization,
low liquidity, poor asset quality and related-party exposures, persistent losses and weak
corporate governance and internal control deficiencies. The Banking Supervision and
Surveillance Division aims to foster and maintain the stability and soundness of the financial
system through rigorous regulation and supervision in line with international best practice.
However, RBZ requires robust information and communication technology (ICT) systems to
perform its mandate especially relating to national payments, financial sector stability and
production of national statistics to formulation and implementation of credible macro-economic
policies. In this regard, the proposed project will upgrade and strengthening the core banking
system and ICT infrastructure with the aim to strengthen the supervision functions of the RBZ
and thereby enhances banking stability (Technical Annex A).
1.2.6 The project aims to address governance and institutional constraints in the
management of the mineral resources. Progress has been made with the Kimberly Process
Certification and the Government of Zimbabwe should continue to work on improving
transparency and accountability in the extractive industries. To this end, Government has
approved a new diamond policy (2012) with the aim to increase transparency and accountability.
It has also prepared a draft Minerals Policy and plans to (a) amend the mines and mineral acts,
(b) implement EITI, (c) establish natural resource charter, and a sovereign wealth fund to
manage natural resource rents such as royalties to finance development programs. In this regard,
Government has requested the Bank to provide capacity building support to strengthen (a) the
Geological Survey to better manage and disseminate publish geological information, and (b)
capacity for mining sector policy making and implementation including the revision of the mines
and minerals act (Technical Annex A).
1.3 Donor coordination
1.3.1 Donor engagement in Zimbabwe is coordinated but aid financing is currently being
channelled through a wide range of procedures and modalities that mostly bypass
Government’s systems3. Much Overseas Development Assistance is channelled through the
programmatic Multi-Donor Trust Fund (Zim-Fund) administered by the African Development
Bank; the Analytical Multi-Donor Trust Fund (A-MDTF) managed by the World Bank; and the
Health and Education Transition Funds managed by UNICEF. The Bank also continues to
3 Zimbabwe Public Expenditure Notes: Strengthening Institutions for the Preparation of Government Budget, 2011
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maintain a close working relationship with the World Bank, and the IMF on Zimbabwe’s arrears
clearance and debt relief.
1.3.2 There is strong commitment by cooperating partners to support capacity
development in Zimbabwe. The main donors supporting capacity development in the areas of
financial and economic management, apart from the Bank, include the World Bank, UNDP,
European Commission, DFID, USAID, and African Capacity Building Foundation, (Technical
Annex A). The Bank participates actively in the Economic Management and Governance
Technical Review Group (EMGTRG) of the A-MDTF and the Government-led PFM Working
Group, and will continue deepening its collaboration and coordination with other development
partners in providing a coordinated support to capacity building.
II. PROJECT DESCRIPTION
2.1 Project Components
2.1.1 Project Objectives: The project’s broad development objective is to support the
Government of Zimbabwe to sustain economic recovery and inclusive service delivery through
improved public sector capacity. The specific objective is to improve transparency and
effectiveness in public finance and economic management with emphasis on four mutually
complementary interventions: (a) increasing transparency and competition in public
procurement; (b) improving effectiveness in internal audit functions; (c) increasing transparency
in mining revenue to create fiscal space for public investment; and (d) strengthening banking
supervision for financial sector stability and economic recovery.
2.1.2 Project Components: The major activities under each component are summarized in Table
2 below while the detailed description of project components and costs is presented in Technical
Annex B.2.
Table 2: Project components
Components Estimated
Total
Cost
Description
Component 1:
Improved
transparency in
public finance
UA 1.6
million
Subcomponent 1.1: Transparency and competition in public procurement
(UA 856,000): The objective is to strengthen procurement capacity in the State
Procurement Board and Procuring Entities. Key activities under this
component are: (a) support to the on-going review process of the procurement
legal framework including experience sharing visits/study tour to 2/3 countries
in the region; facilitate peer learning and partnership with COMESA; provision
of short-term technical assistance to facilitate the review process and
stakeholder consultations. (b) professional training for State Procurement
Board (SPB); (c) provision of computers, printers, copiers to SPB; (d)
provision of technical assistance to develop SPB website; (e) technical
assistance to strengthen the procurement audit and oversight capacity of SPB;
(f) support to Zimbabwe Institute of Public Administration and Management to
develop training curriculum, training of trainers, and provision of training
equipment (computers and projectors) to ensure sustainability of training
provision; and (g) provision of training for procurement and non-procurement
officers in Procuring Entities.
Subcomponent 1.2: Effectiveness in internal audit (UA 744,000): The
objective is to strengthen effectiveness in internal audit functions across
government to ensure compliance with the PFM Act and its enabling
regulations. Activities under this component will include (a) training of internal
audit officers; (b) provision of computers to enhance IT audit; (c) experience
sharing visits/study tours to facilitate the establishment of internal audit
committees in all Government ministries; (d) technical assistance to develop
audit manuals and treasury instructions, (e) workshop to validate the audit
manual and treasury instruction, and (f) Public awareness raising workshops.
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Components Estimated
Total
Cost
Description
Component 2:
Improved
transparency
and capacity in
economic
management
UA 3.1
million
Subcomponent 2.1: Transparency in the mining sector (UA 1,406,000): The project objective is to enhance transparency and accountability in the
management of mineral resources through capacity development support to the
Geological Survey Department; support to strengthening mining sector legal
framework; and support to developing strategic partnership arrangements
between the Ministry of Mines, and Mining Development, and a local think-
tank ((ZEPARU) to strengthening mining sector policies, and regulations.
Key activities under this component will include: (i) provision of geological
equipment; (ii) provision of cartography equipment; (iii) provision of training
for the Geological Survey Department personnel; (iv) support for editing and
printing bulletin and maps; (v) support to the Mines and Minerals Act review
and stakeholder consultation process; and (vi) support to ZEPARU to
undertake mining sector analytical and advisory activities to strengthening
mining sector policies and governance arrangements.
Subcomponent 2.2: Effectiveness in Banking Supervision (UA 1,701,000):
The project objective is to enhance financial sector stability through enhancing
the core banking systems of the Reserve Bank of Zimbabwe. Key activities
under this component will include: (i) upgrading and installation of internal
network; (ii) upgrade and installation of core banking systems or GLOBUS
upgrade; and (iii) provision of IT infrastructure.
Component 3:
Project
management
support
UA 0.5
million
Component 3: Project management support: This will finance coordination,
monitoring and evaluation activities, staff training and salaries, audit, and fund
administration fees
2.2. Technical solution retained and other alternatives explored
During project preparation and appraisal, several options were explored regarding the
areas of intervention; the scope and focus of activities; the implementation modalities and value
for money. Based on previous experience and lessons learned as well as the other donor’s
planned activities, it was agreed that in order to build on the gains achieved in the previous set of
Bank interventions, the proposed operation will adopt a mix of capacity building activities
through (a) developing strategic partnership with local training institutions and think-tanks; (b)
experience sharing visits, twinning arrangements, and provision of technical assistance; and (c)
focusing on rebuilding systems, legal framework, and governance arrangements, to enhance
ownership and sustainability. A summary of the technical consideration and project design
options is presented in Table 2 below.
Table 3: Project Alternatives Considered and Reasons for Rejection
Alternative Brief Description Reason for Rejection
Establishing a
parallel project
implementation
unit (PIU) solely
for the project
Instead of setting up a parallel
PIU, the PAR proposed to use the
existing Project Management Unit
and Coordination Arrangements
with ACBF for the on-going
operation (CBPFEM).
The proposed arrangement will increases synergy and
achieve value for money as it allows effectively
utilising existing staff and enhancing structures,
reducing transaction costs, and coordination more
effective. The existing arrangement complies with the
Bank’s fiduciary and legal requirements.
Pooling of
resources
through Trust
Fund
ADF resources to be channelled
through a Multi-donor Trust Fund
(MDTF). The current funding
arrangements are targeted to
infrastructure, service delivery,
and analytical work.
The Bank is currently managing programmatic MDTF
(ZimFund) for infrastructure and the World Bank in
managing the MDTF for analytical work. Though
there are opportunities for the Bank to take a lead in
setting up and administering MDTF for PFM and
capacity building program, at present there are no
pooled funding arrangements in Zimbabwe that can
provide funding for a comprehensive PFM reform and
capacity building program.
6
ISP that include
support to
tourism and
youth
employment.
Government requested for a
capacity building project that
involves support to seven
components and several
institutions, this include:
procurement, internal audit,
Reserve Bank of Zimbabwe,
Ministry of Mines and Mining
Development, Tourisms, Youth
Development, and Infrastructure
flagship report.
There is a risk of spreading Bank’s support too thinly
across many institutions which may increase
transaction costs, minimize impact of the intervention
and coordination challenge for the Bank and partners.
The recent OPEV evaluation and lessons from
previous operation suggest that the Bank should
reduce fragmentation by designing individual projects
which are focused, particularly where the overall
funding envelope is limited. The Bank suggest to split
the proposed capacity building support to two project
– GISP and Tourism and Youth Enhancement Project
2.3. Project type
The proposed operation is an institutional support project designed to complement
the on-going CBPFEM and other donors’ interventions, including the World Bank
managed A-MDTF and IMF Staff Monitored Program. Through the GISP, the GoZ has
clearly identified reform areas requiring redress. The Bank will thus play a major role in
facilitating implementation of the program by focussing on improved capacity and transparency
in public finance and economic management and directly addressing weaknesses in internal audit
and procurement functions, Reserve Bank and mining sector governance. Other partners will
continue their support to budget preparation, revenue, accounting and reporting, external audit
and legislative oversight components of the PFM roadmap (Technical Annex A).
2.4 Project Cost and Financing Arrangements
2.4.1 The estimated total cost of the project, net of taxes and duties, is UA 5.2 million. A price
and physical contingency of 7% has been factored in the project cost. Tables (4) and (5) present
the estimated project cost by component and sources of finance, whereas Tables (6) and (7)
present the estimated project costs by Category of Expenditure. Details of the project cost by
component and expenditure category are presented in Technical Annex B2.
2.4.2 The Bank will finance 100% of the total cost of the project in line with the Bank’s Policy
on Expenditures Eligible for Bank Group Financing4. Technical Annex C1 provides justification
for 100% financing.
4 (ADB/BD/WP/2007/106/Rev.2-ADF/BD/WP/207/72/Rev.2 dated 02 May 2008
7
Table 4: Project cost estimates by component and subcomponent
Component (US$ ‘000) (UA ‘000)
1. Improving Transparency in Public Finance
1.1 Improved Transparency and Competition in Public Procurement 1,302 856
1.2 Improved Effectiveness in Internal Audit 1,130 744
Subtotal Component 1 2,432 1,600
2. Strengthening Transparency and Effectiveness in Economic Management
2.1 Increased Transparency in the Mining Sector 2,138 1,406
2.2 Enhanced Effectiveness in Banking Supervision 2,585 1,701
Subtotal Component 2 4,723 3,107
3. Project Management Support
3.1 Project Coordination, M&E and Audit 650 427
3.2 Fund administration fees 100 66
Subtotal Component 3 750 493
TOTAL PROJECT COSTS 7,905 5,200 Note: Exchange Rates 1UA= 1.52017 USD and *All figures includes price and physical contingencies
Table 4: Sources of financing
Sources of Financing Total (US$ ‘000) Total (UA ‘000) Percentage
ADF Grant 7,905 5,200 100%
Total 7,905 5,200 100%
Table 5: Project cost by category of expenditure
Table 6: Project Expenditure Schedule
Components
US$ ‘000 UA ‘000 Total
UA 2014 2015 2016 Total
2014 2015 2016
1. Improving Transparency in Public Finance
1.1 Improved Transparency
and Competition in Public
Procurement
500 700 102 1,302 329 460 67 856
1.2 Improved Effectiveness
of Internal Audit
Effectiveness
300 700 130 1,130 197 460 85 744
Subtotal Component 1 800 1400 232 2,432 526 920 152 1,600
2. Strengthening Transparency and Effectiveness in Economic Management
2.1 Increased transparency
and capacity in the mining
sector
1,000 1,000 138 2,138 658 658 91 1,406
2.2 Enhanced core banking
systems 1,000 1,585 0 2,585 658 1,042 0 1,701
Subtotal Component 2 2,000 2,585 138 4,723 1316 1,700 91 3,107
3. Project Management
3.1 Project Coordination,
M&E and Audit 200 250 100 550 132 164 66 362
3.2 Fund administration fees 50 100 50 200 33 66 33 131
Subtotal Component 3 250 350 150 750 165 230 99 493
Total Project Cost 3,050 4,335 520 7,905 2,006 2,852 342 5,200
Category of Expenditure Total (US$ ‘000) Total (UA ‘000) Percentage %
A. Goods 3,965 2,608 50.1%
B. Services 3,190 2,099 40.4%
C. Operating cost 750 493 9.5%
TOTAL PROJECT COSTS 7,905 5,200 100%
8
2.5. Project’s target area and population
The direct project beneficiaries are: the Ministry of Finance and Economic Development,
the State Procurement Board, the Reserve Bank of Zimbabwe, the Ministry of Mines and Mining
Development, the Zimbabwe Institute of Public Administration and Management (ZIPAM),
Procuring Entities across MDAs (Ministries, Departments & Agencies), and the Zimbabwe
Economic Policy Analysis and Research Unit (ZEPARU). The indirect beneficiaries are the
general population of Zimbabwe, and the private sector who will also benefit from (a) a more
transparent and competitive public procurement practice, (b) improved internal control in public
expenditure, (c) effective banking supervision which aims to enhance stability in the financial
sector, and (d) improved transparency in the management of the mining sector which will attract
investment and thereby increase government revenue for infrastructure and better service
delivery.
2.6 Participatory Process for Project Identification, Design and Implementation
A wide stakeholder consultation was held with MDAs, private sector, development
partners, and civil society organizations. The proposed operation is prepared in line with the
CIFA, the Medium Term Plan and Bank’s Country Brief (2013-2015) which are products of
consultative processes conducted through seminars, workshops and candid debates among all the
key stakeholders. Issues raised that informed the design of the GISP include: country ownership
and alignment with the country’s development priorities as well as sustainable capacity building
through training delivered by local training institutions in the areas of audit and procurement.
The appraisal mission also met key PFM stakeholders including donors group to debrief them as
well as solicit their inputs on the scope of the operation to ensure synergy and complementarity.
A stakeholder analysis was carried out to understand the role of key actors and inform project
design (Technical Annex B.7)
2.7 Bank Group Experience and Lessons Reflected in Project Design
2.7.1 The main vehicle for financing Bank support to Zimbabwe over the last five years
has been the ZimFund, Fragile States Facility, African Water Facility and Private Sector
Window. As of 31st October 2013, the Bank’s on-going portfolio in Zimbabwe comprises eight
(8) operations with a total value of UA 86.5 million (Appendix I). Water Supply and Sanitation
accounts for 47.6%, Power Sector for 26.3%, Multi-sector (Governance) for 20.1%, and
Agriculture for 6% (under private sector, OPSM). At present, the average supervision rating
stands at 2.0 (on a scale 0 to3) for projects supervised under the country portfolio. The average
age of the portfolio is 1.5 years, disbursement rate of 18.4%, and no outstanding PCR as at end
October 2013. The proposed operation will build on the previous and ongoing Bank Group
programs including the Capacity Building Project for Public Finance and Economic
Management5, and ongoing operations funded under the FSF. Lessons have been drawn from the
ongoing and previous operations and lessons learned are summarized in Table 8 below.
2.7.2 The design of this operation is guided by various analytical and diagnostic reports
as well as consultations during the project preparation and appraisal missions (Appendix
III). The main analytical underpinning is provided by the CIFA, Draft Road Map for PFM
Improvement, Good Practice Note on Sequencing PFM Reforms, the 2012 OPEV Joint PFM
Evaluation Report, and OPEV Evaluation of Institutional Support in Governance, IMF Staff
Monitored Program, and Mining Sector Policy Study (2012). The proposed project has also
benefitted from the experience and lessons from Bank operations in the areas of PFM and
5 This project was approved in December 2012 with the aim to support Public Financial and Economic Management
by strengthening the capacity for debt, revenue and financial management; strengthening the legal and institutional
framework for Public Private Partnerships, national statistics, and regional integration.
9
institutional support projects in other countries. Analysis of Bank experience is outlined in
Technical Annex B.1 and serves to add strength to the messages summarized below.
Table 8: Lessons learned from the previous and ongoing Bank interventions
Lessons learned Actions taken to integrate lessons into the PAR
Strengthen country ownership,
coordination and leadership for
managing reforms.
Areas of interventions identified in this project are demand driven.
Beneficiary departments were requested to submit capacity building
proposals to inform the design of the operation and ensure ownership. In
addition, the Bank carried out extensive consultation with the government
and non-state actors, and put in place mechanisms to enhance coordination
and leadership in managing the capacity building interventions. The
project therefore focuses on rebuilding systems (core banking systems,
reviewing the legal and institutional framework (procurement and mining
sector), putting in place new structures (internal audit committee) and skill
development to enhance use of country systems. It also promotes
partnership and collaboration with the training institutions and local think-
tanks to sustain the capacity building efforts in the country.
Inadequate implementation
capacity and limited awareness
of project implementation
procedures and requirements.
A specific project management support component has been incorporated
into the project to enhance implementation capacity. In addition a detailed
project operations manual will be prepared to clearly outline procurement
processes, controls, review and approval, and administrative
arrangements. The Bank has delivered two training sessions on
procurement, financial management and disbursement and result
management and reporting requirement. Mechanisms are in place to
increase coordination and knowledge sharing among the project
stakeholders. The Bank through the ZWFO will continues to provide a
regular implementation support. In the medium term the two components
of the project (audit and procurement) will further enhance project
implementation capacity across government.
Limiting the number of
conditions which tend to put
excessive burden on
Government leading to the risk
of slippages in project
execution
The project has been carefully designed by limiting the number of
conditions so that partner organizations are able to focus on
implementation of the capacity building activities within the project
timeframe. A specific project management component has been
incorporated into the project to enhance implementation capacity.
Avoid spreading projects too
thinly across a large number of
institutions.
The project is closely aligned with the Bank’s Country Brief and the
Country’s development plan. The Bank suggest to split the proposed
capacity building support into two separate projects – GISP and Tourism
and Youth Enhancement Project to reduce fragmentation across large
number of beneficiary institutions. The GISP is more focused and each
component involves one/two beneficiary institutions.
Understanding the local context The project has adopted an incremental approach and country-led mining
sector governance initiatives. This involves support to quick win measures
(e.g. Geological Survey, and cooperation with local think-tanks) to gain
trust and promote local knowledge and partnership as well as activities
that promotes home-grown transparency initiatives before embarking on
international initiatives such as EITI.
Getting the Sequence of reform
right
The PFM improvement roadmap provides a comprehensive framework on
which to base further development assistance. It also shows the overall
sequencing strategy and the first prioritiy is to establish core PFM
functions with emphasis on financial compliance and the control aspects
of PFM. The proposed project will contribute to effectively implement
the PFM roadmap and directly address weakness in internal control and
procurement components of the roadmap, which are critical in enhancing
financial compliance and internal control functions,
10
2.8 Project’s performance indicators
The key performance indicators identified and the expected outcomes on project
completion are set out in the Logical Framework, and Results Monitoring Framework (Technical
Annex B7). A summary of the expected outcomes and related outputs for each project
components is summarised below:
Key Performance Indicators (KPIs) Impact – Level 1
6% Average GDP Growth rate
Improved CPIA score from 2.23 to 2.75
Outcome - Level 2
Component 1: Enhanced effectiveness in internal
control and transparency in public procurement
Component 2: Increased transparency in mining sector
and effectiveness in banking supervision and stability
Improved PEFA score relating to:
competition, value for money, and controls in
procurement (PI-19) from D+ in 2012 to C+ in
2016
effectiveness in internal audit (PI-21) from C+
in 2010 to B+ in 2016
Increased transparency in revenue from the mining
sector.
Increased banking stability through effective banking
supervision:
Reduction in non-performing loans from 10% in
2012 to 5% in 2016
Liquidity ratio increased from 36% in 2012 to 40%
in 2016
Output Indicators – Level 3
Comp. 1: Improved transparency in public finance Comp. 2: Improved transparency and capacity in
economic management
Procurement
Revised procurement act submitted to Cabinet
Procurement audit report prepared & published
Procurement curriculum development
300 staff received procurement training incl. 90
females
Internal Audit
Internal audit units established in 24 ministries
Internal audit manual and treasury instructions
published
250 internal auditors received training incl. 60
females. This include 25 certified internal auditors
of which 10 will be females
Mining sector
Revised mining & minerals act submitted to
Cabinet
Geological and cartographic equipment delivered
10 staff of the geological survey department
received training including 3 females
5 mining sector studies published to enhance
evidence-based policy making
Banking sector / Reserve Bank of Zimbabwe
Local area network installation completed
Core banking system /GLOBUS upgraded
Source: GISP Result Measurement Framework.
11
3. PROJECT FEASIBILITY
3.1 Economic and financial performance
The economic and financial benefits from the project will be much higher than UA
5.2 million. Identifying and quantifying the direct and indirect economic and financial benefits
of capacity building interventions are not straightforward. It is difficult to carry out credible and
rigorous cost-benefit and financial analyses. On the other hand, the benefits of such reforms are
widely agreed to be large. While the costs are quantifiable (section 2.4), the benefits are indirect,
ultimately seen in improved capacity and performance in public finance, banking supervision
and surveillance, and mining development. The economic justification of the proposed project is
its contribution to a better functioning government through improved capacity. The benefits of
the project will be derived from (a) enhanced competition, efficiency and controls in public
procurement; (b); improved effectiveness in internal audit; (c) effective functioning of the core
banking system and banking supervision; and (e) effectiveness in geological survey function and
new legal framework to enhance mining sector transparency and increase in revenue for public
investment. The project will also support the development of sustainable human resource
capacity, thereby ensuring that the benefits will be sustained over time.
3.2 Environmental and Social impacts
3.2.1 Environment and Climate Change: The proposed project is environmentally classified as
Category 3 by ORQR. The project will not have a negative impact on the environment as its
activities are limited to training, technical assistance, studies and procurement of logistic
resources, office automation and computer hardware. Furthermore, the provision of geological
and cartographic equipment to the Geological Survey Department will help to strengthen the
environmental assessment and monitoring capacity of the Ministry of Mines and Mining
Development. Project activities that are focused on human and institutional capacity building
have no negative impact on the climate (Technical Annex B.7).
3.2.2 Social: The project is intended to contribute to economic recovery through improved
transparency and capacity of key institutions responsible for the economy. The project will
contribute to strengthening transparency and competency in procurement, mining development,
and banking sector. Transparent and accountable management of resources will lead to increased
civic confidence in government. This will enhance and leverage the impact of the country’s
development strategy on economic recovery and poverty reduction through increasing
effectiveness of internal controls, procurement, enhanced financial sector stability and
transparency in management of mineral resources. The impact on poverty and all other cross
cutting areas will therefore be indirect, but significant. No negative social impacts are expected
from the project implementation (Technical Annex B.7).
3.2.3 Gender: The GoZ is committed to the promotion of gender equality to ensure that all
gender groups are able to fully contribute to the country’s development and benefit from it. The
National Policy on Gender is in place and provides for the promotion of full and equal
participation of all gender groups. In line with the policy, the project will ensure that 100% of
women professionals (internal auditors and procurement officers) are benefitted from the training
and provision of computers. The project also address gender issues in project management
through the appointment of a Project Manager (female), and increasing the participation of
women in the project steering and coordination committees (Annex B.7).
3.2.4. Involuntary Resettlement: The project will not result in any population displacement.
12
4. IMPLEMENTATION
4.1 Implementation arrangements
The project will be implemented over a period of three years between January 2014 and
December 2016. The Ministry of Finance and Economic Development (MoFED) is the lead
executing agency. The existing implementation arrangements for the on-going capacity building
project will be used to manage the proposed operation. A Project Steering Committee (PSC) and
Project Management Committee (PMC) are already in place to provide strategic oversight and
policy guidance. A focal point will be appointed from each beneficiary institution to participate
in the PMC and spearhead the implementation of their respective activities. The ACBF is an
integral implementation partner under the on-going project, being responsible for the
management of the Special Account. This arrangement will be extended to the new project. In
addition, an adequately staffed Project Management Unit6 (PMU), has been established within
the MoFED to oversee day-to-day project implementation, and coordinate portfolio management
including procurement, financial management, and monitoring and results reporting. The PMU
will also provide secretarial service to facilitate the functions of the PSC and PMC. Technical
Annex B3 provides details of the implementation arrangements.
4.2 Financial Management, Disbursement and Audit Arrangements
4.2.1 An assessment of the financial management arrangement and capacity for the ongoing
project indicates that it is satisfactory to Bank’s requirements. The assessment looked at
budgeting, accounting, internal controls, reporting and external audit, a full assessment report is
in Annex B4. To this end, the implementation of the proposed project will use existing
arrangements and legal instruments. This include: the PMU will be responsible for all financial
management aspects of the project including budgeting, a sound internal control environment,
preparation of quarterly Interim Financial Reports as well as annual Financial Statements.
Project financial management will be overseen by the Finance and Budget officer within the
PMU, under the supervision of the Program Manager.
4.2.2 Disbursement shall be predominantly through the Direct Payment method, particularly so
for technical assistance and equipment related expenditure. A separate USD Account shall be
opened by a selected third party (the African Capacity Building Foundation) with a commercial
bank acceptable to the Bank. This Account shall be meant for other expenditure for which the
direct Payment method will be unfeasible, and will cover mainly per-diem and travel expenses
for beneficiary institution staff going for training and workshop related expenses.
4.2.3 This Account shall be opened and managed by the ACBF on a ‘pass through’ basis, i.e. the
PMU will be submitting all request to the ACBF for payments to be made directly to
beneficiaries and funds from and/or to this account shall not be co-mingled with funds in any
other accounts. Bank disbursement rules as contained in the Disbursement Handbook shall be
complied with by the ACBF in managing the Special Account. This arrangement shall be
governed by an Agreement to be entered into by and between the Bank and the ACBF. Such an
arrangement, i.e. where a third party (ACBF) manages funds on behalf of the Bank has been
implemented for the ongoing project (CBPFEM) and previous project funded under the Fragile
State Facility Pillar III (support to Zimbabwe National Statistics Agency).
4.2.4 An external qualified audit firm will be recruited in conjunction with the Office of the
Comptroller and Auditor General under Terms of References and procurement procedures
acceptable to the Bank. The annual audited financial statements together with the auditor’s report
and management letter submitted to the Bank no later than six months after the end of each
financial year. A separate audit opinion will be issued with respect to project Financial
6 The PMU is funded by the Bank and the ACBF and it is staffed with a Project Manager, Procurement Specialist,
PFM Specialist, M&E Specialist, Budget & Finance Officer, a Program Assistant, Program Secretary and a Driver.
13
Statements, Statement of Expenditures (expenditure eligibility testing) and internal controls
environment. Technical Annex B4 provides further details on the financial management,
disbursement and audit arrangements.
4.3 Procurement Arrangements
All procurement of goods, and acquisition of consulting services financed by the Bank
will be in accordance with the Bank’s Rules and Procedures: “Rules and Procedures for
Procurement of Goods and Works”, dated May 2008 (revised July 2012); and “Rules and
Procedures for the Use of Consultants”, dated May 2008 (revised July 2012); as amended from
time to time, using the relevant Bank Standard Bidding Documents, and the provisions stipulated
in the Financing Agreement. The Ministry of Finance and Economic Development through the
Project Management Unit (PMU) will be responsible for and the procurement of goods,
consulting services, and training. An assessment of the capacity of the Ministry and PMU to
implement procurement actions for the project has been carried out by the Bank. The assessment
reviewed the organizational structure for implementing the project and the interaction between
the project’s staff responsible for procurement activities and the various Implementing Agencies.
The PMU is staffed by a Program Manager, Procurement Specialist, Monitoring and Evaluation
Officer, PFMS Specialist, Finance and Budget Officer and a Program Assistant. The
Procurement Specialist has been recently recruited; therefore the resources, expertise and
experience are adequate to carry out procurement. A Project Implementation Manual will be
developed to clearly outline roles and responsibilities of the various actors and control
environment. Detailed procurement arrangements are presented in Technical Annex B5.
4.4 Monitoring and evaluation
The project is scheduled for implementation over a 36-month period, from January 2014
to December 2016. This schedule is reasonable, given the scope of activities to be implemented
and project implementation capacity in Zimbabwe. The PMU will be responsible for project
monitoring and evaluation, using the GISP Result Monitoring Framework (Technical Annex B7)
and the project result based logical framework. The PMU has a dedicated M&E staff in place.
The periodic performance assessment and result reporting will be carried out by the PMU, in
collaboration with the beneficiary institutions. Quarterly and annual activity reports will also be
prepared and submitted to the Bank. The Bank will carry out a rigorous monitoring and
supervision mission at least twice a year, to the extent possible with other development partners
in Zimbabwe. The Zimbabwe Field Office will play an active role in the coordination, country
dialogue, and project supervision and monitoring. A project completion report will be undertaken
to evaluate progress against outputs and outcomes and draw lessons for possible follow-up
operation. Table 7 presents project implementation and monitoring schedule.
Table 9: Project Implementation Schedule Task / Milestone Responsible Party Time Frame
Grant Approval AfDB December 2013
Grant Effectiveness AfDB/GoZ January 2014
Project Launching AfDB/GoZ February 2014
Procurement of goods and services GoZ January 2014 – June 2016
Technical assistance and training GoZ June 2014 – June 2016
Annual Audit Report GoZ June 2014, 2015, 2017 and
Supervision Mission AfDB June/December 2014, 2015 & 2016
Mid-term Review AfDB June 2015
Project Completion Report AfDB/GoZ December 2016
14
4.5 Governance
4.5.1 Robust governance arrangements have been put in place to manage the implementation,
monitoring, review and audit of this project, as outlined in sections 4.1, 4.2 and 4.2 above. The
implementing entity has been assessed as having enough capacity to implement the project,
utilizing the existing project management arrangements. Controls and oversight will be further
strengthened through support to Internal Audit Unit. Lastly, the implementation of the agreed
action plan will further enhance the financial management arrangements in place. The proposed
project will contribute towards strengthening transparency and accountability practices in public
procurement and increasing effectiveness in internal audit, and transparency in mineral resource
development which are critical in improving governance and tackling corruption in Zimbabwe.
4.5.2 The risks to project governance arise in procurement decisions, use of project assets and
selection of persons to attend training and capacity building events. Risks will be mitigated
through the preparation of a detailed procurement plan, robust processes for contractors and
participant selection and application of the agreed procurement rules and procedures. Further
training will be provided to PMC core staff to ensure that they are fully aware of all requirements
and regulations during the launching mission. Compliance with these controls will be reviewed
during supervision missions. An independent audit of project financial reports and procurement
reviews will be undertaken every year.
4.6 Sustainability
An important contributing factor to the sustainability of the proposed project interventions
is the GoZ’s commitment to economic recovery program. The GISP responds to demand-led
capacity building initiatives. Significant attention has been paid to sustainability in the project
design through greater focus to rebuilding systems, legal framework, governance structures and
skills and competencies. Support to the mining sector aims to enhance institutional capacity to
harness the utilisation of mineral resource and increase revenue collection, thus contributing to
positive long term development outcomes. Under the procurement component, the project
employs a holistic approach, building capacity of the State Procurement Board, Procuring
Entities, review of the legal framework (Procurement Act), curriculum development and capacity
building of the capacity building institutions, training of trainers to ensure that knowledge and
skills are transferred. The project will help a local training institution (ZIPAM) to develop and
deliver training programs in a sustainable manner. The project will also strengthen institutional
systems and processes (e.g. through the strengthening core banking systems, internal audit
manuals and treasury instruction) so that reforms are embedded within the Ministries.
4.7 Risk Management
The potential risks and mitigation measures for the project is summarized Table 8.
Table 10: Risk and mitigation measures
Description of Risk Probability/
Impact
Mitigation
Risk 1: Macroeconomic instability
due to policy reversals, failure to
continue with on-going policy
reforms and meeting the agreed
SMP targets and benchmarks. This
may lead to slow pace towards
sealing a deal with international
community.
Medium /
High GOZ’s renewed commitment to prudent fiscal and monetary
policy; and continued implementation of the country’s
accelerated arrears clearance, debt and development strategy.
Enhanced efforts to maintain dialogue between government,
and donor community as well as support to reform
champions will help the country to remain on track with the
implementation of the debt and arrears clearance strategy
and reform actions agreed under the SMP.
15
Risk 2: Implementation capacity
constraints: High attrition
continues leading to lack of
manpower to coordinate and
implement reforms.
Medium /
Medium Project Implementation Unit is in place and fully staffed to
manage and coordinate project implementation. Targeted
capacity building training and government’s performance
management initiatives will provide incentive to retain
competent staff in the key government departments. It is also
envisaged that beneficiaries of the training programs will be
required to serve on the job for a certain period beyond the
end of their training programmes. The Bank, through
ZWFO, will provide hands-on project implementation
support together with ACBF. Government plans to revise the
salary scale and implement result-based performance
management system in the civil service to attract and retain
competent staff as well as motivate good performance.
Risk 3: Fiduciary risk due to weak
public financial management
system.
Medium /
Medium The project will contribute to improve fiduciary
environment. PMU capacity complemented by the use of
third party (ACBF) to administer the special account.
Compliance with the Bank’s procurement rules, annual audit
reports and training.
4.8 Knowledge Management
The GISP will build knowledge and develop skills on specific areas related to public
procurement, internal audit, core banking systems and minerals governance. The implementation
of the GISP will focus in rebuilding systems, legal framework, governance structures and skills
and competencies. This will be achieved in a number of ways including: (i) the procurement
capacity building initiatives which involves curriculum development, professionals training
program, and capacity building of the local training institution; (ii) internal auditors professional
development program in collaboration with the Institute of Internal Auditors; (iii) the use of new
technology and systems to strengthen the core banking functions, (iv) the development of
websites, working manuals and guidelines through technical assistance, (v) support to peer
learning and partnership with local and regional institutions; and (vi) capacity building support to
local think-tank to undertake analytical and advisory services for evidence-based policy making
in Zimbabwe. Knowledge will also be acquired through skill transfer using local and external
experts and developing partnership with peer institutions in the region. In addition, basic and
specialised training on procurement and internal audit matters will be developed to improve
knowledge and skills across MDAs. A sensitisation and public awareness raising program will
be organised to broaden understanding of the new Public Procurement Act, Treasury Instruction
and Internal Audit Manual. The joint supervision and result reporting and project completion
report will contribute towards knowledge management and lessons learnt to inform future
interventions.
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal instrument
The legal framework of the project will be governed by a Protocol of Agreement between
the Republic of Zimbabwe and the African Development Fund for an ADF Grant of UA 5.2
million.
5.2 Conditions associated with Bank’s intervention
5.2.1 Conditions Precedent to Entry into Force: The Protocol of Agreement shall enter into
force on the date of its signature by the Republic of Zimbabwe and the African Development
Fund.
16
5.2.2 Conditions Precedent to First Disbursement: The first disbursement of the grant shall be
conditional upon the entry into force of the Protocol of Agreement, and the Recipient providing
evidence of the fulfilment of the following conditions, in form and substance satisfactory to the
Fund:
(a) the nomination of focal persons from each beneficiary institutions (State Procurement
Board, Reserve Bank of Zimbabwe, and Ministry of Mines and Mining Development) to
participate in the Project Steering Committee and Project Management Committee;
(b) entry into an agreement between the Fund and the African Capacity Building Foundation
(ACBF) that sets out the terms and conditions upon which the ACBF will facilitate
disbursements to the Recipient that are not made by direct payment from the Fund; and
(c) the opening of a USD special account with a bank acceptable to the Fund by the ACBF
dedicated to receive proceeds of the Grant that will not be directly disbursed by the Fund.
5.3 Other Conditions
Within six (6) months of the signing of the Protocol of Agreement, the Ministry of Mines and
Mining Development, and ZEPARU shall establish a memorandum of understanding to govern
their partnership and collaboration arrangements, in form and substance acceptable to the Fund.
5.4 Undertakings
The Recipient shall maintain the existence and functioning of the Project Steering Committee for
the Capacity Building for Public Finance and Economic Management Project (CBPFEM), and
the joint Project Management Committee for the CBPFEM and the ACBF funded Zimbabwe
Capacity Development Program, the Project Management Unit (PMU) each in a form and with a
composition acceptable to the Fund, with their respective terms of reference extended to cover
this project
5.5 Compliance with Bank Policies
The project complies with all applicable Bank policies.
VI. RECOMMENDATION
Management recommends that the Board of Directors approve the proposed Grant of UA 5.2
million to the Government of the Republic of Zimbabwe for the purposes and subject to the
conditions stipulated in this report.
I
Year Zimbabwe Africa
Develo-
ping
Countries
Develo-
ped
Countries
Basic Indicators
Area ( '000 Km²) 2011 391 30,323 98,458 35,811Total Population (millions) 2012 13.0 1,070.1 5,807.6 1,244.6Urban Population (% of Total) 2012 39.3 40.8 46.0 75.7Population Density (per Km²) 2012 32.6 34.5 70.0 23.4GNI per Capita (US $) 2011 640 1 609 3 304 38 657Labor Force Participation - Total (%) 2012 51.0 37.8 68.7 71.7Labor Force Participation - Female (%) 2012 49.0 42.5 39.1 43.9Gender -Related Dev elopment Index Value 2005-2011 0.505 0.502 0.694 0.911Human Dev elop. Index (Rank among 186 countries) 2012 172 ... ... ...Popul. Liv ing Below $ 1.25 a Day (% of Population)2005-2011 … 40.0 22.4 ...
Demographic Indicators
Population Grow th Rate - Total (%) 2012 2.0 2.3 1.3 0.3Population Grow th Rate - Urban (%) 2012 3.4 3.4 2.3 0.7Population < 15 y ears (%) 2012 37.6 40.0 28.5 16.6Population >= 65 y ears (%) 2012 4.2 3.6 6.0 16.5Dependency Ratio (%) 2012 71.6 77.3 52.5 49.3Sex Ratio (per 100 female) 2012 97.6 100.0 103.4 94.7Female Population 15-49 y ears (% of total population) 2012 25.8 49.8 53.2 45.5Life Ex pectancy at Birth - Total (y ears) 2012 52.7 58.1 67.3 77.9Life Ex pectancy at Birth - Female (y ears) 2012 51.8 59.1 69.2 81.2Crude Birth Rate (per 1,000) 2012 28.8 33.3 20.9 11.4Crude Death Rate (per 1,000) 2012 12.1 10.9 7.8 10.1Infant Mortality Rate (per 1,000) 2012 48.6 71.4 46.4 6.0Child Mortality Rate (per 1,000) 2012 73.8 111.3 66.7 7.8Total Fertility Rate (per w oman) 2012 3.1 4.2 2.6 1.7Maternal Mortality Rate (per 100,000) 2010 570.0 417.8 230.0 13.7Women Using Contraception (%) 2012 60.1 31.6 62.4 71.4
Health & Nutrition Indicators
Phy sicians (per 100,000 people) 2004-2010 16.0 49.2 112.2 276.2Nurses (per 100,000 people)* 2004-2009 148.5 134.7 187.6 730.7Births attended by Trained Health Personnel (%) 2009-2010 60.2 53.7 65.4 ...Access to Safe Water (% of Population) 2010 80.0 67.3 86.4 99.5Access to Health Serv ices (% of Population) 2000 85.0 65.2 80.0 100.0Access to Sanitation (% of Population) 2010 40.0 39.8 56.2 99.9Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2011 14.9 4.6 0.9 0.4Incidence of Tuberculosis (per 100,000) 2011 603.0 234.6 146.0 14.0Child Immunization Against Tuberculosis (%) 2011 98.0 81.6 83.9 95.4Child Immunization Against Measles (%) 2011 92.0 76.5 83.7 93.0Underw eight Children (% of children under 5 y ears) 2011 10.1 19.8 17.4 1.7Daily Calorie Supply per Capita 2009 2 219 2 481 2 675 3 285Public Ex penditure on Health (as % of GDP) 2001-2010 0.0 5.9 2.9 8.2
Education Indicators
Gross Enrolment Ratio (%)
Primary School - Total 2010-2012 … 101.9 103.1 106.6 Primary School - Female 2010-2012 … 98.4 105.1 102.8 Secondary School - Total 2010-2012 … 42.3 66.3 101.5 Secondary School - Female 2010-2012 … 38.5 65.0 101.4Primary School Female Teaching Staff (% of Total) 2011 … 43.2 58.6 80.0Adult literacy Rate - Total (%) 2010 92.2 67.0 80.8 98.3Adult literacy Rate - Male (%) 2010 94.7 75.8 86.4 98.7Adult literacy Rate - Female (%) 2010 89.9 58.4 75.5 97.9Percentage of GDP Spent on Education 2008-2010 2.5 5.3 3.9 5.2
Environmental Indicators
Land Use (Arable Land as % of Total Land Area) 2011 10.6 7.6 10.7 10.8Annual Rate of Deforestation (%) 2000-2009 1.5 0.6 0.4 -0.2Forest (As % of Land Area) 2011 39.5 23.0 28.7 40.4Per Capita CO2 Emissions (metric tons) 2009 0.7 1.2 3.1 11.4
Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :
UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available.
Appendix I : Zimbabwe Comparative Socio-economic Indicators
May 2013
0
10
20
30
40
50
60
70
80
90
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Infant Mortality Rate( Per 1000 )
Zimbabwe Africa
0
200
400
600
800
1000
1200
1400
1600
1800
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
GNI Per Capita US $
Zimbabwe Africa
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Population Growth Rate (%)
Zimbabwe Africa
1
11
21
31
41
51
61
71
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Life Expectancy at Birth (years)
Zimbabwe
Africa
II
Appendix II. Bank Group Active Operations in Zimbabwe as at October 31st, 2013
ZIMFUND: The Board approved the establishment of the ZimFund on 31 May 2010, which became
effective on 19 October 2010, after mobilizing USD 40 million. Its aim is to contribute to economic
recovery and development efforts in Zimbabwe by mobilizing donor resources towards key
infrastructure rehabilitation and promoting donor coordination. The ZimFund contributing countries
include the United Kingdom, Australia, Denmark, Norway, Sweden, Germany and Switzerland.
Donors’ commitments to the ZimFund has reached an equivalent of USD 124.66 million, out of
which an actual amount of USD 121.82 million had been released by end of June 2013.
Sectors/OperationsApproval
DateClosing Date Funding Type
Approved
Amount (UA m)
Disbursement
(UA m)
Disbursement
RateRating Age
WATER SUPPLY & SANITATION SECTOR41.2 5.5
13.3%
1 Urgent Water Sup. and Sanit. Rehabilitation (UWSSR) Project 4/7/2011 12/31/2014 ZMDTF Grant 19.28 5.50 28.5% 2.5 2.6
Supplementary Financing to UWSSR Project 7/17/2013 6/30/2015 ZMDTF Grant 9.07 0 0.0% 0.3
2 UWSSR Phase2-Stage2 10/7/2013 12/31/2017 ZMDTF Grant 12.85 0 0.0% 0.1
POWER SECTOR22.8 3.0
13.4%
3 Power Infrastructure Rehabilitation Project 6/30/2011 6/30/2014 ZMDTF Grant 22.76 3.05 13.4% 1.9 2.3
MULTI SECTOR17.4 2.2
12.7%
4 ZIM-FUND Procurement Agent 6/24/2011 12/31/2013 FSF Grant 1.00 0.75 74.5% 2.4
5 Technical Assistance to ZADMO 8/9/2011 12/31/2013 FSF Grant 0.19 0.08 41.6% 2.2
6 T.A FOR HIPC ELIGIBILITY ASSESSMENT 7/30/2013 6/30/2014 FSF Grant 0.07
7
Capacity Building Project for Public Financial &
Economic Management12/5/2012 6/30/2016 FSF Grant 16.12 1.39 8.6%
Not Yet
Rated0.9
AGRICULTURE SECTOR5.2 5.2
100.0%
8 Lake Harvest Project 26/10/11 26/11/20 ADB Loan 5.2 5.20 100.0% 1.5 2.0
TOTAL 86.5 16.0 18.4% 2.0 1.5
Grant 81.3 10.8 13.2%
Loan 5.2 5.2 100.0%
Not
Supervised
III
Appendix III: Similar Projects Financed by the Bank and other Development Partners in
Zimbabwe
DONOR PROJECT TITLE AMOUNT INTERVENTION AREAS
AfDB Capacity Building for
Public Finance and
Economic Management
under the Fragile State
Pillar I (2012-2015)
UA 16.12
million
To strengthen accounting and reporting functions
of the Accountant General Department, debt
management, public sector investment, revenue
management, statistics and regional integration.
Status: Implementation started in August 2013
and it is well underway.
Technical assistance to
Zimbabwe Aid and Debt
Management Office, under
the Fragile State Facility
Pillar III (2011-2014)
UA 190,000 Targeted technical assistance to strengthen
implementation of the debt management strategy.
IMF Technical Assistance and
Staff Monitored Program
- Technical assistance in the areas of PFM reform,
modernizing the payroll and human resource
management systems, tax policy and
administration, and increasing transparency in
diamond revenues
World Bank Support to PFM reform
through the Analytical
Multi-Donor Trust Fund
(2010-2014)
USD 2.3
million
2010 - 2015
Public Expenditure Review (2012-13), CIFA
(2012), payroll, e-procurement, procurement
training and standard bidding document,
accounting and reporting/PFMS/IFMIS, external
audit, parliamentary committee, and budget
management
UNDP Strengthening Institutional
Capacity for Development
Effectiveness and
Accountability (2013 –
2016)
US$18.5m Support to IFMS, accounting and reporting
function of the Accountant General, Human
Resource and Skill Development (training of
accountants), aid management and coordination,
Results Based Management (RBM) systems,
MTP monitoring and evaluation, national
statistics, external audit and parliamentary
committee.
EC Aid coordination - Capacity building support to strengthen aid
management and coordination
DFID UK Strengthening capable
government program
US$ 19m
(2010-2013)
Support to budget planning and result based
budgeting, parliamentary committee, aid
management, skills development and analytical
(including contribution to A-MDTF)
Australian
Aid
Revenue management.
Project completion date
end 2013
- Capacity building support to ZIMRA to enhance
tax administration and collection.
USAID Support to evidence-based
economic policy analysis
and management
- Capacity building support to ZIMSTAT and
ZEPARU to enhance capacity for evidence-based
policy analysis and management
Netherlands Budget oversight and
participation
- Support to Parliamentary Budget and Finance
Committee
ACBF Public sector capacity
building
Support to IPFMS, budget formulation and
monitoring, public sector training
institutions/ZIPAM, aid coordination and
regional integration.
IV
Appendix IV. Summary of the CIFA/PEFA 2012 Assessment
Indicator Description SCORE
2012
PI-1 Aggregate expenditure outturn compared with original approved budget NR
PI-2 Composition of expenditure outturn compared with original approved budget D
PI-3 Aggregate revenue outturn compared with original approved budget D
PI-4 Stock and monitoring of expenditure payment arrears C+
PI-5 Classification of the budget C
PI-6 Comprehensiveness of information included in budget documentation B
PI-7 Extent of unreported government operations D+
PI-8 Transparency of inter-governmental fiscal relations NA
PI-9 Oversight of aggregate fiscal risk from other public sector entities C
PI-10 Public access to key fiscal information C
PI-11 Orderliness and participation in the annual budget process B
PI-12 Multi-year perspective in fiscal planning, expenditure policy, and budgeting C
PI-13 Transparency of taxpayer obligations and liabilities B
PI-14 Effectiveness of measures for taxpayer registration and tax assessment C+
PI-15 Effectiveness in collection of tax payments D+
PI-16 Predictability in the availability of funds for commitment of expenditures D+
PI-17 Recording and management of cash balances, debt, and guarantees B
PI-18 Effectiveness of payroll controls C+
PI-19 Competition, value for money, and controls in procurement D+
PI-20 Effectiveness of internal controls for non-salary expenditure C+
PI-21 Effectiveness of internal audit C+
PI-22 Timeliness and regularity of accounts reconciliation C
PI-23 Availability of information on resources received by service delivery units D
PI-24 Quality and timeliness of in-year budget reports A
PI-25 Quality and timeliness of annual financial statements D
PI-26 Scope, nature, and follow up of external audit C+
PI-27 Legislative scrutiny of the annual budget law C+
PI-28 Legislative scrutiny of external audit reports D+
D-1 Predictability of direct budget support NA
D-2 Financial information provided by donors for budgeting and reporting on
project and program aid
A
D-3 Proportion of aid that is managed by use of national procedures D
V
Appendix V: Analytical Work and Underpinnings
Component/Reform
Areas
Analytical Work Institution
Strategy Medium Term Plan (2011 – 2015) MoF
Zimbabwe Agenda for Socio-Economic
Transformation (Zim-Asset, 2013-2018)
President Office
Country Brief (2011 – 2013 and 2013-
2015)
AfDB
Zimbabwe Accelerated Arrears
Clearance, Debt and Development
Strategy (ZAADDS, 2012)
MoF
Public Finance Act, 2010 MoF
The Mid-Year Fiscal Policy Statement,
July 2013
MoF
Public Financial
Management
Country Integrated Fiduciary Assessment,
(2012)
MoF
Procurement Capacity Needs Assessment
and Capacity Development Plan (2013)
World Bank
Roadmap for Public Financial
Management Improvement (2013)
MoF
OPEV Evaluation of Institutional Support
in Governance (draft 2013)
AfDB
OPEV Joint PFM Evaluation Public
Financial Management Reform (2011)
AfDB
OPEV Evaluation of Bank’s Assistance to
Fragile States (2012)
AfDB
Zimbabwe Public Expenditure Notes:
Strengthening Institutions for the
Preparation of Government Budget (2011)
World Bank
Survey on the Practice of Internal Audit
in Zimbabwe (2010)
Institute of Internal
Auditors
Good Practice Note on Sequencing PFM
Reforms (2013) PEFA Secretariat,
IMF, and EU
Others Positioning the Zimbabwe Tourism Sector
for Growth: Issues and Challenges (2013)
ZEPARU
Mining Sector Policy Study (2012) ZEPARU
IMF Staff Monitored Program (2013) IMF
VII
OUTCOME OF NEGOTIATIONS
1. The delegations of the Republic of Zimbabwe and the African Development Fund have
successfully completed the Negotiations on 20th
November 2013.
2. The two parties agreed on the project objective, components, financing plan, disbursement
conditions as stated in the Project Appraisal Report (PAR), draft Protocol of Agreement and
Disbursement Letter for the Governance and Institutional Strengthening Project.