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Implementation Completion Report (ICR) Review - Programmatic Structural Adjustment Credit

1. Project Data:   
ES Date Posted:
Project Name:
Programmatic Structural Adjustment Credit
Project Costs(US $M)
 15  15
Loan/Credit (US $M)
 15  15
Sector, Major Sect.:
General agriculture fishing and forestry sector, General public administration sector, General education sector, Other social services, General industry and trade sector,
Agriculture fishing and forestry; Law and justice and public administration; Education; Health and other social services; Industry and trade
Cofinancing (US $M)
L/C Number:
Board Approval (FY)
Partners involved
Closing Date
12/31/2003 12/31/2003
Prepared by: Reviewed by: Group Manager: Group:  
Michael R. Lav
Fareed M. A. Hassan Kyle Peters OEDCR

2. Project Objectives and Components:

a. Objectives
To support elements of the Government's strategy for poverty reduction and economic development as outlined in its "Enhanced Growth and Poverty Reduction Strategy Paper" (PRSP). Specifically, the credit aimed at supporting: 1. broad based economic growth with an emphasis on productive generation and rural development. 2. greater and better investment in human capital and the poor. 3. strengthening of institutions and good governance. A fourth pillar of the PRSP (better protection for vulnerable groups) was supported outside of the PSAC.

b. Components
1. Maintain adequate macroeconomic framework. 2. Prepare report on poverty-focussed and overall public spending executed in 2001, to be used as a baseline for monitoring future expenditures. 3. Adopt operational regulations for the Agricultural Technology Institute (INTA) to encourage the creation of a market of providers of agricultural technology services. 4. Create a foundation (FUNICA) to administer a competitive fund to finance agricultural services (FAITAN). 5. Divest 51 percent of shares held by the government in the state telecommunications company (ENITEL). 6. Passage of the School Autonomy Law and its regulations by the Nicaraguan Congress (to permit greater parental involvement in monitoring the provision of education services) together with adoption of measures to implement the new law. Implementing activities include training 2800 members of School Councils and providing 20,000 copies of the School Autonomy Law and its regulations to School Councils and parents. 7. Passage of the General Health Law, which modernizes the health sector, and the adoption of measures to implement the new law, including a results-based management system for basic health care delivery in 13 municipalities. 8. Improvement in access to water and sanitation services, including an increase of at least 1.4 percentage points in both 2000 and 2001 of the total national population served by potable water connections. 9. Implementation of an integrated financial management system (SIGFA) in 31 central government agencies and institutions, comprising most of the central government. 10. Approval of new regulations for monitoring poverty reduction spending and tracking the use of HIPC debt relief funds.

c. Comments on Project Cost, Financing and Dates
The one-tranche project cost US$15 million financed by an IDA credit. It was appraised in November, 2002, approved by the Board on March 13, 2003, made effective on June 16, 2003, and closed on schedule on December 31, 2003.

3. Achievement of Relevant Objectives:

1. Growth has accelerated, although GDP growth rates are still modest. Agricultural sector growth should be facilitated through new institutions to support improved availability of technology to farmers. The divestment of government shares of ENITEL should improve the quality and reduce the cost of telecommunications. 2. Human capital formation should be improved through increased school autonomy and greater public participation. The new health law should lead to better access and treatment. Improved access to potable water should improve public health. 3. Governance and public institutions should be strengthened through improved financial management form the implementation of SIGFA, and the improved system of monitoring poverty reduction spending.

4. Significant Outcomes/Impacts:

Please see comments in Section 9 below.

1. GDP growth increased from 1 percent in 2002 to 2.3 percent in 2003. Total public sector savings increased by 2.5 percent of GDP. While there were concerns about the strength of the adjustment at entry, the outcome seems to have been satisfactory. 2. The PSAC reforms have moved the reform process ahead so that a number of additional reforms for a follow-up adjustment operation, the Poverty Reduction Support Credit (PRSC), are being implemented. The PRSC was approved by the Board in January, 2004. In addition, the PSAC attracted donor interest and participation by KfW staff, leading to cofinancing by the KfW for the PRSC. 3. A poverty reducing spending target was approved for 2003, although this was set by the IMF, consistent with the work done for the PSAC.

5. Significant Shortcomings (include non-compliance with safeguard features):

1. The national accounts data were extremely uncertain during preparation of this project and were in fact adjusted by about 70 percent in mid-2002, so that there was a substantial degree of uncertainty about the macroeconomic framework. Issues related to this uncertainty could have been more directly reflected in the ICR. 2. On the basis of the President's Report, a second concern about quality at entry was fiscal sustainability. While measures do seem to have been put in place to address this issue, this could have been more fully discussed in the ICR.

6. Ratings:ICROED ReviewReason for Disagreement/Comments
SatisfactorySatisfactoryThis outcome rating is tentative, since the Simplified Implementation Completion Report, while complying with the guidelines, does not provide a full basis for evaluation.
Institutional Dev.:
Bank Performance:
Borrower Perf.:
Quality of ICR:

7. Lessons of Broad Applicablity:

1. Close collaboration with the IMF is essential in programmatic adjustment operations. 2. Adequate time for extensive consultations is needed to ensure that the program is adequately owned and that conditionality reinforces ownership.

8. Audit Recommended?  Yes

          Why?  This PSAC should be assessed together with the Poverty Reduction Support Credit I, now being implemented, and PRSC II, planned to follow PRSC I. As with other programmatic loans, it is only after this that OED will be able to assess the PSAC's full impact on development outcome, sustainability and institutional development.

9. Comments on Quality of ICR:

This ICR follows the guidelines for ICR Reports for Programmatic Adjustment Lending. This format stresses brevity over comprehensiveness, with a more comprehensive ICR to be completed at the end of the programmatic series. This brevity, although in compliance with the ICR guidelines, does not call for an assessment that gives adequate information as to whether the original framework and sequencing of loans in the cluster remain valid. The emerging impact of the PSAC would have been more clearly discernible had the ICR presented some time series and better data analysis without which it will remain difficult to gauge the impact of this and subsequent operations. For example, are there any indications that the implementation of SIGFA is having an impact on government financial controls and management? Because of the ICR's brevity, the ICR does not make a clear link between what the project intended to achieve and what it achieved in terms of impact.

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