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Implementation Completion Report (ICR) Review - SIMPLIFIED - PRSC I


  
1. Project Data:   
ICR Review Date Posted:
02/21/2006   
PROJ ID:
P074758
Appraisal
Actual
Project Name:
SIMPLIFIED - PRSC I
Project Costs(US $M)
 58.8  58.8
Country:
Honduras
Loan/Credit (US $M)
 58.8  58.8
Sector, Major Sect.:
General agriculture fishing and forestry sector, General public administration sector, General education sector, Other social services, General transportation sector,
Agriculture fishing and forestry; Law and justice and public administration; Education; Health and other social services; Transportation
Cofinancing (US $M)
   
L/C Number:
C3941      
   
Board Approval (FY)
  4
Partners involved
 
Closing Date
08/18/2005 08/18/2005
         
Evaluator: Panel Reviewer: Division Manager: Division:  
Rene I. Vandendries
Kris Hallberg Kyle Peters IEGCR

2. Project Objectives and Components:

a. Objectives


    The PRSC-I supported a broad spectrum of the objectives of Honduras' poverty reduction strategy, as presented in the 2001 PRSP and its 2003 PRSP Progress Report. More specifically, the objectives were to support government efforts to (1) accelerate pro-poor growth; (2) increase the impact and efficiency of resources devoted to human development and social protection; (3) strengthen governance and public sector management as well as the management of the environment; and, (4) strengthen monitoring and evaluation. PRSC-I was envisaged as the first in a series of quick-disbursing operations in support of the government's poverty reduction strategy.

b. Components (or Key Conditions in the case of Adjustment Loans):

The Board presentation conditions for PRSC-I, which were met by June 2004, covered all of these areas.

      1. In the "growth" area, they included maintenance of an adequate macro-economic framework, measures to expedite registration of businesses, actions to improve the efficiency of airport and telecoms services, and approval of a new property law which established a unified property registry.
      2. In the social sectors, actions were taken to improve the statistical databases in education and health to increase efficiency and transparency.
      3. In the areas of governance and public sector management, actions included steps to further improve the government's integrated financial management system, restore the Executive's control over civil service wage management, and lay the basis for professionalization of the civil service. Steps were also taken to strengthen environmental management of protected areas.
      4. A first PRSP Progress Report had also been completed

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The credit was disbursed as scheduled. There was no co-financing.


3. Relevance of Objectives & Design:

All of the elements of PRSC-I were highly relevant to Honduras' efforts to achieve sustainable and equitable growth. Unfortunately, because of opposition from the teacher's union, the rationalization of the civil service wage regime was only partial: it did not include the teachers, who make up half of all civil servants, thereby postponing what probably remains the overriding challenge to improved public sector wage management in Honduras.


4. Achievement of Objectives (Efficacy) :

PRSC-I, together with a new Poverty Reduction and Growth Facility (PRGF) from the IMF, helped promote fiscal stability and raise investor confidence, thereby strengthening the basis for growth. An earlier PRGF had gone off-track in 2001 under deteriorating fiscal conditions. After a two-year policy dialogue, a new PRGF was approved in February 2004 followed by PRSC-I in June. Apart from the improvement in the public sector deficit, economic growth also picked up. While this coincided with a general improvement in the external environment, the government efforts to contain public spending, especially public sector wages, contributed in a major way to maintain fiscal stability. PRSC-I also helped attract other donor interest in program assistance for Honduras and some donors have expressed their intentions to cofinance PRSC-II.

Apart from the above, it is too early to assess progress towards the medium-term targets in the PRSC-I policy matrix. Specific actions that were established as triggers for PRSC-II are being implemented. Six out of eleven trigger conditions appear to have been achieved fully and another two partially so. But the remaining three trigger conditions are fundamental to sustainable growth, and progress towards their fulfillment has encountered political obstacles: (a) passage of a ports' law and its implementation; (b) separation of the accounts of the electric public utility (ENEE) into different business units in order to prepare it for partial privatization; and (c) passage of the new civil service legislation.


5. Efficiency:

There is no basis on which to evaluate efficiency.

6. M&E Design, Implementation, & Utilization:

Implementation progress in the poverty reduction strategy is being monitored through regular progress reports. Furthermore, the introduction of the government's integrated financial management system makes it possible, for the first time, to produce budget execution reports and cash flow statements. As pointed out in the ICR, it would be useful for Honduras to go further and consider developing an integrated monitoring system to improve the quality of public spending.

7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

The preparation of PRSC-I complied with all relevant Bank policies on environmental and social impact provisions and on fiduciary arrangements. An environmental and social impact analysis was prepared: no significant impact of the reform measures on the environment was foreseen at appraisal, and no significant impact has materialized. A Country Financial Accountability Assessment (CFAA) and a draft Country Procurement Assessment Report (CPAR) were also prepared and found to provide adequate basis to proceed with program lending.


8. Ratings:
ICR
ICR Review
Reason for Disagreement/Comments
Outcome: 
SatisfactorySatisfactoryWhile this is admittedly a simplified ICR, it could have gone beyond the information provided on fulfillment of Board conditions and discussed some more specific outcomes using the two PRSP Progress reports completed to date.
Institutional Dev.: 
SubstantialSubstantial
Sustainability: 
LikelyNon-evaluableThe ICR rates sustainability as S (satisfactory ?). Given that PRSC-I is the first in a series of planned operations, and given continued risks to the program, both political and institutional, which are well documented in the ICR, sustainability cannot be evaluated at this time.
Bank Perf.: 
SatisfactorySatisfactory
Borrower Perf.: 
SatisfactorySatisfactory
Quality of ICR: 
Satisfactory

NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:


    It is difficult to draw lessons from a single operation which also is the first in a series of planned program assistance credits. Possibly the only conclusion in this case would be that the satisfactory outcome of this operation is no reason for complacency: the external environment was favorable and some of the major challenges to be addressed, if sustainable growth is to be achieved, were left aside. One of those challenges in Honduras is the teachers' union (referred to under 3. Relevance above) which has caused fiscal instability in the past and contributed to the extremely low quality of education.


10. Assessment Recommended?  No

          Why?  

11. Comments on Quality of ICR:

The ICR is well structured, clear and concise, and covers all pertinent issues. However, given that one of the four main objectives of PRSC 1 was to improve monitoring and evaluation of poverty and social expenditure outcomes, the ICR is weak on providing outcome indicators.


(ES-Rev4B-Dec/05)
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