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Implementation Completion Report (ICR) Review - Uruguay Public Services And Social Sectors Ssal


  
1. Project Data:   
ICR Review Date Posted:
05/23/2006   
PROJ ID:
P081495
Appraisal
Actual
Project Name:
Uruguay Public Services And Social Sectors Ssal
Project Costs(US $M)
 101.02  26.02
Country:
Uruguay
Loan/Credit (US $M)
 101.02  26.02
Sector, Major Sect.:
General education sector, Health,
Education; Health and other social services
Cofinancing (US $M)
   
L/C Number:
L7165      
   
Board Approval (FY)
  3
Partners involved
 
Closing Date
05/04/2005 05/04/2005
         
Evaluator: Panel Reviewer: Division Manager: Division:  
Helen Abadzi
Jorge Garcia-Garcia Alain A. Barbu IEGSG

2. Project Objectives and Components:

a. Objectives
The objective of the SSAL II was to support improvements in the social sectors in Uruguay, in the wake of

the strong external shocks that hit the economy and public finances in 2001-2002. The financing supported: (a) improvement of efficiency and equity in the educational sector for the operation and coordination of educational institutions, and protection of budget allocation for educational programs affecting the lower-income population; and (b) improvement of efficiency and equity of public spending in the health sector for the quality of services delivered, eliminating regressive subsidies in public hospitals and reforming the Fondo Nacional de Recursos to assure its governance and its financial sustainability.

b. Components (or Key Conditions in the case of Adjustment Loans):
(a) Consolidation and reinforcement of equity within education programs. The programs protected from structural adjustment budget cuts were: (i) basic school supplies, (ii) “bilingual education; and (iii) textbooks. Tranche release conditions for this component included amounts budgeted and executed for each of the three protected programs.
(b) Improvement of educational sector efficiency to improve sector management in order to make the education sector more responsive to the new fiscal context. The priority areas for budget protection were: (i) Functional and administrative organization of the National Administration of Public Education; (ii) human resources management; and (iii) integrated financial and accounting management system. A new internal audit unit, in charge of control and monitoring systems was to be created, to reduce irregularities and inefficiencies. Tranche release conditions for this component included the design and implementation of the proposed reforms and the creation, staffing, and auditing processes design in the Internal Audit Unit.
(c) Improvement of public spending efficiency in the health sector to support outsourcing of ancillary services for public hospitals. Tranche release conditions for this component included the definition,
implementation, and evaluation of a framework for contracting out ancillary services in public hospitals.
(d) Improvement of efficiency and equity of public hospital expenditures. To reduce subsidies from the public health system to private insurers, the government would advance the implementation of the Single Registry for formal assistance coverage system to enable the identification of insured citizens that demand services and the subsequent billing of these services to the corresponding insurer. Uninsured patients were to be charged according to their social conditions and ability to pay. Tranche release conditions for this component included the implementation of RUCAF, its use in the design and implementation of public hospitals budget allocation formulas, and implementation of billing system for insured patients receiving services at public hospitals.
(e) Improvement of the efficiency and sustainability of public expenditures in high-complexity medical care. The National Resources Fund that provides universal coverage for a defined basket of
services was to be reformed to (i) redefine the procedures that are not high-complexity; (ii) establish new fees for the procedures to be funded by it; (iii) define utilization rates to control the volume of procedures funded; and
(iv) implement a validation system for service requests with the beneficiary database. Tranche release conditions included the continued strong financial performance by FNR, completion of review of eligible procedures to by financed by FNR, and use of validation mechanism with RUCAF to authorize services.
(f) Linkage of SSAL II tranches release to performance in SAL II. The second and third tranches of SSAL II could only be released once conditions for the same tranches in SAL II had been satisfied. These conditions included reforms in the infrastructure sector, including specific actions in energy, telecommunications, postal services, water and sanitation, and transport.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The operation totaled US$101.02 million, to be disbursed in three tranches of US$26.02 million, US$25 million and US$50 million. Being a Special Structural Adjustment Loan (SSAL), financial conditions were structured with higher interest rates and shorter maturity terms. The SSAL II was prepared and approved together with a standard structural adjustment operation (the Public Services and Social Sectors Structural Loan – SAL II, for US$151.52m, which focused on Public Services reforms. Both loans were linked, as compliance with conditions of SAL II was included as a condition to release tranches II and III of SSAL II and vice-versa.
The first tranche of US$26.02m was released on April 22, 2003, but the two subsequent disbursements of US$25m and US$50m respectively, were not disbursed. The SSAL II was cancelled on 4 May 2005.


3. Relevance of Objectives & Design:

In view of the severity of the economic crisis, there was great need to increase the impact of dwindling fiscal resources allocated to these sectors, and consolidate the reforms, mitigating the possible negative impact of the crisis on them. This operation, together with a Country Assistance Strategy prepared subsequently outlined the framework for the Bank’s support of pro-poor reforms in social policies.

4. Achievement of Objectives (Efficacy) :

The originally envisaged reforms in the education and health sectors under SSAL II, were fully implemented. These reforms contributed to maintaining – and in part improving - public service levels in the aftermath of the economic crisis of 2002. According to the ICR the Program objectives were achieved and substantially surpassed. Specifically:
(a) Improvement of efficiency and equity in the educational sector (achieved). Programs were implemented to modernize the administration of the education system, such as those involving the strengthening and implementation of new dossier follow-up systems, the implementation of a human resources data base, and the design of the Internal Audit Unit, which is now fully operational. Budgets of programs benefiting the poor were protected in the short- and medium term. In 2003-2004 the budget for the key education programs was protected from cuts, and the budget of the protected programs rose from US$1.45 million in 2003-04 to US$3.72 million in 2005. The total amounts assigned to the three critical programs for 2005 were 130 percent over the SSAL II targets.
(b) Improvement of efficiency and equity in the health sector (achieved). Public hospital budgets were used more efficiently, making it possible to improve the quality of services provided to the poor. This increased efficiency was achieved through the outsourcing of certain services, reducing cross-subsidies, and increasing cost recovery at public hospitals. The beneficiary database was completed and an action plan was defined for its periodical updating. Additionally, 30% of the hospital budget was allocated according to a per-capita criterion, achieving a substantial improvement over the older process, when allocation was based on historical criteria. Billing regulations to recover costs of services provided to private health insurers beneficiaries were studied and prepared. The financial, management and governance reform implemented in the National Resource Fund made it possible to balance accounts and even achieve a surplus in 2005. Thus, the National Resource Fund went from a deficit of 16.4 percent of revenues in 2000 to a surplus of 5 percent in 2003. Overall,
per capita expenditures in the health sector were reduced from US$51.7 to US$41.1 between 1999 and 2003.

Overall, the program seems to have benefited the poor during the crisis. Between 1999 and 2004, the poverty incidence rose from 16.7% to 31.2%. However unemployment rose only by three percentage points (from 10.1% to 13.1%) while school enrollment increased from 733,811 to 807,802 in the same period. Contributory health coverage was affected during the crisis, but the decline was compensated by an expansion of coverage by the public sector; thus health sector coverage rose from 95.2% in 1999 to 97.2% in 2003, while infant mortality was somewhat reduced from 14.4 per thousand to 13.9 per thousand.

5. Efficiency:

Uruguay took advantage of the opportunity provided by the crisis to make progress in the structural reform program, particularly in macroeconomic actions and public finances. Though the ICR does not mention specific indicators to help determine how efficiently reforms took place, the indicators shown in part 4 are suggestive of significant progress vis-a-vis the loan amount disbursed. The ICR states that efficient tracking of expenditures was key to the improved sectoral outcomes. SSAL II also set the stage for further reforms to improve the efficiency and equity in social sectors in the longer run.
6. M&E Design, Implementation, & Utilization:

The project did not have a specific M&E data collection or evaluation design, it relied on the indicators produced by the government for other programs and projects.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

While progress on social sector reforms advanced as expected, infrastructure policies that formed conditions the Public Services and Social Sectors Structural Loan were not implemented as fast as expected (see component (f) above). A December 2003 Referendum and the Constitutional reform determined that some state monopolies would not be disbanded as previously agreed. Thus, tranches II and III, the funds were not disbursed. Meanwhile, the overall economic situation of Uruguay improved and more advantageous financial options became available. Therefore, the Government of Uruguay decided in early 2005, to request the cancellation of the second and third tranches of SSAL II, for a combined amount of US$75 million. Nevertheless, all planned reforms were implemented in full.

8. Ratings:
ICR
ICR Review
Reason for Disagreement/Comments
Outcome: 
SatisfactorySatisfactoryDespite the cancellation of tranches II and II, project objectives in the social sectors were achieved.
Institutional Dev.: 
SubstantialSubstantial
Sustainability: 
LikelyLikelyAlthough the project lasted a short period of time, the Bank continued to support reforms through a new Social Program Development Policy Loan, approved in June 2005.
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:

- Conditionalities to force countries to disband state monopolies may run counter to public opinion and be subject to voter recall. The Bank might gauge more sensitively the willingness of voters in democratic regimes to give more power to the private sector.

-When cross-linking conditionalities between different development policy loans, it is important to evaluate the financial leveraging impact but also the potential problems that might arise if reforms move at different speeds.
-Solid prior understanding of the sectors involved in the operation facilitates the preparation and achievements of a structural adjustment program.
-Close and frequent supervision increases sustainability of programs even in period of crisis or government changes.


10. Assessment Recommended?  No

          Why?  

11. Comments on Quality of ICR:

Overall ICR quality is satisfactory. However, it offers no data to show how the various conditions were met. Some data sources are unclear, including the findings on improved efficiency and management in the education sectors. Too many acronyms are used (some unexplained) and make reading at times difficult.

(ES-Rev4B-Dec/05)
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