Document of The World Bank FOR OFFICIAL USE ONLY Report No: 75821-KG RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CAPACITY BUILDING FOR ECONOMIC MANAGEMENT GRANT PROJECT GRANT (#H388-KG) OF SDR 1.9 MILLION July 01, 2008 TO THE KYRGYZ REPUBLIC March 4, 2013 POVERTY REDUCTION AND ECONOMIC MANAGEMENT CENTRAL ASIA AND SOUTH CAUCASUS UNIT EUROPE AND CENTRAL ASIA REGION This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. KYRGYZ REPUBLIC - GOVERNMENT FISCAL YEAR January 1 – December 31 Currency Equivalents (Exchange Rate Effective as of March 4, 2013) Currency Unit = Kyrgyz Som (KGS) US$1.00 = 47.5585 (KGS) Weights and Measures Metric System ABBREVIATIONS AND ACRONYMS CBEM Capacity Building for Economic Management CPS Country Partnership Strategy DPO Development Policy Operation PIU Project Implementation Unit TA Technical Assistance Regional Vice President: Philippe H. Le Houérou Country Director: Saroj Kumar Jha Sector Manager: Ivailo Izvorski Task Team Leader: Afsaneh Sedghi 2 KYRGYZ REPUBLIC CAPACITY BUILDING FOR ECONOMIC MANAGEMENT GRANT CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 4 3 CAPACITY BUILDING FOR ECONOMIC MANAGEMENT RESTRUCTURING PAPER A. SUMMARY The Capacity Building for Economic Management (CBEM) was approved on July 1, 2008 in order to establish and institutionalize a sound framework and capacity for economic policy making and implementation. The current restructuring involves reallocation of project funds between categories and from the unallocated category for strengthening the capacity of Ministry of Economy in its current and new policy priority areas, including for its anti-corruption reform program. The current restructuring will also allow the completion of ongoing activities under the project. There are no changes to the project development objectives (PDO). B. PROJECT STATUS Overall implementation progress has been good despite earlier delays caused by frequent political changes and the shift of implementation responsibility to various agencies, as well as following the 2010 disturbances when implementation was in a standstill during April-October of 2010. There was good progress in implementation of all the components of the project over the last year, particularly of components 1 and 3.1 An amount of USD 1.7 million or 60 percent of the total IDA grant funds have been disbursed so far. Progress toward meeting the project’s development objectives (PDO) are currently satisfactory and the outcome and results indicators are either met or would be fully met once the remaining funds are utilized. However, a significant portion of the project funds remain undisbursed (SDR 767,814.05) and there is SDR 182,000 of unallocated funds which have been left as reserves to be utilized as needs and priorities change. C. PROPOSED CHANGES Components: The Ministry of Economy plays a significant role in the implementation of the priority areas of the government reform program. The CBEM project has been providing technical assistance and capacity building support to the Ministry of Economy to strengthen its technical and policy making expertise in the area of policy making and economic management. The proposed restructuring aims at reallocation of project funds between categories and from the unallocated category towards strengthening the capacity of the Ministry of Economy in its current and new policy priority areas to support the government reform program including in the area of anti-corruption reform. It will also allow completion of ongoing activities under the project. There would not be any change 1 The project has four components: Component 1: Institutional and technical framework for government wide macroeconomic policy development and coordination; Component 2: Strengthening the capacity to formulate and implement economic policy; Component 3: Develop capacity for pay and grading reform in the civil service; and Component 4: Project management and implementation support. 4 in the PDOs which will continue to be achievable within the extended closing date of end December 2013. Financing: The proposed restructuring is to be financed by modifying some of the activities under component 2 and reallocating the unutilized and unallocated funds to finance activities that would support the implementation of the government reform program including in the area of anti-corruption reform, as well as to continue with completion of the ongoing activities under components 1 and 3 and to provide sufficient financing for component 4. The amount of unutilized funds by the end of 2012 was USD 1.180 million, of which USD 436,000 are agreed to be allocated towards anti-corruption policy and implementation related activities. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the financing and the proposed allocations to each category. Category Current amount of Proposed amount Percentage of the Financing of the Financing Expenditures Allocated Allocated to be (expressed in SDR) (expressed in Financed SDR) (1) Goods 173,000 173,000 100% (2) Consultants 899,600 923,707 100% of local services, including expenditures audit 90% of foreign expenditures (3) Training and study 460,000 460,000 100% tours (4) Operating costs 185,400 253,813 100% (5) Unallocated 182,000 89,480 TOTAL AMOUNT 1,900,000 1,900,000 The proposed restructuring is expected to strengthen the bank’s existing policy dialogue in governance and anti-corruption supported by the Development Policy Operations (DPO) and to provide an input to the upcoming Country Partnership Strategy (CPS). 5