OFFICIAL DOCUMENTS Supplemental Letter No. 2 REPUBLIC OF MACEDONIA January 14, 2016 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Loan No. 8561-MK (Second Municipal Services Improvement Project) Performance Monitoring Indicators Dear Sirs and Mesdames: This refers to paragraph A. 1, Section II of Schedule 2 to the Loan Agreement between the Borrower and the International Bank for Reconstruction and Development (the Bank) for the Loan 8561 -MK (Second Municipal Services Improvement Project). The Borrower hereby confirms to the Bank that the indicators set out in the attachment to this letter shall serve as the basis for the Borrower to monitor and evaluate the progress of the Project and the achievement of the objectives thereof. Very truly yours, REPUBLIC OF MACEDONIA By Authorized Representative Attachment to Supplemental Letter No. 2 Loan No. 8561-MK (Second Municipal Services Improvement Project) Performance Monitoring Indicators Project Development Objectives PDO Statement The proposed Development Objective of MSIP2 Project (PDO) is to improve transparency, financial sustainability and inclusive delivery of targeted municipal services in the participating municipalities. These results are at Project Level Project Development Objective Indicators Cumulative Target Values Indicator Name Baseline YRI YR2 YR3 YR4 YR5 End Target irect project beneficiaries .00 0 0 20,000 60,000 100,000 100,000 (Number) - (Core) Female beneficiaries (Percentage - Sub-Type: Supplemental) - (Core) Vulnerable/marginalized people with marginalized measured as the number of unemployed, social assistance receiving or in other ways vulnerable population that benefits from the project 0.00 0 0 5 7 10 10 intervention (Percentage - Sub-Type: Supplemental) Number of participating municipalities (i.e. the municipalities which signed sub-loan agreements) that regularly publish sub- project progress information on their official websites or 0.00 2 8 14 20 20 elsewhere (Number) Percentage of completed sub-projects that generated improved financial performance, including through increased revenue .00 0 50 0 0 earnings or cost savings (Percentage) Number of the completed subprojects that focus on social inclusion 0.00 5 9 17 17 (Number) Intermediate Results Indicators Cumulative Target Values Number of sub-loans signed .00 5 10 15 0 0 (Number) Number of poverty/social inclusion investment grants signed .00 17 17 (Number) Number of sub-projects, financed by sub-loans or grants, successfully completed 0.00 0 3 10 20 37 37 (Number) Number ofjobs generated, measured as the number of employees of contractors and engineering companies that .00 00 500 00 1100 1,500 1,500 perform works under the sub-projects (Number) Number of visits to websites that publish sub-project progress information 0.00 5,000 50,000 100,000 250,000 500,000 500,000 (Number) Participants in consultation activities during sub-projects preparation .00 50 100 200 300 400 400 (Number) Participants in consultation activities during sub-projects preparation - female 0.00 15 30 60 90 120 120 (Number - Sub-Type: Breakdown) Piped household water connections that are benefiting from rehabilitation works undertaken by the project 0.00 100 00 300 400 00 00 (Number) - (Core) Roads rehabilitated, Rural .00 10 0 30 0 (Kilometers) - (Core) Roads rehabilitated, non-rural .00 8 15 0 0 (Kilometers) - (Core)