The World Bank Second Public Financial Management Capacity Strengthening Project (P151492) REPORT NO.: RES26581 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SECOND PUBLIC FINANCIAL MANAGEMENT CAPACITY STRENGTHENING PROJECT APPROVED ON JULY 7, 2015 TO FEDERAL REPUBLIC OF SOMALIA GOVERNANCE AFRICA Regional Vice President: Makhtar Diop Country Director: Bella Bird Senior Global Practice Director: Deborah L. Wetzel Practice Manager/Manager: George Addo Larbi Task Team Leader: Ikechi B. Okorie The World Bank Second Public Financial Management Capacity Strengthening Project (P151492) I. BASIC DATA Product Information Project ID Financing Instrument P151492 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 07-Jul-2015 30-Jun-2018 Organizations Borrower Responsible Agency Ministry of Finance, Puntland,Ministry of Finance of Federal Republic of Somalia Somaliland Hargeisa,Ministry of Finance Federal Government Project Development Objective (PDO) Original PDO The Project Development Objective is to establish and strengthen institutional capacity for the management of public funds inCentral Finance Agencies and targeted sectors. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A0389 10-Nov-2015 10-Nov-2015 07-Dec-2015 30-Jun-2018 4.00 .96 3.04 TF-A0388 06-Jul-2015 22-Jul-2015 09-Sep-2015 30-Jun-2018 16.00 10.16 5.84 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Second Public Financial Management Capacity Strengthening Project (P151492) II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The request for extension has been made by the Federal Government of Somalia (FGS) to: (i) address the implementation delays resulting from delays in procurement and financing gaps across several project components; (ii) incorporate the necessary programmatic changes arising from re-prioritization of PFM priorities; and (iii) ensure that the project period is well-aligned with the government’s 2016 - 2020 PFM reform Action Plan. An additional financing will be processed under P166206. The proposed AF will strengthen the overall development impact of the PFMCSP, adjust the World Bank’s assistance to better reflect changing government priorities and country context, and enhance the overall achievement of the project development objective (PDO). As part of the proposed AF, the overall project will be restructured to: (a) introduce a "Rapid Response Facility" - a flexible financing window, aimed at providing the FGS, Puntland and others the opportunity to re-prioritize based on changing needs; (b) re-prioritize sets of activities aligned with the PFM Reform Action Plan; and (c) revise the Results Framework to reflect the AF, implementation progress and results achieved to date. For purposes of the extension of closing date, the end target dates for indicators in the results framework have been revised as attached. The Project is a US$20 million Investment Project Financing (IPF), whose Development Objective is to establish and strengthen institutional capacity for the management of public funds in central finance agencies and targeted sectors. It has the following components: (i) Component 1: Revenue Mobilization, Planning and Budget Preparation; (ii) Component 2: Treasury Management, Budget Execution, Procurement, Accounting and Financial Reporting; (iii) Component 3: Strengthening the Integrity Pillars; (iv) Component 4: Public Financial Management Professionalization being implemented by the Ministry of Finance at the FGS; and Component 5: PFM Reform oversight; coordination and management. As at mid-term review held in May 2017, the following results have been recorded: (i) annual financial statements are now being submitted in a timely manner with coverage including revenues, expenditures, financial assets, domestic arrears and cash flow statement, as well as donor funds under the control of the government; (ii) a short-medium term (6-12 months) strategic plan for revenue mobilization has been developed and adopted by the FGS. As part of the deliverables under an ongoing TA assignment, the FGS together with the Puntland State of Somalia (Puntland) are in the process of agreeing on a transition plan for moving from specific - ad valorem tax regime; (iii) budget reports classified to allow comparison to original budget including supplementary budget; (iv) functional and technical requirements for core banking system have been assessed and completed. Procurement and supply of core-banking system completed; and (v) 126 students have passed the IPFM certificate level exams against the targeted 20 students as at original project closing date of June 2018. Project performance is currently rated Moderately Satisfactory for IP and for DO. This MS rating arises from the significant implementation delays – mostly due to funding gaps and the cost premiums resulting from attracting Technical Advisory firms to support the government’s capacity and institutional development efforts. Nevertheless, with a phased-approach to implementation now adopted; the pragmatic use of firms together with individual consultants; and extension of closing date, project implementation is expected to improve with a Satisfactory IP and DO rating. Cumulative disbursements now stand at US$10.89 million (of the Grant of US$20 million). This restructuring is to request for RVP approval of a proposed extension to the closing date of the project from June 30, 2018 to June 30, 2020, which will bring the cumulative extensions to 24 months. The Project was approved on July 01, 2015. Thus, with this extension, the Project will be 5 years old at the time of the new closing date. The World Bank Second Public Financial Management Capacity Strengthening Project (P151492) The Task Team confirms that the requirements of OP/BP10.00 regarding closing dates have been met, specifically: (i) the project objectives continue to be achievable; (ii) the performance of the Borrower remains satisfactory; (iii) the Bank and the Borrower agree on actions that will be undertaken by the Borrower to complete the Project; and (iv) there are no outstanding audits,or IFRs for the Grant. III. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A0388 Effective 30-Jun-2018 30-Jun-2020 30-Oct-2020 TF-A0389 Effective 30-Jun-2018 30-Jun-2020 30-Oct-2020