Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 29046 PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDGRANT INTHEAMOUNTOF SDR3.5 MILLION (US$5 MILLIONEQUIVALENT) TO THE KINGDOMOF LESOTHO FORA HIV AND AIDS CAPACITY BUILDINGAND TECHNICAL ASSISTANCEPROJECT May24,2004 HumanDevelopment1 CountryDepartment 1 Africa RegionalOffice This document has a restricteddistributionandmay be usedbyrecipientsonly inthe performanceof their official duties. Itscontents may not otherwisebe disclosedwithout WorldBankauthorization. CURRENCY EQUIVALENTS (Exchange Rate Effective 30 April 2004) CurrencyUnit = SDR 0.689032 = US$1 1.45133 US$ = SDR I FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AG Auditor General AIDS Acquired ImmuneDeficiency Syndrome APL Adaptable Program Loan ARVs Anti-Retroviral Drugs BCC Behavior Change Communications CBOs Community BasedOrganization CCM Country Coordinating Mechanism CAS Country Assistance Strategy CHAL Christian Health Association o fLesotho DATFs District HIV/AIDSTask Forces DCI Development Cooperation Ireland DflD Department for International Development DHS Demographic and Health Survey ESAMI Eastern and SouthernAfrican Management Institute FBOs FaithBased Organizations FMRs FinancialMonitoring Reports GDP Gross Domestic Product GFATM Global Fundto FightAIDS, Tuberculosis and Malaria GOL Government o fLesotho HIV Human Immunodeficiency Virus HPSU Health Planning and Statistics Unit HSRP Health Sector Reform Project IDA International Development Association ICB International Competitive Bidding LAPCA Lesotho AIDS Program Coordinating Authority LFA Local FundAgent LIL Learningand InnovationLoans MAPS Multi-Country HIV/AIDS Program M&E Monitoringand Evaluation MDGs MillenniumDevelopment Goals MFDP Ministryo fFinance and Development Planning MOHSW Ministry o fHealthand Social Welfare NAC National AIDS Commission NDSO National Drugs and Supplies Organization FOROFFICIAL USEONLY NGOs Non-Governmental Organizations PAU Project and Accounting Unit PM Procurement Manager PU Procurement Unit RSA Republic o f South Africa SADC Southern African Development Community TA Technical Assistance TB Tuberculosis TAL Technical Assistance Loan UNAIDS UnitedNations AIDS Program U N . UnitedNations UNDP UnitedNations Development Program UNICEF UnitedNations International Fundfor Children USAID UnitedStates Agency for International Development VCT Voluntary Counseling and Testing WHO World HealthOrganization Vice President: Callisto Madavo Acting Country Director: PamelaCox Sector Manager: DzingaiMutumbuka Task Team Leader: Julie McLaughlin This document has a restricteddistributionand may be usedby recipients onlyin the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization. LESOTHO HIVandAIDS CapacityBuildingandTechnicalAssistanceProject CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ........................................................................ 6 1. Country and sector issues .......................................................................................................... 6 2. Rationale for Bank involvement ................................................................................................ 7 3. Higherlevel objectives to which the project contributes .......................................................... 7 B . PROJECT DESCRIPTION ........................................................................................................ 8 1. Lending instrument .................................................................................................................... 8 2. Project development objective and key indicators .................................................................... 8 3. Project components ................................................................................................................... 8 4. Alternatives considered andreasons for rejection................................................................... 11 C. IMPLEMENTATION ............................................................................................................... 11 1. Partnership arrangements ........................................................................................................ 11 2. Institutionaland implementation arrangements...................................................................... 12 3. Monitoringand evaluation o f outcomeshesults ...................................................................... 12 4. Sustainability ........................................................................................................................... 13 5. Critical risks and possible controversial aspects ..................................................................... 13 6. Loadcredit conditions and covenants ..................................................................................... 14 D APPRAISAL SUMMARY . ........................................................................................................ 15 1. Economic and financial analyses ............................................................................................ 15 2. Technical ................................................................................................................................. 15 3. Fiduciary .................................................................................................................................. 15 4. Social....................................................................................................................................... 16 5. Environment ............................................................................................................................ 17 6. Safeguardpolicies ................................................................................................................... 17 7. Policy Exceptions and Readiness ............................................................................................ 17 Annex 1:Countryand Sector or ProgramBackground ................................................................ 18 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies ........................ 21 Annex 3: ResultsFrameworkand Monitoring ............................................................................... 22 Annex 4: DetailedProjectDescription ............................................................................................. 28 Annex 5: ProjectCosts...................................................................................................................... 30 Annex 6: ImplementationArrangements ........................................................................................ 31 Annex 7: FinancialManagementand DisbursementArrangements ............................................ 33 Annex 8: ProcurementArrangements ............................................................................................. 38 Annex 9: Economic and FinancialAnalysis .................................................................................... 44 Annex 10: SafeguardPolicyIssues ................................................................................................... 46 Annex 11:Project Preparationand Supervision ............................................................................ 47 Annex 12: Documentsin the ProjectFile ........................................................................................ 48 Annex 13: Statementof LoansandCredits ..................................................................................... 49 Annex 14: Country at a Glance ........................................................................................................ 50 LESOTHO HIV AND AIDS CAPACITY BUILDINGAND TECHNICAL ASSISTANCE PROJECT PROJECTAPPRAISAL DOCUMENT AFRICA AFTH1 Date: May 24,2004 TeamLeader: Julie McLaughlin Country Director: PamelaCox Sectors: Health(55%);0ther social services Sector Mangermirector: DzingaiB. (45%) Mutumbuka Themes: HIV/AIDS(P);Population and reproductive health(S) Project ID: PO87843 Environmental screening category: Not Required LendingInstrument: Technical Assistance Safeguardscreeningcategory: No impact For Loans/Credits/Others: Total Bank financing (US$m.): 0.00 Borrower: Government of Kingdom of Lesotho Lesotho ResponsibleAgency: MinistryofFinanceandDevelopmentPlanning P.0.B 395 Maseru Lesotho Tel: (266) 22323703 Fax: (266) 22310157 mkhethisa@,finance.gov.ls Lesotho HIV/AIDSProgramme Coordinating Authority P.O. Box 527 Maseru Lesotho Tel: 266-22-326794 Fax: 266-22-327210 Ministry ofHealth& Social Welfare P.O. Box 514 Maseru Lesotho Tel: 266-22-313601 Fax: 266-22-323010 F Y 5 h 7 8 9 n n n n 4nnual osd 0.7% 1.od 1s d 1*2% o.od o.od o.od O.O( Zumulative 1 os( 1.24 2.2j 3.74 5.oq 5.04 5.04 5.04 5.O( Project implementation period: Start July 30,2004 End: June 30,2008 Expected effectivenessdate: July 30,2004 Expectedclosing date: December31,2008 Does the project depart from the CAS incontent or other significant respects? Re$ PADA.3 [ No Does the project require any exceptions from Bankpolicies? Re$ PAD D.7 [ ]Yes [XINO Have these beenapproved by Bank management? [[ ]Yes [XINO ]Yes [ IN0 I s approval for any policy exception sought from the Board? Does the project include any criticalrisks rated "substantial" or "high"? Re$ PAD C.5 [XIYes [ ]No Does the project meetthe Regional criteria for readinessfor implementation? Re$ PAD D.7 [XIYes [ ]No Project development objective Re$ PAD B.2, TechnicalAnnex 3 This technical assistance project aims to increasethe capacity of government andnon- governmental institutions responsible for the national response to HIV/AIDSto effectively implementandassess the impact of funds receivedfor HIV/AIDS. Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 Component I:Support to the Ministry of Finance and Development Planning (MOFDP). Component 11: Support to the Ministryo fHealthand Social Welfare (MOHSW). Component 111: Support to Secretariat ofthe National AIDS Program. Component IV: Support for civil society andprivate sector capacity development. Which safeguardpolicies are triggered, ifany? Re$ PAD D.6, TechnicalAnnex 10 No safeguardpolicies are triggered. Significant, non-standardconditions, if any, for: Re$ PAD C.7 Boardpresentation: No conditions. Loadcredit effectiveness: Appoint a Head (Le., the Chief Executive) for LAPCA Covenants applicable to project implementation: 1. Remaineligible for disbursements from the GFATM. 2. Maintain the Head o fLAPCA (or its replacement as Secretariat to the NAC). 3. Ensurethat LAPCA, the Global FundCoordinationTeam, the HIV/AIDS Directorate, the PAU, andthe MOHSW Procurement Unitare (i) assigned functions andresponsibilities, and (ii)staffed at a level required to implement the project. 4. Maintain policies andprocedures adequateto enable itto monitor and evaluate the key indicators. 5. The Government will cause the project to have its records, accounts and financial statements audited eachyear for boththe Special Account and Statements o f Expenditures, commencing with the accounts for the year ending March2005. 6. The PAUwill submit quarterly FinancialManagementReports not later than 45 days after the end o f each quarter. A. STRATEGIC CONTEXT AND RATIONALE 1. Countryandsector issues Lesotho is among the countries worst affected by the HIV/AIDSepidemic. With a populationo f2.2 million and 330,000 o f its adults estimated to be infected with HIV, the country i s facing an unprecedentednational disaster, The first AIDS case was reported in Lesotho in 1986, and since then the adult HIV prevalence has risen to 30 percent (UNAIDS, 2002). An estimated 27,000 children aged 0-14 years were infected withthe HIV virus by 2002. The number o f single and dual orphans inLesotho has risento its highest level ever at around 90,000 children ages 0-15 years and will likely remainhigh or increaseinthe short term, to a large extent due to the HIV/AIDSepidemic. The key drivers o fthe epidemic inthe country include the social vulnerability o fyoung people and women, migrant workers returningfrom South African mines, and a continued culture of silence. Compared to neighboring countries SouthAfrica, Botswana, Namibia and Swaziland who all have similarly highHIV/AIDSprevalence, Lesotho has limitednational financial and human resourcesto tackle effectively the epidemic, which threatensto undermineits development. In2000, the Government adoptedaNationalHIV/AIDSStrategic Planandthe National AIDS Policy Framework. These are basedon a multi-sector approachto the fight against HIV andAIDS, and embracedengagementwith civil society and communities inthe fight against the epidemic. The Lesotho AIDS Program Coordinating Authority (LAPCA) was established in2001with a mandateto coordinate, monitor and evaluate implementation o f the national response. Unfortunately, LAPCA's ability to fulfill its mandatehas beenlimited by many factors, includingthe lack ofautonomy, its inability to recruit a full complement of staff and the dismissal of its Executive Director that has left it leaderless for more than a year. Although the HIV/AIDSUnito fthe Ministry o fHealthand Social Welfare (MOHSW) has been engaged inefforts to addressHIV and AIDS since the late 1980s, as a unit under the Division o fDiseaseControl, it has not has had the status and leadership required to assume the level o fresponsibility and effectively leadthe sector's response. InJuly 2003, Lesotho hostedan extraordinary meeting of SADC on HIV/AIDS, and recent approval by the Cabinet o fa document titled Scaling up the fight against the HIV/AIDS " epidemic inLesotho" reflects increasedhigh-level attention needs to be followed up by concrete action. The Cabinet's approval o fthe document was accompanied by a decision to create a NationalAIDS Commission that will oversee the national responseto HIV/AIDS in Lesotho. Political leaders are now giving greater attention to the HIV/AIDScrisis. All public sector permanent secretaries agreedto undergo tests for HIV/AIDS publicly, and the Prime Ministerhimselfwas tested inpublic inMarch 2004. What is now required is concrete action to make available the prevention, care and impact mitigation servicesto the larger Basotho population. Meanwhile, in2002, with support from its UNpartners, the Lesotho Country Coordinating Mechanism (CCM)' submitteda successfulproposal to the GlobalFunds to FightAIDS, Tuberculosis and Malaria (GFATM), for a U S $34 million grant ($29 million for HIV/AIDS and $5 million for tuberculosis) to scale up its fight against HIV/AIDSand TB over the next 'The GFATM will only receive proposalsfrom aCCM, which includes "representatives from boththe public and private sectors, including governments, multilateral or bilateral agencies, non-governmental organizations, academicinstitutions, private businessesand people living with the diseases." 6 five years. The PrincipalRecipientofthe GFATMresources isthe Ministryo fFinanceand the two sub-recipientsare LAPCA andthe MOHSW. Althoughthe grant was signed in October2003, implementationhas only recentlycommenced, andthe GFATMstill lacksa satisfactoryassessment by itsLocalFundAgent ofLesotho's capacityto meet fiduciary requirements. Experienceover the pastthree years, suggeststhat institutionalcapacityof boththe recipientsand implementingagencies (withinandoutsidegovernment) requires targetedsupport anddevelopment inorder to receive, manage, disburse andaccount for finds, implementeffectiveinterventions,andmonitorthe implementationandresultso fthe GFATM. Such support isneitherprovidedbythe GFATMnor filly availablefrom the few development assistancepartners operatinginLesotho. 2. Rationale for Bankinvolvement The GFATMoperates as a financinginstrumentanddoes notprovidethe kindofsupervision or implementationsupporttypicallyprovidedbythe Bankor a bilateraldonor. Althoughthe GFATMproposalcouldhave encompassedcapacityandtechnicalassistance, neitherthe authors northe GFATMappraisedthe capacityofthe institutionsto implementthe extensive program. The financingfrom the GFATMfocuses almost exclusivelyon financing HIV/AIDS activities. The challengefacingLesothois howto effectivelyimplementa large amount ofexternalfinancing givenlimitedexperienceto date andnationalinstitutions,which are still beingdefined. The proposedprojectwill providetechnicaland implementation support, complementary to otherpartnersthat are supportingthe Lesothonationalresponseto HIV/AIDS. It is clear that additionalfinancialresourcesfor implementationare notwhat is requiredat this pointintime, however targeted implementationsupport couldfacilitate implementationofthe GFATMresourcesas well as leverageadditionalexternalfinancing. The Bankhas gainedmoreexperiencethan any other agency inimplementationofnational multi-sectorHIV/AIDSprograms inAfrica (throughthe MAPs). The Bank is also familiar with the challengesofaddressingHIV andAIDS inLesotho. The previousSecond Population, HealthandNutritionProjectsupportedthe establishment ofthe HIV/AIDSUnit within the MOHSW. Underthe existingHealthSectorReformProject(P053200), the Bank has beenprovidingsupport for LAPCAand financinggrants to NGOs for HIV/AIDS projects. The GFATMproposalbuilt uponthe designo fthe Bankprojectcomponent and is similarto the designofmany MAPs inthe region. As partofprojectpreparation,the Bank team hasbroughtregionalexamples and experience to the table andassistedthe government inclarifyingimplementationarrangements andresponsibilitiesunderthe GFATMprogram. The type ofsupport whichwould be providedboththoughthe proposedproject,andthrough Bank supervisionrespondsto a criticalgap inimplementationcapacity. 3. Higher level objectives to which the project contributes The projectdirectlysupports the GovernmentofLesotho's prioritiesas set out inthe 2001 Poverty ReductionStrategy Paper,the Vision2020 andthe MDGs. The last Lesotho Country Assistance Strategy(CAS) for Lesothowas discussedbythe ExecutiveDirectorsin 1998,anddid notanticipate the proposedproject. Giventhe GlobalFundaward, additionalfinancingfromIDA was notoriginallyconsidered. However, the Bank's recognitionofthe devastating impact of HIV/AIDSinLesotho, combinedwith implementationconstraints faced inutilizingthe Global Fundaward, resultedina decisioninNovember2003 to rapidlypreparethe proposedprojectin order to avertthe riskthat the GlobalFundcouldsuspend its support. 7 The Bank's CAS for 2004-2006-currently being developed-hastwo overarchingobjectives; to achieve sustainablepoverty reduction andto improvethe country's competitivenessinorder to support employmentcreation. A basic principle behindthe design ofthe Bank's strategy is that there are sufficient resourcesthat would be made availableto Lesothoby donor partnersand through direct investmentsifsoundpolicies and with improved management are inplace. The achievemento fthe CAS objectives is dependent on success o fmulti-sector efforts to prevent and respondto the HIV/AIDSepidemic. The proposedproject fits well with the underlying principle o fthe CAS inthat it will focus on buildingcapacity, and will contribute to more effective mobilization o fresources for a multi-sector responseto the epidemic. B. PROJECT DESCRIPTION 1. Lendinginstrument Theproposed lendinginstrument is atechnical assistancegrant with a medium-termfocus (4 years) to finance services, training, and goods in support o f implementation o fHIV/AIDS interventions usingGFATMfinancial resources. The focus will be on institutional capacity development and technical support for implementation. Implementation capacity inthe context o fthis project is definedto encompassbroader institutionalcapacity interms o f havingadequate systems andprocedures, as well as sufficient competent and committed human and physical resourcesto implementproposed activities. 2. Projectdevelopmentobjective and key indicators Thistechnical assistanceproiect aims to increasethe capacity o f government andnon- governmental institutions responsible for the national responseto HIV and AIDS to utilize and assessthe impact o f funds received for HIV/AIDS. LAPCA (or its successor-as it is expected that LAPCA will be replaced by -or transformed into -the new Secretariatfor the National AIDS Commission)will be enabled to coordinate, monitor and evaluate the national responseto HIV/AIDSand fulfill its role as sub-recipient o f GFATMresourcesfor public sector and civil society implementation. The MOHSW will be better able to provide access to quality care andtreatment to those infected by HIV and AIDS and hlfillits role as sub-recipient ofthe GFATMresources. Other government agenciesand civil society institutions will be more effectively engaged inpreventing the transmission o fHIV, caring for individuals and families affected by HIV and AIDS, and mitigating the impact o fAIDS on the country. Key Indicators o f success will be: 1, Percento fthe GFATMgrant disbursedby the end ofthe Project. 2. Percent o f the GFATMgrant disbursed through civil society organizations. 3. Percent o fHIV and AIDS sub-projects have been implemented ina satisfactory manner. 4. That Annual Reports on all key HIV and AIDS program indicators are produced and disseminated. 3. Projectcomponents The objective o fthe national HIV/AIDSprogram inLesotho is to control the spreadof HIV/AIDSand mitigate its impact on vulnerable groups, individuals, families, communities and the nation as whole. The GFATMsupport to Lesotho i s aimed at supporting the scaling up o finterventions for prevention, care, treatment and impact mitigation, includingthe expansion o ftraining and education, provision o fbasic care to those infected and affected by 8 the epidemic, home basedcare, community mobilization, andpromotingcivil society and public-private partnerships inthe fight against HIV/AIDS. The first two years o fGFATM support would provide US$12 million grantsto the principal recipients and sub-recipients for implementation. Disbursementso fthe grant will be basedon satisfactory performance in implementation. The proposedproject will provide targeted supportto enablethe recipient and implementing agenciesto effectively receive, manage and assess the impact these funds. ComponentI:Supportto the Ministry of FinanceandDevelopmentPlanning(MFDP). This component will supportthe MFDP to dischargeits fiduciary andprogram management responsibilities as principalrecipient o fthe HIV/AIDS and tuberculosis grants from the GFATM. Theproject will finance technical assistanceto strengthenthe capacity ofthe Coordination Office inthe Ministry so that itperforms its oversight role under the GFATM grant agreement. The Ministry will be supported to fulfill its accountability function with regardsto the money disbursed to the sub-recipients. Specifically, longterm technical assistance will be contracted bythe project to coordinate between the principal recipient and its sub-recipients and ensure timely submissions o fannual work programs, approval o fthose work programs by the Country Coordinating Mechanism, facilitate disbursement o ffunds to the sub-recipients' account, ensure adequacyofthe financial controls and audits and to ensure timely reporting on the agreed monitoring and evaluation indicators to the GFATM. Component11:Supportto the Ministry of Health and SocialWelfare (MOHSW). The projectwill support MOHSWto fulfill its role as a sub-recipient o fthe GFATMresources for implementation o fHIV/AIDS and Tuberculosis interventions inthe health sector. The proposed project's support will involve two sub-components: a. Assistance to the central MOHSW to enable itto deliver on its responsibilities through: (i)technical assistanceto establish the new HIV/AIDS Directorate, (ii) provision o fequipment andtraining to the MonitoringandEvaluationUnit, (iii) technical assistanceto the Procurement Unit, (iv) strengtheningo fthe Project Accounting Unit (PAU) with the provision o fadditional accounting staff and computers, and (v) support for leadership training to enhancethe management capacity withinthe Ministryat all levels. b. Enablingthe NationalDrugs and SuppliesOrganization (NDSO) to fulfill its role for procuringand distributing health sector goods. The project would support: (a) mediumterm technical assistanceto enableNDSO to conduct procurements using international competitive bidding, (b) support to strengthen drug inventory managementand security, (c) expansion o fwarehousing capability o fNDSO, and (d) support the creation o fa strong logistics system for laboratory services. Component111: Supportto Secretariatof the NationalAIDS Program. The projectwill finance the following: (a) engagement o f a firm to generate and manageproposals submitted for funding through LAPCA, strengthen the District AIDS Coordinators and the District AIDS Task Forces through regular training activities, monitor implementation bythe civil society, private and public sector grant-recipients and ensure that appropriate fiduciary safeguardsand procedures are inplace without constraining implementation; (b) provide assistanceto develop community basedmonitoring and evaluation capacity for implementers at the district and sub-district levels; and (c) provide assistanceto public sector line ministries 9 to develop fundable proposals for mainstreamingHIV/AIDSand support their implementation. ComponentIV: Supportfor civilsociety and privatesector capacitydevelopment. This component will support capacity buildingto enable civil society and faith based organizations, traditional institutions and communities to develop viable proposals, implementsuch proposalsand fulfill the reportingrequirementsfor disbursements under the GFATM agreement. The formal and informalprivate sector would also be supportedto increase their capacity to implementHIV/AIDSactivities with resourcesprovidedthrough the national program. Specific activities for financing under this component will include: (a) assistanceto enable improved coordination o fcivil society activities at the national level through dedicated NGO and private sector focal persons located inLAPCA and (b) contracting a civil society consortium that has substantial grass-roots involvement to work with mediumand small NGOs and CBOs indeveloping proposals and inimplementation. 4. Lessonslearnedand reflectedinthe projectdesign The project buildsuponBankexperience supportingHIV/AIDS in Lesotho. Underthe existing Health Sector Reform Project (HSRP), approved inJune 2000, the Bank has worked with the MOHSW and LAPCA to make grants available to NGOsto undertakeHIV/AIDS projects. The Bank, more than any other partner, is aware o fthe additional capacities requiredto enableLAPCA to better performthis function (as is envisioned under the GFATM program), and to coordinate informationat the national level. The project has identifiedneeds within civil society for additional skills inHIV/AIDS project design, proposal writing, performance monitoring and accounting. The HSRPhas also supported an assessment o fpharmaceutical management, the results o fwhich have informedthe proposed project . Implementationexperience from nationalAIDS programsinAfrica has shown that in those countries which have not madeprogress inreversingthe spreado fthe HIV/AIDS epidemic the main reasons included: (i) the nationalprograms were inadequately financed; (ii) wasinadequategovernmentcommitmentandleadership;(iii) there support from governments and the international community was too slow, especially for scaling up effective programs, often developed byNGOs; (iv) insufficient resources reached communities; and (v) programs were too narrowly focused on the health sector. With these lessons at hand, the project adopted the following approach: The project is steppinginto strengthenimplementation o fthe national program and thereby improve outcomes by ensuringthat the GFATMresources are effectively used and appropriately accounted for. The project hasnurtureda broad basedpartnership across several donor agencies and with civil society organizations and has contributed to the development o fconsensuson the way forward for Lesotho, which is to focus on implementation. The adoption of a flexible approach to financing NGOsand communities by the GFATM i s complemented by this project's effort to strengthen the implementation capacities o f the NGOs. While the health sector has a normative responsibility and a leadership role to play in scaling up access to care and treatment, the national program inLesotho was built onthe foundations o fmulti-sectorality and the project i s providing support to the health sector as well to all other sectors. 10 Focuson comparativestrengths ofvariouspartnerswithin the nationalprogram. The Bank is acknowledged to havecomparative strengthininstitutionaldevelopment and improvingcapacitiesfor fiduciary functions, suchas dealingwith procurementand financial management. Inaddition,the BankhasbeeninvolvedinHIV/AIDS inLesotho for almost two decadesand, as such, it has institutionalmemorythat may notbe availableamongother partners. Projectsinvolvingmultipleimplementingagencies needimplementationarrangementsthat ensure effectivecoordinationofthese agencies. Inthis regard, the projectmanagementand coordinationarrangementshavealreadybeendiscussedand agreedto ensurebetter understandingof issuesto be addressedbythe projectand ofthe Bank's policiesand procedures. The early agreement onprojectcomponents andcoordinationmechanismswill ensure that once the projectis approved, start-upactivitiescan be implementedwithout delay. 4. Alternatives consideredand reasonsfor rejection MAP Project: Inmorethan 24 African countriesand several others inthe Caribbeanand EuropeandCentralAsia, the Bankhas financedimplementationofHIV/AIDS programs. In the Africa regioninparticular,allthe countriessupportedbythe MAPSemploya similar model:mostlygrant financingfor directimplementationofmulti-sectorresponse. Inthe Lesothocontext, additionalfunds for implementationare notthe priority, ratherwhat is requiredis implementationsupportto facilitatethe use ofthe GFATMresources. If additionalgaps remain, the BankcouldprovidetraditionalMAPfunding. Learning and Innovation Loan: Learningand InnovationLoans are meantto test innovative approaches from which lessonscan be drawn. Inthe case ofthe LesothoNationalAIDS Program, the issue isnotthat ofnotknowingwhat to do, butratherthat ofsupportinga processof learningby doingusingthe GFATMresources. Inaddition, a LILwould not necessarily providethe flexibility to financethe TA requiredfor implementation. C. IMPLEMENTATION 1. Partnershiparrangements As the projectis intendedto support the implementationofGFATM, projectpreparationand projectimplementationhave beenclosely coordinatedwith the PortfolioManager ofthe GFATM, members ofthe CountryCoordinatingMechanism(CCM) andthe Local Fund Agent (LFA), PricewaterhouseCoopers (PWC). The Bank's supervisionofthe TA Project will support supervisionofthe GFATMprograminLesotho. As the GFATMhas no capacityto superviseor provideimplementationsupport, the GlobalFundandthe Bankhave beenexploringways to collaborate;the TA Projectis viewedas a potentialmodelfor this partnership. Inaddition, there is extensivecollaborationacross the various externalpartnersproviding supportto HIV/AIDS inLesotho. The pre-appraisalmissionwas ajoint missionundertaken together with UNDP, WHO, UNICEF,GFATM, the DevelopmentCooperationIreland (DCI), andthe UK Departmentfor InternationalDevelopment(DffD). This missiondefined the projectscope and content, andpartnerscontinuedto support preparation-through contributingto the draft Terms ofReference. DffDhas supportedthe institutionalcapacity assessment ofLAPCA, andDCI-together with WHO-will support the institutional 11 capacityassessment ofthe HIV/AIDSunit ofthe MOHSW. These analyseswill informthe terms o freference ofthe technicalassistanceto beprovidedunder the project. The projectteam hasalsoworkedwiththe USEmbassyandthe US-financedPolicyProject (which supports localNGOsworking on HIV/AIDS), as well as the manyNGOsrepresented throughthe UNAIDSExpendedTheme Groupandthe CCM. The activitiesto be financed complement other inputsbythe US, DCIandthe AfricanDevelopmentBank(AfDB), which i s financing a Procurement Managerwho will also support procurement under this project andunderthe GFATMitself. Their support to developingthe capacityofthe Social Welfare arm o fthe MOHSW is also complementary. DCIwill finance the pendingDHS (DemographicandHealthSurvey) which will includean HIV/AIDSmodule. 2. Institutionaland implementationarrangements The proposedTA projectis intendedto facilitate and supportthe managementand implementationrequirementsofthe GFATM. Therefore, it is importantto explicitly recognizethe institutionaland implementationarrangements for the GFATMitself(as described inAnnex 4). The project-specificmanagementand implementationrequirements for the proposedTA projectshould add limitedadditionaldemands andwill employ existing structures and capacities withinthe PrincipleRecipientandtwo sub-recipients. The implementingagency for the TA projectwill bethe GFATMCoordinationOfficewithin the MFDPDebtManagement Office. Itwill be responsiblefor overseeingproject implementationandmonitoring. However,as with the implementationofthe GFATM, the ProjectAccountingUnit(PAU) -which was established withinthe MOHSWto manage funds o fmultipleexternalfinanciersunder the Health Sector ReformProgram-will manage disbursementsoffunds against expenditures, account for, and submitFinancialManagement Reports(FMRs) to draw downagainst the IDA Grant; andthe procurementofcontractual services and goods underthe proposedTA Projectwill be managedby the ProcurementUnit o fthe MOHSW. As described above, recipientsofthe technicalassistance will be (i) the MFDPGFATM CoordinationOffice, (ii)LAPCAand its local arm, the DistrictAIDS Task Forces(DATFs); (iii)theMOHSWHIV/AIDSDirectorate,theM&EUnit,ProjectAccountingUnitandthe Procurement Unit,as well as the NDSOandNationalPublicHealthLaboratory; (iv) other government ministriesandagencies; and (v) NGOs, CBOs andprivatesector entities throughoutthe country. Technicalassistance will be contractedto firms and individuals, except inthe caseofcivil society, where proposalswill be sought from a consortiumoflarge experienced NGOs andumbrellaorganizationsto facilitate supportto implementingagencies within civil society. 3. Monitoringand evaluationof outcomes/results IDA and GFATMbothplacehighpriority on monitoringand evaluation(M&E). M&E requirementsfor assessingthe outcomeand resultsofthe proposedTA projectitselfwill be limited, butas the projectwill providetechnicalassistance to develop and strengthen systems to generate early andregularinformationonthe nationalHIV/AIDSprogram's outputsand impact, as well as epidemictrends, measuresofsuccess will relate to howwell the government is able to assess the impactofthe nationalprogram. Comprehensive monitoring andevaluationsystems shouldincludesurveillance, epidemiologicresearch, financial management, andprojectmanagement components. The proposedprojectwill further 12 develop national indicators, support improvement inthe quality assuranceo fdata collection and the design o fappropriate survey tools, as well as strengthenstaff skills with respectto M&Esystems overall, their management,anduse inenabling continual improvements in programs. A Demographic and Health Survey (DHS)with an HIV/AIDSmodule is under preparation (with financial support from DCI). Itwill produce data on knowledge and behavior, as well as sero-prevalence for 2004, providing important baseline data for the GFATMprogram. 4. Sustainability The project focuses on buildingthe capacity o fgovernment institutions, as well as the capacity o fcivil society. Key project inputsfocus on definingthe terms o freference for and establishing both the NationalAIDS Commission Secretariat, the Directorate for HIV/AIDS withinthe MOHSW andthe GFATMUnitwithinthe MFDP. These new structureswithin the public sector for respondingto HIV/AIDSwill be enabledto better absorb and manage significant external resources, as well as to demonstrateresults. Inturn, this will enable Lesotho to better attract additional external resources after project completion. Also, within the public sector, project inputswill strengthen core functions related to the procurement o f goods and services, and the specialized procurement, storage, distributionand management o fpharmaceuticals and medical supplies-an important contribution to the health sector as a whole. Evenwhere the project will finance contractors to implement activities on behalf o f the GOL, it is expectedto buildexperienceinout-sourcing, and help define away ofdoing business that will extend well beyond the life o fthe project. The GOL recognizes that an expanded andmore effective -engagement o fcivil society -- organizations (NGOs, industry, small businesses, churches, community-based organizations), i s requiredto bringto scale efforts to prevent the transmission o fHIV, to provide care for families living with HIV/AIDS, and to mitigate the impact o fthe diseaseon households, communities, society and the economy. The GFATMprogram will, to a great extent, be implementedby civil society. The project will contribute to developing the ability o fthese many actors to make a contribution -defining their comparative advantage, ensuring they employ tested interventions, buildingtheir capacity to design, implement, monitor and evaluate effective projects, as well as to manageand account for funds received. These inputswill contribute towards sustainedcollaboration betweenthe public andprivate sector which will have a wider impact beyond HIV/AIDS. 5. Critical risks and possiblecontroversial aspects There are no anticipated controversial aspectsto the project. r Risks I RiskMitigationMeasures o project developmentobjective ernal politics undermine IPreparationhas I engagedwide range of stakeholders Nodest decisionsonhowthe GFATMwill andthe approachutilizes existing institutions. be managed. Potentialconflict among partners. The areas targeted for capacity The projectcovers procurement, financial Modest support are not sufficientto management, M&E, logisticsmanagementandthe support GFATMimplementation. engagementofcivil society. The projectbuildsupon experience underthe existingHealthSector Reform 13 SFATM implementation. draftedprior to Negotiations. AfDB has financeda ProcurementManager for unit. Qualified firms do notrespondto Work hasbeenbundledinto largecontracts, so as to Modest the RFPs. attractexperiencedfirms. Consultancieswill be advertisedinDevelopmentBusiness as well as throughsector-specificavenues. Overall RiskRating Modest 6. Loadcredit conditions and covenants Condition o fEffectiveness 0 Appoint a Head (Le., the ChiefExecutive) for LAPCA Legal Covenants 0 Remain eligible for disbursementsfrom the GFATM. 0 Maintainthe Head o fLAPCA (or its replacement as Secretariatto the NAC). 0 Ensurethat LAPCA, the Global FundCoordination Team, the HIV/AIDS Directorate, the PAU, and the MOHSW Procurement Unit are (i) assignedfunctions and responsibilities, and (ii)staffed at a level requiredto implement the project. 0 Maintainpolicies and procedures adequateto enable it to monitor and evaluate the key indicators. FinancialCovenants 0 The Government will cause the project to have its records, accountsand financial statementsaudited each year for boththe Special Account and Statements o f Expenditures,commencing with the accounts for the year ending March2005. 0 The PAUwill submitquarterly FinancialManagement Reports notlaterthan45 days after the end of eachquarter. 14 D. APPRAISAL SUMMARY 1. Economicandfinancialanalyses The proposed project will provide technical assistanceandbuildthe institutional capacity requiredfor successfulimplementation ofHIV/AIDSprograms inLesotho. The nature ofthe anticipated financing should have no fiscal impact andwill not increaseoperating expenditures. The project should improve the efficiency o fpublic expenditure by strengthening implementation capacity, by improvingprocurement procedures inorder to obtain better value for money, and by outsourcing implementation to civil society. The project is expectedto enable Lesotho to mobilize additional financing for HIV/AIDS. GFATMfinancing isnot subject to economic and financial analysis. The engagementofthe Bank through the proposedproject should facilitate a more robust consideration o fthe existingGFATMand other potential financing. Particular concernsrate to sustainability o f financing for treatment. The proposedproject is intendedto helpensure sustainedfinancing (through improved utilization o fresources), and TA financed under the project will help ensure that the national program employs cost-effective standards. 2. Technical Lesotho ranks among the countries with the highestHIV/AIDS prevalence globally. It is also a poor country compared to its immediate neighbors: South Africa, Botswana, Swaziland and Namibia. Not only doesthe country face enormous economic challenges, it also is affected bythe ease with which human capital originating from within its borders can easily migrate to the neighboring countries. As a result, many highlyqualified Basotho depart public sector institutions. The Bank's experience in supporting health sector reforms has shown that institutional capacity, definedas adequacy o f systems, procedures and individual capabilities, i s a significant constraint to implementation. Effectively responding to HIV/AIDSin Lesotho will require improved institutional capacity, not only financial resources. By far the largest source offinancing to the Lesotho AIDS program isthe GFATM, which approved $34 million to Lesotho for HIV/AIDS (US$29million) andtuberculosis (US$5 million) over five years from 2002. So far, despite the initial disbursement o fthe funds from the GFATM, very little has been accomplished interms o f implementation. Increasingly, it i s becoming obvious that Lesotho stands the risk o f losing part, ifnot all, o fthe approved funds unless implementation picks up. What is crucial withthe GFATMis for there to be proper systems to ensure that funds disbursed are usedfor intended activities and that results are monitored and reported as agreed. The rationale for this project is to provide implementation support for HIV/AIDS, complementary to other partners that are supporting the Lesotho national response. It is clear that additional financial resourcesfor implementation is not the answer, that implementation capacity for HIV/AIDSis a cross-cutting limiting factor within the public sector, and that additional efforts are required to mobilize latent capacity in civil society within Lesotho and from other areas inthe region. Such an approach i s inconformity with international standardso fcomplementary partnership for development and is appropriate to the immediate needs o fthe Government o f Lesotho. 3. Fiduciary Both the MFDP and MOHSW will have accounting responsibility for the components falling under their respective ministries. However, as the Project Accounting Unit(PAU) resides 15 withinthe MOHSW, itwill have responsibility for consolidating the performance ofall components for purposes o f giving an overall project picture, when required. At the MOHSW, the project will make use o fthe existingPAU, which is the accounting unit for the ongoing Health Sector ReformProject (HSRP) and has carried out that responsibility satisfactorily to date. The PAUFinance Manager will therefore have overall financial managementresponsibility for the project. One Special Account will be opened andwill be managedby the PAU. The GFATMallows executing agenciesto utilizetheir existingsystems inmanaging any funds provided, therefore the use ofthe PAUwill not contravenethe financier's terms and conditions. The PAUwill however requireadditional accounting staffto enable it to cope with the increasedwork load emanating from taking on the addedresponsibility for the GFATM. Inthis regard, a `no objection' for the terms o freference ofaproposed "Global Fund' accountant at the PAUhas alreadybeen issued bythe Bank. The PAUhas also decided to strengthenits financial management systems, including seekingto upgrade its present Microsoft Access basedaccounting system, probably replacing it with a more conventional accounting software. This would better equip the unitto meet the challenges that lie ahead, such as the compulsory production o fFinancial Monitoring Reports (FMRs) for the TA project. Lesotho government regulations requires the Auditor General (AG) o f Lesotho to bethe I auditor o fall government revenuesand expenditure. Thus the AG will be the statutory auditor o fthe project, although the regulations permit her (the AG) to sub-contract some o f the work where in it is deemedprudentto do so. Inthat event, the terms and conditions for the hiringofthe `other' auditor haveto be satisfactory to the Bank. Procurement will be performed bythe Procurement Unit o fthe MOHSW. Currently, this unit is responsible for IDA,DCIandAfDB-financed procurement under the existing Health Sector Reform Program. It has two Procurement Officers, who have benefited from long- term technical assistance and short-term training inIDA procurement procedures. It is headedby a Procurement Manager, who has recently joined the unit from an AfDB-financed agriculture project. Ithas the minimum systems and procedures requiredto implementthe proposed project, although it will require additional capacity to respond to increaseddemands underthe GFATM. 4. Social The project is expectedto have a significant, positive social impact through (i) building capacity both within the Government and civil society to better target and serve vulnerable groups; (ii)strengthening capacity withinthe Government to collaborate with civil society; and (iii)buildingcapacity within civil society and the private sector to prepare and implement proposals and otherwise participate inthe scaling-up o fthe national responseto HIV/AIDS. The project will build capacity to better serve and target vulnerable groups inmultipleways. Itwill provide support to MOHSW's Department ofSocial Welfare to implement interventions targeted towards orphans and vulnerable children, consistent with the Social Welfare Policy. The Department will also be supported to strengthen its capacity to collaborate with NGOs and optimally implement interventions including the Social Welfare Policy for orphans and vulnerable children. Finally, through the participationo fcivil society 16 described below, it will enhancethese organizations' capacity to better serve vulnerable populations. The Civil Society andPrivate Sector Capacity Development component ofthe project will support capacity for facilitating civil society and faith-based organization -including umbrella organizations -and communities to develop and implementproposals to contribute to the scaling up o fthe national response. This component will support the formal and informalprivate sectorto increasetheir capacity to implementHIV/AIDSactivities with resourcesprovidedthrough the national program. This capacity will be immediately applied as GFATMsupport through LAPCA is to be channeledto civil society, as well as private and public sector entities. Support to LAPCA will include strengtheningthe District AIDS Task Forcesto perform their appraisal and coordination hnction for community proposals, and the strengthenedcapacity inmonitoring & evaluation will ensurethat feedback from civil society, as well as other stakeholders, continues to be reflected inthe priorities o fthe national program. 5. Environment The project is a capacity andtechnical assistanceoperation and hasbeencategorized as Category C with regardsenvironmental impact. There will be no drugs, chemicals, reagents or similar commodities procured underthe project. The only works envisagedwill expand an existing warehouse on the grounds o fthe National Drug Supply Organization. 6. Safeguard policies Safeguard PoliciesTriggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [I [XI Natural Habitats (OPBP 4.04) [I [XI PestManagement (OP 4.09) 11 [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [I [XI InvoluntaryResettlement (OPBP 4.12) [I [XI Indigenous Peoples (OD 4.20, beingrevisedas OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o fDams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OPBP/GP 7.60)' [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI There are no Bank safeguardpolicies triggered bythe project. 7. Policy Exceptions and Readiness No policy exceptions are sought. Draft Terms o fReference have beenreviewed duringthe Appraisal mission. A Procurement Plan has also been reviewed and approved. The key Technical Assistance will be advertised and the recruitment process is scheduledto begin inadvance o fEffectiveness, withthe remaining primary recruitments taking place over the subsequent six months. * By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of theparties'claims on the disputed areas 17 Disbursementsmadeafter April 30, 2004 for consultantswill beeligible for retroactive financing. Annex 1: Countryand Sector or ProgramBackground LESOTHO: HIV and AIDS CapacityBuildingandTechnicalAssistance Project Lesotho is among the countries worst affected by the HIV/AIDSepidemic. HIV/AIDSis the leading cause o fmorbidity and mortality inthe country. With an estimated national population o f2.2 million and 330,000 of its adults estimated to be infected with HIV, the country is a facing an unprecedentednational disaster. Compared to neighboring countries like South Africa, Botswana, Namibia and Swaziland who all have similarly high HIV/AIDS prevalence, Lesotho has limited national financial and human resourcesto effectively tackle the epidemic, which threatensto further undermineits development. The first AIDS case was reported inLesotho in 1986. SincethenHIVprevalence rose dramatically from an initial adult prevalence o f4 percent in 1993 to 9.8 percent in 1998 and 31percent by 2002. Ina generalized epidemic such as that o fLesotho, urban-rural differentials inthe prevalence rates are diminished. Inaddition, traditional at-risk groups, such as commercial sex workers and their clients, truckers and migrant workers are no longer the only riskgroups. The epidemic hasbecomefirmly established inall segmentsofsociety, and the majority o fthose infected have no easily identifiable risk behavior. There are many reasons for the rapid spreado fHIV infection inthe country. Unprotected sex with multiplepartners is the most important contributor, especially among the young, but the underlyingreasonsare multi-faceted, includingsocio-cultural, behavioral, economic and possibly biological. Despite the highprevalence o fHIV/AIDS, there still exist stigma associatedwith the disease, and a large proportion o fthose infected are still indenial. With a long period from infectionto appearance o f symptomatic disease, those who are infected can transmit the infection to several others. Voluntary counseling and testing is still inadequate, and even where it exists, stigma may preventpeople from seekingthe tests. Social vulnerability o fyoung people and women, migrant workers returningfrom South African mines, andthe continued culture ofsilence, which does not speakagainst stigma and discrimination, continues the propagation o fthe epidemic. An estimated 27,000 children aged 0-14 years were infected with the HIV virus by 2002, the vast majority o fwhom contracted the virus through parent to child transmission. Inadequate attention to prevention o fmother to child transmission is responsible for these largely preventable child HIV infections. The impact ofthe epidemic hasbeensevereand may continue to worsen as those who are currently infected become illor die. Heavy burdenis placed bythe epidemic on families and communities who have to cope with caring for infected persons as well as shouldering their other responsibilities. The numbero f single and dual orphans inLesotho has risen to its highest level ever at around 90,000 children ages 0-15 years and will likely remainhighor increase inthe short term, to a large extent due to the HIV/AIDS epidemic. As more adults andparents die o fthe disease, increasing numbers o fchildren will become single or dual 18 orphans. The cohesive and communaltradition o fthe Basuto is beingeroded as families disintegrate and unbearableburden is placed on communities by the premature deathso f infected individuals. Negative effects attributable to the epidemic include decreased workforce productivity, increasedabsenteeism from work and school and spiraling poverty. Economic development is being hamperedas a result. With the help o f its multi-lateral and bi-lateral partners, the Government o fLesotho is now fully engaged inefforts to strengthen its national responseto the HIV/AIDS epidemic. In 2000, the Government ofLesotho adopted aNationalHIV/AIDSStrategic Plan andthe National AIDS Policy Framework, which were basedon multi-sector approachto the fight against HIV/AIDSand embracedengagementwith civil society and communities inthe fight against the epidemic. The Lesotho AIDS Program Coordinating Authority (LAPCA) was established in2001with a mandateto coordinate and monitor and evaluate implementation o fthe national response. Unfortunately LAPCA's ability to fulfill its mandatewas limitedby a multitudeo f factors, includingabsence o f a full complement o f staff, impromptu dismissal o f its Executive Directorthat made it almost leaderless for more than a year and an unclear legal status. InJuly 2003, Lesotho hostedanextraordinary meeting of SADC on HIV/AIDS, andrecent approval by the Cabinet o f an UNDP-led document titled "Scaling up the fight against the HIV/AIDSepidemic inLesotho" reflects increasedhigh-levelattention needs to be followed upby concrete action. The Cabinet's approval ofthe document was accompaniedby a decision to create aNational AIDS Commission that will overseethe national responseto HIV/AIDS inLesotho. The Commission i s envisioned to comprise appointed Commissioner and four other Commissioners electedby their constituents (Youth, Women, Church Groups and People Livingwith HIV/AIDS) and with an improvedLAPCA functioning as Secretariat to the Commission. Despite the decision bythe Government to createthe Commission, it appears that the process may be prolonged as the consultations that precededthe Government's decision are now appearingto be less than adequate. With the approval o fthe GFATMresources and first disbursements to Lesotho, the challenge now has shifted from advocacy and resourcemobilization to one o f implementation and delivery on the ground. The Principal Recipient o fthe GFATMresourcesis the Ministry of Finance, and the two sub-recipients are LAPCA andthe Ministryo fHealth and Social Welfare (MOHSW). It is clear that effective implementation would require substantial capacity mobilization and development o f innovative ways to appropriately channel the funds, carry out interventions and monitor the outputs, outcomes and impacts to ensure continued flow o f funds from the GFATM. Despite two decades o f experience within the health sector inaddressing HIV/AIDS and the essentialrole that it must play in settingquality standards and delivering services, becauseo f dissatisfaction with the MOHSW's contribution, it has been more recently sidelinedinthe national responseto HIV/AIDS. Implementation o fthe GFATMresourceswill dependupon the finalization and dissemination ofnational guidelines and standardsrelatedto prevention, care and treatment, and informed projections o fpharmaceutical requirementsand functioning logistics system (Le., the selection, budgeting, procurement and distribution o fdrugs, laboratory and medical supplies). Strengthening health sector is fundamental to an expanded responseto HIV/AIDS and would have effects on the performance o fthe broader health .system. Improvements infinancial managementandprocurement as well as strengtheningof 19 health workers capabilities to deliver health services, especially inthe rural areas, would have immense benefit for the health system overall. The current HIV/AIDS Unit ofthe M O H S W resides under the Division of Disease Control, which is under the Directorate o f Primary Health Care, which reports to the Director General ofHealth Services, who reports to the Principal Secretary. Implications are that (i) the hierarchy inhibits the agile response required of an AIDS unit ina highprevalence country; and (ii)no one on the Senior Management Team of the M O H S W is directly accountable for HIV/AIDS. 20 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies LESOTHO: HIV andAIDS CapacityBuildingandTechnicalAssistance Project LatestSupervision Project (PSR) Ratings (Bank-finance projectsonly) Implementation Development Bank-financed:Sector Issue Progress (IP) Objective (DO) dealth, Nutrition & Population- built Health Sector Reform Program S U irocurement &financial management 3-Phase APL wpport, assessedpharmaceutical (Approved June 2000, PhaseI ogistics management capacity, built closes). M&E capacity. vlultisectoral HIVIAIDS - initiated Component within above project. :ontractingto civil society to implement WYAIDSprojects,focused on role of LAPCA. 3ducation -addressesHW/AIDS in Education Sector Development S u S TducationSector. APL Phase I1(Effective 9/15/2003). SocialProtection-piloted approachesto Community Development U ?ommunityParticipation. Support Project (Closed 913Of20031. Other developmentagencies 3FATM to FightAIDS, TB andMalaria. HIVIAIDS and TB Project. Ievelopment CooperationIreland-will rupport DHS,supjorts MOHSW YIV/AIDSunit. 4frican Development Bank -supports HealthVI. $ocial Weyarecapacity of theMOHSW, mdprocurement capacity within MOHSW. 3uropeanUnion-$name TA on M&E TA Project. md on decentralization in the MOHSW. JSAID -supportsdevelopmentof NGOs The Policy Project. uorking on health andAIDS. JSAID -social marketinq ofcondoms. PoDulation Service International. 21 Annex 3: ResultsFrameworkandMonitoring LESOTHO:HIV andAIDS CapacityBuildingand TechnicalAssistance Project ResultsFramework PDO utcomeIn To increasethe capacity o f Percentagedisbursement o f The pace o f disbursement government and non- GFATM resources will indicate whether governmental institutions (monitored each quarter and lbsorptive capacity has responsiblefor the national cumulatively). increased. IfGFATM responseto HIV/AIDSto jisbursementsdo not utilize and assessthe impact Percentageand amount o f increase, thenthe project a f funds received for financing disbursed through design will needto be HIV/AIDS. civil society (CBOs, NGOs, assessed. The share o f FBOs and the private sector disbursementsto civil society for HIV/AIDS). will measurethe levelo f engagement and increased capacity o fcivil society. Percentageo fprojects Implementation o fthe financed under the GFATM projects receiving support which arejudged to be underthe Lesotho GFATM implementedsatisfactorily. will be monitored by LAPCA (with TA procured under the project). The percent that are being implementedsatisfactorily should increaseifthis TA project is successful at improving capacity. Annual reports on all key The ability to assessthe HIV/AIDSprogram impact o f fund though indicators are produced and monitoring program disseminated (and usedto indicators will be critical to inform allocation decisions). accessingadditional resourcesand to ensuring that strategies have the desiredeffect on behavior, incidence, diagnosis and care. 22 ResultsIndicators Use of ResultsMonitoring ComponentOne: Timely submission of Reportproductionwill be Support to Ministry of quarterlyreportsto the CCM criticalto obtaining Finance andDevelopment: andGFATM. additionalfunds andwill Strengthenedcapacityto monitorthe impactofTA on fulfill itsprogramoversight M&E. and fiduciary responsibility inthe managementof The percent o festablished Ifthepostsinthe new GFATMresources. postsfilled inthe MOHSW HIV/AIDSdirectorateare HIV/AIDSDirectorate. not filled, then it is unlikely ComponentTwo: that the MOHSW can fulfill MOHSFK Increasedcapacity itsrolewithin the GFATM. to implementanexpanded responseto HIV/AIDS inthe The percentageo ffacilities Ifthe newMOHSW healthand social welfare which are familiar withthe Directorateis properly sectors. nationalguidelinesonVCT, functioning, guidelinesand ARVs, Care & Treatment, protocolsshouldbe ComponentThree: andOrphans. completed, and service StrengthenedSeeretariat of delivery sites shouldbe the National AIDS Program familiar with them. Ifthis is (LAPCA): Increased notthe case, thenadditional capacityto coordinatethe TA maybe requiredfor the HIV/AIDS. nationalresponseto HIV/AIDSUnit and/or disseminationwork should be outsourced. Component Four: Civil Society & Private Sector: NumberofVCT sites with Ifthe impactofinputsinto Increasedcapacityto requiredtest kits, counselors improvinglogisticsand develop grant proposals, and following national procurementdo notresult in implementsub-projects, and protocols. improvedavailabilityof to providetimely and supplies (such as at VCT accurate activity reports. Institutionalizationof sites) or adoptionofICB InternationalCompetitive thenthe TA for NDSO& Bidding(ICB) for large labswill needto procurementofmedical reconsidered. goods by the public health sector. The percentage ofestablished Will indicatecommitmentby posts filled inLAPCA (or its GOLto strengthencapacity successor Secretariat). of LAPCA. 23 rs The qualityofBehavior The qualityo fthe BCC Change Communication initiativeswill informthe strategies within the BCC TA approaches and MOHSW, LAPCAand duration. NGOs, as assessed independently. Percentageofproposals The qualityofproposals submittedto LAPCA for submittedto LAPCA will financingeachquarter which indicatethe impactofefforts are successful. to buildNGOcapacity. 24 3 ! 4 a aE E 6 4 Y cl x h d 4 3 3 (d 1 a2 a f .I m sm 0 d I 3 * 3 m 0 z 5: E 3 0 c Y x x 2 e d MCI cd cd dc 5 3CI v) 0 IA cd m IA b g E: 3 cd W E: 0 0 0 0 Annex 4: DetailedProjectDescription LESOTHO: HIV andAIDS CapacityBuildingandTechnicalAssistance Project Thisproject is designedto complement the use ofGFATMapproved resourcesinLesotho through provision o ftechnical assistanceand capacity buildingactivities. The project is supporting the implementation o fthe national AIDS program to control the spreado fHIV/AIDS and mitigate its impact on vulnerable groups, individuals, families, communities and the nation as whole. The GFATMsupport to Lesotho is aimed at supporting the scaling up o fspecific interventions for preventions, care, treatment and impact mitigation, including the expansion o ftraining and education, provision o fbasic care to those infected and affected by the epidemic, home basedcare, community mobilization, and promotingcivil society and public-private partnerships inthe fight against HIV/AIDS. Infurtherance o fits objective, the project will have the following components: Component I:Support to the Ministryo f Finance and Development Planning;(MFDP) MFDP is the principal recipient o fthe GFATMresources on behalf o fthe Government o fLesotho, According to the GFATM assessment, MFDP needs its capacity to be strengthened interms o fstaff, equipment and ability to provide support and overall leadership, oversight and program management responsibility for all sub-recipients and participating stakeholders. The MFDP is not positioned to provide leadership responsibility for implementation and has delegatedsuch responsibilities to the sub-recipients (see below). Component Io fthe project will focus on supporting the MFDPto discharge it's fiduciary and program managementresponsibilities. The project will specifically finance technical assistanceto strengthen the capacity o fthe Coordination Ofice inthe MFDP so that it performs its oversight role underthe GFATMgrant agreement. The MFDPwillbe supportedto fulfill its accountability function with regardsto the money disbursedto the sub-recipients through the same technical assistanceand byproviding it with computers and equipment. The technical assistancewill assist the MFDP incoordinating with the subArecipientsand ensuring annual work programs are submitted on time and approved bythe Country Coordinating Mechanism, facilitating disbursementoffundsto the sub-recipients' accounts, and ensuring adequacy o fthe financial controls and audits andto ensure timely reporting onthe agreedmonitoring and evaluation indicators to the GFATM. Component 11: Support to the Ministryo fHealth and Social Welfare (MOHSW) MOHSW is a sub-recipient o fthe GFATM resources for both HIV/AIDS and Tuberculosis. In addition, the Ministryhas a normative role inhealth sector service delivery in general and a technical leadership role to play with regardsto HIV/AIDS.Recent efforts within the Ministryhave rekindled hope that it would play its part inscaling up the HIV/AIDSresponse. Component I1o fthe project will provide support to the MOHSWthrough two sub-components: Sub-component A will finance: (i) technical assistanceto the new HIV/AIDSDirectorate, (ii) provision o fequipment and training to the Monitoringand Evaluation Unit, (iii)technical assistance to the Procurement Unit, (iv) strengthening o fthe Project Accounting Unit (PAU) with the provision o fadditional accounting staff and computers, and (v) support for leadership training to enhancethe managementcapacity within the Ministryat all levels. 28 Sub-component B will focus on enabling the NationalDrugsand Supplies Organization (NDSO) to fulfill its role for procuringand distributing health sector goods. The project will finance: (i) expansion o f existing warehousing capability o fNDSO, (ii)support to strengthen drug inventory managementsystem and security at all hospitals, (iii)mediumterm technical assistanceto enable NDSO to conduct health sectorprocurements usinginternational competitive bidding, and (iv) support for the creation o fa strong logistics system for laboratory services. Component 111: Support to the Secretariato fthe NationalHIV/AIDSProgram - Lesotho AIDS Program Coordinating Authority (LAPCA) is a sub-recipient o fthe GFATM for , HIV/AIDSactivities on behalfofpublic sector andcivil society institutions. Additionally, LAPCA's mandate for coordinating, monitoring and evaluatingthe implementation o fthe National HIV/AIDS Program is crucial to the successful implementation o factivities usingGFATMand other resources. The project's support to LAPCA will include strengtheningthe District AIDS Task Forcesto perform their appraisal and coordination function for community proposals as LAPCA's representative institutions. Theproject will specifically finance the following: (i)engagementofa firm to generate andmanage proposals submitted for funding through LAPCA, strengthenthe District AIDS Coordinators and the District AIDS Task Forces through regular training activities, monitor implementation by the.civil society, private and public sector grant-recipients and ensurethat appropriate fiduciary safeguards and procedures are inplace without constraining implementation, (ii) provide assistanceto develop community basedmonitoring and evaluation capacity for implementersat the district and sub-district levels, and (iii)provide assistanceto public sector line ministriesto develop fundable proposals for mainstreaming HIV/AIDS and support their implementation. Component IV: Support for Civil Societv and Private Sector Capacity Development for HIV/AIDS: Lesotho has latent capacity outside the public sector which should be mobilized, further developed and harnessedinthe fight against HIV/AIDS.NGOs, FBOs, CBOs and private sector are potential implementers o factivities financed bythe GFATM. Consultations heldwith the civil society and private sector duringprojectpreparation has revealed specific areas o fassistancethat this project can complement other partners, including the GFATM. The project will support institutionalcapacity for facilitating umbrellacivil society and faith based organizations, traditional institutions and communities to develop proposals, implement such proposals and fulfill the reporting requirements for disbursementsunder the GFATMagreement. Formaland informal private sector would also be supported to increasetheir capacity to implement HIV/AIDSactivities with resourcesprovidedthrough the national program. Specific activities for financing under this component will include: (a) assistanceto enable improvedcoordination o fcivil society activities at the national levelthrough dedicated NGO and Private Sector focal persons located in LAPCA and (b) contracting a civil society consortium that has substantial grass-roots involvement to work with mediumand small community basedNGOs indeveloping proposals and in implementation. 29 Annex 5: ProjectCosts LESOTHO: HJY and AIDS Capacity Buildingand TechnicalAssistance Project ProjectCost By Componentand/or Activity Local Foreign Total US $million U S $million US $million. MinistryofFinance& DevelopmentPlanning 0.01 0.36 0.37 Ministry ofHealth and SocialWelfare 0.46 1.68 2.14 LesothoAIDS Preventionand Control Authority 0.44 0.94 1.38 Civil Society and Private Sector Capacity 0.79 0.38 1.16 Development Total Baseline Cost Total ProjectCosts' 1.70 3.35 5.05 30 Annex 6: ImplementationArrangements LESOTHO: HJY and AIDS CapacityBuildingand TechnicalAssistance Project As the project will mainly finance technical assistance, the implementation arrangementsare not complex. Descriptions o fhow the GFATMfinancing will be managedand implementedappear under the project description annex. The project will be managedbythe GFATMCoordination Team to be establishedwithin the Ministryo fFinance and Development Planning (MFDP), Debt Management Office. The team will be establishedprior to project initiation. Retroactive financing is intendedto support the hiringofconsultants to complement the MFDP staff, This office will receive support underthe project but will also be responsible for ensuringthe success o fproject implementation and for liaisingwith and reporting to the World Bank, as well as other partners. This office i s closely affiliated with the Country Coordinating Mechanism (the CCM) which represents the key stakeholdersand implementingagencies under the GFATM. Financialmanagement, disbursementand accounting will be the responsibility o fthe Project Accounting Unit (PAU) withinthe Department o fHealthPlanning and Statistics (HPSU) inthe Ministry o fHealth and Social Welfare (MOHSW). Procurement o f goods, services and works will be managedbythe Procurement Unitwithin the same Department. A special account will be establishedto be managedby the PAU, under authority o fthe MFDP. Under the project, both o f these units will receive technical assistance and institutional capacity to enablethem to also provide financial management, disbursement andprocurement servicesto the GFATM. Terms o fReference for the consultant servicesto be procured will be finalized and approved by various offices: MFDPfor support to its coordination office; MOHSW inthe case o fTA to its HIV/AIDSSecretariat, the support to the NationalDrug SupplyOrganization (NDSO), the support to the National Laboratory, support to its own M&EUnit, as well as TA to the PAUand the Procurement Unit.LAPCA and the MOHSWwill approve TORSfor the Behavior Change Communications (BCC) consultancy, M&Esupport to LAPCA, the contracted grant management, support to lineministriesandthe TOR for the NGO focal point. The CCM will approve the final TOR for the consultancy to strengthenthe engagement o fcivil society. The establishment o fthe MOHSWHIV/AIDSDirectorate and commitment to builduponthe existingcapacity o f LAPCA as the emerging Secretariat for the National AIDS Commission will be essential to effective project implementation. These offices are intendedto benefit from much o fthe technical assistance, and inthe case o fLAPCA/the NAC Secretariat, will be required to manage, oversee and support the implementation o ftechnical assistanceon M&Eand on grant management. Underthe HSRP, LAPCA received support for grant managementfrom Crown Agents, RSA. A similar arrangementwill apply underthe proposedproject. However, lessons learned suggest that the consultantsmust residewithin LAPCA inorder to operate efficiently andto transfer skills. Support on M&Eprovided to the MOHSW will benefitand be managedby the M&E Team under the HPSU. The consultancy on behavior change communication will reside under the new HIV/AIDS Directorate withinthe MOHSW, although it will also work with LAPCA/the N A C Secretariat. The long-term technical assistanceto the NDSO will reside within NDSO and liaise with the MOHSW PharmaceuticalsDepartment, the National Laboratory and the newHIV/AIDS Secretariat. 31 Project supervision will be critical to ensuring that the aims of the project - Le., facilitating the successful implementation o fthe GFATM-are achieved. Thus, although this is a small Technical Assistance Loan (TAL), supervision will be substantial, as it effectively serves as supervision o f implementation o fthe GFATM itself. 32 Annex 7: FinancialManagementandDisbursementArrangements LESOTHO: HIV and AIDS CapacityBuildingandTechnicalAssistance Project Financialmanapement CountryFinancialIssues A Country FinancialAccountability Assessment (CFAA) for Lesotho hasnot yet beencarried out (projected for FY05). Basedon country experience, however, it is known that the country is handicapped by a serious lack o fcapacity inthe areao f financial management. While there is a small but growing number o fqualifiedBasotho accountants, these have tendedto be attracted by richer rewards inneighboring South Africa, thereby perpetuatingthe problem. Bank assistedprojects have therefore traditionally relied on outside advisors (finance, procurement, and technical) to assist the projects intheir implementation efforts. Lesotho has also been inthe news recently, with cases o f foreign companies convicted o f fraud and corruption involving donor funds. The corruption situation is nowhere near rampant, but the high profile fraud and corruption trial that has recently been concluded involved a large Bank-assisted project inthe country. The area identifiedas most susceptible to corruption was procurement, but it does involve finances at the end o fthe day. To mitigate this, it is recommendedthat internal controls at the project be enhanced, and a regular procurement audit be made a formal requirement. Summary RiskAssessment Inherent Risk Country M Low financial management capacity in general. Mitigated by use o f advisors. ImplementingEntity N Experienced inproject management. Overall Inherent Risk N t o M ControlRisk ImplementingEntity N Internalcontrol framework for the PAUwell established. Adequately supported by up to date procedures I manuals. Banking system that has worked Funds I N for existing Bank supported projects inplace. Staffing N Enoughqualified staffhandling project financial matters at PAU. May need additional training on Bank procedures . 33 Accounting Policies and IN Upto datemanuals atthe PAU, Procedures I already customized for the Global Fundactivities. InternalAudit Nto M Newly establishedIA department intheAccountant General's office covering all ministries. Have startedworking on donor unit o f MOHSW. Ministryconsidering establishment o fown in-house unit. External Audit N Current audit outsourced to Ernst and Young on terms satisfactory to the Bank. Financial Reporting and N Adequate quarterly and annual Monitoring financial and other management reports produced bythe PAU. FMRsalready designedbutstill to be reviewed and finalized. Information Systems I M Present systems earmarked for ~ replacement. Overall Control Risk IN 1 Overall RiskAssessment: Low I 1Key: H=High S = Substantial M=Moderate N=Negligible or low NIA =Not Applicable Assessment of the FinancialManagementSystem Staffing of theAccounting Function The finance function at the PAUinthe MOHSW has 3 Accountants, under a qualified Finance Manager. All three accountantshave hadtraining on Bankprocedures, and an additional accountant will behiredto handle directly the issuesrelatingto the GFATM. Additional training on Bank procedureswill obviously be requiredto enhanceproficiency in accounting for the grant funds, for boththe existingstaff and the newperson to be recruited Internal Controlsincludingpoliciesand procedures The PAUhas an establishedaccounting proceduresmanual which hasbeencustomized to include the operations o fthe new project. This means that the project hastaken the necessary steps to ensure that it complies with the relevant Bank policies (OP/BP 10.02). The requirements include the needto establish internal controls and proper accounting procedures, which are documented inan Operational Manual. The Manual should include general administrative procedures, financial managementprocedures, staffing requirements, identificationo faccounting and auditing standardsto be adheredto by the project, project reporting and monitoring, procurement procedures, procedures for banking, and procedures for the management o fcash. 34 The basis ofaccountingisthe cashbasis, per GovernmentofLesotho regulations. RecordKeeping The currentrecordkeepindfilingsystem was found to be satisfactory. Particularattentionwill howeverneedto betaken inthe maintenanceandtimely updatingofthe FixedAssets Register. ContractsManagement is currentlybasedon a spreadsheet recorddetailingall contractsawarded, amountso fthe contracts, and existingunfulfilledcommitments. Controlswill be requiredover the awardingof contracts, as well asto ensurethat paymentsare madeonly for certifiedwork. Some form ofContractStatus Reportwill bepreparedquarterlyas partofthe FMRs. InternalAudit The AccountantGeneralhas establishedan internalaudit department which hasresponsibilityfor the internalaudit ofall government ministries.Ithasalready started workingon the donor accounting sectionofthe Ministryof Health. The unit is headedby a retiredmember ofthe Accountant General's staff, andhas sometrainedauditors.Its effectivenesswill however be measuredwithtime. The MOHSW is itselfintendingto create an in-house Internal Audit unit. This is however still on the drawingtable, andmaynot materializeduringthe life o fthe project. The internalaudit function, ifavailable, would complimentphysicalprojectmonitoringefforts. FinancialReportingand Monitoring Financial Monitoring Reports (FMRs) The PAUwill be responsiblefor designingthe appropriateFinancialMonitoringReports (FMRs) and producingthem on a quarterly basis. Formats of these were agreed at negotiations, and the FMRs include: 0 The SpecialAccount Activity Statement 0 Summary SA Exp for Contractsrequiringprior review 0 Summary SA Exp for Contractsnotrequiringpriorreview 0 Sources andUses ofFundsby Category 0 Sources andUses ofFundsbyProjectComponent 0 Projectprogressreporting 0 Procurement reports Budgetingand Planning BudgetingSystem The MOHSWis already onthe MTEFdrivenbudgetingprocess. The new funds will be includedin this processonce available. ComputerizedAccounting Systems The PAUis currentlyon a credibleMicrosoft Access drivensystem. This is however not an accountingsystem by definitionandhas several inherentweaknesses. Theprojecthas already started effortsto identifya modernreplacement system that will allow safe multipleaccess from botha wide or local area network. 35 External Audit Arrangements MOHSW is subjectto audit bythe Auditor General (AG) ofLesotho. Lesotho law, however, allows the AG to subcontract some ofher work where, inher opinion, it is prudentto do so. The current audit hastherefore beenoutsourcedto ErnstandYoung. Any modificationsto the existingaudit terms ofreference to incorporatethe new projectwill needto be onterms that are acceptable to the Bank. Auditedfinancial statements for the projectwill needto be submittedto the Bankwithin six months ofthe end o fthe financial year, accompaniedby a detailedaudit comments(management) letter. Conclusion The proposed financialmanagementarrangementsfor the projectmeetthe Bank'sminimum requirementsfor financialmanagement. FinancialManapementActionPlan .. While not conditionsof effectiveness, the followingtime boundactions needto be completedinthe timefkames indicatedfor smoother projectimplementation: Completethe hiringofthe additionalAccountant for the GFATM(at thetime ofthe second GlobalFundDisbursements). Demonstrateability to produce the agreedFMRs(at the time ofthe initialadvance). Acquirehnstallnewaccountingsoftware(six months after effectiveness). FinancialCovenantsand SuDervisionPlan The followingcovenantsrelateto financialmatters and form part ofthe DGA: 0 The Government will cause MOHSW (PAU) to have itsrecords, accounts and financial statementsauditedeachyear, commencingwith the accounts for the year endingMarch 2005. 0 PAUwill submit separate quarterlyFMRs, startingwith the first quarterafter effectiveness. SupervisionPlan The reportso fthe progress ofproject implementationwill bemonitoredindetailduringsupervision missions. FMRswill be reviewedona quarterlybasis bythe field-basedFMSandthe resultsor issues followedupduringthe supervisionmissions. The project's audit reportswill be reviewedand issues identifiedwill be followedup. The field basedFMSwill monitorthe agreedactionplanto ensure appropriateactions have beenimplementedbythe project. DisbursementandFlow of Funds Flow of Funds The project is expectedto operate one U S Dollar SpecialAccount for allprojectcomponents, includingthose implementedbythe MFDP. The Special Accountwill beheldat the CentralBankof Lesotho,which is acceptableto the Bank, andmanagedbythe PAU, with some MFDP signatories. The PAUwill have a local currency (maloti) projectaccount for processingpayments inlocalcurrency. 36 Disbursement Disbursements from the loanwill bemade initiallybasedontraditionaldisbursement methods (i.e., from the SpecialAccountwith reimbursementsmadebasedon Statements o fExpenditures- SOEs), with documentationretainedat the PAU, as well as direct payments from the LoanAccount where appropriate, and Special Commitments, ifrequired.FMRsproducedwill essentiallybe a reporting tool untilsuchtimethat the qualityofreportingis deemedsuficiently highto supportreport-based disbursements. RetroactiveFinancing Disbursementsmadeafter April 30,2004 for consultantservices are eligible for retroactivefinancing upto US$150,000. Direct Payments This methodwill be usedwhenthere is needto pay a thirdpartyfor goods and services supplied, but the amountto bepaidis higherthan canbe reasonably sustainedbythe Special Account. There shouldgenerallynotbetoo many ofthese `direct' payments, butwhen they do occur, the following details needto be suppliedto the Disbursement Office: - ---- Nameandaddress ofthethirdpartyto whom payment will be made. Briefdescriptionofthe goodshervicessupplied. Category o fexpenditure. Eligibility Percentage. Supplier'sbankingdetails. Special Commitments This methodrefers to a situationwhere, insteadofwithdrawingfinds from the LoanAccount, the borrowercanrequest, andbymutualagreement, the Bankcan enter into a SpecialCommitment in writing, to pay for certainexpenditures to be financedout ofthe loan. SpecialCommitmentsare usuallyissuedto cover lettersofcredit, andto haveaccessto this methodofdisbursement, the recipienthasto makea formal requestthereofduringnegotiations. SOEReplenishment Method Thismethodwill be usedwhere paymentsto thirdpartieshavebeenmadeout ofthe Special Account, andthe replenishmentsare usedto restorethe Special Account advance to itsoriginal level. TableC: Allocation ofGrantProceeds ExpenditureCategory Amount inUS$ million FinancingPercentage Civil Works 0.50 90% of local expenditures 100%offoreign expenditures Consultants'services, including 3.90 90% of local expenditures and audit andtraining 100% of foreign expenditures for consultantsincludingaudit, and 100%oftraining Goods 0.30 90% of local expenditures 100%o fforeign expenditures Operatingcosts 0.10 90% Unallocated 0.20 TotalProjectCosts 5.00 37 Annex 8: ProcurementArrangements LESOTHO:HIV andAIDS CapacityBuildingand TechnicalAssistance Project General The CountryProcurement Assessment Report(CPAR) for Lesothowas carriedout in 1997. Apart from increasingthe CentralTender Board(CTB) prior reviewthresholdfrom M10,OOO (about US$ 1,500) to M30,000 (about US$ 5,000), there is no implementationprogressonthe above recommendations. This meansthat the status ofpublicprocurementsystem isthe same as in 1997 when the CPAR was carriedout. The CPAR recommendedseveralactions to betaken bythe Governmentto makethe nationalprocurement systems moreeconomic, efficient, transparent, and accountable. Key recommendationsas a resultof 1997CPAR included, inter alia; the Government ofLesotho(GOL) to prepare a comprehensiveprocurementlawbasedonthe UnitedNationsCommissionandInternationalTrade andLaw(UNICETRAL) modeland Regulations; 0 to raise substantiallythe CTBprior reviewthresholds; to restructure,realignand strengthenthe CTB to support the work of lineministries; 0 the GOLto carryout a study on a costbenefitanalysis ofprocurementdecentralization;and 0 the GOLto restructurethe Government Stores, the Government Printers,andPlanned, Vehicle PoolServices that seem to be Government monopoliesas sole supplier or buyingagents. Use of Bank Guidelines Civilworks and goods for the proposedprojectwill beprocuredinaccordancewith the "Guidelines: Procurement under IBRDLoans andIDA Credits" datedMay 2004; andthe provisionsstipulatedin the DevelopmentGrantAgreement. Allprocuremento fconsultantserviceswill be done in accordancewith "Guidelines: SelectionandEmployment of Consultantsby the WorldBank Recipients" datedMay 2004 andthe provisionsstipulatedinthe DevelopmentGrantAgreement. Bank's StandardRequestfor Proposalsand evaluationformswill be usedwhere applicable. The general descriptiono fvarious itemsunder different expenditurecategory are described below. For each contractto be financedbythe Grant, the differentprocurementmethods or consultantselection methods, the needfor pre-qualification,estimated costs, prior reviewrequirements, andtime frame are agreedbetweenthe Recipientandthe Bankprojectteam inthe Procurement Plan. The Procurement Planwill beupdatedat least annuallyor as requiredto reflectthe actualproject implementationneeds and improvementsinstitutionalcapacity. ProcurementManual Procurementproceduresare detailedinthe Procurementthat was preparedunder the HealthSector ReformProject(HSRP). The Government hasrevisedthis Manualby incorporatingBank's commentsof2003 and will be used for procurementofworks, goods, and consultantsunderthis project. 38 ProcurementMethods Procurementof Works: Works procuredunder this project would include construction o fNDSO Warehouse, offices and associatedworks. The procurement will be done usingthe Bank's Standard BiddingDocuments (SBDs)and StandardBidEvaluation Forms for works and goods for all ICB. Since the Government does not have national StandardBidding Documents for procurement o f works, the Government may use the same Bank's SBDs for procurement o fworks underNational Competitive Bidding(NCB). Procurementof Goods: The agreedprocurement plancoversthe first 18 msnthsofthe project. Goods procured under this project would include computers, printers, scanners, accounting software, motor vehicles, office furniture, and office equipment. The procurement will be done using Bank's StandardBidding Documents (SBDs) and StandardBidEvaluation Forms for works and goods for all ICB. Since the Government does not have national StandardBiddingDocuments for procurement o f goods, the Government may use the same Bank's SBDs for procurement o fgoods under National Competitive Bidding(NCB). Contracts for these goods and other small quantities o foffice supplies and consumable materials, which are available locally at economical prices would be procured through national shopping proceduresbasedon price quotations obtained from at leastthree reliable suppliers. Subsequentto the period covered by the current procurement plan, Limited International Biddingmay be usedifagreedas an appropriate method inIDA's review o ffuture procurement plans. Selectionof Consultants: The consultancy servicesrequiredwould cover Technical Assistance to MFDP, monitoringand evaluation TA, procurement specialists, an informationeducation and communication expert, design and supervision o f construction o fNDSOwarehouse and offices, NGOs, etc. All consulting servicescontracts costing morethan US$ 100,000 equivalent for firms will be awardedthrough Quality and Cost Based Selection (QCBS) method. Short lists o f consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely o fnational consultants inaccordance with the provisions o fparagraph 2.7 o fthe Consultant Guidelines. Consulting services contracts estimated to cost lessthan US$ 100,000 for firms may be awardedthrough Consultants' Qualifications (CQ) method. Consulting services contracts for appointment o fconsulting firms to conduct leadership training will be awarded through Quality Based Selection (QBS) method. Selection o fNGOs will be carried out inaccordancewith the provisions ofparagraph 3.16 ofthe Guidelines. All servicesofindividualconsultants will be procured under individual contracts inaccordance with provisions o fparagraphs 5.1 to 5.3 o fthe Guidelines. Subsequentto the period covered bythe current procurement plan, Selection Under a FixedBudget, Least Cost Selection and/or Single Source Selection mightbe used ifagreedas an appropriate method in IDA's review o f future procurement plans. OperatingCosts:Operating costs, which would be financed under the project would beprocured usingthe Government's procurement systems acceptableto the Bank. ImplementationArranpements MOHSWwill bethe ImplementingAgency o fthis Technical Assistance project. Thisproposed project will provide US$5 million equivalent o fIDA grant financing to support the implementation o factivities financed by the Global Fundfor HIV/AIDS, Tuberculosis and Malaria (GFATM). Beneficiaries to this project include: Ministry o f Finance and Development Planning(MFDP); MOHSW; NationalDrugsand SuppliesOrganization (NDSO); Lesotho AIDS Prevention and Control Authority (LAPCA); and civil society. -TheProcurement Unit (PU) o fthe MOHSW which is 39 also responsible for day to day procurement o fthe ongoing Health Sector Reform Project (HSRP) will be responsible for procurement ofthisproject. Besides, the PUwill be responsible for procurement o fnon-medical goods for GFATM(estimated value o fGFATMaward is US$34 million). The PUis under the Director ofHealth Planning and Statistics Unit-the overall coordinator o fthe HSRP. ProcurementCaDacitv Assessment Procurement Unit (PU): The MOHSW has a procurement unit under the Director o fthe Health Planning and Statistics Unit that is responsible for day to day procurement o fongoing HSRP, which is funded by IDA, ADB, EU, and Development Corporation Ireland. Currently this unit i s not responsible for procurement o fcontracts financed by the Government's own budget. The Stores Department o fthe MOHSW is responsible for procurement o fgoods financed by Government's budget, The heado fthe PUis the Procurement Manager (PM), who came on board March 15,2004. The P Mreports directly to the Director o fthe Health Planning and Statistics Unit and is assistedby 2 Procurement Officers (POs). The PMis a qualified Quantity Surveyor and has adequateprocurement experience. H e has beendoing procurement since 1995. He has worked as a procurement expertto several IDA-fundedprojects. He has also attendedIDA procurement courses including one inTurin. The 2 POs are also consideredto have adequateprocurement experience. One PO has an advanced Diploma inBusinessManagement and has beenwith the project since 2001. She has attended procurement courses organized by ESAMI. She will be on a year's study leave beginning January 2005. Another PO is a licensed Accountant and has beendoing procurement since 1996. She worked as a procurement officer with the Ministry o fEducation for 4 years. Shejoined the project 2 years ago. The MOHSW has a civil works technical departmentthat provides technical support to the PUwith regardto civil works contracts. It also supervises the execution o f civilworks contracts. The department was involved inimplementation o fthe HealthIV project that was supported by ADB and mainly covered civil works activities -construction and rehabilitation o frural clinics. Underthe Technical Assistance Project, the civil works technical department will continue supporting and providingtechnical back stopping to PUfor the implementation o fcivil works activities. The department is staffed with following qualifiedpeople: 2 Civil Engineers; 2 Architects; 2 Quantity Surveyors; 1ElectricalEngineer; and 2 Clerks o f Work. CTB and ProcurementLevels: Accordingto the existingprocurement Regulations, CTB is the authority for awarding a contract o fvalue M30,OOO (about US$5,000 equivalent). This threshold was revised inNovember 2003 from the previous threshold o fM10,000 (about US$ 1,500 equivalent). The CTB does not review draft biddingdocuments or RFPs regardless o fthe value o f the contract. Apart from handling procurement o fthe central government, the CTB also handlesthe procurements done bythe districts -Lesotho has 10 districts. The current CTB secretariat is staffed by 3 people. Two o fthem are procurement proficient. The Board is constituted by 6 members from: MinistryofEducation (1); Ministryo fWorks and Transport (2); MinistryofAgriculture (1); MinistryofTrade, IndustryandMarketing(1); andLesotho RevenueAuthority (1). The Chairman o fthe Board i s from the Ministryo fFinance and Development Planning. Despite revisiono fthe prior review thresholds upwards, almost every contract beingprocessedbythe MOHSW seems to passthrough CTB because o fthe low thresholds. The current public procurement system does not specify formation o f a MinistryTender Board. Dueto highly centralized procurement system and inadequatecapacity o fCTB, award o fcontracts is considered to be a source o fprocurement delays. According to MOHSW's experience, an International Competitive Bidding(ICB) contract may take 40 about 6 -9 months from preparationofbiddingdocumentsupto awardedstage. There is a needfor the GOLto implementthe 1997CPARrecommendationsinorder to mitigatesuchproblems. Record-keepingSystem: The Bankhas notconducteda ProcurementPostReview(PPR) for the HSRP, which might havebeena good source ofcomments regardingfiling andrecordkeeping system ofthe MOHSW. The PUkeepsthe procurement files includingcopies ofthe contracts but seems to have difficulty inretrievinginformation. The originalcontracts are kept bythe Project Accounts Unit (PAU) ofthe HSRP. The PAUalso is under the Directorofthe HealthPlanningand necessary that the MOHSWhirea short term consultant-about 6 monthsduration- to reviewthe StatisticsUnit. Inorder to improvefiling andrecordkeepingsystem ofthe PU, it was considered system andinstalla system-manualor electronic-which wouldenable easy retrievalofthe information. Proposedintegrationofprocurementfunctionofthe MOHSW: As indicatedabove, currently, the PUis responsiblefor procurementsofHSRP, which are donor-fundedcontracts. The unit does notdo procurements of contracts financedby Government'sownbudget. This function is being done bythe Stores department ofthe MOHSWunderthe FinancialController. Ithasbeenagreed within the MOHSWthat the PUhandlesentireprocurementofthe MOHSW - includingcontracts funded by donors andthose financedbythe Government's ownbudget. This will entailadditional work loadto the PU. Inthis respect, there will be a needto restructurethe PUto handleprocurement functioneffectivelyandefficiently. ProcurementPlan The Recipient,at appraisal, developeda ProcurementPlanfor projectimplementationwhich providesthe basis for the procurementmethods. The planhas beenagreedbetweenthe Recipient andthe ProjectTeam onMay 7,2004 and is availableat the MOHSW. Itwill also be availableinthe Project's database inthe Bank's externalwebsite. The ProcurementPlanwill be updatedin agreement with the ProjectTeam annuallyor as requiredto reflectthe actualprojectimplementation needsand improvementsinthe institutionalcapacity. 41 Table A: Project Costs by ProcurementArrangements (US$millionequivalent) ProcurementMethod' ExpenditureCategory ICB NCB Othe? N.B.F. Total Cost 1. Works 525,000 0.00 0.00 0.00 525,000 (500,000) (0.00) (0.00) (0.00) (500,000) 2. Goods 151,000 110,000 59,000 0.00 320,000 (141,000) (100,000) (59,000) (0.00) (300,000) 3. Services 0.00 0.00 3,900,000 0.00 3,900,000 (0.00) (0.00) (3,900,000) (0.00) (3,900,000) 4. OperatingExpenses 0.00 0.00 100,000 0.00 100,000 (0.00) (0.00) (100,000) (0.00) (100,000) 5. Unallocated 0.00 0.00 200,000 0.00 200,000 Total 676,000 110,000 4,259,000 0.00 5,045,000 (641,000) (100,000) (4,259,000) (0.00) (5,000,000) 'Figures in parenthesesare the amounts to be financed by the {Loan/Credit/Trust Fund}. All costs include contingencies. *Includes civil works and goods to be procured through national shopping, consulting services, services o f contracted staff o fthe project management office, training, technical assistanceservices, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Table B: Thresholds for ProcurementMethods andPrior Review' Contract Value n ContractsSubject to ExpenditureCategory Threshold rrocurement Prior Review (US$) Method (US$ millions) 1. Works 200,000 and above ICB All Less than 200,000 NCB None (E-Post) 2. Goods 150,000 andabove ICB All Less than 150,000 NCB None (Ex-Post) Upto 30,000 Shopping None (Ex-Post) 3. Consultants(firms) 100,000 and above QCBS All Less than 100,000 CQ None (Ex-Post) 4. Consultants(individual) 50,000 and above IC All Less than 50,000 IC None (Ex-Post) 5. Training 100,000 and above QBS All Less than 100,000 QBS None (Ex-Post) Total Value of ContractsSubjectto Prior Review: Overall ProcurementRiskAssessment: High Frequency of Procurement Supervision Inadditionto the prior review supervisionto be carriedout from Bank offices, the capacity assessmentofthe ImplementingAgency has recommendedonce every 6 months (includes special 42 procurementsupervisionfor post-review/audits)supervisionmissionsto visit the fieldto carry out post reviewo fthe procurement action. Action Planfor Mitigatingthe HighProcurementRisk Action Submit draft final ProcurementPlanfor Bank's review. SubmitrevisedProcurementManualtakingintoaccount - Bank's comments ofJuly 23,2003. Submitthe GeneralProcurementNotice(GPN) for Bank's I ByNegotiations MOHSWPU review. Hire a consultantto review,design, and establishadequate ByEffectiveness MOHSW/PU filing andrecordkeepingsystems andcarryout trainingin contractadministrationand contractdisputes handling.- Initially recruit one morePOto enhancecapacity ofthe PU. ByEffectiveness MOHSWPU Assign a secretary to the PUto off loadsome ofsecretarial ByEffectiveness MOHSW/ duties from the POsandPM. HPSU Restructurethe PUto do procurementsofbothdonor fbnded DuringProject MOHSW/ contractsandthose financedbyGovernment own budget. implementation HPSU Train PUstaffto updatetheir skills. DuringProject MOHSW/IDA implantation- On going activitv 43 Annex 9: EconomicandFinancialAnalysis LESOTHO:HJY andAIDS CapacityBuildingandTechnicalAssistance Project The economic impactofHIV AIDS hasbeenwidely recognizedinbothlow-incomeandmiddle- income countries. The estimates ofthe macroeconomic costs ofAIDS inAfricancountrieswhere the epidemichas beensevererange between0.3 and 1.5 percent ofGDPannually. While specific analysis ofthe macro-economicimpactofHIV and AIDS inLesothohas notbeenconducted, the impacto fthe epidemic, inview o fthe highprevalenceofthe disease, increasedvulnerabilityofthe migrantminersreturningfrom SouthAfrica, andrelativelysmallpoolofhumancapital, is likelyto be high. HIV/AIDSaffectsthe mostproductivesectors ofthe population;youngadultswho are beginningto contributeto the economy. Highadultmortalityas a resultofthe epidemicwouldmakehouseholds more vulnerable, stretchfamily and communitycopingmechanismsand leadto deterioratingliving standards andperpetualpoverty. The disease alsoweakensthe mechanismthroughwhich knowledgeandabilitiesare transmittedfrom one generation to the nextby killingparents and leaving the childreno fitsvictims without one or bothparentsto love, raise andeducate them. HIV/AIDS increasesthe risk and spread of other communicable diseases such as Tuberculosis inthe larger populationthus expressinga negativeexternality. A recentstud? usingan overlappinggenerations modelappliedto SouthAfrica foundthat inthe absence ofAIDS, economic growthis likelyto be modest with universalandcomplete educationattainedwithinthree generations. Without addressing the spreadofAIDS, however, the study foundthe "a completeeconomic collapse" will occur within three generations. FightingHIV/AIDSbypromotingbehaviorchangeto reducetransmissionand improvingaccess to care and support for those infectedandaffectedis centralto any efforttowards povertyreductionina countrywith highHIVprevalence, suchas Lesotho. Thisprojectwill provideassistancetowards implementationofinterventionsfor HIV preventionand impactmitigationfocusingon vulnerable groups and usingthe GFATMapprovedresources. As a result ofthe nature ofthe design ofthe project, the netpresent value ofthe specific investmentcannot beadequately representedin financial terms. Severalbenefitswill accrueto the nation from controllingthe HIV/AIDSepidemic and mitigatingits impact. Economicproductivitywill be enhanced ifthe populationis healthier and free ofHIV/AIDS. Householdswill bemore likely to generate andpreservewealthwhen the scourge of HIV/AIDS is eliminatedor mitigated. The proposedprojectwill only finance technicalassistance, limitedgoods to supportinstitutionsand the expansion ofthe warehouse at the NationalDrugand Supplyorganization. The inputsbeing financedare time-limitedand shouldnot generate additionalrecurrentcosts. The total financing is limitedto US$ Smillion. The projectshouldimprovethe efficiencyo fpublic expenditureby strengtheningimplementation capacity, by improvingprocurementprocedures inorder to obtainbettervalue for money, andby outsourcingimplementationto civil society. The projectis expectedto enableLesothoto mobilize The Long-runEconomicCosts o f AIDS: Theory and an Applicationto South Africa, by CliveBell, ShantayananDevarajanandHans Gersbach, June 2003. 44 additional financing for HIV/AIDS.GFATMfinancing is not subject to economic and financial analysis. The engagement o fthe Bank through the proposedproject should facilitate a more robust consideration o fthe existing GFATMand other potential financing. Particular concernsrelate to sustainability o f financing for treatment. The proposedproject is intendedto help ensure sustained financing (through improvedutilization o fresources), and TA financed under the project will help ensure that the national program employs cost-effective standards. 45 Annex 10: SafeguardPolicyIssues LESOTHO: HIV andAIDS CapacityBuildingandTechnicalAssistanceProject EnvironmentalAssessment (OP/BP 4.01): The project hasbeenclassified as Category C with regardsto Bank's environmental and social safeguardspolicies. Being a technical assistanceand capacity project, its activities are almost entirely innocuous and would not trigger any safeguards assessment. 46 Annex 11:ProjectPreparationand Supervision LESOTHO: HIV and AIDS CapacityBuildingand TechnicalAssistanceProject Planned Actual PCNreview 1I19l2004 1/30/2004 InitialPIDto PIC 1/22/2004 1/26/2004 Initial ISDSto PIC 1/22/2004 1/30/2004 Appraisal 5/04/2004 5/04/2004 Negotiations 511ol2004 5/10/2004 BoardIRVP approval 611712004 611712004 Planneddate ofeffectiveness 713ol2004 Planneddate ofmid-term review 613012006 Plannedclosingdate 12/31/2008 Key institutions responsiblefor preparationofthe project: Public Debt ManagementOffice ofthe Ministry ofFinance and DevelopmentPlanning, Ministry ofHealth and Social Welfare and Lesotho HIV/AIDS ProgramCoordinatingAuthority (LAPCA). Bankstaffandconsultantswho worked onthe project included: Name Title Unit Julie McLaughlin Sr. Health Specialist AFHTl MuhammadPate Health Specialist AFHTl SheilaDutta Sr. Health Specialist AFRHV Andrew Follmer OperationsOfficer AFTHl EdmundMotseki OperationsOfficer AFCOl JonathanNyamukapa Financial ManagementSpecialist AFTFM PascalTegwa Sr. Procurement Specialist AFTPC T. Mpoy Kamulayi LeadCounsel LEGAF Helen Tadesse Team Assistant AFTHl Bank funds expended to date onproject preparation: 1. Bankresources: $70,868 2. Trust funds:O 3. Total: $70,868 EstimatedApproval and Supervisioncosts: 1. Remainingcosts to approval: $16,000 2. Estimatedannual supervisioncost: $150,000 47 Annex 12: Documentsinthe ProjectFile LESOTHO: HIV and AIDS CapacityBuildingand TechnicalAssistance Project StrengtheningPreventionand Control of HIV/AIDS in Lesotho,ProposalSubmittedto the Global Fundto FightAIDS, TuberculosisandMalaria, September 2002. ProgramGrantAgreementbetweenthe GlobalFundto FightAIDS, TB andMalariaandthe MFDP of the Governmentofthe Kingdomo fLesotho, LSO-202-G01-H-00,November 1,2003. OperationsManualfor the GlobalFund, November 2003. Turninga Crisis into an Opportunity: Strategiesfor Scaling up the National Response to the HIV/AIDSPandemic in Lesotho,2003, Partnership o fthe Governmento fthe Kingdomo fLesotho andthe ExpandedTheme Group on HIV/AIDS. Reportofthe PreliminaryVisit for the GFATMProcurement and SupplyManagementAssessment of Lesotho,LocalFundAgent PricewaterhouseCoopers,June 2003. IDA HIV/AIDSTA ProjectProcurementPlan, May2004. Backto OfficeReportandAide Memoire:Pre-AppraisalMission,February 18,2004. Backto OfficeReportandAide Memoire:AppraisalMission, May 7,2004. MinutesofDecisionMeeting, April 27, 2004. 48 Annex 13: StatementofLoansand Credits LESOTHO: HIV andAIDS CapacityBuildingand TechnicalAssistanceProject Differencebetween expectedand actual OriginalAmount inUS$Millions disbursements ProjectID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO81269 2004 ESDPI1(Phase 2) 0.00 21.00 0.00 0.00 0.00 21.81 1.81 0.00 PO52367 2002 MALOTI-DRAKENSBERG CONSERV. & 0.00 0.00 0.00 7.32 0.00 7.90 2.32 0.00 DEVELOP. PO70673 2001 Utilities Sector ReformProject 0.00 28.60 0.00 0.00 0.00 19.49 8.39 0.00 PO53200 2000 HealthSector Reform 0.00 6.50 0.00 0.00 0.00 3.06 2.37 0.46 PO01409 1998 HILAND WATERIB 45.00 0.00 0.00 0.00 9.00 15.64 19.98 1.14 Total: 45.00 56.10 0.00 7.32 9.00 67.90 34.87 7.60 LESOTHO STATEMENT OF IFC's HeldandDisbursedPortfolio InMillions ofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ApprovalsPending Commitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 49 Annex 14: Countryat a Glance LESOTHO:HIV andAIDS CapacityBuildingandTechnicalAssistanceProject Sub- POVERTY and SOCIAL Saharan Low- Lesotho Africa income Development diamond' 2002 Population, mid-year(millions) 2.1 688 2,495 Lifeexpectancy GNIpercapita (Atlas method, US$) 480 450 430 GNI(At/as mefhod, US$ billions) T tW 306 1,072 Average annual growth, 1996-02 Population(%) 15 2.4 1.9 Laborforce (%) 18 2.5 2.3 Gross primary M o s t recent estimate (latest year available, 1996-02) capita Poverty (%of populationbelownattonalpoveftyline) Urbanpopulation (%of totalpopulation) 29 33 30 Lifeexpectancyat birth(pars) 43 46 59 I Infantmortality (per lO00livebrfths) 92 a5 81 Childmainutntion (%ofchiIdrenunder5) 18 Access to improvedwatersource Access to animprovedwater source (%ofpopulation) 78 58 78 Illiteracy(%ofpopulation age 69 18 37 37 Gross primaryenrollment (%of schooI-agepopulation) 115 86 95 -Lesotho Male 19 92 a 3 . -Lowincomegroup Female 18 80 87 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 zoo2 Economic ratios' GDP (US$ billions) 0.40 082 0.76 0.78 Gross domestic investmentlGDP 43.5 46.8 40 2 37.2 Emortsof goods and serviceslGDP 158 8.1 436 60.8 Trade Gross domestic savingslGDP -635 -55.2 -M.6 -9.1 Gross nationalsavings/GDP 483 9 9 24 3 25.2 Currentaccount balancelGDP 5.5 4.5 -15.0 - a 7 Interestpayments/GDP 18 2.7 2.7 Total debt/GDP 80.5 98.1 818 Totaldebt servicelexports .... 4.6 tt6 91) i Present value of debtlGDP 53.2 Present value of debtlexports 74.2 Indebtedness 1982-92 1992-02 2001 2002 2002-08 (average annualgronth) GDP 5.6 3.3 3.2 4.0 4.3 -Lesotho GDP percapita 3.4 1.4 18 2.7 2.9 ...___ Lowincome g m u ~ ~ STRUCTURE of the ECONOMY I 1982 1992 2001 1 Growth of investment and GDP ( W ) (%of GDP) I Agriculture 23.5 V.7 18.5 8.3 'O Industry 272 40.0 415 42.4 Manufacturing 7.7 7.6 0.0 0.0 Services 49.3 42.3 39.9 39.4 -10 Privateconsumption 137.6 97.9 82.5 78.5 .20 1 Generalgovemmentconsumption 25.9 27.3 32.1 1a.o 33.6 Imports of goods andsewices P2.8 ao.1 98.4 -GDI -GDP 1982-92 1992-02 2001 2o02 (average annualgrowth) Growth of exports and imports (K) Agriculture 2.9 3.4 2.7 Industry 9.0 4.0 4.5 5'7 Manufacturing 0.4 5.3 7.5 8.9 40 Services 4.3 3.4 18 2.7 2o Privateconsumption a.1 -10 3.2 -0.5 Generalgovernmentconsumption 5.2 5.9 -6.5 7.6 -20 Gross domestic investment 38.5 -0.2 -3.7 Imports of goods and services 0.5 14 xl.5 -4.6 15a -Exports -Imports 50 Lesotho PRICES and GOVERNMENT FINANCE n~ 1982 1992 2001 2002 Domestic prices Inflation (Oh) (%change) Consumer prices l2.1 17.2 7.1 6.7 Implicit GDP deflator 11.5 15.4 6.3 9.5 Government finance (%of GDP, includescurrentgrants) Current revenue 36.8 418 39.6 e7 98 90 00 0, hl Current budget balance 6.6 6.4 3.3 Overallsurpius/deficit -8.6 -2.5 -6.1 -GDPdeflator -CPi TRADE I982 1992 2001 2002 (US$ millions) Export and Import levels (US$ mlll.) Totalexports (fob) 87 286 393 T Clothing and othergoods 23 141 1,250 Machineryandtransport equipment 6 60 Manufactures 6 51 Total imports (cif) 896 675 718 Food 73 Fueland energy 1x) I I Capital goods 0 4 Egortpriceindex(S95=7JO) 06 97 98 99 00 Import priceindex(Q95=?J0) .Exports mimports Terms of trade(SSS=WO) O' O2 BALANCE of PAYMENTS 1982 1992 2001 2002 (US%millions) Current account balance to GDP (%) Exports of goods and services a4 146 318 464 Imports of goods and services 494 967 722 678 Resource balance -430 -822 -406 -394 Net income 346 381 174 175 Net currenttransfers -242 0 3 118 P O Current account balance -326 -307 -115 -99 Financingitems (net) 334 256 101 105 Changes innet reserves -8 51 14 -6 M e m o : Reserves includinggold (US$ mfllions) 48 160 407 407 Conversion rate(DEC, /ocaVUS$) 11 2.9 8.6 9.6 EXTERNAL DEBT and RESOURCE FLOWS 1982 1992 2001 2002 (US$ millions) Composltlon of 2002 debt (US$ mlll.) Total debt outstanding and disbursed 495 734 638 IBRD 5 58 37 G 7 IDA $27 2 0 218 F:63 A:37 Total debt service 29 63 64 IBRD 0 10 27 IDA 2 5 5 Composition of net resource flows Official grants 46 31 31 Official creditors 84 21 2 Private creditors -5 -2 -3 Foreigndirectinvestment Portfolio equity World Bank program Commitments 10 29 0 A E- Bilateral Disbursements 15 22 26 B IDA -- IBRD D other MIIiIatwd F- Private ~ Principalrepayments 1 9 28 C-IMF G-Sbrt-term 51 MAP SECTION