Document of The World Bank Report No: ICR00003665 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8500) ON A GRANT IN THE AMOUNT OF SDR 13.4 MILLION (US$20 MILLION EQUIVALENT) TO THE KINGDOM OF LESOTHO FOR A FIRST GROWTH AND COMPETITIVENESS DEVELOPMENT POLICY GRANT December 19, 2016 Macroeconomics and Fiscal Management Global Practice AFCS1 Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective as of June 30, 2014) Currency Unit = Maloti Maloti 1.00 = US$0.07 US$ 1.00 = 10.62Maloti FISCAL YEAR April 1 – March 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AGOA African Growth and Opportunity Act AIDS Acquired Immune Deficiency Syndrome BEDCO Basotho Enterprises Development Corporation BoS Bureau of Statistics CAS Country Assistance Strategy DFID Department for International Development from United Kingdom DPO Development Policy Operation ECF Extended Credit Facility EU European Union FDI Foreign Direct Investment FIA Financial Institutions Act FIRST Financial Sector Reform and Strengthening Initiative GDP Gross Domestic Product GNI Gross National Income GoL Government of Lesotho GPOBA Global Partnership for Output-Based Aid GTZ German Technical Corporation HBS Household Budget Survey HIV Human Immunodeficiency Virus HMIS Health Management Information Systems HRH Human Resources for Health IBRD International Bank for Reconstruction and Development ICT Information and Communication Technologies IDA International Development Association IFMIS Integrated Financial Management Information System IMF International Monetary Fund LDHS Labor and Demographic Health Survey LNDC Lesotho National Development Corporation LRA Lesotho Revenue Authority MCC Maseru City Council MDA Ministries, Departments and Agencies ii MDGs Millennium Development Goals M&E Monitoring and Evaluation MDP Ministry of Development Planning MoF Ministry of Finance MoH Ministry of Health MoSD Ministry of Social Development MTEF Medium-Term Expenditure Framework NISSA National Information System for Social Assistance NPAB National Planning Advisory Board NSDP National Strategic Development Plan OBFC One Stop Business Facilitation Center PAF Performance Assessment Framework PEFA Public Expenditure and Financial Accountability PMT Proxy Means Test PPAD Procurement Policy and Advice Division PPP Public/Private Partnerships PSCEDP Private Sector Competitiveness and Economic Diversification Project PFM Public Finance Management PRS Poverty Reduction Strategy R&D Research and Development SACU Southern African Customs Union SADC Southern African Development Community SCD Systematic Country Diagnostic TVET Technical and Vocational Education Training Vice President: Makhtar Diop Country Director: Catherine Signe Tovey Senior Practice Director: Carlos Felipe Jaramillo Practice Manager: Mark R. Thomas Task Team Leader: Asli Senkal ICR Team Leader: Asli Senkal iii KINGDOM OF LESOTHO First Growth and Competitiveness Development Policy Grant Contents A. Basic Information ........................................................................................................... vi B. Key Dates ....................................................................................................................... vi C. Ratings Summary ........................................................................................................... vi D. Sector and Theme Codes...............................................................................................vii E. Bank Staff ......................................................................................................................vii F. Results Framework Analysis .........................................................................................vii G. Ratings of Program Performance in ISRs ....................................................................... x H. Restructuring (if any) ..................................................................................................... xi 1. Program Context, Development Objectives and Design ................................................. 1 1.1 Context at Appraisal .................................................................................................. 1 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) ......................................................................................................................... 2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification ................................................................................................. 3 1.4 Original Policy Areas Supported by the Program (as approved) ............................... 4 1.5 Revised Policy Areas (if applicable).......................................................................... 5 1.6 Other significant changes ........................................................................................... 5 2. Key Factors Affecting Implementation and Outcomes ................................................... 6 2.1 Program Performance (supported by a table derived from a policy matrix) ............. 6 2.2 Major Factors Affecting Implementation: ................................................................. 7 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: ........ 11 2.4 Expected Next Phase/Follow-up Operation (if any): ............................................... 12 3. Assessment of Outcomes ............................................................................................... 12 3.1. Relevance of Objectives, Design and Implementation ........................................ 12 3.2. Achievement of Program Development Objectives ............................................ 13 3.3. Justification of Overall Outcome Rating ............................................................. 20 3.4. Overarching Themes, Other Outcomes and Impacts ........................................... 20 3.5. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ... 22 4. Assessment of Risk to Development Outcome .............................................................. 22 5. Assessment of Bank and Borrower Performance .......................................................... 23 5.1 Bank Performance .................................................................................................... 23 5.2 Borrower Performance ............................................................................................. 25 6. Lessons Learned............................................................................................................. 26 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners................ 26 MAP IBRD 33434R1 ......................................................................................................... 36 iv ANNEXES Annex 1: Bank Lending and Implementation Support/Supervision Processes ..................... 28 Annex 2: Beneficiary Survey Results .................................................................................... 29 Annex 3: Stakeholder Workshop Report and Results............................................................ 30 Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR .............................. 31 Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders ................................ 32 Annex 6: List of Supporting Documents ............................................................................... 33 TABLES Table 1: Prior Actions for First Growth and Competitiveness DPO ...................................... 7 Table 2: Links between the DPO and Prior Analytical Work ................................................ 9 v A. Basic Information LS- First Growth and Country: Lesotho Program Name: Competitiveness DPG Program ID: P128573 L/C/TF Number(s): IDA-H8500 ICR Date: 07/01/2016 ICR Type: Core ICR KINGDOM OF Lending Instrument: DPF Borrower: LESOTHO Original Total XDR 13.40M Disbursed Amount: XDR 13.40M Commitment: Revised Amount: XDR 13.40M Implementing Agencies: Ministry of Finance and Development Planning Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 01/17/2013 Effectiveness: Appraisal: 04/08/2013 Restructuring(s): Approval: 06/03/2013 Mid-term Review: 02/03/2014 03/31/2014 Closing: 06/30/2014 06/30/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Moderately Implementing Quality of Supervision: Not Applicable Unsatisfactory Agency/Agencies: Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA): (Yes/No): vi Problem Program at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 60 60 General industry and trade sector 20 20 Other social services 20 20 Theme Code (as % of total Bank financing) Economic statistics, modeling and forecasting 20 20 Public expenditure, financial management and 40 40 procurement Regulation and competition policy 20 20 Social Protection and Labor Policy & Systems 20 20 E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Catherine Signe Tovey Asad Alam Sr. Practice Director Carlos Felipe Jaramillo Practice Manager: Mark Roland Thomas John Panzer Program Team Leader: Asli Senkal Christian Yves Gonzalez Amador ICR Team Leader: Asli Senkal ICR Primary Author: Maria Teresa Benito-Spinetto F. Results Framework Analysis Program Development Objectives The operation's development objective is to assist the Government in implementing a reform program aimed at promoting growth, competitiveness and public sector efficiency. The DPO supports progress towards the Country Assistance Strategy objectives of fiscal adjustment and public sector efficiency and enhanced competitiveness and diversification. Revised Program Development Objectives Program Development Objectives were not revised. vii (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Number of sub-leases per year Value (quantitative or 8 64 10 Qualitative) Date achieved 12/31/2012 01/01/2016 03/31/2016 Comments Not met. The number of sub-leases (which refers to land sub-leases), were 10 (incl. % from April 1, 2015 to March 31, 2016, therefore not meeting the target. achievement) Indicator 2 : Number of days to obtain a construction permit Value (quantitative or 330 240 179 Qualitative) Date achieved 12/31/2012 01/01/2016 01/01/2015 Comments Met (100%) The target was achieved earlier than expected. Per Doing (incl. % Business 2015, it took 179 days to obtain a construction permit Since then, the achievement) time has remained constant per DB, 2016 and 2017 draft Indicator 3 : Number of days to register a firm Value (quantitative or 40 7 7 Qualitative) Date achieved 12/31/2012 01/01/2016 01/01/2016 Comments Met (100%). Doing Business Report 2016 report that it takes 7 days to register (incl. % a firm. Therefore, the target was met. achievement) Indicator 4 : Number of days required to obtain manufacturing and trading licenses 3 Value 2 days to obtain an (quantitative or 1-5 3 industrial license Qualitative) +1 day for trading license. Date achieved 12/31/2012 01/01/2016 06/01/2016 Met (100%). Doing Business Reports 2014 and after do not measure this Comments indicator any longer. However, the number of days that it takes to obtain an (incl. % industrial license according to Director of Industry, is currently 2 days if there achievement) are no queries on the application. In addition, it takes 1 day to obtain a trading license. Indicator 5 : Number of days required for import clearance Value (quantitative or 4.5 days 1 day 7 hours Qualitative) Date achieved 12/31/2012 01/01/2016 01/01/2015 Comments Met (100%). DB Reports 2015 and 2016 measure this indicator in hours and viii (incl. % separates the times to obtain Border Compliance and Documentary achievement) Compliance. Both added to 7 hours which was considered to be one day and therefore, the indicator was met. Indicator 6 : Number of days required for export clearance Value (quantitative or 4.7 days 1 day 7 hours Qualitative) Date achieved 12/31/2012 01/01/2016 06/02/2014 Met (100%). The target was met earlier than expected. DB Reports for 2015 Comments and 2016 measure this indicator in hours and separates the times to obtain (incl. % Border Compliance and Documentary Compliance. Both added to 7 hours and achievement) therefore the indicator was judged met. Indicator 7 : Number of months delay in publishing the audit reports on public accounts 24 months for 2013/14 Public Value Zero (this is Accounts and over (quantitative or 18 months interpreted as less 12 months for Qualitative) than one month) 2014/15 Public Accounts Date achieved 12/31/2012 01/01/2016 9/31/2015 Comments Not Met The delay for the 2013/14 accounts was 24 months and for the (incl. % 2014/15 accounts, 12 months, therefore, indicator was not met. achievement) Timely and reliable budget expenditure data from the Integrated Financial Indicator 8 : Management Information System (IFMIS). No quarterly Value No quarterly expenditure reports (quantitative or expenditure reports Zero delays reconciled from Qualitative) reconciled from IFMIS IFMIS Date achieved 12/31/2012 01/01/2016 06/10/2016 Comments Not Met By June 2014, still there weren't reconciled quarterly expenditure (incl. % reports from IFMIS. Currently there are some reconciliation, but reports are achievement) not reliable. Therefore, this indicator is judged not met. Medium term budget policy statement and a medium term fiscal framework Indicator 9 : approved by Cabinet. Value Not approved by Approved by Informal approval (quantitative or Cabinet Cabinet by Cabinet Qualitative) Date achieved 12/31/2012 01/01/2016 06/15/2016 Met. The Medium term budget policy and medium term fiscal framework are Comments not approved by Cabinet separately. However, the budge ceilings which are (incl. % approved by cabinet include a budget policy statement and MTFF Therefore, achievement) one can argue that the MTFF has implicitly been approved by Cabinet deeming this indicator as met. Indicator 10 : Number of waivers allowing non-competitive bidding approved Value (quantitative or 79 30 79 Qualitative) ix Date achieved 12/31/2012 01/01/2016 06/30/2015 Comments Not met. The number of waivers allowing non-competitive biddings approved (incl. % was 48 in June 2014, but went back to 79 by mid-2015 which is latest achievement) information available according to the register at the Ministry of Finance. Indicator 11 : Number of waivers allowing non-competitive bidding not approved Value (quantitative or 40 70 56 Qualitative) Date achieved 12/31/2012 01/01/2016 03/31/2015 Comments Mostly met (80%). Number of waivers allowing non-competitive bidding not (incl. % approved were 31 in June 2014, but increased to 56 by March 2015. Not achievement) further information is available. Number of households in NISSA reached through the Childs Grant Indicator 12 : Programme(CGP) Value 19,500 (April 1, (quantitative or 6,920 25,000 2014) Qualitative) 25,400 (End 2015) Date achieved 12/31/2012 01/01/2016 09/29/2015 Comments Met. Latest available data is that 25,400 children where reached. In April (incl. % 2014 19,500 were reached. Therefore, indicator was achieved. achievement) Indicator 13 : Number of ministries using harmonized concepts and definitions Value (quantitative or Zero 14 Not available Qualitative) Date achieved 12/31/2012 01/01/2016 06/10/2016 Comments Not met. The BoS no longer follows up on the ministries’ progress on the (incl. % usage of harmonized concepts and definitions. Therefore, the indicator is achievement) considered not met. Indicator 14 : Percentage of population issued with National ID cards Value (quantitative or Zero 100 percent 43% (April 2016) Qualitative) Date achieved 12/31/2012 01/01/2016 04/30/2014 Comments Partially met (43%). 43% of the population were issued National ID cards by (incl. % April 2016. This program continues to be implemented. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years G. Ratings of Program Performance in ISRs Date ISR Actual No. DO IP Archived Disbursements x (USD millions) Moderately Moderately 1 05/03/2014 20.54 Unsatisfactory Unsatisfactory H. Restructuring xi 1. Program Context, Development Objectives and Design 1. This Implementation Completion and Results Report (ICR) assesses the achievements of expected results of the programmatic series “Growth and Competitiveness Development Policy Grants� to the Kingdom of Lesotho. The DPO series intended to support the Government of the Kingdom of Lesotho in implementing a reform program aimed at promoting growth, competitiveness and public sector efficiency. The first operation of SDR 13.4 million (US$ 20 million equivalent) was approved by the World Bank’s Board of Directors on June 3, 2013. The second operation was planned to be presented to the Board on April 2015, but it was stopped on January 28, 2015 due to the inadequacy of the macroeconomic framework. Subsequent operations in the series never materialized. 1.1 Context at Appraisal 2. At appraisal, the Government showed commitment to fiscal consolidation to restore macroeconomic stability. After a sharp decline in SACU revenues from 33.1 percent of GDP in 2009/10 to 15.8 percent of GDP in 2010/11, in 2010 the authorities had embarked on an ambitious fiscal consolidation program supported by the IMF ECF in response to fiscal pressures and volatility of SACU transfers through cutting expenditures by 11 percent of GDP. The Government had successfully completed the Fifth Review under the Extended Credit Facility (ECF) arrangement and the program remained broadly on track. Despite the drought and declining diamond prices, authorities continued the adjustment efforts. Financial aid by Lesotho’s international partners helped mitigate the impact on fiscal and external balances. This operation was aimed at assisting the Government, in close collaboration with Lesotho’s development partners and stakeholders, to implement its reform agenda. 3. Macroeconomic developments were judged positive at appraisal. Despite the global financial crises the economy had grown by 5.4 percent in FY 2011/12 (April to March) driven mainly by public investment. And in 2012/13, despite lower agricultural production caused by the drought and weak diamond prices, the economy grew by 3.5 percent fueled by construction and mining. The construction sector had grown significantly, driven by large infrastructure projects, and the mining sector was expanding. Inflation was continuing to subside since the beginning of 2012 reaching 5.1 percent by the end of February 2013. External balances were improving aided by large financial inflows and the government’s fiscal consolidation efforts. The improved external balance allowed for a rebuilding of external reserves reaching 4 months of imports by the end of February 2013. 1 4. Fiscal consolidation was moving forward. The non-SACU deficit1 was estimated to have reached 20 percent of GDP in FY 2012/13, compared with 22.6 percent in 2011/12 and the overall deficit was estimated at 4.8 percent of GDP in 2012/13, down from 10.3 percent of GDP a year earlier. In 2012/13, recurrent spending declined slightly to 39 percent of GDP (down from 39.6 percent a year earlier) as the government embarked in a program to contain the wage bill which stood at 19.3 percent of GDP in 2011/12 and 2012/13. Capital expenditures increased slightly by 0.2 percentage points in 2012/13 to 21.7 percent of GDP, caused by delays in the implementation of some investment projects during the transition period after the election. Revenue collection increased as SACU revenues almost doubled in 2012/13 to 28.9 percent of GDP partly as compensation for underpayments in previous years. The magnitude of the SACU revenue volatility had made budget management challenging and a priority. As a key element of the medium term macroeconomic program adopted by the Government in 2010, containing expenditures to levels consistent with revenue flows, while safeguarding social spending for the poor and vulnerable groups, became increasingly important. Rational for Bank Assistance 5. This operation was designed to assist the Government in implementing a reform program aimed at promoting growth, competitiveness and public sector efficiency. The operation as part of the DPL series was envisaged in the Country Assistance Strategy covering FY2010-2014, discussed by the Board in July 2010. Specifically, the operation supported three areas that were central to the reform program: (i) improve private sector competitiveness, through implementing key investment climate reforms; (ii) improve the sustainability and efficiency of public spending, through fiscal consolidation and public financial management and public procurement system reforms; and (iii) improve social protection and monitoring systems, through improving the targeting of social safety net programs and strengthening the statistical system. The operation supported three strategic goals of the National Strategic Development Plan (NSDP): (i) pursue high, shared and employment creating economic growth; (ii) improve health, combat HIV and AIDS and reduce (social) vulnerability; and (iii) promote peace and democratic governance and build effective institutions. It also contributed to two pillars of the three CAS’s Pillars2: (i) fiscal adjustment and public-sector efficiency; and (ii) competitiveness and diversification. 1.2 Original Program Development Objectives (PDO) and Key Indicators 6. The operation’s development objective was to assist the Government in implementing a reform program aimed at promoting growth, competitiveness and public sector efficiency. 1 Non-SACU fiscal deficit is equal to the overall budget deficit minus the SACU revenues. 2 The CAS programme was constructed around three strategic pillars, six results clusters, and 22 outcomes. 2 7. The key indicators as approved were grouped under three pillars. The three pillars of the DPO were (i) improve private sector competitiveness, through implementing key investment climate reforms; (ii) improve the sustainability and efficiency of public spending, through fiscal consolidation and public financial management and public procurement system reforms; and (iii) improve social protection and monitoring systems, through improving the targeting of social safety net programs and strengthening the statistical system. The DPO supported progress towards the Country Assistance Strategy objectives of fiscal adjustment and public sector efficiency and enhanced competitiveness and diversification. Although the Program development objectives as originally approved don’t refer to these three pillars clearly, the key indicators in this document will be analysis under these themes which reflect the PDOs intention of assisting the Government of Lesotho with promoting growth, competitiveness and efficiency of the public sector. Pillar I: Improving Private Sector Competitiveness i. Number of sub-leases per year. ii. Number of days to obtain a construction permit. iii. Number of days to register a firm. iv. Number of days required to obtain manufacturing and trading licenses. v. Number of days required for import clearance. vi. Number of days required for export clearance. Pillar II: Improving the Sustainability and Efficiency of Public Spending vii. Number of months delay in publishing the audit reports on public accounts. viii. Timely and reliable budget expenditure data from the Integrated Financial Management Information System (IFMIS). ix. Medium term budget policy statement and a medium term fiscal framework approved by Cabinet. x. Number of waivers allowing non-competitive bidding approved. xi. Number of waivers allowing non-competitive bidding not approved. Pillar III: Social Protection and Monitoring Systems a. Strengthening Social Protection xii. Number of households in NISSA reached through the Child’s Grant Programme. b. Improving Data and Information Monitoring Systems xiii. Number of line ministries using harmonized concepts or definitions. xiv. Percentage of population issued with National ID cards. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 3 8. The DPO and key indicators were not revised. 1.4 Original Policy Areas Supported by the Program (as approved) 9. The program supported three main policy areas: i. Improving private sector competitiveness. The DPL supported the government’s efforts to continue improving the business environment as an essential area for attracting new FDI, in particular investment coming from new sources (such as South Africa), flowing into new sectors (with emphasis on low- skill production), and with greater focus on the South African market. Lesotho’s was ranked 136th among 185 countries in terms of Ease of Doing Business among 185 countries and there were significant constraints in almost every stage of business such as access to land, obtaining construction permits, access to finance, and cross-border trade. Focusing on areas of competitiveness that were under control of the Government was very important given that the Government did not have control over key policies to improve competitiveness, such as: exchange rate policy, which is determined by the Maloti’s peg to the Rand; and trade policy, which is decided at the SACU level. \ ii. Improving the sustainability and efficiency of public spending . PEFA report of 2012 documented several weaknesses in credibility, comprehensiveness and transparency of the budget, predictability and control in budget execution and audits. The DPL supported the government’s PFM reforms developed in detail in the PFM Action Plan approved by the PFM Improvement and Reform Steering Committee (IRSC) in March 2013. The Action Plan was developed in close collaboration with development partners. It sought to develop more effective PFM systems, including improvements in planning, budget execution, procurement accounting, reporting, audit and oversight. The PFM Action Plan included activities to fully control and commit the budget through IFMIS. The DPL supported the IFMIS to improve financial control and reporting weaknesses. It supported the government steps to improve the availability and reliability of financial information, including the timely publication of reliable budget expenditure data and audit reports. The DPL also supported the government’s plans to further strengthen the public procurement system, starting with the establishment of the Public Procurement Tribunal and its appointed members. iii. Improving social protection and monitoring systems. The DPL supported the government efforts to strengthen social protection and improving data and information monitoring systems. In 2012 a separate Ministry of Social Development was created which demonstrated the government’s growing emphasis on social protection. Despite higher spending on social programs relative to comparator countries, due to poor targeting social spending did not translate into better outcomes for the poor and the vulnerable. To improve 4 targeting the Government created a national registry for the households receiving payments through transfer programs called National Information System for Social Assistance (NISSA).The system was designed to cover several key social protection programs, including the Child Grants Programme (CGP), the Old Age Pension Program, the Public Assistance Program, and the Orphan Vulnerable and Children Bursary Program (OVC). 1.5 Revised Policy Areas 10. The policy areas and key policy areas were not revised. 1.6 Other significant changes 11. There were no significant changes in design, scope and scale, implementation arrangements and schedule, or funding allocations for DPO1. 12. The second operation was stopped when the budget for FY 2014/15 presented to the parliament deviated from the previous agreements between the World Bank and government. Table 1 below displays the macroeconomic framework at DPO1 and at the time of the budget speech of February 20, 2014. Lesotho abandoned the fiscal consolidation efforts that started in FY 2010/11 due to political instability and higher than expected SACU revenues and grants. The macroeconomic framework envisioned was very different than the macroeconomic framework in the presentation to the Board at the launch of the DPO series and the completion of the IMF’s ECF program. Non-SACU budget deficit in 2013/14 was higher by 2 percentage points of GDP. The non-SACU balance was expected to deteriorate by 7.2 percentage points of GDP in 2014/15, 9.8 percentage points of GDP in 2015/16, and 9.6 percentage points of GDP in 2016/17 compared to the deficit expected at the launch of the DPO1. 13. The envisioned reduction in the non-SACU deficit never materialized due to increased expenditures that surpassed the increased revenues. 3 According to the economic update April 2014, the wage bill increased from 19.3 percent of GDP in FY 2012/13 to 21 percent of GDP in FY 2013/14, contrary to the supported policy actions to help reduce the recurrent expenditures. The high wage bill in Lesotho, an estimated 22 percent of GDP in 2015/16, continues to be one of the most important structural problems, Lesotho is facing in the years to come. Similarly, the use of goods and services increased from 12.1 percent of GDP in FY 2012/13 to 13.6 percent of GDP in FY 2013/14 mostly due to the subventions to the Queen Mamahato Hospital. 3 At DPO1 SACU revenues were expected to be at 25.4 in 2013/14, 21.9 percent of GDP in 2014/15, and 19.2 percent in 2015/16. According to the FY 2014/15 budget fiscal framework SACU revenues were estimated to be 27.5 percent of GDP in 2013/14, 28.7 percent of GDP, and 27.4 percent of GDP. 5 Table 1: Macroeconomic Framework, 2013/14 to 2016/17 (As percentage of GDP) Source: Lesotho Economic Update April 2014 2. Key Factors Affecting Implementation and Outcomes 14. The program was supported by one single tranche operation. The First Growth and Competitiveness Development Policy Grant was approved subject to the implementation of five prior actions each (see Table 2). All prior actions were satisfactorily met before Board approval on June 3, 2013. 2.1 Program Performance 6 Table 2: Prior Actions for First Growth and Competitiveness DPO Prior actions from Legal Agreement/ Program Document Status Pillar I: Improving Private Sector Competitiveness Prior Action 1: The Government through its Ministry of Trade and Industry, Met Cooperatives and Marketing, submitted the Industrial Licensing Bill 2012 to its Parliament. Pillar II: Improving the Sustainability and Efficiency of Public Spending Prior Action 2: The Government has, through: (a) its Ministry of Finance, Met submitted the revised Fiscal Year (“FY�) 2009/10 public accounts to the Office of the Auditor General; and (b) its Office of the Auditor General, published the audit report on the FY2008/09 public accounts. Prior Action 3: The Government has, through its Ministry of Finance, Met established the Public Procurement Tribunal and appointed its members. Pillar III: Improving Social Protection and Monitoring Systems a. Strengthening Social Protection Prior Action 4: The Government has, through its Ministry of Social Met Development, developed and adopted the National Information System for Social Assistance (“NISSA�) and is piloting said NISSA through the Child Grants Programme. a. Improving Data and Information Monitoring Systems Prior Action 5: The Government has, through its Ministry of Development Met Planning, submitted to the Ministry of Finance a FY 2013/14 Budget Framework Paper for the Bureau of Statistics. 2.2 Major Factors Affecting Implementation: Adequacy of government’s commitment` 15. There was government commitment to the program at the start of implementation, but political instability weakened that commitment. In June 2014 after the suspension of the parliament, the political instability continued until February 2015 when snap elections were held to resolve the parliamentary crisis. The coalition government that took power in June 2012 had endorsed the NSDP, which stressed the importance of fiscal sustainability through promoting fiscal consolidation, containing the wage bill, increasing public sector efficiency as well as improving the business climate. These reform areas were supported by the DPL. However, political instability that manifested at the beginning of 2014 was an important element that slowed down this operation’s 7 implementation. 4 In addition, the already weak capacity to implement reforms was exacerbated by new comers without experience in public sector affairs. Soundness of background analysis 16. Applied Lessons from Previous Operations. Four main lessons from previous Poverty Reduction Support Credit series (FY2008-11) were incorporated into this operation: (i) Government ownership of reforms as a critical aspect for a successful outcome; (ii) Effective donor coordination during project preparation and implementation; (iii) Strong analytical underpinnings and links to Bank investment lending provide the foundation for a well-designed operation, and (iv) Strong links to other Bank technical capacity and investment operations as a critical aspect for a successful implementation of the program. A continued technical and policy dialogue with the authorities and their technical team was important in maintaining the country's ownership and commitment. To avoid conflicting policy advice and provide a stronger voice in the policy dialogue with the Government, it was important to coordinate with the AfDB, IMF, EU, and other donors during program preparation and implementation. The key pieces of Economic and Sector Work (ESW) and the Public Expenditure and Financial Accountability (PEFA) Reports not only contributed to the design of previous and this lending operation, but also helped shape the Government's reform efforts and supported a fruitful policy dialogue. 17. In past operations, the prior actions that were not linked with any other Bank operation resulted in poor program outcomes. In a country with weak institutional capacity, it would be better if the prior actions were supported by a capacity building operation. Therefore, this operation was supported by Bank investment operations, trust funds, and technical assistance operations.5 18. Analytical work. The preparation of this DPL series was based on extensive analytical work carried out by the Bank, the government, and other partners. A substantial body of analytical work provided the basis for an in-depth dialogue with the Government and supported the design of the DPO. 3 below shows the links between the components included in the DPO and the recommendations from prior analytical work. 4 On February 10, 2014, turmoil in the cabinet triggered a realignment of political interests in Parliament, which resulted in an attempt to pass a “vote of no -confidence� against the Prime Minister on March 20, 2014. The “vote of no-confidence� failed, but raised public concerns about the survival of the coalition Government. In February 2015, Lesotho held snap general elections to resolve its parliamentary crisis, and a new coalition government formed in April 2015. 5 Some of the operations that supported this one were: the Private Sector Competitiveness Loan II, and the Lesotho Public Financial Management Reform Support Program (P143197), all three under preparation at time of appraisal. The Bank’s Private Sector Competiveness and Eco nomic Diversification Project (PSCEDP) provided technical assistance in the preparation of the Industrial Licensing Bill; and through the Lesotho-RSA Customs Collaboration Trust Fund (P125780), the Bank provided technical assistance in the design and implementation of the Customs Modernization Program. 8 Table 3: Links between the DPO and Prior Analytical Work Links to DPO Prior Analytical Reports – Findings and Recommendations Actions I. Improving Private Sector Competitiveness Selected Policy Notes (WB 2012) The Government through its The report recommends: “To further reduce the time to register a business, it is Ministry of Trade and necessary to fully implement the Companies Act of 2010 and the amended Trading Industry, Cooperatives and Enterprises Regulations. In addition, it is important to approve and implement the Marketing, submitted the Industrial Licensing Bill, which will eliminate the requirement for approval of Industrial Licensing Bill manufacturing licenses by the Pioneer Industrial Board, which meets only once every 2012 to its Parliament. two weeks, and adds an unnecessary layer to the process.� II. Improving the Sustainability and Efficiency of Public Spending Selected Policy Notes (WB 2012) The Government has, through: (a) its Ministry The report recommends continuing with the implementation of the PFM of Finance, submitted the Action Plan. revised Fiscal Year (“FY�) 2009/10 public accounts to the Office of the Auditor General; and (b) its Office of the Auditor General, published the audit report on the FY2008/09 public accounts. Selected Policy Notes (WB 2012) The Government has, through its Ministry of The report recommends: “Government urgently needs to set up the Finance, established the Procurement Tribunal to provide the private sector with recourse to an Procurement Tribunal and independent complaint-handling process.� appointed its members. Public Expenditure Review (WB 2012) The Government has, through its Ministry of The report recommends: “Monitoring is also severely hindered by Finance, established the weaknesses in Lesotho's financial reporting and procurement systems. The Public Procurement limited availability of budget information constrains oversight by the Tribunal and appointed its legislature, civil society, and the media.� members. III. Improving Social Protection and Monitoring Systems Lesotho: A Safety Net to Protect Extreme Poor and Build Human Capital The Government has, (WB 2013) through its Ministry of Social Development, The report recommends: “Lesotho implements a number of social transfer developed and adopted programs, but these are not well coordinated and there is a need to better the National Information define the overall priorities and objectives of the safety net.� Specific actions System for Social should include: Assistance (“NISSA�) and is piloting said 9 “Establish a national safety net strategy for the next 5-10 years that spells NISSA through the Child out the country’s broad poverty reduction objectives, desired target groups Grants Programme. and coverage, and program choices. Eliminate any duplication of coverage—for example, between the OAP, the CGP, and PA, and the creation of an integrated beneficiary register. Establish a central body with policy oversight and expenditure planning authority over all transfer programs. -Continue a gradual expansion of the NISSA once a clear vision for the system has been developed and careful consideration has been made as to how the expansion would/should take place. The system should also be continuously monitored to determine whether it is in fact an effective way to improve coordination and targeting.� Selected Policy Notes (WB 2012) The Government has, through its Ministry of The report recommends strengthening data quality by accelerating Development Planning, implementation of the National Strategy for the Development of Statistics as submitted to the Ministry outlined in the NSDP. of Finance a FY 2013/14 Budget Framework Paper for the Bureau of Statistics. Lesotho: Sharing Growth by Reducing Inequality and Vulnerability: The Government has, Choices for Change. A Poverty, Gender, and Social Assessment (WB 2010) through its Ministry of Development Planning, The report recommends: “Lesotho’s fight against poverty and exclusion is submitted to the Ministry hampered by a lack of adequate quality data or disaggregated data on of Finance a FY 2013/14 household demographics, assets, livelihoods, earnings and income, shocks, Budget Framework Paper such as deaths or other major life events access to services, and social for the Bureau of indicators. As a result, the impact of growth and public policy is hard to Statistics. identify.� Assessment of the operation’s design 19. The operation’s design included strong country ownership through close cooperation and technical assistance, close coordination with other development partners (especially the EU and IMF), alignment of the operation with the Government’s reform timetable, and selection of critical structural reforms that would yield medium- to long-term benefits. However, the scope of the reforms supported by this operation lacked direct support to fiscal consolidation through structural reforms aimed at cutting expenditures and mobilizing revenues. Given that fiscal consolidation was and still is a key element in the sustainability of the country’s macroeconomic framework, the design overlooked actions that would have supported fiscal consolidation more directly. Relevance of the risks identified at appraisal and effectiveness of mitigation 20. Three main risks were identified at appraisal and were mitigated as follows: 10 i. On the institutional side, the main risk stemmed from the weak capacity of Government institutions to implement the reform program. To reduce this risk, the Bank worked with other donors to support the Government’s reform program ongoing operations. During the operation technical assistance was provided through the ongoing operations, however no separate technical assistance operation was implemented. One venue for this coordination was the Joint Budget Support Review meeting of February 2013. This meeting was held annually amongst donors to coordinate budget support and to follow up on agreed indicators. ii. On the political side, the main risk emanated from the new Government's unproven capacity to muster broad consensus and be able to approve and complete the implementation of the politically difficult aspects of the reform program. The new administration faced the challenge of managing a complex multi-party coalition government. This arrangement limited the Government's ability to build consensus around reforms that were critical for the sustenance of economic growth and its capacity to mobilize enough political support to implement its programs. To mitigate this risk, the Bank prepared a set of policy notes on the major reform areas that were delivered to the new Government. The Bank continued to foster policy dialogue through this operation using its analytical work, investment operations, and coordination with other development partners. iii. On the economic front, the main risk centered on the possibility of further worsening of the global economic environment. Under this scenario, the country’s shock-absorption capacity could have faced important limitations, particularly in applying effective countercyclical macroeconomic policies and suitable social safety nets. However, this risk never materialized as the SACU revenues and grants increased followed by an increase in expenditures by the government. The operation, by not focusing more directly on measures to consolidate the fiscal situation, was unable to mitigate the risk to the macroeconomic framework caused mainly by high expenditures. The operation underestimated the risks to fiscal consolidation. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 21. Design. The 14 indicators selected by the operation were chosen to monitor progress towards the program development objectives aimed at promoting growth, competitiveness and public sector efficiency. They were grouped under three Pillars, but these did not match the original PDOs. The DPOs could have been more clearly stated to match the pillars under which the indicators were categorized. Nevertheless, the pillars embodied the intensions of these series. Furthermore, although the indicators were aligned to the objectives, they were weak in supporting the objective related to improving the sustainability and efficiency of public sector spending. The selected indicators were relatively easy to monitor. Indicators related to Pillar 1 (Improving private sector competitiveness) were part of the Doing Business Report indicators. Indicators for Pillar 2 (Improving the sustainability and efficiency of public spending) and Pillar 3 (Improving social protection and monitoring systems) were designed to be mostly monitored through 11 the Performance Assessment Framework (PAF) of the Joint Budget Support (JBS) system. The JBS was developed under Government leadership supported by the EU and IDA. However, PAF was not adjusted and the following operations were cancelled due to macroeconomic inadequacy. The objectives of the DPO was in line with NDSP. 22. Implementation. The Ministry of Finance led the implementation of M&E. The institutional arrangements for implementing this operation fell within the framework of the Joint Budget Support structure, but the PAF never adjusted to the second PRSP, the NSDP, so most of the operations indicators that were initially expected to be monitored through it, could not be monitored through it. The PAF was intended to be the basis for the program’s monitoring and evaluation, but only a few of the DPO indicators were part of the PAF, such as, the number of days to receive trading license and the timely auditing of public accounts.. The monitoring an evaluation of the indicators measured by the Doing Business Report, could only be followed up periodically as the Doing Business Reports were completed. 23. Utilization. The data and information provided by the Joint Annual review of the General Budget Support in March 2014 provided guidance regarding the state of indicator 4 (number of days required to obtain manufacturing and trading licenses) and indicator 12 (number of households in NISSA reached through the Child Grant Programme). This information in addition to the one obtained through the Doing Business platform and directly from the NMES, was utilized during the ISR to encourage the authorities to advance with the implementation of the program. Likewise, the information regarding the macro-fiscal situation during implementation of the first operation initially led to in delay the second operation and eventually halted the remaining operations in the series. 2.4 Expected Next Phase/Follow-up Operation: 24. None expected at this time. 3. Assessment of Outcomes 3.1. Relevance of Objectives, Design and Implementation Overall relevance rating: Modest Objectives: High. 25. The objectives of the DPO emphasizing private sector competitiveness, efficiency of public spending and social protection and monitoring systems remains relevant to Lesotho’s current priorities. They support the goals of the Lesotho Vision 2020 and the National Strategic Development Plan (NSDP) for 2012–2017. These goals are also consistent with the priorities identified in the Systematic Country Diagnostic (SCD) of the World Bank. The two priority interventions to achieve progress on the twin goals outlined in the SCD are redefining the role of the state through increasing the efficiency and effectiveness of the public sector and better fiscal management and shifting to a new 12 growth model with an outward oriented private sector through improving the business climate. They also support the WBG Country Partnership Framework for 2016-20, which is scheduled to be approved by the Board in June 2016. Under the 2016-20 CPF the WBG assistance will support two focus areas: (i) improving efficiency and effectiveness of the public sector, and (ii) promoting private sector job creation. There is currently an urgent need to increase the efficiency and effectiveness of the public sector (Pillar 1 of DPL) to create space for the private sector to become an engine of growth and generate enough jobs. Improving the overall business environment (Pillar of DPL) will be essential for attracting new FDI, promoting domestic private-sector growth, and creating new jobs. Design: Modest 26. The DPL was designed so the prior actions selected were relevant steps to attaining the medium term objectives of improving private sector competitiveness, improving the sustainability and efficiency of public spending, and improving social protection and monitoring systems. The policy areas were aligned with the PDOs; however, the design of the DPO indicators related to supporting public sector efficiency and effectiveness could have focused more on enhancing the effectiveness of spending. The PDOs were in line with the NSDP. Given the country’s conditions and risks at the time of the operation designed, they were adequate. As stated in the current CPF: “Public sector fiscal consolidation is a prerequisite in restoring macroeconomic stability, but it could weigh on future growth if not matched by enhanced effectiveness of spending and service delivery institutions�. The design of the DPL took into account the potential risks for the success of the reforms supported by the operation, but underestimated the risks to fiscal consolidation, the key element in maintaining an acceptable macroeconomic framework. Implementation: Modest 27. The institutional arrangements for implementing this operation fell short of initially planned arrangements. The institutional arrangements for implementing this operation were within the framework of the JBS structure; however, the PAF never adjusted to the second PRSP, so most of the operations indicators could not be monitored through it. Nevertheless, due to political uncertainty it was important to work within the framework of the JBS and buy-in at the political level. Currently, there is no IMF program. The EU cancelled its budget support operation in March 2016 under the EDF10 and suspended possibilities of support under EDF11. 3.2. Achievement of Program Development Objectives Overall Rating: Modest 28. The Program Development Objectives Results are summarized in the data sheet at the beginning of this report and addressed in this section. The program development objectives related to the improvement of private sector competitiveness (Pillar I) were mostly met. Doing Business report shows a significant improvement in various areas 13 including the ones measures by the selected indicators of this operation. Only indicator 1 related to the number of sub-leases was not achieved. PDOs for improving the sustainability and efficiency of the public sector (Pillar II) have generally not been met. In addition, progress in the PDOs related to the strengthening of social protection and improvement of data and information systems had mixed results, The NISSA program surpassed expectations, while issue related to data and information monitoring systems progressed more slowly. Therefore it is concluded that given the significant shortcomings in this operation’s achievement of objectives, it is rated moderately unsatisfactory. Pillar 1. Improving Private Sector Competitiveness. (Substantial) 29. In the past few years, the Government has made some progress in implementing reforms to alleviate constraints on the private sector. The Companies Act of 2010 was a step forward in reducing the number of procedures to register a new firm; it was supported by Private Sector Competitiveness and Economic Diversification (PSCEDP, P088544) Project and Second Private Sector Competitiveness and economic Diversification Project (P144933). The Trading Enterprises Regulations of 1999 were amended in December 2011 to make it easier to obtain trade licenses through the establishment of a One Stop Business Facilitation Center (OBFC). The revised law also replaced prior inspections with post inspections for selected businesses with low health and environmental risks. Both these reforms were supported by the PSCEDP. The OBFC brings several functions under one roof. These include issuance of trading enterprise licenses, industrial licenses, work permits, and import permits/rebates and export visas (a restricted list of products still requires approval from various ministries). Already, through the Ministry of Trade and Industry, Cooperatives and Marketing, the Government issued the regulations to implement the Industrial Licensing Bill and rolled out OBFC services in Maputsoe6 (triggers for DPO2). Rolling it out to other districts was expected to follow. 30. The process for getting a permit to start a business in Lesotho was streamlined. The Ministry of Trade and Industry, Cooperatives and Marketing, submitted the Industrial Licensing Bill 2012 to Parliament (prior action #1). The Industrial Licensing Bill of 2014 was approved by Parliament on September 5, 2014. 7 The Bank’s PSCEDP provided technical assistance in the preparation of the Industrial Licensing Bill. Its purpose is to facilitate and promote industrial development of small, micro, and medium enterprises (SMMES) through a new regulatory regime that is simple, short, and cost effective. Licensing powers are vested in the Director of Industry, making processing shorter and simple. Currently, the Pioneer Industrial Board must approve manufacturing licenses. The board meets once every two weeks, adding an unnecessary layer to the 6 The One Stop Business Facilitation Centre (OBFC) substation was launched at Maputsoe on January 28, 2015. From Lesotho Trade Portal at: http://www.lesothotradeportal.org.ls/?r=site/display&id=180 7 http://www.lesotholii.org/ls/legislation/bill/2014/47/. 14 process. The Industrial Licensing Bill eliminates Pioneer Industrial Board approval, reducing the number of days required to obtain manufacturing licenses. However, by April 2014, the number of days to obtain manufacturing and trading licenses was still 5 days, as the baseline of Indicator 4. Currently, recent Doing Business reports do not measure this indicator. However, according to the Director of Industry, it currently takes 2 days to obtain an industrial license if there are no queries on the application. In addition, it takes one day to obtain a trading license. Therefore, this indicator is judged met. 31. The Industrial Licensing Bill eliminated the Pioneer Industrial Board approval. This also cut the process of registering a firm to 7 days according to the Doing Business 2016. Lesotho has also improved its ranking in registering and starting a business. In 2012, the average days to start a business in Sub-Saharan Africa was at 37 days as opposed to 40 days in Lesotho. Today, Lesotho stands at 112 in the ranking of 189 economies, better than the regional average (Sub-Saharan Africa) of 128. Therefore, Indicator 3, reduce number of days to register a firm from 40 to 7 days by 2016, was met). 32. Regarding the number of days to obtain a construction permit (Indicator 2) the target was surpassed. Doing Business report of 2015 and 2016 report that it takes 179 days to obtain a construction permit. It took 330 days in 2012 and the target for 2016 was 240. The Government took measures to reduce the number of days to obtain a construction permit. According to the World Bank (2013), dealing with construction permits required 11 procedures, 330 days, and cost 950 percent of per capita income. Various regulations supported by this operation streamlined the process: The Government issued regulations and guidelines to require environmental impact assessments only for construction projects for industries that pose high environmental risk, rather than for all projects (Trigger for DPO2). This is in line with international best practices which recommend a risk-based approach. This one measure alone is estimated to have cut 25 days off the process of obtaining construction permits for most firms. Under Component 1 of the Second Private Sector Competiveness and Economic Diversification Project the government is working with the World Bank for the construction permits reform. The Task Team of Chief Legal Officers from MCC and various bodies has been established. The automated system to obtain permits is not yet live, but complete. The user testing training took place in July 2016 and the system is expected to go live in September 2016. 33. The Government has taken steps to reduce barriers to land access by investors, including foreigners. Subleasing is now possible under the amended Land Act of 2010. The Land Act of 2010 gives specific rights to lessees but not to subleases. The authorities have submitted to Parliament a sectional title bill, which allows citizens to sell or transfer a section of their property with an accompanying title for ownership. However, the Government has not yet submitted to Parliament the Amendments Land Bill of 2013 which has specific clauses that give rights to subleases8 (Trigger for DPO2) 8 In the Land Act 2010 - the duties on subleases are no longer charged as was the case in the repealed Land Act of 1979 - an improvement both on the lead time and cost. But the 15 and provides them greater certainty and security in occupational rights. As a result of these changes, it was expected that the number of subleases would have increased from 8 in 2012 to 64 by 2106 (Indicator 1). However, the number of sub-leases in the FY April 2015 to March 2016 was only 10. Therefore, it is considered that this indicator was not met. 34. Trading across borders has shown some improvements before and during the implementation period of this operation. Time to import has been reduced from 49 days in 2007 to 35 days in 2013 and to 33 days by 2014; the number of procedures has been cut from eight in 2007 to seven by 2014. Time to export has been reduced from 44 days in 2007 to 31 days in 2013 but has remained the same through 2015.9 The number of days required for import clearance (Indicator 5) and export clearance (Indicator 6) were expected to be reduced from 4.5 and 4.7, respectively to 1 day by 2016. Although, the way this indicators is measured has changed10, it takes. 7 hours to obtain and import or export clearance according to DB 2015 and 2016. Therefore, we judged indicators 5 and 6 to have been achieved. The trigger for DPO2 linked to these indicators was completed. Through the Lesotho Revenue Authority, the government has completed the Preferred Trader Program Pilot11 at the end of March 2014 and reported on recommendations for implementation of the full scheme. Pillar 2. Improving the Sustainability and Efficiency of Public Spending (Negligible) 35. Results in this area have been slow, with some progress recorded more recently. This pillar of the DPO was closely linked to the PFM Reform Project (P143197) approved by the Bank Board on February 2014. 12 Political turmoil in 2014 also delayed the implementation of this project. Nevertheless, the Office of the Accountant General progressed during the second half of 2014 with the implementation of various issues related to IFMIS, which allowed for: (i) the link between the IFMIS and the Central Bank for electronic payments to be functional, and the planning to pilot such payments in the MoF and Ministry of Development Planning (MoDP) to advance; (ii) data cleaning on the IFMIS to progress to such an extent that the FY14 Public Accounts were sub-lessees rights are still not in included in the Land Act 2010 as amended - inter alia is the recent High Court Judgement that has set precedence and entrenched the sublease's rights 9 The last year that the Doing Business report measured these indicators was 2015. For imports and exports, the mentioned indicators have remained unchanged. 10 Doing Business Reports in 2015 and 2016 measures these indicators in hours and separates the time to obtain Border Compliance and time to obtain Documentary Compliance. 11 http://www.sacu.int/docs/pr/2014/pr0724a.pdf 12 Became effective July 25, 2014. 16 submitted within the legal timeframe, although revisions from the Auditor General delayed the process somewhat. Indicator 8 aimed at a timely and reliable budget expenditure data from IFMIS and aimed at having reconciled quarterly reports from it. Currently there is some reconciliation, but reports are not reliable, deeming the indicator as not achieved. Fiscal reporting is still hampered by the lack of reliable information, because of data and reconciliation problems. 36. Indicator 7, reducing the number of months delay in publishing the audit reports on public accounts to zero showed progress, but was partially achieved. The PFM Act determines in section 37 that audited consolidated financial statements need to be presented to Parliament within 8 months after the end of the financial year they relate to. So the “delay� is calculated as the time taken to present it to Parliament beyond 8 months of the end of the fiscal year to which it relates. The FY 13 (end March) public accounts should have been submitted by end November 2013, and the FY 14 public accounts by end November 2014. For FY13 the delay was therefore 24 months, and it reduced to 12 months (and not zero) for the FY14 public accounts. The Public Accounts for 2014/15 were received for auditing by the Ministry of Finance on September 1, 2015, and have not yet been published as of June, 2016, although they are expected to be published very soon. Public sector auditing is carried out in accordance with standards set by INTOSAI and the International Auditing Standards. However, the operations of the Office of the Auditor General are hampered by, amongst other things, significant weaknesses in the fiduciary systems in the country. Accounts, and in turn audits, are therefore still prepared with delays. However, under the PFM reform program supported by this operation13 and the PFM project, both the backlog of audited accounts and the time publish the accounts have been reduced. The Auditor-general is also receiving support from an operation already approved by the AfDB. Prior action and trigger for DPO2 were completed.14 37. According to the SCD the Medium Term Fiscal Framework process is still weak. Projects and programs are not always linked to the NSDP priorities. The MTFF’s outer- year spending plans are seldom used in preparing subsequent years’ budgets, and the approach to budgeting remains largely incremental and line item-based. Indicator 9 calls for the MTFF and medium term budget policy statement to be approved by the Cabinet. There is no separate formal approval of the budget policy statement and the MTFF by the cabinet, but the budget ceilings which are approved by cabinet include a budget policy statement and MTFF. Therefore, one can argue that the MTFF has implicitly been approved by Cabinet deeming this indicator as met. 13 The PFM Reform is being supported by the World Bank, EU, AfDB and IMF. 14 The Government through the Office of the Auditor General publishes the audit report on the FY2009/10, FY2010/11 and FY2011/12 public accounts. 17 38. Regarding Indicator 10 (reduction of number of approved waivers allowing non- competitive bidding to 30 by 2016 from 79 in 2012), the limited progress registered by June 2014 when they decreased to 48, regressed back to 79 by July 2015. Therefore, this indicator was not achieved. Indicator 11 (increase in the number of non-approved waivers allowing non-competitive bidding to 70 by 2016 from 23 in 2012), was partially achieved. It became worse by mid-2014 (31), although it improved somewhat by mid- 2015, to 56 non-approved waivers for non-competitive biddings. The trigger for DPO2, that is, the publicizing of contract awarded above 100,000 maloti on the web and media through the Ministry of Finance is not currently being done. Pillar 3. Improving Social Protection and Monitoring Systems (Modest) I. Strengthening Social Protection 39. Lesotho’s spending on social transfer programs is relatively high, but targeting is weak, resulting in poor outcomes in terms of reducing vulnerability and poverty. Coverage of social protection transfers is small, especially among the poorest households. However, since 2012 the Government has taken some important steps in improving the performance of the sector, creating a Ministry of Social Development (MSD) to lead and coordinate the social protection agenda and introduced a National Information System for Social Assistance (NISSA) to serve as a national registry for beneficiaries of safety-net programs and piloted the NISSA through the Child Grants Programme (CGP) (Prior Action 4). Before establishment of the new ministry in June 2012, the Department of Social Welfare in the Ministry of Health and Social Welfare led the social-protection agenda. The new MSD runs three of the six main social protection programs, the Child Grants Programme, the Nutrition for Malnourished and Other Vulnerable Groups (OVC), and the Public Assistance Program (PA). The MSD also elaborated the National Social Protection Strategy (NSPS), which was endorsed by Cabinet in December 2014 and officially launched in February 2015. 40. NISSA is at the basis of harmonization of program delivery, which the NSPS identifies as the back bone of the social protection system. The social registry of NISSA contains social-economic information for around 100,000 households in the country (roughly a quarter of the population), representing the basis for targeting of the CGP. The World Bank and EU/UNICEF, carried out reviews of the NISSA, which provide evidence of the quality of the targeting tool and describes the potential of the NISSA as the basis for a harmonized mechanism for selecting poor households for all social assistance programs. Based on the recommendations of the most recent NISSA review, MSD is revisiting the strategy of community-based targeting to strengthen its importance in the beneficiary selection process. 41. Furthermore, data from the Continuous Multipurpose Survey (CMS) of 2013/14 suggest that the CGP is the most effective program at reaching the poor, with 65% of its beneficiaries belonging to the bottom two quintiles. By end 2013, the number of households in NISSA had reached through the CGP 19,500 households, up from 6,920 in 18 2012. Most recent data shows that number at 25,400, above the target for 2016 of 25,000 (Indicator 12).15 Therefore, this indicator was fully achieved. II. Improving Data and Information Monitoring Systems 42. Lack of accurate and timely information hampers the Government’s decision-making. Data from household surveys, ministries, public service delivery units, and public-sector spending reports are sporadic and vary in quality, imposing constraints on the ability of decision-makers to assess alternative policies and make informed decisions. As a result, decisions regarding the allocation of scarce resources and options for reforming and improving public services often lack a sound analytical foundation, and program evaluation is at best difficult. 43. The Government recognizes this weakness. It has taken important steps to improve the quality of its statistics. The Bureau of Statistics (BoS) published a definitions and concepts manual in August 2013, which harmonized concepts and definitions with international standards. This operation’s indicator 13 aimed at having 14 line ministries using the harmonized concepts or definitions by 2016. This indicator was not made available to the Bank, because the progress is not regularly followed up by the BoS. Hence, the progress towards the harmonized concepts and definitions with international standards is considered to be on halt. Therefore, we consider this indicator not achieved. 44. In addition, the BoS has adopted in early 2014 the 2008 System of National Accounts methodology (trigger DPO2). Following the new methodology, the BoS has already incorporated the effects of innovation and R&D as well as the central bank’s output into the GDP estimation. The BoS has undertaken an Economic Census to get additional data needed to fully implement the 2008 Systems of National Accounts methodology. However, amendments to the Statistics Act of 2001 (trigger for DPO3) which will grant autonomy to the BoS, has not yet been submitted to Parliament. 45. The Government has already taken the first steps toward giving administrative autonomy to the Bureau of Statistics. The Government has, through its Ministry of Development Planning, submitted to the Ministry of Finance a FY 2013/14 Budget Framework Paper (BFP) for the Bureau of Statistics (Prior Action 5) and allocated resources to activities leading to its administrative autonomy. The BFP calls for: (i) reviewing the Statistics Council’s terms of reference to ensure the body’s appropriateness and relevance for governing an autonomous BoS; (ii) amending the Statistics Act 2001 to grant the BoS operational autonomy to enhance its effectiveness in managing and coordinating the country’s statistical activities; and (iii) reviewing and 15 The trigger for DPO2 was completed, that is, that through the Ministry of Social Development, the Government has increased coverage of NISSA reached through the CGP by an additional 10,000 households. 19 aligning all relevant laws of other agencies to make them consistent with the amended Statistics Act. 46. Most citizens lacked a national ID when this operation was launched. The only formal ID was a passport which was available to a very small number of people. This hindered targeting of service delivery and social transfers and access to credit, among other things. The national ID system is linked to the Credit Bureau since December 2014 and still is expected that it will be linked to the National Voter’s Registry, NISSA and the Health Service Database. This operation supported the establishment of a national ID system and aimed that a 100% of the population would have it by 2016 (Indicator 14). By April 2014, only 5 percent of the population were issued an ID. Two years later, information from April 2016 shows that 43 percent of the eligible population (16 years and above) have been issued National ID cards. The NPR has 58 percent of the population registered. The Government has recently procured 6 mobile registration units to help reach out to the rural areas. It is expected by the end of the current Lesotho’s financial year (March 31, 2017), there will be about 80% of the population into the NPR and about 60% to 70% of eligible population issued ID cards16. Although this indicator has been partially achieved (43%) the likelihood of achieving it in the next two years seems to be high. Furthermore, the priority is currently on Registration of Births and issuance of ID while the other variables, namely Registration of Marriages, Deaths, Divorce, Adoptions and Orphans are registered on a voluntary basis. The NPR is currently piloting registration of deaths in selected health facilities and they hope to roll out in all health centers and mortuaries soon. 3.3.Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory 47. With the program remaining highly relevant in terms of objectives, moderately relevant in terms of design and implementation, and moderately unsatisfactory for achievement of objectives, the overall outcome rating is moderately unsatisfactory 3.4.Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 48. The policy actions supported by this proposed operation were expected to have positive poverty and social impacts. Actions under Policy Area I, Improving Private Sector Competitiveness, were expected to lead to higher private-sector investment and growth in the medium and the long run. Hence, higher growth was expected to lead to an 16 Once the percent of population covered reached 50%, then trigger for DPO3 would be completed. Trigger for DPO2 was completed, that is to roll out the ID program and cover 10% of the population. 20 acceleration in poverty reduction. However, private sector investment appears to have fallen due to AGOA uncertainty, political instability, and lower global and regional growth prospects. Lesotho lacks reliable poverty estimates and the poverty statistics are based on estimated data. Based on the estimated data from the 2010/11 household surveys, there has been almost no progress in poverty and unemployment reduction, despite the considerable spending on social sectors and transfers. The latest data shows it at 57 percent of total population. 49. Policy actions under Policy Area II could have helped reduce poverty, however almost no progress was made. Therefore, the fiscal space needed to protect the social safety net program in case of an external shock was mostly absent. The financial management reforms would have allowed the Government to have a better control and management of its resources. Potential savings in the management of these resources could have been used to improve and expand services in rural areas where poverty is concentrated. 50. Policy actions under Policy Area III had positive social impact. The CGP had positive impact on food security, health and education according to a rigorous impact evaluation conducted in 2013-14 by Oxford Management Policy. While the CGP is an unconditional cash transfer, in practice beneficiaries receive a very effective messaging that the cash transfer should be spent on children, which was closely followed by beneficiary households. The CGP contributed to retaining children ages 13-17 in primary school, particularly boys who would have otherwise dropped out. It contributed to a 15 percentage point reduction (from a baseline of 39 percent) in the proportion of both boys and girls ages 0-5 who suffered from an illness (generally flu or cold) in the 30 days prior to the survey. The program reduced the number of months by 1.5 during which households experienced extreme food shortage, and the proportion of CGP households that did not have enough food to meet their needs at least for one month in the previous 12 months decreased by five percentage points. The CGP was not associated with a significant reduction in poverty rates amongst beneficiary households two years after the introduction of the pilot in the study areas, however beneficiaries’ welfare has improved and trends are encouraging.17 This DPO reforms were expected to be gender neutral. (b) Institutional Change/Strengthening 51. This operation strengthened the Cabinet Level Committee which was created to oversee the business environment. It brought to the attention of the Cabinet the importance of the initiatives to improve the business climate in Lesotho. The Deputy Prime Minister which was part of the previous government, still is part of this Committee. (c) Other Unintended Outcomes and Impacts 17 World Bank, September 2015. Draft PAD for Social Assistance Project, Report No: PAD1377. 21 52. The DPO supported one of the weakest areas in need for reform that is, procurement reform, through the establishment of the Procurement Tribunal. However, what was intended as a punctual reform went beyond what was envisioned. The creation of the tribunal changed the mentality of this unit, which started simple, but they went beyond their mandate by, for example, monitoring newspaper publication of bids. This led to the AFDB to become more engaged and pave the way to their support through an investment loan. 3.5. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Rating: High 53. The risk that developments outcomes will not be maintained or realized is high and is associated with three main risks: political, economic, and institutional. 54. On the political side, the main risk derives from the Government's ability to approve and complete implementation of the reform program, fiscal consolidation reforms. Lesotho’s first coalition government, which came into power in 2012, collapsed in 2014 amidst much turmoil, including the suspension of parliament and conflict among the security services. Despite early elections in February 2015 and a smooth transition to a new coalition government, tensions once again escalated a few months later, particularly within the army. In addition, opposition party leaders fled the country. Implementation of Lesotho’s National Strategic Development Plan 2012/13-2016/17 (NSDP) has stagnated in this environment, while disruptions in parliamentary procedures have delayed a number of legislative proposals. Business investment has slowed and, most recently, some development partners have expressed concerns that political and security developments could dampen their economic support for Lesotho. 18 The Bank has continued to maintain policy dialogue through its analytical works, investment operations, and coordination with other development partners.19 55. On the economic front, the main risk centers on Lesotho’s ability to respond in a timely manner to the current effects of reduced SACU revenue and other spillovers from South Africa’s slower growth. Lesotho’s shock-absorption capacity faces important limitations because of much reduced fiscal space. Without an appropriate fiscal adjustment, the magnitude and duration of the drop in SACU revenues would lead to unsustainable fiscal deficits, which would jeopardize debt sustainability and the 18 IMF, February 2016. Staff Report for Article IV Consultation. 19 When this DPO series was approved, the Bank had prepared a set of policy notes on the major reform areas that was delivered to the Government to assist them with their reform agenda. 22 maintenance of adequate international reserves. For Lesotho, the main transmission channels of the shock are likely to be the same as they were in the 2008 crisis. First, the United States and South Africa were Lesotho’s largest trade markets, and exports fell significantly. Second, workers’ remittances from abroad were about 30 percent of GDP, and 90 percent of them originated in South Africa. Like exports, they declined. Third, official development assistance was limited. In addition, there is a drought emergency currently in Lesotho. To reduce macroeconomic risk, the Government had committed to maintaining macroeconomic stability and Lesotho’s current stock of international reserves mitigates them temporarily. The Bank and other development partners, including the IMF, are providing analytical support and policy dialogue to aid the Government to face these shocks. The recent IMF Article IV conveys that there was broad Government agreement to undertake the necessary fiscal adjustment in steps, as recommended by Fund staff. However, recently, the EU has pulled out its budget support from Lesotho. 56. On the institutional side, the main risk stems from the weak capacity of Government institutions to implement the reform program. To reduce this risk, the Bank has been working with other donors to support the Government’s reform program through technical assistance and ongoing operations. In particular, the Lesotho-RSA Customs Collaboration Trust Fund was supporting technical assistance in implementing reforms aimed at improving trade facilitation, and the Technical Assistance to the National Information System for Social Assistance is supporting reforms aimed to strengthen the social safety net. The Bank’s Public Financial Management Reform Support Project aims to provide technical assistance for implementing reforms in public financial management and public procurement. Finally, the Second Private Sector Competitiveness Project is supporting the implementation of reforms aimed at improving private-sector competitiveness. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 57. The DPO supported the government’s reforms under the National Strategic Development Plan. The program supported three strategic goals of the NSDP: (i) pursue high, shared and employment creating economic growth; (ii) improve health, combat HIV and AIDS and reduce (social) vulnerability; and (iii) promote peace and democratic governance and build effective institutions. It also supported the CAS’s two of the three pillars: (i) fiscal adjustment and public-sector efficiency; and (ii) competitiveness and diversification. The DPO series was fully aligned with the Bank’s Africa Region Strategy. 58. The operation was underpinned by solid analytical work conducted by the Bank, IMF, and others. The substantial body of analytical work provided the basis for an in-depth dialogue with the Government and supported the design of the DPO series (see Table 2). 23 Continuous dialogue with the Lesotho authorities and development partners were carried out during preparation of the program. It was prepared within the joint framework of budget support developed under Government leadership supported by the EU and IDA. AfDB, WHO, UNICEF, UNAIDS, Irish Aid, and GTZ were not providing direct budget support, but they participated in the process. 59. The design of the operation applied lessons learned from the previous Poverty Reduction Support Credits series (FY2008-11). The lessons included the need to ensure that the operation: (i) exclusively supported Government-led initiatives; (ii) had strong analytical underpinnings and links to Bank investment lending; (iii) coordinated with donors effectively during project preparation and implementation; and (iv) had strong links to other Bank technical capacity and investment operations. With these lessons in mind, during preparation, and implementation, there was continued technical and policy dialogue with the authorities and their technical teams to try maintaining the country’s ownership and commitment. To avoid conflicting policy advice and provide a stronger voice in the policy dialogue with the Government, it was important to coordinate with the AfDB, IMF, EU, and other donors during program preparation and implementation. In a country with weak institutional capacity, the prior actions must be supported by a capacity building operation. Therefore, this operation was supported by Bank investment operations, trust funds, and technical assistance operations. Moreover, key pieces of Economic and Sector Work (ESW) and the Public Expenditure and Financial Accountability (PEFA) Reports helped shape the Government’s reform efforts and supported a fruitful policy dialogue. 60. The main shortcoming during preparation was the difficulty in choosing reforms that were thought to be the ones that could move forward with most success. On one hand, there was a very energetic new government that wanted to implement reforms. On the other hand, there were many new and inexperienced officials that could not deliver a reform package. The team struggled somewhat with the government in choosing reforms that were relevant and plausible to implement at the same time. (b) Quality of Supervision Rating: Moderately Unsatisfactory 61. Supervisor focused on monitoring the development of development objectives and outcome indicators. There were several economic monitoring missions in 2014 and 2015 that aided the follow up of this operation and preparation of the following one that never materialized. 20 Since the first quarter of calendar year 2014, there already was acknowledgement that Pillar 2 objectives were not been met. The ISR of April 2014 concluded that the operation had achieved moderately unsatisfactory results in general, and the objectives for Pillar 2 had not been met. The Bank maintained a continuous 20 Macroeconomic monitoring missions took place on the following dates: Jan 26-31, 2014; Feb 10-14, 2014; March 19-20, 2014; April 1-4, 2014. 24 dialogue with the authorities to try keep their engagement and commitment, but the political situation made it difficult to maintain the momentum. The continued engagement identified in time that the macro framework was not keeping up with previous commitments. Efforts to improve it were not successful given the political obstacles. As a result, this DPO series was cut short of initially programmed. The main shortcoming during supervision was the complicated political situation which did not allow the government to address the macroeconomic challenges, in particular, fiscal consolidation. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 62. Given that the Bank performance for quality at entry and quality of supervision is rated moderately unsatisfactory, the overall Bank Performance is rated moderately unsatisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 63. The Government failed to maintain macroeconomic stability, and therefore, jeopardized the attainment of the development objective to “improve the sustainability and efficiency of public spending through fiscal consolidation and public financial management and public procurement reforms�. The fiscal consolidation did not take place as envisioned at the launching of the DPO series. The prior actions, indicators and even the triggers for the operations were thought to be relatively easily attainable, but the Government failed in the macroeconomic arena and in attaining several of the indicators and envisioned triggers21. Nevertheless, the Government’s commitment to Pillar 1 and 3, were more robust and various development objectives related to the improvement of the private sector competitiveness and improvement of social protection were attained. Currently, the situation has not yet improved for re-engagement of the Bank through programmatic lending. Moreover, it has proven difficult to obtain information to assess some of the indicators despite efforts by the Bank to obtain answers from the authorities. Therefore, the Government performance is rated moderately unsatisfactory. 21 For example, trigger for DPO2 on the amendments to the Land Act of 2010 to facilitate the use of sub-lases did not materialized. In the Land Act 2010, the sub-lessees rights are still not in included in the Land Act 2010 as amended - inter alia is the recent High Court Judgement that has set precedence and entrenched the sublease's rights. Another example is the DPO2 trigger related to the publication of all tenders and contracts awarded above 1000,000 Maloti on the web or print media which has not been done yet. 25 (b) Implementing Agency or Agencies Performance (see Borrower Performance) (c) Justification of Rating for Overall Borrower Performance (see Borrower Performance) 6. Lessons Learned 64. There were three main lessons learned from this operation that could aid future ones and could have wider general application. Lesson 1. Future DPOs should chose indicators that support the objective of fiscal consolidation more directly and should address components of fiscal spending and revenues. If future DPOs support fiscal consolidation, then they should support structural reforms specifically aimed at cutting expenditures and mobilizing revenues. This DPO envisioned a fiscal consolidation framework but it did not provide the support needed to attain it. For example, Lesotho with a wage bill of 22 percent of GDP has one of the highest wage bills in the world, however there were no indicators on the wage bill. Recent evidence shows that the composition of fiscal spending is favoring recurrent expenditures as opposed to capital expenditures, which might have adverse consequences on long term growth potential of Lesotho. Lesson 2. Programmatic lending limited to no more than 2 year programs could give more flexibility to adjust the program to changing circumstances. Lesotho’s economy is very dependent on the external environment because of its dependence on SACU revenues and remittances. When faced with a more favorable environment, the government tends to relax fiscal conditions which leads to delays in the reform agenda. Lending that is limited to more than 2 year programs can help in adjusting to the changing political and external economic conditions. Lesson 3. In the context of Lesotho, which has low capacity of implementation, all operations should include capacity building or should be linked to other ones that provide it. Most critical is providing capacity building in the area of fiscal policy given the central role that fiscal consolidation plays in the sustainability of the countries macro- framework. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 65. GOL endorsed this ICR and noted the appreciation of the GOL for World Bank’s support in various development programs. (b) Cofinanciers- None 26 (c) Other partners and stakeholders- None 27 Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Macmillan Ikemefule Anyanwu Senior Country Officer SACAA Christian Yves Gonzalez Senior Economist AFCS1 Amador LCSPE - Carolina Biagini Majorel E T Consultant HIS Melis Ufuk Guven Senior Social Protection Econo GSPDR Fernando Gabriel Im Economist GMFDR Melanie Jaya Program Assistant AFCS1 Smita Kuriakose Senior Economist GTCDR Tuan Minh Le Senior Economist GMFDR Phindile Abigail Ngwenya Research Analyst GMFDR Pedro Olinto Program Leader LCC5C Gert Johannes Alwyn Van Der Lead Financial Management Spec GGODR Linde Supervision (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No. of staff weeks travel and consultant costs) Lending/ Supervision/ICR Total: 44.4 247,715.5 28 Annex 2: Beneficiary Survey Results Not applicable 29 Annex 3: Stakeholder Workshop Report and Results Not applicable 30 Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR Incorporated in the main text in Section 7. 31 Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders Not applicable 32 Annex 6: List of Supporting Documents World Bank, Doing Business Reports 2013, 2014, 2015 and 2016. World Bank, Doing Business Profile 2016. World Bank, April 2014 and June 2015. Lesotho Economic Update, Africa Poverty Reduction and Economic Management – AFTP1. World Bank, May 2014. Lesotho - Review of the National Information System for Social Assistance (NISSA), Report No. ACS14183. World Bank, December 17, 2013. Lesotho- ICR for Private Sector Competitiveness and Diversification Project, Report No. ICR00002957. World Bank, March 2016, Lesotho: Aid Memoire for Second Competitiveness and Economic Diversification Project. World Bank, September 29, 2015, Lesotho: Credit for a Social Assistance Project, Report No. PAD1377 World Bank, October 6, 2014. Letter to Minister of Development Planning and Minister of Finance from WB Country Director. World Bank, June 2, 2016, Country Partnership Framework, Report No. 97823-LS World Bank, June 25, 2015, Lesotho: Systematic Country Diagnostic World Bank (2013) LESOTHO: A Safety Net to End Extreme Poverty and World Bank (2015), A Lesotho: Review of Public Assistance and the OVC Bursary Scheme; and World Bank (2015), Lesotho Old Age Pensions Program Diagnostic. Aide memoire of Joint Annual Review of General Budget Support, March 31-April 1, 2014. UNCEF/EU, April 2014, Review of the National Information System for Social Assistance (NISSA) in Lesotho. Analysis of NISSA and current PMT, Carraro, L. and Marzi, M. (2014). IMF, various Article IV documents. 33 Annex 7: The Status of Prior Actions and Triggers Prior Actions Status The Government through its Ministry of Trade and Complete Industry, Cooperatives and Marketing, submitted the Industrial Licensing Bill 2012 to its Parliament. The Government has, through: (a) its Ministry of Complete Finance, submitted the revised Fiscal Year (“FY�) 2009/10 public accounts to the Office of the Auditor General; and (b) its Office of the Auditor General, published the audit report on the FY2008/09 public accounts. The Government has, through its Ministry of Finance, Complete established the Public Procurement Tribunal and appointed its members. The Government has, through its Ministry of Social Complete Development, developed and adopted the National Information System for Social Assistance (“NISSA�) and is piloting said NISSA through the Child Grants Programme. The Government has, through its Ministry of Complete Development Planning, submitted to the Ministry of Finance a FY 2013/14 Budget Framework Paper for the Bureau of Statistics. Triggers for DPO2 Status The Government through the Lesotho Land Authority Incomplete Administration has submitted to its Parliament amendments to the Land Act of 2010 to facilitate the use of sub-leases. In particular, the amendments will define the rights of a sub-lessee. The Government through the Ministry of Tourism, Complete Environment and Culture has issued regulations and guidelines to require environmental impact assessments only for construction projects in industries with high environmental risks. The Government, through its Ministry of Trade and Complete Industry, Cooperatives and Marketing, issued the regulations to implement the Industrial Licensing Bill and rolled out OBFC services in Maputsoe. The Government through its Lesotho Revenue Authority Complete has completed the Preferred Trader Program Pilot and reported on recommendations for implementation of the full scheme. The Government through its Ministry of Public Service Incomplete has reconciled the establishment list with the payroll in at least one ministry. The Government through the Office of the Auditor Complete General publishes the audit report on the FY2009/10 public accounts. The Government through its Ministry of Finance has Incomplete issued the regulations detailing responsibilities, procedures, controls and systems covering all stages of the budget cycle (as outlined in the PFM Act of 2011) and developed training needed to implement them. The Government through its Ministry of Finance Partially complete publicizes all tenders and contracts awarded above M100,000 on the web and in printed media. 34 Through its Ministry of Social Development, increase Complete the coverage of the NISSA reached through the Childs Grants Programme by an additional 5,000 households. The Government through the Bureau of Statistics has Complete published the Definitions and Concepts Manual and has adopted the 2008 System of National Accounts methodology. The Government through its Ministry of Home Affairs Complete has rolled out the National ID and covers at least 10 percent of the population. Triggers for DPO3 Status The Government through the Lesotho Land Authority Complete Administration has submitted to its Parliament the Sectional Titles Bill. The Government introduces streamlined procedures to Partially complete better integrate approvals from the various utility bodies prior to obtaining building permits from the Maseru City Council. The Government, through its Ministry of Trade and Partially complete Industry, Cooperatives and Marketing, submitted to its Parliament the Business Registration Bill. The Government started to roll out the Preferred Trader Complete Program and has adopted an Integrated Border Management Strategy. The Government through its Ministry of Public Service Incomplete has: i) reconciled the establishment list with the payroll in at least two additional ministries; and ii) adopted an action plan based on a study on civil service restructuring. The Government through the Office of the Auditor Complete General publishes the audit reports on the FY2010/11 and FY2011/12 public accounts. The Government has taken actions to implement the Complete recommendations of the Audit Report to the FY 2008/09 public accounts. Reconciled quarterly expenditure reports are produced Incomplete from IFMIS to monitor budgetary targets. The Government implements an annual mid-term budget Incomplete review. The Government through its Ministry of Finance Complete monitors the waivers that allow non-competitive bidding. The National ID System covers at least 50 percent of the Partially complete population. 35 MAP IBRD 33434R1 36 37