75744 v1 Document of The World Bank FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FINANCIAL AND LEGAL SECTOR TECHNICAL ASSISTANCE PROJECT CREDIT NO. 39920 {BOARD APPROVAL DATE} OCTOBER 14, 2004 TO THE REPUBLIC OF KENYA DATE OF RESTRUCTURING February 25, 2013 FINANCIAL SECTOR AFRICA REGION Restructuring Status: Draft Restructuring Type: 1. Basic Information Project ID & Name P083250: Financial & Legal Sec TA Country Kenya Task Team Leader Yira Mascaró Sector Manager/Director Irina Astrakhan Country Director Johannes C.M. Zutt Original Board Approval Date 10/14/2004 Original Closing Date: 03/31/2010 Current Closing Date 03/31/2013 Proposed Closing Date [if applicable] EA Category C-Not Required Revised EA Category N/A EA Completion Date Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 2.00 N/A DFID 10.00 N/A IDA 18.00 N/A Total 30.00 N/A 3. Borrower Organization Department Location Government of the Republic of Kenya Kenya Office of the Deputy Prime Kenya Minister and Ministry of Finance 4. Implementing Agency Organization Department Location 2 5. Disbursement Estimates (US$m) Actual amount disbursed as of 02/25/2013 10.43 Fiscal Year Annual Cumulative 2013 7.50 18 Total 18 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select N from the checklist below and update ISDS accordingly before submitting the package. 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes The overall development objective of the project is to create a sound financial system and strengthened legal and judicial capacity that will ensure broad access to financial and related legal services. 7b. Revised Project Development Objectives/Outcomes [if applicable] 3 Reallocation of Proceeds KENYA – FINANCIAL AND LEGAL SECTOR TECHNICAL ASSITANCE PROJECT P083250 CREDIT NO. 39920 Restructuring Paper 1. The project was approved on October 14, 2004 and became effective on June 30, 2005. The original credit amount was SDR 12.2 million, equivalent to US$18 million, with DFID providing an additional US$10 million equivalent and the Borrower providing an additional US$2 million equivalent. Total project funding is US$30 million equivalent. The first restructuring was made on February 29 2010 and September 30 2011. 2. This restructuring includes the following items, with the revisions reflected in the table below: (i) An increase in the special account ceiling from US$ 2 million to US$ 4 million; (ii) Re-allocation of funds among expenditure categories; (iii) Upward revision of the percentage of expenditures to be financed by the IDA Credit in the Development Credit Agreement (DCA), once UK Department for International Development (DFID funds are exhausted. Proceeds for Kenya – Financial and Legal Sector Technical Assistance Project, (Credit No. 39920, P08325) will be as follows: Category Current - Current - Revised - Revised - Amount of the Percentage of Amount of the Percentage of Credit Expenditures Credit Expenditures to Allocated to be Allocated be Financed (Expressed in Financed (Expressed in (inclusive of SDR (inclusive of SDR Taxes) Equivalent) Taxes) Equivalent) (1) Goods & 3,970,000 67% 5,280,000 67%; once DFID Equipment funds are fully utilized, 100% (2) Consultant 4,010,000 62% 4,650,000 62%; once DFID Services funds are fully including Audit utilized, 100% 4 (3) Training 1,930,000 60% 1,750,000 60%; once DFID and Workshops funds are fully utilized, 100% (4) Operating 1,090,000 53% 466,184 53%; once DFID Costs funds are fully utilized, 100% (5) Refunding 500,000 Amount due 53,816 Amount due of PPF pursuant to pursuant to Section Section 2.02 (b) 2.02 (b) of this of this Agreement Agreement (6) Unallocated 700,000 0 TOTAL 12,200,000 12,200,000 AMOUNT 3. Brief summary of project implementation progress: (i) As of February 13, 2013, out of the US$18 million IDA Credit (excluding exchange rate gains), US$10.43 million are disbursed (US$20.2 million for IDA, DFID and GoK) and US$7.5 million committed (including a number of ICT activities and goods), with a US$3.4 million contract (and 3 other smaller contracts) recently signed. The need to adjust the percentage of expenditures is required explicitly to be able to pay for this large contract, which under existing co-financing arrangements would not be possible. Please note that by contract, the goods and services will be delivered before March 31, 2013. (ii) The project’s performance in achieving the PDOs has been satisfactory and project implementation has benefited from the restructuring processes. The Recipient, DFID and the IDA project team are in agreement that despite the project’s structural complexities: (i) a large and critical set of activities has been completed with recognized impact by all implementing agencies, (ii) substantial progress has been made towards achievement of objectives, and (iii) all crucial activities planned are now under implementation (with the exception of one ICT related activity, which will not be completed). 4. The rational for the proposed reallocation is to facilitate completion of project activities and substantial achievement of development objectives by removing constraints related to the project’s co-financing structure reflected in the legal agreement. With DFID funds close to being depleted, and the GoK’s contribution exhausted, reallocating and increasing the portion financed by the IDA Credit, and increasing the special account ceiling, would allow for the full implementation of ongoing activities that were deemed crucial for the achievement of objectives. This notably includes the finalization of the automation and modernization of supervisory processes of all financial sector supervisors, as well as activities related to the legal sector. 5