Country Portfolio Performance Review

1

27939

TANZANIA

COUNTRY PORTFOLIO PERFORMANCE REVIEW

April 3-4, 2003

The Government of Tanzania

The World Bank

1

Acronyms and Abbreviations

APL / Adaptable Program Loan/Credit
ASMP / Agriculture Sector Management Project
AWP / Annual Work Plan
CAS / Country Assistance Strategy
CO / Country Office
CPAR / Country Procurement Assessment Report
CPPR / Country Portfolio Performance Review
CSD / Civil Service Department
DCA / Development Credit Agreement
DO / Development Objectives
ERR / Economic Rate of Return
ESSD / Environmentally and Socially Sustainable Development Network
FIDP II / Second Financial Institution Development Project
FILMUP / Financial and Legal Management Upgrading Project
FMS / Financial Management Specialist
FY / Fiscal Year
GoT / Government of Tanzania
HDN / Human Development Network
HIPC / Highly Indebted Poor Countries
HNP / Health, Nutrition and Population
HQ / Headquarters
HSDP / Health Sector Development Project
ICR / ImplementationCompletion Report
IDA / International Development Association
IFMS / Integrated Financial Management System
IMWG / Inter-Ministerial Working Group
IP / Implementation Progress
IRP II / Second Integrated Roads Project
LACI / Loan Administration Change Initiative
LIL / Learning and Innovation Loan/Credit
LVEMP / Lake Victoria Environmental Management Project
M&E / Monitoring and Evaluation
MDAs / Ministries/Departments/Agencies
MOF / Ministry of Finance
MTEF / Medium Term Expenditure Framework
MTR / Mid-term Review
NAEP / National Agricultural Extension Project
OED / Operations Evaluation Department
PAD
PEDP / Project Appraisal Document
Primary Education Development Program
PER / Public Expenditure Review
PIP / Project Implementation Plan
PIU / Project Implementation Unit
PMO / Prime Minister’s Office
PMR / Project Management Reports
PREM / Poverty Reduction and Economic Management
PRBS / Poverty Reduction Budget Support
PRSC / Poverty Reduction Support Credit
PRSP / Poverty Reduction Strategy Paper
PSAC 1 / Programmatic Structural Adjustment Credit 1
PSD / Private Sector Development
PSR / Project Status Report
RBMSIIP
SAD / River Basin Management and Smallholder Irrigation Improvement Project
Sector Adjustment Loan/Credit
SAL / Structural Adjustment Loan/Credit
SASE / Selected Accelerated Salaries Enhancement
SIL / Specific Investment Loan/Credit
SIM / Sector Investment and Maintenance Loan/Credit
SOEs / Statement of Expenditures
SWAP / Sector Wide Approaches
TAL / Technical Assistance Loan/Credit
TAP / Tax Administration Project
TARP II / Second Tanzania Agricultural Research Project
TAS / Tanzania Assistance Strategy
TASAF / Tanzania Social Action Fund
TTLs / Task Team Leaders
UNDP / United Nations Development Program
WRM
WSS / Water Resource Management
Water Supply and Sanitation

TABLE OF CONTENTS

Page Number

Portfolio at a Glance vi

Portfolio Performance at a Glance vii

Portfolio Details at a Glance viii

Portfolio Performance Highlights ix

Graphical Representation of Portfolio Performance Highlights x-xi

Section I

CPPR Approach and Objectives 1

Introduction 1

CPPR Approach 1-2

Lessons Learned from Previous CPPR 2

Objectives of the April 2003 CPPR 2

Structure of the Report 2-3

Section II

Progress in Implementing the Plan of Action of the September 2000 CPPR 4

Annual Work Plans and Counterpart Funds 4

Implementation Lessons Learned 4-5

• Monitoring and Evaluation 5
• Role of the World Bank Country Office in Portfolio Management 5-6

Section III

Portfolio Fundamentals 7

Portfolio Size and Flows 7

Age and Composition 7-10

Cancellations 10

Distribution by Sector 11

Section IV

Portfolio Performance 12

Timely Project Start-ups/Effectiveness 12

Projects at Risk 12-13

Proactivity and Realism 13-14

Disbursements Performance 14-15

Financial Management 15-16

Environmental Performance 16-17

Management of Closing Date Extensions 18

Page Number

Section V

Track Record of Bank-assisted Projects in Tanzania (1991-2002 Exits) 19

• Key Indicators 19
• Achievement of Development Objectives 19
• Prospect for Sustainability 19
• Creation of Institutional Capacity 20-21
• Outcome, Sustainability and Institutional Capacity Creation 22
• Bank Performance 22
• Tanzania’s Performance 23

Section VI

Key Systemic/Generic Implementation Issues 24

• Project Management/Implementation Arrangements 24-25
• Project Implementation Unit Staff Salaries 25-26
• Efficient Management of Project Funds/Resources 26-27
• Portfolio Management Challenges Posed by Decentralization Program 27-28
• IDA’s Future Assistance Program 29-30
• Putting Existing Projects to Work to Combat the HIV/AIDS Scourge 30-31

Section VII

Action Plan for Addressing Systemic Portfolio Management Issues 32

ANNEXES:

Annex IProgress on the 2000 CPPR Agreed Action Plan

Annex II Project Profiles

Annex IIIProfiles of Projects in the FY03 Lending Program

TABLES

Table 1a Portfolio at a Glance

Table 1b Portfolio Performance at a Glance

Table 1c Portfolio Details at a Glance (Projects under implementation as of March 03, 2003)

Table 2 Portfolio Flows

Table 3 Age of the Portfolio

Table 4a Portfolio Distribution by Lending Instrument (Number of Operations)

Table 4bPortfolio Distribution by Lending Instrument (Committed Amount)

Table 5 Project Cancellations

Table 6 Portfolio Distribution by Sector

Table 7 Portfolio Performance Trends (FY98-02)

Table 8 Portfolio Management Indicators (FY98-02)

Table 9 Timeliness of Audit Reports Received

Table 10 Number of Projects by Age (FY98-02)

Table 11 Key OED Indicators

FIGURES

Figure 1Problem Projects, Projects at Risk, and Commitments at Risk

Figure 2Proactivity and Realism Indexes

Figure 3Disbursement Ratio

Figure 4Achievement of Development Objectives

Figure 5Prospect for Sustainability

Figure 6Creation of Institutional Capacity

Figure 7Outcome, Sustainability and Institutional Capacity Creation

Figure 8Bank Performance

Figure 9GoT’s Performance

BOXES

Box 1Portfolio Performance Highlights

Box 2Graphical Representation of Portfolio Performance Highlights

Table 1a: Portfolio at a Glance

As of June 30, 2002
Amounts in US$ Million
Project /

Originally

/ FY 02 /

Undisbursed

Committed /

Disbursement

/ Balance

ESSD

/ 131.70 / 61.56 / 60.53
Lake Victoria Environment Project / 10.10 / 8.79 / 0.46
National Agric. Extension Project II / 31.10 / 23.49 / 5.05
River Basin Management Project / 26.30 / 17.14 / 7.01
Tanzania Agric. Research Project II / 21.80 / 11.73 / 9.21
Forest Conservation Managt. Project / 31.10 / 0.00 / 32.60
Lower Kihansi Env. Managt. Project / 6.30 / 0.41 / 6.20
Infrastructure / 560.20 / 198.22 / 283.63
Railways Restructuring Project / 76.00 / 64.29 / 2.52
Second Integrated Roads Project / 170.20 / 53.50 / 44.77
Urban Sector Rehabilitation Project / 105.00 / 72.64 / 23.92
Songo Songo Gas Dev. & Power Gen. / 183.00 / 7.79 / 184.85
Rural Water Supply and Sanitation / 26.00 / 0.00 / 27.57
Finance and PSD / 171.60 / 39.93 / 125.37
Financial Institutions Dev. Project II / 27.50 / 9.07 / 17.93
Privatization and PSD Project
Public Service Reform Project / 45.90
41.20 / 9.03
7.64 / 34.82
31.93
Rural and Micro-finance Services Proj. / 2.00 / 0.43 / 1.55
Tax Administration Project / 40.00 / 10.01 / 27.75
Regional Trade Facilitation / 15.00 / 3.75 / 11.39
HDN / 252.90 / 87.63 / 168.33
Health Sector Development Program / 22.00 / 6.50 / 14.72
Human Resource Development Program / 20.90 / 17.24 / 2.52
Primary Education Dev. Program / 150.00 / 50.00 / 105.23
Tanzania Social Action Fund / 60.00 / 13.89 / 45.86
PREM / 190.00 / 67.04 / 118.68
PSAC 1 / 190.00 / 67.04 / 118.68
TOTAL / 1,306.40 / 454.38 / 756.54

Table 1b. Portfolio Performance at a Glance

FY 98 / FY99 / FY00 / FY01 / FY02

Active Portfolio

Number of Projects / 21 / 18 / 21 / 18 / 22
Net Commitments (US$m) / 1,298 / 1,066 / 1,207 / 907 / 1,233
New Commitments (US$m) / 43 / 40 / 329 / 75 / 396
Opening Undisbursed Balance (US$m) / 788 / 590 / 435 / 572 / 571

Closed Projects

/ 2 / 4 / 3 / 3 / 1

Portfolio Performance

Problem Projects (#) / 5 / 1 / 1 / 0 / 1
Problem Projects (%) / 24 / 6 / 5 / 0 / 5
Projects at Risk (#) 1/ / 6 / 2 / 1 / 1 / 1
Projects at Risk (%) 1/ / 29 / 11 / 5 / 5 / 5
Commitments at Risk (US$m) 1/ / 711 / 106 / 31 / 41 / 31
Commitments at Risk (%) 1/ / 55 / 10 / 3 / 5 / 3
Total Disbursements (US$m) / 148 / 148 / 116 / 93 / 166
Disbursement Ratio (%) 2/ / 15 / 20 / 28 / 19 / 19
Proactivity Index (%) 3/ / 20 / 100 / 100 / 100
Realism Index (%) 4/ / 83 / 50 / 100 / 0 / 100

Development Impact

Number of OED evaluated projects

/ 2 / 4 / 3 / 4 / 1

Percent rated satisfactory

/ 100 / 75 / 100 / 100 / 100

Overdue Audit Reports

Percent not received by due date

/ 17 / 34 / 55 / 71

Number of Overaged Projects 5/

/ 3 / 3 / 5 / 1 / 2

Undisbursed Balance for Overage Projects (US$m)

/ 18.5 / 8.4 / 47.3
Data as of June 30
Definitions:
1/Includes problem projects (i.e. with unsatisfactory Implementation Progress (IP) and/or Development Objective (DO) ratings) and potential problem projects (i.e. at risk of not meeting DO and/or IP).
2/ Ration of the disbursements during the year to the undisbursed balance of the Bank’s portfolio at the beginning of the year for investment projects only.
3/ Proactivity is defined as [# of projects that were problem projects 12 months ago, but for which proactive actions have been taken within the year] / [# of projects that were problem projects 12 months ago].
4/ Realism is defined as [# of Projects rated as problem projects]/[#of Projects rated at Risk]. Problem projects have DO or IP rated unsatisfactory. Projects at risk include both problem projects and potential problem projects.
5/ Investment projects 8 years and older. Adjustment projects 3 years and older.

Table 1c: Portfolio Details at a Glance

IDA Projects Under Supervision (As of March 03, 2003)

(Amounts in US$ Million)

ESSD

/ 4.6 / 131.7 / 55.9 / 73.3
Lake Victoria Environment Project / 07/30/1996 / 06/30/2004 / 6.6 / 15.1 / 3.9 / 10.8 / HS / HS

National Agric. Extension Project II

/

07/11/1996

/

12/31/2002

/

6.6

/

31.1

/

2.5

/

26.1

/

S

/

S

River Basin Management Project / 07/11/1996 / 12/31/2003 / 6.6 / 26.3 / 4.8 / 19.5 / S / S
Tanzania Agric. Research Project II / 01/29/1998 / 06/30/2003 / 5.1 / 21.8 / 6.3 / 14.8 / S / S
Forest Conservation Managt. Project / 02/26/2002 / 12/31/2007 / 1.0 / 31.1 / 32.3 / 1.4 / S / S
Lower Kihansi Management Project / 07/03/2001 / 12/31/2006 / 1.7 / 6.3 / 6.1 / 0.7 / S / S
Infrastructure / 4.5 / 420.7 / 264.9 / 158.7
Second Integrated Roads Project / 04/07/1994 / 06/30/2004 / 8.9 / 106.7 / 38.5 / 61.0 / S / S
Urban Sector Rehabilitation Project / 05/23/1996 / 06/30/2004 / 6.8 / 105.0 / 19.2 / 78.0 / S / S
Songo Songo Gas Dev. & Power Gen. / 10/09/2001 / 03/31/2006 / 1.4 / 183.0 / 179.9 / 18.6 / S / S
Rural Water Supply Project / 03/20/2002 / 06/30/2006 / 0.9 / 26.0 / 27.3 / 1.1 / S / S
Finance and PSD / 3.2 / 171.6 / 120.1 / 49.9
Financial Institutions Dev. Project II / 08/31/1999 / 12/31/2003 / 3.5 / 27.5 / 16.0 / 11.5 / S / S
Privatization and PSD Project / 12/14/1999 / 09/30/2004 / 3.2 / 45.9 / 32.3 / 12.7 / S / S
Public Service Reform Project / 12/02/1999 / 12/31/2004 / 3.3 / 41.2 / 31.8 / 8.8 / S / S
Rural and Micro-finance Services / 08/26/1999 / 12/31/2003 / 3.5 / 2.0 / 1.2 / 0.9 / S / S
Tax Administration Project / 03/30/1999 / 12/31/2004 / 3.9 / 40.0 / 26.4 / 12.2 / S / S
Regional Trade Facilitation / 04/03/2001 / 06/30/2011 / 1.9 / 15.0 / 11.8 / 3.8 / U / U
HDN / 3.0 / 252.9 / 151.8 / 159.1
Health Sector Development Program / 06/15/2000 / 12/31/2003 / 2.7 / 22.0 / 9.7 / 11.9 / S / S
Human Resource Development Program / 10/07/1997 / 12/31/2005 / 5.4 / 20.9 / 1.9 / 17.9 / S / HS
Primary Education Dev. Program / 10/09/2001 / 10/31/2004 / 1.4 / 150.0 / 108.7 / 50.0 / S / S
Tanzania Social Action Fund / 08/22/2000 / 06/30/2005 / 2.5 / 60.0 / 31.5 / 29.4 / S / S
PREM / 2.7 / 190.0 / 81.7 / 107.6
PSAC 1 / 06/15/2000 / 06/30/2003 / 2.7 / 190.0 / 81.7 / 107.6 / S / S
TOTAL / 1,166.9 / 674.4 / 548.6

DO = Development Objective

IP = Implementation Progress

S = Satisfactory

U = Unsatisfactory

HS = Highly Satisfactory

Box 1: Portfolio Performance Highlights

The quality of the portfolio is good (95% of the portfolio was rated satisfactory at the end of FY02, down from 100% in FY01).

• The number of projects in extended problem status declined from 5 in FY98 to zero in FY02.

• Commitments at risk declined from 55% to 3% of the portfolio between FY98 and FY02.

• Number of projects at risk declined from 29% to 5% of the portfolio between FY98 and FY00 and has been maintained at that level to date.

• Proactivity index has been maintained at 100% between FY99 and FY01 while Realism index improved from 50% in FY99 to 100% in FY00. Realism index declined to 0% in FY01and then rose again to 100% in FY02.

• Total disbursements declined from US$150 million in FY00 to US$93 million in FY01 and then increased to US$166 million in FY02. Disbursements on the investment portfolio declined from US$124 million in FY00 to US$63 million in FY01 and then rose to US$128 million in FY02.

• Disbursement ratio (ratio of disbursement during the year to the undisbursed balance of the portfolio at the beginning of the year for investment projects only) fell from 28% in FY00 to 19% in FY01. The ratio remained at 19% in FY02. This rate is slightly below that of the Africa Region and Bank average. Two out of the 22 projects in the portfolio have disbursement flags.

• Tanzania has maintained a notable performance in fiduciary compliance since FY98. The number of audit reports received in the fiscal year in which they were due showed a significant improvement (96% in FY02 up from 92% in FY00 and 69% in FY98). However, a large number of the audit reports received in the fiscal year in which they were due were not received by due date. 29% of the reports were received on time in FY02 (down from 83% in FY99) compared to 46% for the Africa Region.

• Four projects were closed between FY01 and FY02 and seven new projects were approved during that period. Total commitments against the seven projects were US$471.40 million.

• A growing number of portfolio functions (procurement approval up to a given threshold, financial management, task responsibility for some projects) are being managed from the Country Office.

• Regular Country Office meetings with GoT, project coordinators and other project staff are held to discuss project management issues.

• Significant gains have been made in the share of completed projects with satisfactory outcomes (according to OED ratings). Seventy percent of IDA disbursements to Tanzania in favor of projects that exited the portfolio between 1991 and 2002 met their development objectives. The percentage rated satisfactory in more recent years increased from 75 in FY99 to 100 in FY00 through FY02.

Box 2: Graphical Representation of Portfolio Performance Highlights

Figure 1: Problem Projects, Projects at Risk, and Commitments at Risk

Figure 2: Proactivity and Realism Indexes

Figure 3: Disbursement Ratio

1

Section I: CPPR Approach and Objectives

Introduction

1.The Bank disbursed about US$1,644 million of IDA resources to Tanzania through projects and operations that exited the portfolio between 1991 and 2002. It has greatly expanded its support – both financial and knowledge sharing – to the country. New commitments in the last fiscal year (FY02) amounted to US$396 million. The Bank’s net commitment to Tanzania at the beginning of FY03 was US$1,233.0 million (second highest, after Ethiopia, in the Africa Region of the Bank). One of the challenges for both the Government of Tanzania (GoT) and the Bank is to ensure that this momentum is maintained, followed through on project implementation, on disbursements, and on dialogue with all stakeholders.

2.With a total commitment of US$1,301.40 million and an undisbursed balance of US$756.54 million of IDA resources in 22 operations/projects spread across many sectors at the close of FY02 (Table 1a), effective implementation of the portfolio remains the Bank’s single biggest opportunity to impact the lives of the people in Tanzania. The need for both the GoT and the Bank to manage this portfolio more pro-actively cannot be overemphasized. A number of key systemic portfolio management issues have been identified for discussion during the April 2003 Country Portfolio Performance Review (CPPR) to ensure a successful implementation of the portfolio. These issues have been identified through consultations with officials of Ministry of Finance (MOF), sector ministries, departments and agencies (MDAs), project staff (Project Coordinators, Procurement Officers, and Project Accountants) and Task Team Leaders.

3.The last CPPR was held in September 2000. While focusing on key implementation issues, it specifically:

(a)assessed the progress made in portfolio management since the previous CPPR and provided details on status of the portfolio;

(b)took stock of some current issues affecting project implementation and proposed measures to address them; and

(c)sought to reach agreement on a portfolio improvement plan and also proposed measures to improve quality at entry.

CPPR Approach

4.Building on the last CPPR, the April 2003 review continues the effort being made at transforming the CPPR to a more open and forward-looking process. Focus on individual projects and their current problems is minimal. Instead, there is a special annex on project profiles (Annex II) with brief write-ups on each project in the portfolio, putting each project in its sectoral context and focusing on the project’s development objectives; components and activities; key issues and challenges for the Government, the Bank, and other stakeholders; and the way forward. The CPPR also focuses on GoT and Bank performance in key portfolio management areas. Further, it compares Tanzania’s portfolio performance to that of the Africa Region and Bank-wide averages using selected key performance indicators. For the first time in the history of CPPRs in Tanzania, this CPPR includes a review of the track record of Bank-assisted projects in the country, focusing on their outcomes, sustainability, and institutional development impact and assesses Bank and GoT performance. In addition to covering core issues of portfolio performance, the CPPR focuses on sectoral portfolio issues and examines the directions that IDA’s future assistance program should take as well as modalities for delivering that program. The discussion document also includes a brief profile of projects in the FY03 lending program (Annex III). As agreed at the last CPPR meeting, other development partners who are also co-financiers in Bank-funded projects will be involved in the April CPPR meeting.

Lessons Learned from Previous CPPR

5.In the past, emphasis has been on physical implementation of individual projects. While the April 2003 CPPR will continue to review the core area of portfolio implementation performance, it will also attempt to draw closer attention to linkages between project implementation (process and outputs) and expected development impacts/outcomes. In light of ongoing efforts aimed at harmonization of procedures and reducing transaction cost to GoT, a number of other development partners will be invited to this CPPR.

Objectives of the April 2003 CPPR

6.The primary objective of the April 2003 CPPR is to identify critical factors constraining a fuller and sustainable achievement of the development impact of IDA’s assistance to Tanzania and to agree on a realistic action plan to remove the key constraints. Specifically, the goals of the CPPR are to:

(a)assess progress in implementing the plan of action of the September 2000 CPPR;

(b)review status of the FY02 portfolio[1];

(c)review track record of Bank-assisted projects/operations in Tanzania in achieving their intended results on the ground at the country level;

(d)discuss key systemic/generic implementation issues including directions of IDA’s future assistance program; and

(e)agree on an action plan and timetable for resolving identified issues.

Structure of the Report

7.The report is divided into seven sections. Section I outlines the CPPR approach and objectives; Section II reviews progress made in implementing the plan of action of the last CPPR; Section III outlines the portfolio fundamentals including size and flows, age and composition, cancellations, and distribution by sector; Section IV assesses the FY02 portfolio performance; Section V reviews track record of Bank-assisted projects in Tanzania that exited the portfolio between 1991 and 2002; Section VI describes selected key systemic portfolio management issues to be discussed during the April 2003 CPPR; and Section VII will outline action plan and timetable for resolving identified issues. Section VII will be completed after the April 2003 CPPR meeting.

Section II: Progress in Implementing the Plan of Action of the September 2000 CPPR

8.The September 2000 CPPR identified four crosscutting issues constraining portfolio performance. The agreed plan of action focused on the four issues. These were:

• Annual Work Plans and Counterpart Funds,
• Implementation Lessons Learned,
• Monitoring and Evaluation, and
• Role of the World Bank Country Office in Portfolio Management.

Specific actions were agreed on each of the four areas. Both the GoT and the Bank have done considerable work since the September 2000 CPPR in implementing agreed actions. Overall, good progress has been made in implementing the agreed actions. However, there are some areas where the agreed actions were not fully implemented. Progress on the 2000 CPPR action plan is summarized below. Further details are given in Annex I.

Annual Work Plans and Counterpart Funds

9.An agreed format for annual work plans (AWPs) was developed with support from the Bank’s Country Office staff. AWPs are now prepared for all projects (even though there is variation in quality) before Budget time not only for budget purposes, but also as an implementation tool. GoT now issues budget guidelines by February.

10.A pilot basket fund for counterpart fund requirements was not established to minimize cash-flow constraints imposed by the cash-budgeting system as agreed. However, good progress has been made in providing counterpart funds on a timely basis, especially during this fiscal year (FY03). That not withstanding, there are still some cases where late release of and/or inadequate counterpart funds continue to constrain project implementation. Songo Songo Gas Development and Power Generation Project is an example of a project where lack of Ministry of Energy and Minerals counterpart funding has been a significant unresolved issue despite being addressed by a March 2002 supervision mission. Only Tshs. 25 million, an amount that is significantly below the estimated budgetary requirements, has been made available.