Afghanistan Reconstruction Trust Fund Public Disclosure …documents.worldbank.org/curated/en/117741467994659827/... · 2016-07-08 · Donor Contributions: This report presents the

With Pledged Support From:

Afghanistan Reconstruction Trust Fund Annual Report to Donors

Annual Report

for the Afghan Fiscal Year 1386 March 20, 2007 to March 19, 2008

Prepared by the Administrator (The World Bank)

ARTF Management Committee: Asian Development Bank, Islamic Development Bank,

United Nations Development Programme, World Bank

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ARTF Annual Report SY 1386 (March 20, 2008)

CURRENCY EQUIVALENT

(Effective March 19, 2008) Currency Unit = Afghani (AFN)

US$ 1 = 49.95 AFN

GOVERNMENT’S FISCAL YEAR (SY1386 ) March 21, 2007 - March 20, 2008

Solar Year Period SY 1381 March 21, 2002 – March 20, 2003 SY 1382 March 21, 2003 – March 19, 2004 SY 1383 March 20, 2004 – March 20, 2005 SY 1384 March 21, 2005 – March 20, 2006 SY 1385 March 21, 2006 – March 20, 2007 SY1386 March 21, 2007 – March 20, 2008 SY 1387 March 20, 2008 – March 20, 2009

Contact Information for the ARTF

World Bank Kabul Office Street 15, House 19 Wazir Akbar Khan Kabul, Islamic Republic of Afghanistan Telephone: 0700-27-60-02

Mariam Sherman – Country Manager - [email protected] Hugh Riddell – ARTF Coordinator – [email protected] Paul Sisk – Task Team Leader, Recurrent Cost Financing - [email protected] Ludmilla Butenko – Operations Advisor, Investment Financing - [email protected] N. K. Thondaiman – Financial Management Analyst – [email protected] For additional information: http://www.worldbank.org/artf


ABBREVIATIONS AND ACRONYMS

AEP Afghan Expatriate Program AFMIS Afghanistan Financial Management Information System AFN Afghanis – Local Currency of Afghanistan AISA Afghanistan Investment Support Agency ARDS Afghanistan Reconstruction and Development Services ARTF Afghanistan Reconstruction Trust Fund CAWSS Central Authority for Water Supply and Sewerage CDC Community Development Council CDP Community Development Plan DAB Da Afghanistan Bank EQUIP Educational Quality Improvement Program FS Fiduciary Standards GoA Government of Afghanistan IARCSC Independent Administrative Reform and Civil Service Commission IDA International Development Association IMF International Monetary Fund KfW Kreditanstalt für Wiederaufbau LEP Lateral Entry Program MA Monitoring Agent MC Management Committee MCP Management Capacity Program MDG Millennium Development Goal MEW Ministry of Energy and Water MFI Microfinance Institution MISFA Microfinance Investment and Support Facility for Afghanistan MoC Ministry of Communication MoE Ministry of Education

MoF Ministry of Finance MoFA Ministry of Foreign Affairs MoPW Ministry of Public Works MTFF Medium-Term Fiscal Framework MRRD Ministry of Rural Rehabilitation and Development MUDH Ministry of Urban Development and Housing NEEP National Emergency Employment Program NEEPRA National Emergency Employment Project for Rural Access NGO Non-Governmental Organization NPBSE Non-pension-based Salary Expenditure NPP National Priority Program NRAP National Rural Access Program NRVA National Risk and Vulnerability Assessment NSP National Solidarity Program O&M Operations and Maintenance PAM Performance Assessment Matrix PBSE Pension-based Salary Expenditure PFEM Public Finance and Expenditure Management PFM Public Financial Management PPU Procurement Policy Unit PRR Priority Reform and Restructuring SOE Statement of Expenditures TAFS Technical Assistance and Feasibility Studies TSA Treasury Single Account UNAMA United Nations Assistance Mission in Afghanistan UNDP United Nations Development Program UNOPS United Nations Office for Project Services USAID United States Agency for International Development WB World Bank


TABLE OF CONTENTS

Administrator’s Statementi I. Summary of ARTF Activities in SY 1386………………………………………………………. 1 II. The ARTF in Relation to the Budget and Flow of Funds………………………………………4

III. ARTF Development Impact and Performance Assessment Matrix…………………………....8 Rural Development…………………………………………………………………………………9 Human & Institutional Capacity…………………………………………………………………..19 Economic Infrastructure…………………………………………………………………………. 23 Performance Assessment Matrix………………………………………………………………….25 IV. The ARTF Recurrent Cost Financing…………………………………………………………. 29 ANNEXES ANNEX 1: Status of Active Investment Portfolio………………………………………………………37

ANNEX 2: Recurrent Cost Financing…………………………………………………………………...61

ANNEX 3: ARTF Financial Tables……………………………………………………………………...69



1

I. SUMMARY OF ARTF ACTIVITIES IN SY1386 Donor Contributions: This report presents the Afghanistan Reconstruction Trust Fund’s (ARTF) financial and implementation status for SY1386 which ended March 19, 2008. Donors paid in US$634 million during the solar year, an increase of 40 percent on SY1385. Since inception in 2002, donors have contributed a total of US$2.3 billion to the ARTF. Increased contributions have been driven mainly by increased preferencing for specific investment projects (see figure 1).

Commitments: Given in-creased contributions, the ARTF Management Commit-tee considered and approved a greater volume of investments than in previous years. In addition to ARTF’s financing of the operating budget of US$291 million1, ARTF allocated US$311 million to the government’s priority national programs (the “investment window”). This represented almost a three-fold increase on SY1385. All investments were included in

SY1386 budget and were therefore in line with national strategy. Disbursements: ARTF operations use—and thereby seek to strengthen—the government’s public financial management systems. Disbursements continue to be smooth: this year, US$521 million was disbursed in total, of which US$226 million was for investments, US$291 million was for the operating budget and US$5 million was for fees for the Monitoring Agent. Figures 2 and 3 lay out the cumulative picture of both the recurrent and investment windows. Allocations to the recurrent window took place in four tranches throughout the year. In the investment window, allocations took place in five tranches. Disbursements against eligible expenditures were ongoing through the year.

Figure 2: SY1386 Cumulative Financing of Recurrent Costs, US$ m

Figure 3: SY1386 Cumulative Financing of Investments, US$m

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Note: does not include closed investment projects

1 This amount includes US$276 million agreed with government plus US$14.55 million that were SY1385 expenditures carried over to SY1386 for reimbursement.

Figure 1: Donor contributions SY1381-SY1386, US$m

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1381 1382 1383 1384 1385 1386

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2

Overview of the portfolio2: Figure 4 presents the overview of the investment portfolio in terms of year on year disbursements (bars) and commitments (line). The figure demonstrates the consistent growth of the portfolio over the six years of the ARTF. It also highlights that the ARTF has enabled a major scale-up in the rural development sector, which have been able to absorb and disburse funding effectively. The National Solidarity Program and the National Microfinance Program have together received the majority of investment funds to date. The results of these projects are explored in the next section. Baseline analyses and impact analyses are either underway or completed for both projects.

Figure 4: ARTF Disbursements and Commitments SY1381 – 1386 (US$m)

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Kabul-Aybak/Mazar-e-Sharif Pow er ProjectNaghlu Hydropow er PlantRural w ater supply & sanitationKabul Roads and Drainage SystemStrengthening Financial Capacity of the GovtTelecom & Microw ave LinkKabul pow erEQUIPCivil service capacity buildingTAFSUrban w ater supply & sanitationKabul-Aybak/Mazar-e-Sharif Pow er ProjectNRAPMicrofinanceNSPCommitments

Note: includes both active and closed investment projects. Figure 5 sets out the composition of the active investment portfolio. As at March 19, 2008, there were 11 active projects in the portfolio with total investment of US$491 million. As noted above, just over two thirds of the portfolio’s commitments are in the rural development sector. However, it should be noted that at the end of SY1386, the Management Committee (MC) approved a US$57 million allocation for power distribution and a US$27 million allocation for the justice sector. Once these amounts are effective in early SY1387 they will increase the respective sector weightings of economic infrastructure and human and institutional capacity considerably. Figure 5 also underscores the different implementation status of the sectors. In rural development, commitments are 90 percent disbursed already. However, in both the human and institutional capacity sector, as well as in economic infrastructure, portfolio implementation is at an earlier stage, with projects still establishing implementation capacity in government agencies. Generally speaking, uneven implementation capacity is reflected in the ARTF portfolio. Weak coordination, lack of administrative clarity, procurement delays and budget allotment problems slowed implementation on some ARTF-financed projects, particularly in the infrastructure/power sector. On the other hand, rural development programs reflect stronger implementation performance, despite greater insecurity in some rural areas. Formal reviews of investment projects are generally conducted at least twice annually by the Administrator. Supervision reports and related communications are shared with ARTF donors upon request. Sometimes, supervision missions are conducted jointly between the Bank and donor teams. Insecurity continues to hamper implementation of many projects. The Administrator’s policy is to continue to fund activities where implementing partners are able to operate. Ministries are flexibly reordering priorities toward districts where implementation is possible.

2 See Annexes I and II of this Annual Report for more detail.


3

A satisfactory annual audit of project financial statements by the Auditor General of Afghanistan, with the support of an Audit Advisor, is required to be completed within six months of the end of each fiscal year during which the project is disbursing. FY2007 (SY1385) audits for all ARTF-financed projects have been received and the findings are being reviewed and discussed by the Administrator.

Figure 5: Composition of ARTF (active) Investment Financing (as of March 19, 2008)3

ProjectsTotal Allocation

US$ millionDistribution

% Disbursement

US$ million Disbursement

% Human & Institutinal Capacity 73.50 15% 34.22 47%

TF050970 - Technical Assistance Feasibility Studies 18.50 4% 15.61 84%TF090077 - Management Capacity Program 10.00 2% 0.00 0%TF053940 - Civil Service Capacity Building 13.00 3% 11.61 89%TF054730 - Education Quality Improvement 32.00 7% 7.00 22%

Rural Development 348.62 71% 308.59 89%TF050973 - National Emergency Rural Access Program 52.82 11% 51.94 98%TF052452 - Microfinance Program 119.30 24% 119.11 100%TF053939 - National Solidarity Program 171.50 35% 136.33 79%TF055447 - Rural Water Supply & Sanitation 5.00 1% 1.22 24%

Economic Infrastructure 68.44 14% 25.68 38%TF052541 - Kabul Power Supply 7.44 2% 6.84 92%TF054718 - Rehabilitation of Naghlu Hydropower Plant 20.00 4% 0.23 1%TF054729 - Urban Water Supply and Sanitation 41.00 8% 18.61 45%

490.56 368.50 75%

3 These figures are for the active portfolio. Therefore, the figure for NSP excludes NSP I, which is now closed. Annex III gives full information on closed investments.


4

II THE ARTF IN RELATION TO THE BUDGET AND FLOW OF FUNDS

1. National Budget Structure The national budget consists of a Core Budget and External Budget (see Figure 6 for SY1385). The Core Budget tracks those funds that flow through the government’s treasury system and includes core operating expenditures and core development expenditures. By contrast, the External Budget includes expenditures disbursed directly by donors outside the treasury system. The external budget represents about two thirds of all expenditures in the country. All ARTF disbursements utilize the treasury system and thus are reflected in the Core Budget.

2. Results of the

SY1386 Budget Budget Approval Pro-cess: Parliament ap-proved the SY1386 budget on April 16, 2007 in accordance with the requirements of the Public Finance and Expenditure Law. The government first approved the budget as a cabinet on February 7, 2007 and sent it to Parliament on February 12, 2007. While the upper house approved the proposed budget, the lower house rejected it. The budget was only approved by the lower house after its comments on provincial reallocation of the development budget and salary increases to civil servants and the families of martyrs and disabled were reflected. As a result, salaries and stipends to civil servants and families of martyrs and disabled were increased by Afs 300 (US$6) and Afs 100 (US$2) across the board, respectively. The 45 day delay in the approval of budget meant that the government did not have a development budget for the same period and delayed development spending. Domestic revenues fell short of the target: The government collected US$683 million4 of domestic revenues in SY1386. While 18 percent higher than the SY1385 realization of US$581 million, it is almost 5 percent below the target agreed with the International Monetary Fund of US$715 million. The key reasons for the shortfall include: the failure to collect Business Receipt Tax (BRT) from a number of the larger firms including airlines, deterioration in security, reduction in custom collections (due to a lower tariff on food items and reduction of imports from Pakistan due to border issues and political unrest in Pakistan) and a reduction in the BRT from five to two percent. As the Parliament had not passed the planned revisions of the tax laws, the government was not able to cover the shortfall.

4 Preliminary actual numbers based on Revenue Department figures.

Figure 6: Structure of the National Budget - SY1385 Resources Expenditure

External budget34%

Grants to operating budget18%

Grants to development

budget

Loans (net)6%

Domestic revenues

27%

Core development expenditures

30%

External budget32%

Operating expenditures

38%

Source: MoF


5

Core Budget Expenditures: Preliminary results show that in SY1386, Core Budget expenditures (the sum of operating and development expenditures) reached US$1,986 million or 69 percent of the revised budget of US$2,893 million. The exection of the operating budget was 93 percent out of the revised budget of US$1,096 million. Execution of the development budget remained low, reaching US$970 million, or 54 percent of the total revised budget (compared with 56 percent in SY1385). Nevertheless, this did represent an increase of 38 percent in absolute terms over the previous year. The low disbursement ratio is due to uneven implementation capacity and unrealistic budgeting of expenditures. As indicated in Figure 7, the ARTF has accounted for about one quarter of core develop-ment expenditures for the last two years. As the govern-ment’s operating budget has increased, the ARTF recurrent cost window has represented a declining share, but was still around 30 percent of the total in SY1386.

Figure 7: Afghanistan Budget Execution (2003/4-SY1386) Comparison

2005/06 2006/07 2007/08 % IncreaseSY1384 SY1385 SY1386* SY1386 /

Actual Actual Pre. SY1385A. Domestic Revenues 416 581 683 18 Tax 283 438 500 14 Non-Tax 133 144 183 27

B. Expenditures 1,077 1,567 1,986 27 Operating Expenditures 652 863 1,016 18

Wages and Salaries 412 529 671 27 Goods and Services 135 248 254 3 Capital Expenditure 62 40 28 (29) Other 44 47 62 33

Development Expenditures 425 704 970 38

C. Fiscal Deficit (before grants) 661 933 678 (27)

D. Donor Grants 534 635 1,219 92 ARTF 337 466 517 11

Recurrent 253 300 291 (3) Investment 84 166 226 36

Other 197 169 702 316

E. Fiscal Deficit (after grants) 289 476 237 (50) Source: MoF * SY1386 preliminary realization is based on the MoF Treasury financial reports and may be updated.

Highlights of the SY1386 Budget

Although domestic revenue fell short of the target by almost 5 percent, it increased by 18 percent in absolute terms over the previous year. Tax and non-tax revenues increased by 14 percent and 27 percent, respectively.

Operating and development expenditures increased by 18 percent and 38 percent, respectively,

reflecting improvements in spending and implementation capacity of the government. Nevertheless, core development expenditures were US$970 million, 54 percent of the revised budget. The improvement in project implementation capacity is slower than expected and the budget tends to overestimate core development expenditures.

Wages and salary related expenditures increased by 27 percent in SY1386 compared to SY1385

reflecting new hiring (mainly in the education sector) and an across the board pay increase for civil servants.


6

Figure 8 – ARTF and the Core Budget: SY1381-1388 (US$ million)

SY1381 SY1382 SY1383 SY1386 SY1387 SY13882002/03 2003/04 2004/05 Pre. 2008/09 2009/10

In Millions of USD Actual* Budget Proj.A. Domestic Revenues 129 208 269 416 581 683 888 1,094 B. Expenditures 342 645 874 1,077 1,567 1,986 2,667 2,830

Operating Expenditures 342 452 558 652 863 1,016 1,307 1,297 Wages and Salaries n/a 299 374 412 529 671 848 824 Goods and Services n/a 95 110 135 248 254 222 225 Capital Expenditure n/a 41 41 62 40 28 20 50 Other n/a 17 32 44 47 62 218 75

Development Expenditures - 193 317 425 704 970 1,380 1,533 C. Fiscal Deficit (before grants) 213 438 606 661 986 1,303 1,780 1,735 D. Donor Grants 208 299 487 725 717 1,219 1,846 1,747

ARTF 59 236 294 337 466 517 576 516 Recurrent 59 214 235 253 300 291 276 276 Investment - 22 59 84 166 226 300 240

Other 149 63 193 388 250 702 1,269 1,231 E. Fiscal Deficit (after grants) 5 139 119 (64) 269 84 (66) (12) F. Financing 5 139 119 (64) 269 84 (66) (12)

External financing (net) n/a 100 309 107 27 1,187.2 - 135 Sale of Non-Financial Assets n/a - - 56 40 - - 249 Domestic financing (net, incl. adjsmnts) n/a 39 (191) (228) 202 (1,103) (66) (396)

Memorandum ItemsExternal budget 503 1,226 2,503 1,306 743 - - - GDP 4,084 4,585 5,975 6,822 7,430 8,759 10,524 12,300 Exchange rate 45.3 49.0 47.7 49.6 50.0 50 50.0 50.0 Domestic revenues (% GDP) 3.2 4.5 4.5 6.1 7.8 8 8.4 8.9 Expenditures (% GDP) 8.4 14.1 14.6 15.8 21.1 22.7 25.3 23.0 Fiscal deficit (before grants, % GDP) 5.2 9.5 10.1 9.7 13.3 14.9 16.9 14.1

-------------------- Actual --------------------2005/06SY1384 SY1385

2006/07

Sales of Non-Financial Asset include the Telecom licenses sold in 2005/06 & 1385 (from IMF). * SY1386 preliminary realization is based on the MoF Treasury financial reports and may be updated. Source: MoF, IMF, Staff projections

3. Features of the approved SY1387 budget: The budget was approved in a timely manner. The SY1387 budget preparation process was initiated in May 2007. The budget was submitted to the Parliament ealier than the requirement of the Public Finance and Expenditure Law and was approved on March 16, 2008 without any major changes from the government’s proposal. This is the first time that the budget was approved before the start of the fiscal year and enabled the President to sign the presidential decree on March 24, 2008.

Domestic Revenues are budgeted at US$887 million, 24 percent higher than the SY1386 budget (US$715 million) and 30 percent above the SY1386 preliminary realization (US$683 million). Domestic revenues are budgeted to cover 68 percent of the operating budget. Given the domestic revenue performance in SY1386, achieving the 2008/09 revenue target will require addititonal measures.

Operating expenditures are budgeted at US$1,307 million, a 22 percent increase from the SY1386 budget (US$1,096 million). This increase is mainly due to additional expenditures on the budget comprised of:

An increase of 30,800 personnel of the National Army and National Police (22,000 in ANA and 8,800 in ANP).

Recruitment of an additional 12,500 teachers. US$40 million for fuel subsidy. US$46 million for the first phase of the pay and grading reform. Other fiscal pressures including an across the board pay increase of US$6/month for the

civil servants.


7

Core development expenditures are budgeted at US$1,388 million compared to the budget of US$1,743 million last year. However, the carryover from the previous year of around US$750 million is not yet included in the development budget. The carryover is added to the budget after the financial statements for the previous year (Qatia) are prepared by the treasury department and approved by the parliament and the cabinet. 4. Medium-Term Projections Government adopted a Medium-Term Fiscal Framework (MTFF) in October 2005 which sets out the government’s targets for sustaining the increases in domestic revenue generation. Domestic revenues were expected to reach US$715 million (above eight percent of GDP) in SY1386 but could reach only US$670 million, six percent short of the target. The recent MTFF (March 2008) projects the domestic revenues to reach above 10 percent of the GDP by SY1390. By SY1391 the domestic revenues are projected to reach 11 percent of GDP and fully fund the operating expenditures of the government (this has slipped since the original 2005 MTFF). However, the government will need donor funding to finance the core development expenditures in the medium-term.


8

III. ARTF DEVELOPMENT IMPACT

AND

PERFORMANCE ASSESSMENT MATRIX

Introductory Note: This section reviews the development impact of the ARTF investment window as well the effectiveness of core budget expenditures as monitored by the Performance Assessment Matrix (PAM). Results-based reporting was discussed with ARTF Donors at the Donor Committee meeting of March 25, 2008 and is intended to become a standard part of all future ARTF Annual Reports. As Administrator, the World Bank’s objective is to make available to our partners in Afghanistan and in the international community a clear presentation of the impact of funds contributed to the government through the ARTF. This information will feed back into the broader funding policy and strategy of the ARTF. All projects in the portfolio are implemented by the Government of Afghanistan and supervised by the World Bank. A brief implementation status on each project is attached in Annex 1.


9

ARTF-financed rural development projects are the core of the investment portfolio, benefiting from US$ 503 million of funding allocations between SY1382 and SY1386. Despite increasing instability, these projects have been able to scale-up rapidly and deliver results on the ground. A key feature of the model has been flexible community-contracting and leveraging NGO capacity. Rural development projects ⎯by increasing access to basic services⎯have established an important bridge between government and communities across the country. Rural Afghanistan is home to nearly 80 percent of the population, where incidence of poverty is high, penetration of insurgency is growing, and opium production is booming, as the country recovers from the long-term effects of the six-year drought. Agriculture and Rural Development is one of the key sectors in the “Economic and Social Development” pillar of the Afghanistan National Development Strategy (ANDS). The government’s sectoral strategy includes investment programs in rural infrastructure (e.g., irrigation and water management, drinking water, electrification, rural roads, school) and community development that facilitates participation of rural communities in local governance. This section will examine the results of three national priority programs that form the backbone of this rural strategy: National Solidarity Program, Microfinance for Poverty Reduction and the National Emergency Rural Access Project5.

National Solidarity Program (NSP)6

ARTF Financing (SY1381-1386) Committed (active & closed projects) Disbursed

US$340 million US$305.2 million Now in its second phase, NSP has proven to be an effective program that is able to deliver local development across Afghanistan. NSP was created by the Ministry of Rural Rehabilitation and Development (MRRD) to develop the ability of Afghan communities to identify, plan, manage and monitor their own development projects. NSP empowers communities to make decisions and manage resources during all stages of the project cycle. The program

lays the foundation for a sustainable form of inclu-sive local governance, rural reconstruction, and poverty alleviation. NSP outputs and outcomes to date

NSP is in line with the ANDS and its sectoral strategy for Agriculture and Rural Development. This flagship project has assisted more than 21,000 communities in 346 districts in all 34 provinces of Afghanistan to elect Community Development Councils (CDCs).7 CDCs are the basis for local 5 The ARTF-financed portion has until now been known as the National Emergency Employment Program (NEEP). 6 For up to date information on the NSP, visit www.nspafghanistan.org. 7 The NSP II Technical Annex and Financing Agreement stated that NSP would cover an expected total of 21,600 communities representing 90 percent of the estimated total of 24,000 villages. There was however much concern among donors and MRRD to cover the 4 southern priority provinces. Hence NSP/MRRD planned an exceptional roll-out to 25 districts in the 4 priority provinces, conditional on special funding commitments from select donors (eg. CIDA and DFID). NSP plans to cover an average of 80 communities in each of these 25 districts which will

Rural Development

The community mobilization activities of NSP have

positively impacted more than 15 million people in

rural Afghanistan.


10

governance and community development. Building on the success of the first phase of the NSP, NSP II is continuing to assist MRRD to mobilize communities for the election of CDCs, the design of Community Development Plans (CDPs) and the implementation of sub-projects. The main findings of the midterm evaluation undertaken for MRRD in 2005-06 were that, in communities reached by NSP, there is significant evidence of:

• empowerment of CDCs • improved community relations • increased public faith in the system of

government.

Sub-projects: The sub-projects implemented during NSP I project period have generated direct employment for the beneficiary families, equi-valent to 10.6 million labor days, and if activities based on the CDPs receive funding in the future, this will sustain the direct employment opportu-nities for the rural poor families. Spillover effects

of farm and non-farm em-ployment and

income opportunities in the NSP communities

will further contribute to improve household incomes. Increased profit margins for wheat growers and grape producers, reduced farming costs for small holders, increased mechanization of farm operations, improved access and quality of water supply, the freeing of women’s labor for income generating activities, and innovative institutional initiatives at community level for better health care and access to basic services are already realized in many project communities. Sector Sub-projects (end SY1386) Water Supply & Sanitation 7,890 Transport 7,461 Irrigation 5,213 Power 4,908 Education 4,415 Livelihood 2,159 Rural Development 631 Health 86 Public Building 22 Agriculture 20 Emergency Response 9 Total 32,814

Water Supply & Sanitation

24%

Transport23%

Irrigation16%

Pow er15%

Education13%

Livelihood7%

Other2%

amount to an additional 2,000 new communities. Thus, in addition to the planned 21,600, NSP will cover an additional 2,000, bringing total coverage numbers for NSP II to 23,600.

A rate of return of 23.6 percent is estimated for the subprojects in

the four major sectors of irrigation, transport, drinking

water, and power, which account for 78 percent of the block grants

Performance Indicators

Total as of end 1386 (20th Mar

2008) Provinces 34 Districts 346 Facilitating Partners personnel deployed 5,762 Communities Contracted for NSP to FPs 22,323 Communities Mobilized 21,420 Community Development Councils Elected 20,502 Community Development Plans Completed 20,182 No. of Sub-Project Proposals Submitted 37,559 No. of Sub-project Proposals Approved 36,310 No. of Sub-Projects Completed 18,434


11

Poverty reduction and rural development impact: Of Afghanistan’s rural population, 52.8 percent have incomes below the poverty threshold. In 2003, the poverty threshold was estimated at Afs 4,621 per capita per year, which would purchase a daily food consumption equivalent to 2,100 calories per person per day. 8 Converted to 2007 prices, the poverty threshold is Afs 5,767 (US$115) per capita per year. National Risk and Vulnerability Assessment (NRVA) has identified high incidence of landlessness, and unskilled farm and non-farm families depending on daily wage labor as some of the key characteristics of the moderately to extremely poor households in Afghanistan. Of the 1.15 million rural families that benefited during NSP I from these sub-projects in the power, roads, water, and education sub-sectors, about 0.6 million can be classified as moderately to extremely poor families. Immediate savings realized annually are estimated at US$65 per beneficiary family, while improved access to basic services like electricity, roads, water, and education will impact rural livelihoods in the longer run to reduce poverty. For instance, power generation accounted for about 20 percent of the block grants disbursed, providing access to electricity for about 193,000 rural families, of which more than half are classified as moderately to extremely poor. NSP Strategic Positioning: NSP I and II are laying foundations for local governance and livelihood development, by establishing one CDC per community as a catalyst for community development. The government is recognizing CDCs as the primary service delivery instrument for rural development. CDCs could facilitate the implementation of other rural development projects such as the Horticulture and Livestock Project (HLP) and the National Rural Access Project (NRAP). The planned Afghanistan Rural Enterprise Development Program (AREDP) which is still in the concept stage, is also expected to have close linkages with the NSP CDCs. CDCs can possibly assist in identifying enterprise groups formed under AREDP and provide them with any necessary support in undertaking AREDP activities. NSP II Targets Outcome 1: Inclusive local governance:

Outcome 2: Improved access to social and productive infrastructure and services:

Outcome 3: Human capital and livelihood improvement

• At least 21,600 CDCs established • At least 4,200 women sub-

committees established within CDCs

• At least 21,600 CDPs developed and completed

• At least 16,000 subprojects financed and completed

• At least 50 percent of subprojects completed with O&M in place

• At least 21 million people benefit from infrastructure projects

• At least 3,800 livelihood/human capital development subprojects implemented

• At least 96,000 people benefit from livelihood/human capital development projects

8 Based on the NRVA analysis as quoted in WB Report No. 29694-AF on Afghanistan Poverty, Vulnerability and Social Protection: An Initial Assessment, dated March 7, 2005.

“NSP communities have far more tools than non-NSP communities for envisaging problems, linking priorities, and planning. NSP communities are therefore less reactive and more proactive, and have a significantly more favorable opinion of the government that non-NSP communities do not share. The non-NSP communities have a strong distrust of government and little faith in its ability to address their problems.”

NSP I Implementation Completion Report, World Bank.

“The CDCs and tribal shuras are seen as more responsive to Afghan needs than provincial governments and provincial councils, and in many cases are the only sign of improvement villagers have seen in the past five years”.

Center for Strategic and International Studies


12

Towards a Baseline for NSP: Given the lack of impact analysis during NSP I, a randomized impact evaluation study is being undertaken of NSP II. The objective of the evaluation is to rigorously identify the social, political, and economic impact of NSP and to propose refinements to the program. The evaluation seeks to achieve this by tracking changes in outcomes of interest in 500 villages located in 10 districts in north, northeast, east, central, and west Afghanistan, half of which were randomly selected to participate in the NSP program over the next two years, and the other half of which form a control group. Outcomes of interest are to be measured by a series of household and focus group surveys administered in all 500 villages and by monitoring exercises undertaken at key stages of program implementation. A baseline survey, undertaken prior to NSP activities in any of the 500 evaluation villages, was administered in August and September of 2007 by 90 enumerators and 10 supervisors contracted to the Vulnerability Analysis Unit (VAU) of the MRRD. Future rounds of follow-up surveys are proposed for fall 2008 or spring 2009 and again in the fall of 2009 and will form a major component in building capacity within VAU to implement rigorous and independent impact evaluations. The data from the baseline survey is still being cleaned and analyzed and a more detailed analysis of the data will be shared in the next ARTF report. In the meantime, a website has been set up to disseminate papers, presentations, materials and general information about the evaluation and is located at: http://www.beath.org/NSP-IE.


13

NSP & the Funding Challenge: Despite significant contribution to the development of Afghanistan by reaching out to rural communities in dire need of basic infrastructure, NSP I experienced great difficulties in disbursing block grants to CDCs, due to unpredictability in financing. Since the start of NSP II in April 2007, funding has been more secure with US$120 million of IDA grants and $171.5 million from ARTF. Available NSP II funding, however, is currently expected to run out by May 2008 in the middle of the construction season. It is imperative that NSP II secure funding for the period of May –October 2008 which is the prime construction season to ensure the momentum is not lost.


14

Microfinance for Poverty Reduction9

ARTF Financing (SY1381-1386)

Committed Disbursed US$119.3 million US$119.1 million

This project was one of the first in the ARTF portfolio and has continued to receive consistent support from ARTF donors. The microfinance project helped put in place the Microfinance Support Facility for Afghanistan, or MISFA, which was established as a vehicle through which the Afghan government and international donors could channel technical assistance and funding to build Afghanistan’s microfinance sector, though more recently this mandate was expanded to include the lower ranges of SME lending. It was the first facility of its kind, pooling diverse donor funding mechanisms and converting them into streamlined, flexible support to microfinance institutions in Afghanistan, tailored to local priorities and accompanied by technical assistance and strong performance monitoring. Increasing Access to Financial Services: While the microfinance sector is at an early stage of development in Afghanistan, the apex model adopted in 2003 has demonstrated potential to scale up its reach across the country. The sector now has 15 microfinance institutions (MFIs) serving clients in 23 provinces. To date, this has been possible despite insecurity: BRAC and WOCCU recently began operations in the southern provinces of Helmand and Kandahar. In the first two months of 2007 BRAC disbursed US$62,682 in Helmand and US$49,146 in Kandahar. WOCCU established its office in Helmand and completed staff recruitment. There are now 428,990 active clients with an outstanding gross loan portfolio of over US$105 million. Since work began in 2003, the sector has cumulatively disbursed US$402 million through 1,062,628 loans. The current average loan size is US$288. Microfinance service providers have collected US$11.8 million in small savings deposits. The current repayment rate has come down slightly due to security constraints and staff management issues in some areas.

Gender: At present there are about 275,000 women clients, 68 percent of the total client portfolio. The sector employs 4,352 staff of whom more than 95 percent are Afghan. This includes five MFIs with Afghan CEOs, two of whom are women. MFI Registration: Of the fifteen MFIs that the project works with, one is an Afghan commercial bank

and one sets up financial cooperatives that will be regulated under cooperative regulations. Of the remaining 13, 12 were registered in 2007 as companies under Afghan law and the others are expected to follow suit soon.

9 For up to date information, please visit www.misfa.org.af

Sector Growth Actual Projected Jan-08 Dec-08 Dec-09 Clients 428,990 500,000 625,000 % women 68% 65% 65% Gross Loan Portfolio (US$m) $105 $155 $200 Loan outstanding per Borrower $288 $320 $375

Source: MISFA


15

SME initiative: One important recent development has been the creation in late 2006 of an SME window within MISFA that on-lends funds through local banks for small and medium enterprise (SME) loans, with support from USAID. These SME loans range from $3,000- $300,000. Currently, MISFA has five partner banks that are actively providing access to finance for Afghan SMEs. Thus far the program has provided training to 55 loan officers and managers as well as provided strategic advice to four banks and/or financial institutions. Additionally, MISFA expects to soon conclude a landmark financing deal with a commercial bank.

Map of MISFA Activities

North East Region (Badakhshan, Baghlan, Kunduz

and Takhar) No. %

MFIs 5 33% Clients 73,866 16% Portfolio $23,734,009 22%

West Region: Badghis, Herat, Farah, Ghor, Nimroz

No. % MFIs 5 33% Clients 42,261 10% Portfolio $8,749,049 8%

North West Region (Balkh, Jawajan, Samangan, Faryab and

Sari Pul) No. %

MFIs 6 40% Clients 95,429 22%

Portfolio $23,522,417 22%

Eastern Region (Nangarhar, Nooristan, Kunar and Laghman)


Capital Region (Kabul, Parwan, Kapisa, Bamyan, Daikundi, Wardak

and Logar) No. %

MFIs 12 80% Clients 176,273 40%

Portfolio $42,470,375 39% South Region: Helmand, Kandahar,

Zabul, Uruzgan, Ghazni, Paktia, Paktika


Percentage Overall Outreach Total

Rural Urban # of MFIs 15 Provinces 23 Clients 436,777 30% 70% Portfolio $107,523,200 28% 72%

Source: MISFA

MISFA: In March 2006, MISFA Ltd was registered as a limited liability non-profit company whose sole shareholder is the Ministry of Finance. MISFA Ltd is an independent apex Organization with 15 implementing partners (Microfinance Institutions) on the ground. MISFA’s mission is to facilitate the development and growth of a long-term, strong and healthy microfinance sector in Afghanistan that provides high quality and efficient financial services to low income people. This is achieved through a grant and loan process that identifies strong partner organizations and encourages ‘best practice’ delivery of appropriate microfinance products and services by these partners. The Board of Directors is comprised of seven members representing the government of Afghanistan, donors and the private sector.


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Baseline and Impact Analysis MISFA commissioned a study in September 2007 to assess the social impact of the microfinance sector in Afghanistan and to establish a baseline by which to measure impact.10 The study revealed that a majority of the credit supplied is used to establish new businesses, with each loan creating 1.5 new jobs on average. The findings of the study show that 80 percent of the female clients reported an ‘improved attitude’ on the part of their husbands and other relatives and that clients were better off than non-clients. Before the microfinance sector started functioning in Afghanistan in 2003, 65 percent of the people said that they did not take any loans or, more probably, did not have access to loans and 23 percent of the sample reported that their credit needs went unmet before the advent of MFIs. The remaining 35 percent borrowed from friends, relatives, and money-lenders. Households burdened under consumptive debt would find their asset base eroded to furnish the debt thus starting a vicious downward spiral. The main activities these loans finance are livestock, small business, self-employment and housing. 81 percent of the loans have been used to either start a new business or expand an existing business. Some findings from the assessment

Creation of Economic Opportunities

• More than 80 percent of the loans were used for setting up businesses or expanding them;

• These economic initiatives have provided self-employment to 414 individuals in the sample;

• Considering that this is a representative sample, employment created by all MISFA clients is estimated to be 659,312 (+- 6%);

• 64 percent women clients and 74 percent of men clients generated employment for themselves;

• 47 percent of urban clients generated employment opportunities for others. At 39 percent, this figure was lower for rural clients.

Social Empowerment

• 44 percent women clients reported absolute control over their money as against 18 percent non-client women;

• 80 percent women clients reported ‘improved attitude’ of their husbands and other relatives, both male and female;

• 91 percent of women clients interviewed reported enjoying good relationship with other group members;

• 47.22 percent of the women clients reported that they could rely on their group members for social advice.

Coverage

• The programme is spread across 23 provinces and covers all major ethnic groups; • 70 percent of the programme beneficiaries are women; • Overcoming an initial urban bias, the programme reports 40 percent rural clients.

Trends in Economic Well Being

• 72 percent of the clients reported an improvement in their economic situation as against 51 percent non-clients;

• 46 percent of the client households reported savings as against 31 percent non-client households.

10 Martin Greeley, a microfinance expert from the Institute of Development Studies (IDS) University of Sussex, and Mr. Mohit Chaturvedi undertook the work.


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National Emergency Employment Program (NEEP)

ARTF Financing (SY1381-1386) Committed Disbursed

US$52.8 million US$51.9 million The ARTF NEEP project has been a major part of the government’s larger National Rural Access Program (NRAP), implemented by MRRD and the Ministry of Public Works (MPW). NRAP is the government’s comprehensive rural access program with operations in all 34 provinces and with financing from a range of donors. The United Nations Office for Project Services (UNOPS), as Implementation Partner (IP) provides support for project implementation. Works are carried out by local contractors and communities. The objective of NRAP is to help to improve accessibility, integrating the village economy with regional and national markets, leading to better allocation of resources, technology transfer, and higher productivity and outputs. It also facilitates the expansion of rural non-farm activities. Households who can diversify their income sources will become less economically vulnerable and less dependent on opium poppy cultivation.

The achievements of NEEP/NRAP up to February 2008 have been impressive: the program has improved nearly 10,000 km of roads in all 34 provinces. It has created more than 14 million labor days and has provided tangible benefits to the rural population in the form of wages and improved infra-structure.

Provincial Distribution of NRAP

Region Disbursements (US$)

Population KM of road improvements

Disbursements per capita (US$)

Badakhshan 9,862,683 805,000 476 12.25 Central Highlands 9,494,372 1,356,100 840 7.00 East 7,279,047 2,147,600 888 3.39 Kabul 18,150,112 4,976,000 1,677 3.65 North 10,745,699 3,165,800 1,379 3.39 North-East 9,811,020 2,422,800 1,262 4.05 South 8,921,676 2,465,500 956 3.62 South-East 12,457,908 2,364,000 1,690 5.27 West 5,208,946 2,393,600 471 2.18 Total 91,931,462 22,096,400 9,638 4.16

Source: NRAP Monthly Progress Report, updated August 31, 2007.

Outputs through February 2008 Activity Total Km of road rehabilitated since inception 9,794 Labor days generated since inception 14,304,020 Running meters of structures completed since inception 64,936 Number of bridges completed since inception 108 Running meters of bridges completed since inception 1,568 Number of districts targeted 312 Number of provinces targeted 34 Contracts issued since the start of the program 2,052


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In its early days, the program was more diverse than it now is. In addition to financing the rehabilitation of rural roads, funding was provided for 748 irrigation schemes, 965 wells, 89 water reservoirs and water supply networks, 95 schools, 15 clinics, 135 shelters, 41 other buildings, and 29 plant nurseries. In addition to road rehabilitation, NEEPRA financed the rehabilitation of eight provincial airfields and the construction of the MRRD headquarters in Kabul. The bulk of funding, however, has been for roads and associated structures.

Map of ARTF-funded Rural Roads

Legend: Red lines – MPW roads

Green lines – MRRD roads Yellow lines – national highways Baseline Study: A baseline study will be carried out with the help of the Vulnerability Assessment Unit (VAU) of MRRD in 2008. The baseline survey will collect household level information on transport and travel needs, income and expenditures patterns, asset ownership, cropping patterns (including opium poppy cultivation) employment as well as access to markets, health and education services. In order to identify the effects of rural access projects on outcomes and to generate evidence-based recommendations on how the structure of the overarching NRAP program may be adapted to more efficiently meet program goals, a rigorous impact evaluation of project effects and related interventions will be implemented across the life-cycle of the project. The impact evaluation will focus on estimating two core effects: (i) project effects; and (ii) effect of complementary input interventions.


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Human and institutional capacity building projects are beginning to receive a greater share of the ARTF investment financing, with US$73.5 million in active commitments. In SY1386, the Management Capacity Building Project (MCP) was initiated with the MC’s approval of US$10 million in financing. At the end of SY1386, the MC also approved funding for the new Justice Sector Reform Project, a key component of the National Justice Strategy agreed at the Rome Conference in 2007. Education has been the major recipient of funding in the sub-sector to date through the Education Quality Improvement Project (EQUIP). ARTF financing has enabled the project to become active in all 34 provinces of the country, extending access to basic education for just under six million children. This project has also now entered its second phase and is transitioning into the government’s national education policy and platform. Looking ahead in this sub-sector the Justice Sector Reform Project, approved by the MC towards the end of SY1386, will be closely monitored for results. The project preparation process serves as an example of how ARTF can support greater cross-donor collaboration on difficult reform areas.

Education Quality Improvement Project (EQUIP)


US$32 million US$7 million Since its inception, EQUIP has become the national flagship program of the Ministry of Education (MoE). Thanks to ARTF-financing, which was first approved in SY1384, EQUIP is now active in all 34 provinces of the country. EQUIP’s development objective is to increase equitable access to quality basic education, with a special emphasis on girls. National Outcomes: Since 2001, Afghanistan has made remarkable progress to increase the rates of female participation both among students and teachers. In 2003 there were four million children in school, about 25 percent of which were girls. Today there are 5.79 million children in school of which 35 percent are girls. In addition, there are now 30,460 female teachers: a ten-fold increase since 2003. Female teachers now represent 28 percent of the force. EQUIP has supported this progress by financing school construction, teacher training and institutional development. The key characteristic of EQUIP is community-ownership. Communities have become close partners with the government in the delivery of education in their local area. Similar to NSP, EQUIP delivers block grants directly to schools and to communities. These block grants are used for the rehabilitation and construction of school buildings and for accessing quality inputs, such as teaching and learning materials, through Provincial Education Departments and, in four provinces, the facilitation of non-governmental organizations (NGOs). The total number of schools nationwide which will be constructed with EQUIP financing will be 1,263. This community-based approach is seen as successful. Communities have mobilized and formed around 7,500 School Management Committees (SMC), or School Shuras, under the quality grants enhancement subcomponent. EQUIP I has provided lessons learned to a national community-based modality for school infrastructure improvements and education quality enhancement activities. This community participation

Human and Institutional Capacity


20

effort is now being implemented in all MoE registered schools. 6,000 quality enhancement grants have been disbursed under EQUIP I. The Ministry of Education believes that, through SMCs, greater community involvement in activities related to school rehabilitation and improved teaching and learning helps protect schools from violence and burning by insurgents. As a direct result of EQUIP, community based implementation of school infrastructure improvements and quality enhancement activities are now a national modality being implemented in all MoE schools. SMCs are responsible for community-contracting as well as carrying out a ‘social audit’. The audit ensures that the utilization of the quality and infrastructure grants are posted on the school building. MoE is also developing a community monitoring manual to help build SMC capacity. School grants for infrastructure development are used to rehabilitate existing government schools and construct new registered government schools based on priority criteria described in the project design. Schools will be rehabilitated and constructed based on improved building models developed by the construction department of the MoE. Thus far, 190 schools have been completed with 278 already under construction and 1,031 planned. The modality in which in-service teacher training is delivered has been redesigned based on the government's National Education Strategy Paper (NESP). The revised design uses NGOs to implement teacher training and provides for greater district based academic support to in-service teachers. A USAID project funded outside the government budget but with the same project design and performance indicators, finances and implements the program in 11 out of 34 provinces, with IDA funds covering the remainder. EQUIP is also helping to build the capacity of the MoE’s central, provincial and district departments. The Education Management Information System is being strengthened and a full nationwide survey was completed in November 2007. Updated school survey data can now be accessed at the MoE’s website. Monitoring Methodology To the extent possible, communities—usually through School Shuras—and NGOs monitor their own activities gathering information as activities are implemented. This strategy addresses the difficulty in accessing remote schools in several provinces and districts while at the same time empowering communities to assess and ultimately own EQUIP activities. Information is reported upwards to Kabul through the district education department, ensuring that information is available at a central location and allows for tracking at the national, provincial, and district levels.

Ge ne r a l Educ a t i on S t ude nt P opul a t i on - By Gr a de a nd Ge nde r

555,800

470,261

393,596

51,860

200,523

520,667

509,652

480,808

245,643170,992

117,19984,835

66,549

315,895

338,287

324,813

315,448

243,360

97,31062,054 42,499 28,088 22,607

17,2050

100,000

200,000

300,000

400,000

500,000

600,000

1 2 3 4 5 6 7 8 9 10 11 12

Grade

Boys

Gir ls

Source: MoE School Survey 1386


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Civil Service Capacity Building / Management Capacity Building


US$23 million* US$12 million * includes both projects The nearly complete Civil Service Capacity Building Project (CSCBP) and the recently initiated Management Capacity Program (MCP) represent an evolving program financed by ARTF to build the capacity of the Afghan public sector. The programs are demand-driven and support the delivery of basic services. Working through the Civil Service Commission and the Ministry of Finance (MoF), these projects are also building a platform for core public administration reform supported by other projects, including ongoing comprehensive pay & grading reform and public financial management. Together the civil service reform effort financed by ARTF is buying in the best Afghan expertise available from the diaspora, regionally or locally. It proactively identifies the need and uses outreach to significantly broaden the market of potential candidates. In doing so it removes the obstacles that prevent qualified Afghans returning to the country and working in government. This should increase the capabilities of ministries to develop policy and implement reforms and new systems and in time develops their capacity. Background & Results The ARTF-financed CSCBP was established with two components in 2004, and was part of the original capacity-building objective of ARTF. The first component, the Afghan Expatriates Program (AEP), increases the contribution of professional Afghans living abroad in the reconstruction of Afghanistan. AEP has allowed them to play a role in formulating public sector policy and building institutional capacity. This component also aims to close the skills gap of the Afghan people in information technology, engineering, and teaching by getting well-trained overseas Afghans to return and provide local Afghans with on-the-job training to enhance their technical skills. Since September 2004, around 97 Afghan experts from overseas have been placed in government ministries and agencies. The second component, the Lateral Entry Program (LEP), includes a pilot phase, which aims to place 100 lateral entrants from NGOs and international organizations in middle and senior-level line positions in government ministries and agencies for a period of up to two years. Entrants assist with the reform and restructuring process and help build institutional capacity. Since August 2005, around 130 lateral entrants have been recruited.11 The Management Capacity Program has been designed as a consolidation and refinement of CSCBP. It will help ministries to temporarily improve their capacity in key managerial areas. This should enable the government to manage resources more effectively and deliver results faster on the ground. The program will fund qualified Afghan staff, currently working in NGOs and international agencies, to work in critical positions in government in areas such as financial management, procurement, human resource management, policy, and administration. Priority will be given to positions in the sub-national offices of line ministries. Key features of the MCP include:

Focus on senior-level line positions. Support of common functions (procurement, financial management, human resource

management, administration, etc.) and provincial and district administration. 11 It should be noted that both AEPs and LEPs are predominantly male – see table overleaf.


22

Offer competitive remuneration (comparable to international organizations) to attract and retain the required skills.

Strengthen Capacity Development Secretariat. Oversight of program by PAR Steering Committee.

The project was declared effective in October 2007 following the completion of the project manual and the financial manual. The procurement of technical assistance to support HRM, Financial Management and Contracting is being finalized and implementation is expected to be underway by March 2008, as funding under the Civil Service Capacity Program is fully utilized. Allocation of AEPs/LEPs across Agencies

AEP Gender LEP Gender No Ministry / Agency Number Active M F Number Active M F

1 Office of the President 13 0 0 10 4 4 0

2 Office of Administrative Affairs 14 6 6 0

3 IARCSC 14 3 2 1 10 8 6 2

4 Ministry of Finance 8 1 1 9 4 4 0

5 Ministry of Foreign Affairs 5 0 0 0 0 0

6 Ministry of Transport and Civil Aviation 1 0 0 9 3 2 1

7 Ministry of Public Works 1 0 0 0 0

8 Ministry of Mines and Industries 1 0 0 4 0 0 0

9 Ministry of Energy and Water 2 0 0 13 3 2 1

10 MRRD 4 0 0

11 Ministry of Urban Development and Housing 7 0 0 1 0 0 0

12 Kabul Municipality 2 0 0

13 Ministry of Agriculture and Livestock 12 2 2 5 1 1 0

14 Ministry of Education 7 0 0 6 0 0 0

15 Ministry of Higher Education 5 0 0 8 6 6 0

16 Ministry of Public Health 5 0 0 6 0 0 0

17 Ministry of Communication 2 0 0 11 0 0 0

18 Ministry of Commerce 3 0 0 3 1 1 0

19 Ministry of Information and Culture 3 1 1 9 2 2 0

20 Ministry of Economic 1 1 1 0

21 Office of Refugees and Returnees Affairs 1 0 0 0 0 0 0

22 Ministry of Interior 2 1 1 0

23 Ministry of Border and Tribal Affairs 1 0

24 Office of Attorney General 3 1 1 0

25 Science Academy of Afghanistan 1 0 0 1 1 1 0

26 Ministry of Youth 2 0 0 0

27 Anti-corruption & Bribery Commission 1 0 0 0

28 General Directorate of Geodesy and Cartography 1 1 1

29 Office of senior Advisor to the President 2 1 1 0

Total 97 7 6 1 132 44 40 4


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Economic infrastructure projects are also beginning to receive a greater share of ARTF investment financing, with US$125 million in active commitments. Historically slower to develop, economic infrastructure projects have also not been the favorite of ARTF donors – with no preferencing received for projects in this sector. Nevertheless, ARTF-financing is beginning to play an important role especially for power transmission and distribution. In SY1386, ARTF MC approved US$57 million in financing for power distribution. This new commitment builds on ongoing projects for the rehabilitation of Naghlu Hydropower Station and Kabul power supply – both also financed through ARTF. With future investments in the pipeline, these investments are helping to consolidate the North East Power Supply grid, a backbone for economic development along the Mazar – Pul-i-Khumri – Charikar – Kabul corridor.

Improvement of Power Supply to Kabul Project


US$7.4 million US$6.8 million

This project has sought to improve the availability and reliability of power supply in Kabul through the rehabilitation of Mahipar hydropower station and of 110 kV transmission lines. Measures have also been taken to improve street lighting. ARTF financing has complemented KfW’s substantial investment in this activity. Rehabilitation of Mahipar: Mahipar hydropower plant is situated on the Kabul and Logar rivers near Jalalabad. Commissioned in 1967, the 66 MW plant has almost never been serviced and was in need of comprehensive rehabilitation. ARTF financing has complemented KfW’s investment in the comprehensive rehabilitation of two 22 MW units at the Mahipar power station. The first unit was commissioned in May 2007 and the second unit is expected to be completed by December 2008. Power production in Mahipar is critical for power supply in Kabul during the winter as the river feeding this power station has water only during this season (December–May) without any other competing usage. Energy produced in one unit in Mahipar can supply at least 16,000 households during the winter (assuming the average consumption of 200 kWh/month in Kabul). In addition, the energy from one unit would replace the thermal power requiring 12 million liters of fuel, which would cost about US$11 million at the current oil prices. Rehabilitation of Transmission Lines: ARTF financing has also ensured the rehabilitation of the 110 kv transmission line from the hydropower stations to Kabul which was dilapidated and overloaded, and the Breshna Kot substation to which it is connected was destroyed during the war. ARTF also co-financed the rehabilitation of the nonfunctional transmission line between Sarobi and Breshna Kot sub-stations. The total cost of the project was EUR 5.5 million, and out of that amount, ARTF funded EUR 1 million, or 18 percent of the total. This component was completed in March 2006, and the benefit of rehabilitating this line and the Breshna-Kot substation is to provide power supply to southern part of Kabul city involving about 25,000

Economic Infrastructure


24

households. In addition, this line provides back-up support to the Naghlu-Kabul line, which provides the main power supply to Kabul. Rehabilitation of Public Lighting: Kabul’s street lighting system has been largely destroyed by the war. At the time the project was initiated, Kabul was almost dark during the nights aggravating the general security situation in Kabul. The component funded by ARTF consisted of co-financing the rehabilitation of the main public lighting system in Kabul by providing new equipment and installations. The total cost of the project was EUR 3 million, and out of that amount, ARTF agreed to fund EUR 1 million, or 33 percent of the total. This component was completed in February 2005. The main benefit of the project was to rehabilitate about 116 kilometers of street-lighting circuits, which benefited about 30,000 premises in different areas of the city and improved security in these areas. Other ARTF power projects ARTF has committed US$20 million for the rehabilitation of Afghanistan’s largest power station: Naghlu Hydro. Naghlu is situated close to Mahipar and Sarobi in the east, and was also commissioned in 1967 with a capacity of 100 MW. ARTF financing complements the World Bank’s own investment in emergency power rehabilitation. Contractors have been mobilized and contracts signed. ARTF will report the project’s progress over the two year duration. ARTF has also committed US$57 million for power transmission and distribution along the North East Power System: Kabul – Aybak - Mazar. This project is closely aligned with other donor-funded projects in the power sector. As described earlier, investments in generation and transmission have not been matched by the necessary investments in distribution required to improve service to end consumers. In particular, significant investment by the major donors in the sector (ADB, Government of India, KfW,

USAID and the World Bank) has focused on the North East Power System and the construction of a 220 kV transmission line and associated sub-stations to bring lower cost imported power from Afghanistan’s northern neighbors to Kabul. This project will complement ongoing investments by the World Bank - upgrading the medium voltage distribution network in Kabul; USAID - financing additional thermal generation capacity in

the capital city; KfW - constructing a new 220/20 kV substation in Mazar; and ADB - constructing a new 220 kV line from the border of Uzbekistan to Pul-e-Khumri via Aybak.

ARTF Power projects


25

To date, the ARTF has served to coordinate financial assistance to the core budget. The Performance Assessment Matrix – or PAM – was developed to leverage that assistance towards a more coordinated dialogue between government and ARTF donors on core policy issues. This section sets out some of the highlights of the PAM as of the end of SY1386. The full PAM is available on the ARTF website. In SY1386, following donors’ agreement on the PAM indicators in June, the updated PAM has been presented at two Donor Committee Meetings: in October 2007 and in March 2008. Policy dialogue does not consist of a mechanical review of matrices, but rather a thematic discussion between government and donors on selected priority issues identified for their importance and, more specifically, where it is felt that policy dialogue can help move the reform and policy agenda forward. The policy dialogue around the ARTF and the associated PAM is focused on areas and issues of particular relevance to the ARTF, under the umbrella of the ANDS and Compact. They include the following:

PAM Benchmarking Justification

Public Finance Management

PFM is critical for the appropriate and effective utilization of ARTF resources, and moreover the national budget process has a major impact on the prioritization of spending and results achieved

Aid Effectiveness and Mutual Accountability

Aid effectiveness goes to the heart of the ongoing partnership between Afghanistan and the international community, with the focus being on financial aspects in the context of the ARTF. Thus this part of the policy dialogue reinforces and enhances the corresponding objectives in the Afghanistan Compact as well as more broadly the Paris Declaration on Aid Harmonization.

Development Sectors: Education and Health

Key social services for human development in Afghanistan, and the ARTF is a major funder of both (especially Education), notably through the recurrent budget. (Depending on the experience with these two sectors, additional sectors may be included in the ARTF policy dialogue process and PAM later, as appropriate.)

Public Administration Reform

PAR is a core element of the state building agenda: specifically with respect to the ARTF, PAR is extremely important for developing the sustainable core capacity in government that enhances the impact of external assistance through the Core Budget and from a longer-term perspective will reduce Afghanistan’s dependence on expensive and unsustainable international capacity.

PAM Results as at end SY1386 1. Public Financial Management

• Revenue mobilization: revenue to GDP ratio was 7.8 percent in SY138512. In SY1386 the revenue target was 8.2 percent of GDP; the government did not change this revenue target (US$715 million) at the mid-year review (MYR). However, the preliminary actual revenue realization achieved 7.8 percent of GDP in SY1386 (US$683 million) and therefore fell short by 5 percent. Revenue performance affects the fiscal sustainability indicator (the revenue to operating expenditure ratio).

• Budget execution: in absolute terms total core development expenditure in SY1385 increased by 54 percent over SY1384, reaching US$712 million, an impressive achievement. The budget execution

12 Revised from 7.0 percent mainly due to the changes in GDP

Performance Assessment Matrix


26

ratio of core development expenditures in SY1385 was 54 percent13. In SY1386, the budget execution ratio targeted 55 percent. Preliminary results for SY1386 as of May 2008 show that the actual core development expenditures for SY1386 were US$970 million, 54 percent of the revised budget14.

• The control framework: the percentage of staff with Individual Salary Payment the Verified Payroll Program (VPP) continues to improve. However, in SY1386, progress had been very slow (the projection was revised downward from 45 percent to 30 percent) and only a 25 percent of staff had been covered by the verified payroll plan (VPP). This was mainly due to (i) slow progress especially in Ministry of Defense and Ministry of Education; and (ii) inability of commercial banks to provide adequate facilities in provinces. The VPP is projected to cover around 35 percent of staff in SY1387.

• The linkage between budget and strategy: the ANDS includes the fiscal envelope for the next 5 years (SY1387-SY1391). Costing of the 3 sectors (health, education and roads) was completed in SY1386. The government plans to complete costing of other sectors by November 2008 so that the costings are fully integrated into SY1388 budget.

Table 1: Selected PFM Indicators (Comparison between Target and Realization)

Indicators SY1384 actual

SY1385 actual

SY1386 Target

(Oct 2007)

SY1386 Revised

Estimates (Mar 2008)

SY1386 Preliminary

Actuals (May 2008)

Revenue to GDP ratio 1/,2/ 6.1% 7.8% 8.2% 8.2% 7.8% Revenue to operating expenditure ratio 2/ 65% 67% 67% 65% 67.2%

Budget execution ratio (core development) 44% 54% Above 50% 55% 54%

% of staff with Verified Payroll Plan 10% 23% 45% 30% 25%

1/ the ratios are revised due to the change in GDP figures 2/ From the Mid Year Review (MYR)

Source: World Bank Staff

2. Aid Effectiveness and Mutual Accountability

Some improvements were achieved in aid effectiveness in SY1386 (see Table 2).

• Government’s PFM system, a second assessment of PEFA PFM performance ratings was conducted in early 2008, following the first assessment in 2005.15 Results show significant improvements of the government PFM system.

• Predictability of ARTF funding, significant dialogue has occurred, and progress has been made in establishing an annual schedule of payments of ARTF. As a result, 91 percent of the total ARTF pledge was deposited by donors by the end of the year.

13 This is partly due to the government ambitious target on core development expenditures. 14 Core development budget was revised from the originally approved $1,540m to $1,744m due to carryover from the previous year. 15 The full PEFA is available on the ARTF website. The Public Expenditure and Financial Accountability (PEFA) indicators were developed by the multi-agency international PEFA group, and are intended to provide a comprehensive and comparable (both over time and across countries) snapshot of the performance of a country’s PFM system.


27

Table 2: Selected Aid Effectiveness Indicators (Target versus Realization)

Indicators SY1384 actual

SY1385 actual

SY1386 Estimates

(Oct 2007)

SY1386 Revised

Estimates (Mar 2008)

% of ARTF estimated recurrent need cm’ted at start of year 25% 60% 70% 70%

% of un-preferenced pledges (ARTF) 73% 70% 60% 57% Discretionary resources as share of total core dev budget 42% 29% 32% 16% Source: World Bank Staff

There are, however, a number of challenges.

• The flexibility of ARTF resources: the share of un-preferenced ARTF pledges decreased from 73 percent in SY1384 (US$294 million) to 70 percent in SY1385 (US$316 million). Although the absolute amount of un-preferenced contributions increased, their share of the total further decreased to 57 percent in SY1386. A stronger advocacy on the part of the government for un-preferenced ARTF contributions may be needed, including not letting such advocacy be undercut by line ministries requesting donors to indicate preferences for their programs.

• Flexibility of all core budget assistance: discretionary resources as a share of total core development budget have continued to decline from 42 percent in SY1384 to 16 percent in SY1386. This is mainly due to the increase in the size of core development expenditures16. In absolute values, discretionary resources (the sum of budget supports and core operating budget surplus) are constant at around US$200 million.

3. Education

• Progress against the education indicators has been on track. Gross enrollments have been progressing well and is planned to reach 107 percent in SY138617. The Ministry of Education is a bit delayed with respect to in-service training of male and female teachers. A third of teacher ID and registration process has been completed. Also, the Human Resources Management Information System (HRMIS) and the Human Resources (HR) system are under preparation, and the competency framework for pre-service teacher training development is being piloted.

4. Health

• Good Progress on Health Indicators. The coverage of preventive services and utilization of curative services has been rapidly increasing based on independent surveys. Third party surveys also show large year-on-year improvements in quality of care. The increase in quality of health services is happening at the same time as a large increase in the number of health facilities and availability of female health workers. The latest household survey (late 2006) found an under-5 mortality rate of 191, a 26 percent decrease from estimates in 2002 but still high by international standards.

5. Public Administration Reforms

Progress on key indicators has been as follows:

• Structure of government: 19 ministries and 15 independent agencies have come under the reform process (PRR stage 2), which exceeded the earlier expectation of 28. The remainders are under PRR

16 SY1386 core development expenditures is as of the revised budget. With the lower disbursement ratio (55 percent), the ratio would be about 30 percent. 17 In the October 2007 PAM, Gross Enrollment Rates were projected to reach 100 percent in SY1388.


28

stage 1.18 The overall quality of this progress is being reviewed as a precursor to beginning pay and grading reforms in ministries.

• Civil service management: a new Civil Servants Law has been drafted and is currently with parliament. This will create a legal framework for the implementation of the pay and grade reforms due to start in SY1387. IARCSC and MoF are confirming the overall fiscal cost of this reform in light of clarifications made in the law and some proposed revisions to pay scales. An action plan to improve the effectiveness of the Civil Service Appointments Board was prepared and the first phase implemented.

• Civil service appointments through merit-based procedure reached 16,265, lower than the earlier estimates of 30,000 due to the delay in the implementation of the pay and grade reforms, and constraints in capacity within the Appointments Board. Capacity building within the Appointments Board is underway.

• Capacity development: the ARTF Civil Service Capacity Development Project (AEP & LEP) has now been fully committed, the successor Management Capacity Project (MCP) has recruited the international technical assistance to guide implementation and ministry proposals will be processed from the beginning of SY1387. This should provide a centralized mechanism for supporting extra normal positions within government, and reduce the need for individual salary top ups by donors of government staff.

• IARCSC is testing a monitoring mechanism in line ministries that will track progress on key civil service reform issues including those related to structure of government and civil service management. This will be presented to donors as soon as possible.

18 With the exception of Ministry of Labor and Social Affairs, Ministry of Refugees and Repatriation Affairs, the Academy of Science and the Attorney General Office.


29

IV. THE ARTF RECURRENT COST FINANCING

The ARTF, through recurrent cost financing, finances salaries and wages of over 250,000 non-uniformed civil servants (most of whom are working outside Kabul), and government’s operating and maintenance (O&M) expenditures outside of the security sector, including purchases of essential supplies. As of March 21, 2008, a total of US$1,473 million had been made available to the government for recurrent cost financing of which $1,403 was disbursed. In SY1386 the ARTF disbursed US$290.55 million through the recurrent window to reimburse the government for eligible expenditures. This amount includes the US$276 million agreed with government plus US$14.55 million that were SY1385 expenditures carried over to SY1386 for reimbursement. 1. SY1386 Recurrent Budget Execution Table 3 presents budget and actual expenditures for SY1386 for the government’s recurrent budget, adjusted to exclude those ministries ineligible for ARTF financing. With ineligible ministries excluded, the eligible budgeted and actual expenditures are reflected in bold text below.

Table 3: SY1386 Budget versus Actual Expenditures

PayrollAFN m

O&MAFN m

SY1386 AFN m

SY1385 AFN m

Initial Budget SY1386 (1) 35,204 18,396 53,600 40,346 Add: Mid year budget review (2) 934 281 1,215 3,855 Defense, Interior, National Security, Presidential Protection Services (18,522) (4,226) (22,748)

(18,265) Budget Ministries qualified for financing 17,616 14,452 32,067

25,936

Actual expenditures for year 31,598 16,517 48,115 43,041 Defense, Interior, National Security, Presidential Protection Services

(15,918)

(4,931)

(20,849)

(17,466)

Advances (245) (1,650) (1,895) (214) Expenditures Ministries qualified for financing 15,435 9,936

25,371

25,361

Actual expenditures in percentage of adjusted budgeted expenditures 87.6% 68.8% 79.1%

97.8%

Remaining budget 2,180 4,516 6,696 575 Remaining budget in percentage of initial budget 12.4% 31.2% 20.9%

2.2%

(1) Ordinary budget for the year SY1386 (2) The mid-year budget review for SY1386 was approved as of 14 Quas SY1386. Source: Monitoring Agent 4th Quarter SY1386 Report


30

2. SY1386 Distribution among Cost Categories Figure 11 presents the distribution of AFN 23,635 million in eligible expenditure for SY1386 among the four broad cost categories financed by the ARTF. Payroll expenditures are divided into payroll-based salary expenditure (PBSE) comprising all payroll based salary expenditures including gross salary, food allowance, education level allowance, PRR payment and bonus payrolls. And non-payroll-based salary expenditure (NPBSE) comprises all expenditures classified in AFMIS as wages/payroll but supported by documents other than payroll, such as assistance payments to employees and transportation expenses. O&M expenditures are broken into O&M expenditure excluding pensions (OM-P) comprising all recurrent expenditures recorded in AFMIS not included in one of the other categories, and Pensions (P) comprising pension payments by the Ministry of Martyr and Disabled. The difference between the data presented in Table 3 bolded line “Expenditures SY1386 Ministries qualified for financing” and the amount in Figure 11 below is due to the fact that the initial budget figures (Table 3) do not provide sufficient details to be able to further adjust the budget for the category “other not qualified for financing”. In other words, Table 3 reflects some budgetary expenditure which are ineligible for reasons unrelated to their Ministry of origin; these expenditures are not part of the amount of AFN 23,635 million whose breakdown is reflected below in Figure 11.

Figure 11: SY 1386 Expenditures by Main Category

(excluding Military and other ineligible (by nature) expenditures) (in AFN million)

Source: Monitoring Agent March 19, 2008 Report 3. Recurrent Costs by Line Ministry As of March 19, 2008, 61 percent of total disbursements of payroll and O&M expenditures were related to 5 out of 46 line ministries and independent budget agencies as shown in the Figure 12 below. These 5 represented 63 percent of the disbursements in SY1385. The main spending ministry is the Ministry of Education. The high level of expenditure within this ministry is mainly caused by salaries of teachers, who represent almost a half of all Afghan civil servants.

14,787.4

63%

697.4 3%

6,634.1

28%

1,516.2

6%

Payroll Based Salary Non Payroll Based Salary O&M excluding Pension Pension


31

Figure 12: SY1386 Disbursements by Ministry

Source: Monitoring Agent March 19, 2008 Report As shown in Table 4, the top ten largest expending ministries comprised approximately 77 percent of the total non-security operating budget up to Q4 of SY1386.

Table 4 – Top 10 Ministries by Expenditure for Q1-Q4 of SY1386 (in US$ thousands)

36%

8%8%5%

4%

39%

Education

Foreign Affairs

Labor and SocialAffairs

Public Health

Higher Education

Other


32

4. Trends of the Eligibility of Submitted Expenditures Eligibility The ARTF finances recurrent cost expenditures which meet the criteria set by the government, the ARTF Grant Agreement and the additional requirements, agreed to by the Ministry of Finance and the Administrator, termed the Fiduciary Standards. Criteria for eligibility are set out in Box 1. Current Performance For each category—payroll or O&M—of recurrent cost, Table 5 presents comparative data on submitted expenditures and actual approved expenditures, over the life of the ARTF. Table 6 presents these for SY1386 in more detail. Where payments are deemed ineligible it could be according to any of the criteria described in Box 1. The expenditure and eligibility figures for SY1383 and SY1384 were restated taking into account the final deductions based on the auditors’ findings for SY1383 and the final SOE for SY1384. The deduction for auditors’ findings of SY1384 was effected in the last SY1385 reimbursement request. Payroll eligibility continues to improve SY1384 – 84.9 percent; SY1385 – 92.5 percent and SY1386 – 96.7 percent.

Box 1: ARTF Eligibility Criteria Government Regulations The Annual Budget Decree: since ARTF provides budget support to the government, expenditures can be found eligible only if they are included in the yearly budget; ARTF’s share of financing in this year’s budget was approved by the ARTF Management Committee. Other. All goods and services must be procured and accounted for in accordance with government law and regulations. If an expenditure does not comply with local regulations it will not be considered to be eligible for financing by ARTF. It is important to note that the Afghan procurement law allows for procurement to conform to donor requirements (article 50 sub 1). ARTF Grant Agreement All military and security related expenditures are ineligible for financing. Procurement. Capitalized goods and works need to be procured in accordance with the World Bank procurement guidelines. Fiduciary Standards Fiduciary Standards (revised as at 20 December 2004). In addition to the Afghan laws and regulations, an additional set of requirements was agreed on the timeliness of reporting and efficiency of cash management of eligible expenditures.


33

Table 5: SY1381-86 Summary of Statements of Expenditure: Submissions and Payments (US$ thousand)

O&M Payroll Total O&M Payroll Total O&M Payroll TotalUSD USD USD USD USD USD % % %

1381 Total 42,239 87,917 130,157 27,318 87,690 115,007 64.7% 99.7% 88.4%

1382 Total 300,478 120,204 420,682 41,737 111,241 152,978 13.9% 92.5% 36.4%

Total 82,164 202,038 284,202 61,433 186,199 247,633 74.8% 92.2% 87.1%

Total 104,100 227,858 331,958 75,014 193,520 268,533 72.1% 84.9% 80.9%

Q1 13,704 35,961 49,665 13,290 35,961 49,251 97.0% 100.0% 99.2%Q2 41,219 80,727 121,945 36,403 77,039 113,442 88.3% 95.4% 93.0%Q3 35,089 69,162 104,251 25,971 62,973 88,944 74.0% 91.1% 85.3%Q4 58,172 94,453 152,626 20,024 83,342 103,366 34.4% 88.2% 67.7%

Total 148,184 280,303 428,487 95,688 259,315 355,003 64.6% 92.5% 82.9%

Q1 18,415 40,710 59,125 18,415 40,710 59,125 100.0% 100.0% 100.0%Q2 41,315 91,544 132,859 33,853 87,857 121,711 81.9% 96.0% 91.6%Q3 11,306 27,492 38,798 10,746 25,839 36,585 95.0% 94.0% 94.3%

Total 71,035 159,746 230,781 63,014 154,406 217,420 88.7% 96.7% 94.2%

748,200 1,078,065 1,826,266 364,204 992,371 1,356,574 48.7% 92.1% 74.3%Source: SoE submitted to World BankTable excluding deductions for reaching the yearly budget cap as agreed between donors and GIRA.

Submitted by MoF to MA Approved by MA and by WB

Grand total

1384

1383

1385

1386

While monitoring of SY1386 expenditures is still underway for provinces and pensions, nevertheless even assuming some impact of those results, SY1386 eligibilities for O&M and payroll both improve on the preceding four years. Table 6 disaggregates the total ineligibility of SY1386 (AFN 2716.7 million) by type of expenditure and within this by cause of ineligibility. The leading cause (55 percent) of ineligibility is failure of the spending units to comply with government’s own procurement regulations (O&M-GoA AFN 1,489). This arises with the implementation of the new procurement regulation and is being addressed by capacity building component of the PACD project. The ineligibility in Payroll Based Salary Expenditure is more diverse than in previous years when almost all ineligibility was caused by non-compliance with fiduciary standards. This is mainly caused by payroll expenditure for embassies (Ministry of Foreign Affairs) that were not supported with payroll documents.


34

Table 6: SY1386 Total ineligibility by main cause and category of expenditure

AFN million

GoA

ARTF

FS

Cum.Total SY 1386

Payroll Based Salary 243.1 141.6 495.1 879.8Non Payroll Based Salary 197.5 8.5 32.8 238.8Total Payroll 440.6 150.1 527.9 1,118.6O&M excluding Pension 1,489.0 37.7 71.3 1,598.0Pension 0.0 0.1 0.0 0.1Total Operations and Maintenance 1,489.0 37.8 71.3 1,598.1 Cumulative total SY1386 1,929.6 187.9 599.2 2,716.7

Table derived from monitoring site visit findings up to and including March 19, 2008. For definitions of column headings see Box 1.

Figure 13: SY1386 (up to Q4) Total Ineligibility by Main Cause (in AFN million)

1,929.671%

187.9 7%

599.2 22%

GOA

ARTF

FS


35

Figure 14: SY1386 (up to Q4) Ineligibility by Category of Expenditure (in AFN million)

879.832%

238.89%

1,598.0 59%

0.10%

Payroll-Based Salary

Non Payroll- Based Salary

O&M -/- Pension

Pension


36


37

ANNEX 1: STATUS OF INVESTMENT PROJECTS


38


39

Status and Ratings of Active and Disbursing ARTF Investment Projects* (amounts in US$ million)

1

Civil Service

Capacity Building TF053940

2

Management Capacity Program TF090077

3

TA and Feasibility

Study Project

TF050970

4

NEEP (NRAP) TF050973

5

Micro-finance

TF052452

6

Kabul Power Supply

TF052541

7

National Solidarity Program

II TF090205

8

Emer-gency Power Rehab.

TF54718

9

Urban Water and

Sanitation TF054729

10

Education

Quality Improve-

ment Program

TF054730

11

Rural Water

Supply and

SanitationTF055447

12

Kabul-

Aybak/Mazare-Sharif

Power Projec

Approved Grant

Amount 13.00 10.00 18.50 52.82 119.3 7.43 171.5 20.00 41.00 32.00 5.00

Amount Disbursed 11.98 0.00 15.65 51.94 118.74 6.84 136.32 0.23

18.61

7.00 1.22

Amount Available 1.02 10.00 2.85 0.88 .56 0.59 35.18 19.77 22.39 25.00 3.78

Start Date 06/15/05 10/17/2007 03/08/03 03/14/03 07/10/03 02/02/04 05/27/07 02/13/05 02/21/05 06/01/05 12/15/2005

Closing Date 02/28/10 03/31/2010 02/28/10 03/31/09 06/30/10 03/31/08 09/30/09 06/30/10 12/31/08 03/31/09 12/31/08

Achievement of Grant

Objectives MS NA MS S S S S MS MS S S

Implemen- tation S NA MU S S MS S MS MS S S

(S: Satisfactory MS: Moderately Satisfactory, MU: Moderately Unsatisfactory, U: Unsatisfactory; NA: Not Applicable)

Rating Definitions Highly Satisfactory (HS) There are likely to be no shortcomings in the project’s achievement of its objectives, in

its efficiency or in its relevance. Satisfactory (S) There are likely to be minor shortcomings in the project’s achievement of its objectives,

in its efficiency, or in its relevance. Moderately Satisfactory (MS)

There are likely to be moderate shortcomings in the project’s achievement of its objectives, in its efficiency, or in its relevance.

Moderately Unsatisfactory (MU)

There are likely to be significant shortcomings in the project’s achievement of its objectives, in its efficiency, or in its relevance.

Unsatisfactory (U) There are likely to be major shortcomings in the project’s achievement of its objectives, in its efficiency, or in its relevance.

Highly Unsatisfactory (HU) There are likely to be severe shortcomings in the project’s achievement of its objectives, in its efficiency, or in its relevance.


40

1. AFGHANISTAN CIVIL SERVICE CAPACITY BUILDING PROJECT (TF053940)

Contact: Mr. Nigel Peter Coulson

Approved: 02-May-05 Effective: 15-Jun-05 Closing: 28-Feb-10 [email protected] Allocated: US$13 million Disbursed: US$11.98 million Available: US$1.02 million Objective: To meet the short-term capacity needs of the Afghan Civil Service through two inter-related programs: the Afghanistan Expatriate Program (AEP) and the Lateral Entry Program (LEP). Component 1: The Afghan Expatriates Program (US$10 million) The "Afghan Expatriates" component enabled exceptionally well-qualified Afghan experts residing abroad to work as senior advisers to help key line ministries and apex agencies with institutional reforms, human resources development, and formulation and management of priority development programs Component 2: The Lateral Entry Program (US$3 million) aims to recruit a significant number of qualified Afghan professionals to ‘act’ in line civil service positions between Grades 2 and 4, on a scale of up to US$2,000 on contract for a term of two years, renewable once for not more then one year and no more, with the purpose of:

• Providing short to medium term capacity to ministries primarily in agencies where the PRR effort has been slow to take off.

• Laying the foundation for the reform process in ministries and government agencies, which are currently not under the PRR process.

• Training, mentoring and motivating regular post holders to work more efficiently and more effectively for the government, providing an alternative to the continued extensive use of technical assistance and consultants.

Implementation Progress (AEP): To date, 97 positions (including 3 women) have been filled through the AEP in over 20 ministries and agencies, with 29 currently under contract. (LEP): To date 135 lateral entrants (including 4 women) have been recruited to work in over 22 ministries and agencies, with 69 currently under contract. Issues and Actions Independent evaluations were conducted of the AEP and LEP. The results of the two reviews and subsequent discussions with government (MoF and the IARCSC) identified a new, unified program with a single set of criteria for identifying needs, recruitment, remuneration and supervision. The new Management Capacity Program (MCP) has significant advantages over maintaining two separate programs to respond to the short to medium-term management capacity needs of ministries and is described in project 2 below.

Please visit the Afghanistan Expatriate Program website: http://www.artfexpat.gov.af/about.html

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

Jun-0

5

Oct-05

Feb-06

Jun-0

6

Oct-06

Feb-07

Jun-0

7

Oct-07

Feb-08

Jun-0

8

Oct-08

Feb-09

Jun-0

9

Oct-09

Feb-10

Mill

ion

DisbursementRate: 82%

Achievement of Objectives: Implementation:

Moderately Satisfactory Satisfactory


41

2. MANAGEMENT CAPACITY PROGRAM (TF090077) Contact: Mr. Nigel Peter Coulson

Approved: 30-June-07 Effective: 17-Oct-07 Closing: 31-Mar-10 [email protected] Allocated: US$10 million Disbursed: - Available: US$10 million Objective: To achieve sustained improved performance in the management capacity of key departments dealing with any or all of the common functions including financial management, human resource management, policy and regulatory design, and administration. This should ultimately result in improved utilization and cost effectiveness of budgetary resources and faster and better development results on the ground. The “Management Capacity Program” (MCP) would essentially support the interim buying-in of critical management capacity to line ministries to complement donor provided technical advisory assistance. The purpose would be to improve the utilization and cost effectiveness of donor resources and generate faster and better development results on the ground. This is necessarily an interim solution to address the multiple capacity challenges facing Afghanistan: a small pool of Afghan professionals; competing demands from UN agencies and bilateral donors who continue to implement projects outside the government systems; and the ongoing distortions in the remuneration levels for skilled manpower. Component 1: Provision of management services component Component 2: Program management component would strengthen the Capacity Development Secretariat (CDS) within the IARCSC. Implementation Progress Key features of the MCP include:

Focus on senior-level line positions. Support of common functions (procurement, financial management, human resource management,

administration, etc) and provincial and district administration. Offer of competitive remuneration (comparable to international organizations) to attract and retain the

required skills. Strengthening Capacity Development Secretariat. Oversight of program by PAR Steering Committee.

The project was declared effective in October 2007 following the completion of the project manual and the financial manual. The procurement of technical assistance to support HRM, Financial Management and Contracting is being finalized and implementation is expected to be underway by March 2008, as funding under the Civil Service Capacity Program is fully utilized. Issues and Actions To continue to raise awareness with ministries of the support provided by MCP, leading to successful applications being made. A number of initial ministry applications have been received and are awaiting the mobilization of the International TA to ensure the quality assurance and build further capacity.


42

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

Oct-07

Dec-07

Feb-08

Apr-08

Jun-0

8

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-0

9

Aug-09

Oct-09

Dec-09

Feb-10

Mill

ion

Disbursement Rate: 0%


NA NA


43

3. TECHNICAL ASSISTANCE AND FEASIBILITY STUDIES FACILITY (TF050970)

Contact: Ms. Ludmilla Butenko

Approved: 08-Mar-03 Effective: 08-Mar-03 Closing: 28-Feb-10 [email protected] Allocated: US$18.5 million Disbursed: US$15.7 million Available: US$2.9 million

Objective: To build capacity of government by providing expertise to line ministries and developing local technical and professional capacity to define reconstruction and development projects. Component 1: Feasibility Studies and Implementation Support (US$10 million): Aims to identify and prepare projects for financing and implementation. This component supports the recruitment of specialized firms to undertake the feasibility studies. Component 2: Recruitment of Individual Consultants (US$8.5 million): Specialists recruited guide the preparation and supervision of reconstruction and development activities and supervise feasibility studies on behalf of the government. Implementation Progress Component 1: A total of seven contracts has been awarded (to MEW and MUDH), for US$10.1 million. Out of this amount, US$2.35 million has been disbursed and US$7.75 million is committed but not disbursed. Component 2: There are two experts working in line ministries. Total commitments for individual contracts amount to US$7.4 million, out of which US$7 million have been disbursed. Major Contracts (Firms) and Status Date Type US$ Million Contractor Country Status

May-04 Consulting services for MEW 2.3 DECON GmBH Germany Completed

Jun-05 Baghdara Hydro Power Plant Feasibility Study for MEW 3.8

Fichtner GmBH & CoKG

Germany On-going

Dec-05 Consulting Services for MUDH (Urban Plan) 2.6 SMEC Australia On-going

Mar-06 FM Consulting Services for Kabul Municipality (Urban Plan)

0.3 IPE India On-going

Jul-06 Aynak Copper Deposit Transaction Advisor 0.9 Gustavson

Associates USA On-going Issues and Actions Judging by the activities implemented, the project has had a lower than expected impact in terms of feasibility studies and its contribution to the preparation of the public investment pipeline. In many cases, individual consultants were employed for short term assignments. To what extent the engagements of individual consultants have contributed toward capacity building in Afghanistan is difficult to assess but the impact is likely to be limited. The consulting firms engaged have provided a sound contribution to the design and management of the projects that they were supporting. For example, Gustavson Associate’s work has been instrumental in the preparation of a transparent and efficient tender process for the Aynak copper deposit. The contract has been amended to support to the Ministry of Mines in the negotiations with the winning bidder.


44

$0.00$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00$18.00$20.00

Mar-03

Sep-03

Mar-04

Sep-04

Mar-05

Sep-05

Mar-06

Sep-06

Mar-07

Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Mill

ion



Moderately Satisfactory Moderately Unsatisfactory


45

3. NATIONAL EMERGENCY EMPLOYMENT PROGRAM-1 (NEEP-I, TF050973) [PART OF THE GOVERNMENT’S NATIONAL RURAL ACCESS PROGRAM ]

Contact: Ms. Susanne Holste

Approved: 14-Mar-03 Effective: 14-Mar-03 Closing: 31-Mar-09 [email protected] Allocated: US$52.82 million Disbursed: US$51.94 million Available: US$0.88 million

Objective: To assist the government in providing employment in rural areas at a minimum wage, as a safety net, to as many people in as short a time as possible. This objective should be read in conjunction with the objective of government’s NRAP which is to enhance human security and promote equitable economic growth by ensuring year-round access to markets, basic services and facilities in the rural areas of Afghanistan, through promoting local productive capacity, and private sector development of essential rural access infrastructure and employment creation for the rural poor. Component 1: Road Sector Labor Intensive Public Works Component 2: Irrigation Labor Intensive Public Works Implementation Progress The National Rural Access Program (NRAP) is one of the government’s most successful national priority programs. The World Bank administers financing for four projects under NRAP: the ongoing Japanese-funded Disarmament/Demobilization and Reintegration/Rural Alternative Livelihoods project (DDR/RAL, Grant no. 53415), and the ARTF-funded NEEP-1. The National Emergency Rural Access Project (NERAP, IDA Grant no. H0344) was recently approved by the World Bank’s Board and is expected to be effective by June 2008. The fourth project i.e. National Emergency Employment Program for Rural Access (NEEPRA, IDA Credit no. 3799 and IDA Grant no. H054) closed in September 2007 after successfully meeting its development objectives. The specific progress under the ARTF-funded NEEP-I (and additional funding under the NEEP extension) is:

Project Performance Indicators Baseline Revised Committed Achieved to date Roads (kms) 5,000 2,725 2,461 2,461 Irrigation 24,000 hectares

rehabilitated 15,000 hectares



rehabilitated

NEEP-I

Un-skilled Labor days

5,000,000 3,400,000 4,000,000 3,728,000

NEEP/NRAP Roads (kms) 850 600 614 457 (ARTF Bridges (m) 728 702 780 454

NEEP-1 Cross Drainage Structures (m)

n.a. 6,000 5,247 4,977

Extension) Un-skilled Labor days

4,780,000 1,500,000 2,151,866 1,409,386


46

Issues and Actions Extension in project closing date: The project has been extended by a further 12 months, establishing a new closing date of March 31, 2009, allowing remaining physical works to be completed. Out of the 105 contracts awarded under NEEP-1 Extension, 23 sub-projects have been delayed, and are scheduled to be completed by September 2008. Most of the reasons for delay in completion are due to force majeure, i.e. delays due to unforeseen and inclement weather and severe and deteriorating security situation in a number of provinces. The lack of contractor capacity has contributed to delays in award (unresponsive bids, failure to meet minimum qualifying criteria etc.), as well as slow physical progress. Implementation arrangements: Since start of the NEEP program in 2002, the projects were implemented by the ministries (MPW, MRRD and MEW) with the help of an Implementing Partner. However during preparation of the new National Emergency Rural Access Project (NERAP), the implementation arrangements were altered by shifting to an Implementing Consultant model, placing a greater responsibility on the Ministries in taking the lead and assuming the core functions. While the Ministries are still deficient in capacity to fully implement the program independently, however this is a step towards achieving that goal in the near future. Change in objective: The original NEEP-1 primarily focused on being an emergency safety-net program, providing employment to as many people in the shortest possible time through improvement of basic rural access infrastructure. However, the objective has been realigned to support government’s National Rural Access Program (NRAP) to create durable and sustainable rural access infrastructure, while generating short-term employment when feasible. Security: The major challenge in implementation continues to be the deteriorating security conditions in the southern and central regions. The worst affected provinces are Kandahar and Helmand but continued operation in several other provinces is becoming increasingly difficult.

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

Mar-03

Jul-0

3

Nov-03

Mar-04

Jul-0

4

Nov-04

Mar-05

Jul-0

5

Nov-05

Mar-06

Jul-0

6

Nov-06

Mar-07

Jul-0

7

Nov-07

Mar-08

Mill

ion



Satisfactory Satisfactory


47

5. MICROFINANCE SUPPORT FOR POVERTY REDUCTION (TF052452)

Contact: Mr. Stephen F. Rasmussen, Mr. Niraj Verma

Approved: 10-July-03 Effective: 10-July-03 Closing: 30-Jun-10 [email protected], [email protected]

Allocated: US$119.30 million Disbursed: US$118.74 million Available: US$.56 million

Objective: To help Afghans improve their livelihoods using microfinance as a tool to make the transition from dependence on humanitarian assistance to economic independence and empowerment to build on entrepreneurial spirit and skills. Component 1: Microfinance Fund (Loan fund) Component 2: Capacity-building/training of Microfinance Providers (MFIs) Component 3: Implementation Support to MISFA and MFIs Implementation Progress (see also Figure 1) Geographic Coverage: The sector has 265 branches across 23 provinces. BRAC and WOCCU have already started their operations in the southern provinces (Helmand and Kandahar). BRAC disbursed US$145,014 in Helmand and US$49,146 in Kandahar. WOCCU has established office in Helmand, completed staff recruitment and disbursed US$76000 (refer to Figure 2). Sector Update: As of March 2008 and over four years of operation, the sector has more than 436,000 active clients out of which over 373,000 are active borrowers with an outstanding gross loan portfolio of over US$107.5 million. The sector has cumulatively disbursed an amount of US$420 million in more than nearly 1.1 million loans. The current average loan size is US$288. The current repayment rate has come down slightly due to security constraints and staff management issues in some areas and corrective measures have been initiated. Besides credit, MFIs have collected over US$12 million in small savings deposits. (Refer Table 1 which provides indicators to be used for the IDA Microfinance Project that is expected to be effective soon). Gender / Special Clients: At present there are about 285,000 women clients (65 percent of the total client). Some of the microfinance partners specifically cater to women clients. The sector employs about 4,681 staff. MISFA has trained over 600 Afghans in microfinance. There are also over 200 disabled and over 13,000 returnee clients. MISFA Registration: MISFA has registered with AISA as an Afghan company. Fourteen MFIs are also registered as companies under Afghan law. Projections: It is expected that by the end of December 2008 the sector will be serving 530,000 households and that a total amount of nearly 600 million dollars in loans will have been disbursed. A significant proportion of the clients will remain female, half of the loans are proposed to be disbursed in rural areas, and MFIs will be active in over thirty provinces. Issues and Actions Funding Issues. A US$30 million IDA Grant for microfinance has narrowed the funding gap for Microfinance activities in SY1386. In June 2007, the ARTF MC approved an additional US$33 million in fresh ARTF financing for SY1386. MISFA has started disbursement of these loans after a six month delay due to a decision pending with the government.


48

FIGURE 1

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

Jun-

03

Dec

-03

Jun-

04

Dec

-04

Jun-

05

Dec

-05

Jun-

06

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Mill

ion




Results Monitoring Target Actual Comments

Outcome Indicators Baseline Dec 2006

YR1 Dec 2007

Mar 2008 1. Percent of loan portfolio outstandingthat is accounted for by MFIs w ith OSS>100% .

51% 60% 52% Below target, but on way to achieve Yr 2 target

2. Number / %of MFIs registered as separate legal entities underAfghan law – as corporations, companies, banks, orany other recognized legal form for financial service providers.

0 / 0% 10 / 67% 14 / 93% Above target

3. Number of active clients of MFIs.

300,000 375,000 436,777 Above target

4. % of active clients who are women.

70% 68% 65% Nearly achieved and will fully achieve Yr2 target

5. Increase in amount and percentage of loan portfolio outstandingrelative to base year

$65 M $90 M / 138%

107.5M /165% Above target

MFIs=Microfinance partners; OSS=Operational Self -Sufficiency


49

6. IMPROVEMENT OF POWER SUPPLY TO KABUL (TF052541) Contact: Mr. Pedro E. Sanchez

Approved: 10-Dec-03 Effective: 02-Feb-04 Closing: 31-Mar-08 [email protected] Allocated: US$7.43 million Disbursed: US$6.84 million Available: US$0.60 million

Objective: To improve the availability and reliability of power supply in Kabul through (i) rehabilitation of the Mahipar hydropower station (including a 110 KV transmission line); and (ii) improvement of street lighting in Kabul. Component 1: Rehabilitation of Hydro Power Stations Component 2: Rehabilitation of Transmission Lines Sarobi-Kabul Component 3: Rehabilitation of Public Lighting in Kabul Implementation Progress Component 1: KfW reported that the rehabilitation works for one of the units is completed. Completion of the second unit is expected by December 2007. Component 2: Completed in 2005. Component 3: Completed in 2004. Issues and Actions: KFW estimates a financing gap of US$270,000 due to the fact that the VSHK contract is nominated in Euros and this currency has appreciated with reference to the US Dollar.

$0.00$1.00$2.00

$3.00$4.00$5.00$6.00

$7.00$8.00

Feb-04

Jun-0

4

Oct-04

Feb-05

Jun-0

5

Oct-05

Feb-06

Jun-0

6

Oct-06

Feb-07

Jun-0

7

Oct-07

Feb-08

Mill

ion



Satisfactory Moderately Satisfactory


50

7. NATIONAL SOLIDARITY PROGRAM II (NSP II) TF090205 Contact: Ms. Susanne Holste Approved: 07-Dec-06 Effective: 27-May-07 Closing: 30-Sep-09 [email protected] Allocated: US$171.5 million Disbursed: US$136.3 million Available: US$35.2 million

Objective: To lay the foundations for strengthening community level governance, and to support community reconstruction and development projects that improve access of the rural communities to social and productive infrastructure and services. Component 1: Block Grants for Communities to Implement Reconstruction and Development Sub-projects Component 2: Community Facilitation and Capacity Building Component 3: Program Implementation Management Support, Monitoring and Evaluation Implementation Progress: The Second National Solidarity Project (NSP II) became effective on May 15, 2007, following up NSP I which closed on March 31, 2007. NSP II continues to support the NSP roll-out to an additional 4,300 communities toward the targeted 21,600 communities in Afghanistan representing 90 percent of the country. As of April 2008, more than 21,420 communities were mobilized (99 percent of the target). Approximately 20,502 of these communities successfully elected Community Development Councils (CDCs) and about 20,182 Community Development Plans (CDPs) were formulated. 36,310 sub-project proposals were approved of which 18,434 were completed. About 79 percent of the sub-projects develop productive infrastructure mainly, water supply and sanitation (21.7 percent), rural roads and bridges (20.5 percent), irrigation (14.3 percent), village electrification (13.5 percent). Issues and Actions: 1) New allocation in SY1387 (Grant no. 090205): NSP greatly appreciates the allocation of an additional US$81.5 million of ARTF financing in SY1386 by the MC on February 12, 2008 resulting in a total ARTF allocation of US$171.5 million. The balance of ARTF funds from SY1386 is US$35.1 million. The current budget allocation for SY1387 provides US$178 for NSP. 2) Funding shortfall for NSP roll-out: Funding shortfalls continue to be a problem for the program. NSP has been so successful and is in such great demand by the population that the program has rolled out faster than available funding. NSP has consistently faced difficulties to meet its obligations towards the communities and facilitating partners. There is a risk that the credibility of the government will be undermined if, once again, the population is disappointed in the reliability of government’s commitment. The current forecast is that NSP will again have a funding shortfall starting in June 2008, and thus improving predictability of funding remains a high priority. 3) Security: Security is increasingly the concern of the project implementation. Threats and attacks against MRRD staff and facilitating partners continue. The security situation in the districts is very fluid and the FPs and NSP must adjust accordingly. The World Bank, NSP/MRRD, and FPs have drafted a strategy for working in high risk areas. NSP could be used effectively to stabilize those districts which are presently secure by demonstrating the ability of government to deliver needed services to the population and thus could serve as an effective stabilization instrument. Contracts with FPs for NSP implementation in high risk districts are being finalized and implementation should begin soon. 4) Consolidating CDCs: NSP has been instrumental in setting up CDCs. In its second phase of implementation, the roles of CDCs which have fully utilized their blocks grants are being discussed, and the concept for a possible third phase is being developed. CDCs


51

have effectively become the lowest level of governance and an effective institution to manage development assistance and resolve local issues. The CDC by law confers legal status. It is evident that CDCs cannot yet self-finance but going forward, CDCs may be an increasingly effective development instrument in rural Afghanistan. The Mid-Term Review (MTR) of NSP II is ongoing from April-May 2008. The purpose of the MTR is to reassess the relevance of the project development objectives, evaluation its development impact, outcome, and outputs, assess the likelihood of achieving them and make any mid-course adjustments to project implementation if needed. The aide mémoire for this MTR will be available at the end of May 2008.

$0.00$20.00$40.00$60.00$80.00

$100.00$120.00$140.00$160.00$180.00$200.00

May

-07

Jul-0

7

Sep-

07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-

08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Mill

ion





52

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

Feb-05

Jun-0

5

Oct-05

Feb-06

Jun-0

6

Oct-06

Feb-07

Jun-0

7

Oct-07

Feb-08

Jun-0

8

Oct-08

Feb-09

Jun-0

9

Oct-09

Feb-10

Mill

ion

DisbursementRate: 1%

Achievement of Objectives: Implementation

NA NA

8. EMERGENCY POWER REHABILITATION PROJECT (Naghlu HPP) (TF054718) Contact: Ms. Sunil Khosla

Approved: 13-Feb-05 Effective: 13-Feb-05 Closing: 30-Jun-10 [email protected] Approved: US$20 million Disbursed: US$0.23 million Available: US$19.77 million

Objective: To improve reliability of the power supply in Kabul. Component 1: Rehabilitation of 100 MW Naghlu Hydropower Plant in Laghman province (US$18.9 million) Component 2: Supervisory Engineer for Rehabilitation of Naghlu Hydropower Plant (US$1.1 million) Implementation Progress The entire US$20 million grant amount is fully committed. The contract for the rehabilitation of the Naghlu Hydropower Station with Technopromexport (Russia), and co-financed with IDA, was signed on August 30, 2006 and became effective on November 30, 2006 following the transfer of the advance payment and establishment of the letter of credit. The contract for the supervision consultant was signed on September 18, 2006 and became effective on December 27, 2006. Almost 15 percent of the work has already been completed. The contractor mobilized on site in mid January 2007. The operational acceptance test for the first unit (25 MW) is scheduled for the first quarter of 2009, the second unit for the third quarter 2009, the third unit for the fourth quarter 2009, and the fourth and final unit expected to be completed by the second quarter of 2010. Payments under the letter of credit will be made against achieving these milestones. Issues and Actions: Nothing significant to report.


53

9. URBAN WATER SUPPLY AND SANITATION (TF054729) Contact: Mrs. Karine Fourmond

Approved: 21-Feb-05 Effective: 21-Feb-05 Closing: 31-Dec-08 [email protected] Allocated: US$41 million Disbursed: US$18.61 million Available: US$22.39 million

Objective: To provide sustainable, improved water supply and sanitation services to urban areas and to build the technical and institutional foundation for the medium term. Component 1: Kabul Water Supply – Upper Kabul River Well-field, Transmission Mains and Distribution Networks. Component 2: Kabul Sanitation – Construction of New Facilities for On-site Sanitation and Municipal Solid Waste. Component 3: Provincial Towns Water Supply/Sanitation – Rehabilitation and Extension of Systems in 13 Provincial Towns. Component 4: Engineering Support and Technical Assistance to Central Authority for Water Supply and Sewerage (CAWSS) and Kabul Municipality. Component 5: Financial Support to the government’s Central Authority for Water Supply and Sewerage (CAWSS) Operations. Implementation Progress 1. Kabul Water Supply: The construction of boreholes is on-going (six boreholes are completed in Logar and eight are completed in Allaudin) and the works are expected to be completed in May. The land acquisition process for the boreholes is almost complete as required under the provisions of the project’s Environmental and Social Management Framework. Bids for the second (pipelines and equipment for well fields and pumping stations), third (collector pipes and transmission mains), and fourth (principal and local mains) works packages were received in September 2007 and the bids evaluation reports are finalized. The corresponding construction contracts should be signed in the coming weeks. 2. Kabul Sanitation: The consultancies to assist Kabul Municipality in implementing the project are mobilized. Activities to provide operations support to the Department of Sanitation are on-going and cover subjects such as public awareness campaign, management information system etc. Several contract for goods and small works are on-going, including a co-composing pilot which was just completed and the conduction of a workshop for the Department of Sanitation. Bids for disposal facilities (upgrading of Chamtala dumpsite and construction of sludge/septage disposal station) were received in December 2007 whereas the concept for the continuation of mid-scale, low cost co-composting activities is being worked out. 3. Provincial Towns Water Supply/Sanitation: This project component covers Sheberghan, Mazar-i-Sharif, Taloqan, Charikar, Jalalabad, Metherlam, Gardez, Ghazni, Kandahar, Qalat and Maimana, Puli Khumri, and Zaranj. Four contracts for goods amounting to US$9.98 million were signed in January 2007, letters of credit were opened, and some 400 containers are currently being received in Afghanistan from various places across the world after due inspections at shipment. Bids for drilling and pipe laying works were received in August 2007 and the corresponding contracts are currently being signed whereas a few lots have to be re-tendered. Following the conduction of geo-technical investigations, the design of several reservoirs was finalized and the corresponding works were tendered with a submission deadline in May by


54

$0.00$5.00

$10.00$15.00$20.00$25.00$30.00$35.00$40.00$45.00

Feb-05

May-05

Aug-05

Nov-05

Feb-06

May-06

Aug-06

Nov-06

Feb-07

May-07

Aug-07

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Mill

ion



Moderately Satisfactory Moderately Satisfactory*

* As of end of March. Subject to a supervision mission review in Q1 SY1387.

MoUD and MoF in April 2006. The Articles of Incorporation of the new Afghan Water Supply and Sewerage Corporation (AUWSSC) were approved by Cabinet and immediately published in the Official Gazette in July 2007. Following the transfer of assets and liabilities, the new corporation is expected to enter into function shortly. 5. Financial Support to CAWSS Operations: The financial support to operations of CAWSS was effective since August 2005 with about US$2 million utilized over 20 months. This support has significantly contributed to improving the management capacity in all 14 units of CAWSS, and has generated detailed technical, financial and commercial data for the first time. Elementary financial management systems are now in place in all towns. The financial support to CAWSS operations was terminated as of March 21, 2007 to prepare for the transition to the financial assistance to Afghan Urban Water Supply and Sewerage Company under the IDA-financed Urban Water Sector Project (US$40 million). Issues and Actions: Implementation of the major investments has now started. Some major construction contracts for Kabul Water Supply are currently being signed and the ARTF Grant is progressively moving in to a situation of over-commitment, highlighting a funding gap. The project closing date will have to be extended to reflect the construction schedule which has now been fully clarified.


55

Issues and Actions: Deteriorating security remains the chief concern and a bottleneck to speedier implementation in specific conflict areas. Second, predictable funding is key to ensuring that EQUIP can continue to expand to reach all provinces.

10. EDUCATION QUALITY IMPROVEMENT PROGRAM (EQUIP) (TF054730)

Contact: Ms. Scherezad Joya Monami Latif

Approved: 01-Jun-05 Effective: 01-Jun-05 Closing: 31-Dec-09 [email protected] Allocated: US$32 million Disbursed: US$ 7 million Available: US$ 25 million

Objective: To strengthen and support capacity of (a) schools and communities to better manage teaching/learning activities; (b) human resources (teachers, principals and educational administration personnel) and physical facilities; and (c) District Education Departments, Provincial Education Departments and the Ministry of Education (MoE). The program promotes education for girls by giving priority to female teachers and students within each component activity. Component 1: School Grants for Quality Enhancement and Infrastructure Development Component 2: Institutional and Human Resources Development Component 3: Policy Development, Monitoring and Evaluation Implementation Progress Implementation progress has been satisfactory. EQUIP is the national program and is being implemented in all 34 provinces of the country. Achievements so far:

• Remarkable progress has been made in increasing rates of female participation⎯notably, the dramatic increase in girls’ enrollments and in the number of female teachers.

• EQUIP has been very successful in mobilizing communities for establishing School Management Committees and Parent Teacher Association under the quality grants enhancement subcomponent. Refresher programs will be needed to deepen community understanding of quality education. After school-level preparatory activities (including school surveys, awareness programs, community mobilization, and PTA training), about 2,480 (91 percent of original target) SMCs have been established. All 2,480 SMCs have prepared SIPs, following the relevant training to SMC/PTAs, and provincial and district educational departments. So far, 1,075 SMCs are implementing quality grants according to agreed criteria

• There has been satisfactory progress in infrastructure development: (i) community participation in school construction has been significant; (ii) a menu of cost effective alternative designs has been developed. Technical supervision and enhanced monitoring of construction sites will need to be strengthened. 500 schools would have been built by the end of the project.

• The modality for the national in service teacher training program has been established under the multi-donor supported teacher education program. A district based teacher training team scheme will be implemented to jump start teacher training activities in the next two years. A basic monitoring and evaluation systems in EQUIP is in place. Most notable has been the successful completion of the national school survey under the Educational Management Information System. The data is being further analyzed but initial analysis finds it to be relatively reliable.

• Project management has improved significantly since EQUIP effectiveness; greater effort needs to be made in strengthening coordination across departments.

The entire ARTF Grant is committed and is expected to be disbursed by end 2008.


56

$0.00$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00$18.00

Jan-0

6

Apr-06

Jul-0

6

Oct-06

Jan-0

7

Apr-07

Jul-0

7

Oct-07

Jan-0

8

Apr-08

Jul-0

8

Oct-08

Jan-0

9

Mill

ion


Achievement of Objectives: Implementation



57

11. RURAL WATER SUPPLY AND SANITATION (TF055447)) Contact: Mrs. Karine Fourmond

Approved: 15-Dec-05 Effective: 26-Feb-06 Closing: 31-Dec-08 [email protected] Allocated: US$5 million Disbursed: US$1.22 million Available: US$3.78 million

Objective: To improve the health of rural communities by increasing awareness through integration of health and hygiene education with the provision of safe and sustainable water supply and sanitation services in eight provinces (Baghlan, Takhar, Kundoz, Kabul, Badghis, Samangan, Jowzjan, and Sari Pul); to strengthen and build the capacities of government (central and provincial) for sector development and that of NGOs, the private sector and the communities to scale up provision of safe and sustainable water supply and sanitation services. Component 1: Strengthening Capacity of Entities and Communities Component 2: Construction of Water Points and Sanitary Latrines in Rural Areas Component 3: Carrying out Studies for Developing Service Delivery Mechanism Implementation Progress After MRRD recruited a Project Manager in August 2006, a Project Implementation Unit (PIU) was established in the Water and Sanitation Department of MRRD. The PIU is fully staffed with procurement specialist, finance and IT specialists, as well as technical staff. The PIU is being strengthened with a project assistant and additional staff to increase the supervision effort. Support Organizations were mobilized in February 2007 and software activities could then be initiated. The planning phase is now completed with district demand collection and provincial planning having resulted in the selection of four target districts in each of the eight provinces in which the project is being implemented. In these 32 selected districts, action plans for selection of sub-projects have been finalized at the community level together with necessary engineering designs and Support Organisations are now moving into supervision of construction activities. Hygiene and sanitation promotion and O&M training efforts are taking place in all the project villages through mobilization of hygiene promoters/visits to households and identification/training district mechanisms and water points caretakers. Procurement of works for construction of water points and sanitary latrines (21 contracts for a total of US$2.519 m) was completed for all eight provinces in two batches (each contract duration is 5 months). Construction contracts were signed between August and October 2007 and construction partners are now mobilised. The procurement of works for gravity pipe schemes is on-going (12 contracts worth US$0.523 m) after the procurement modalities were finalized (NCB vs community contracting). Implementation modalities for community contracting through Community Development Councils (CDCs) were clarified by MRRD and approved by MoF. The progress related to the contracting out of the various studies has been very slow. The project has reviewed the need, scope of the studies and is finalising their contracting. Key subjects include the independent review of various implementation models previously implemented by different actors, setting up frameworks for small towns, peri-urban areas and multi-village schemes - as well as for rural drinking water quality management, and conceptualizing the architecture of what could be a comprehensive M&E system. Issues associated with a potential scale-up include the need for fine-tuning the implementation arrangements, and coordination with NSP and broader provincial planning efforts. Issues and Actions: Deterioration in security conditions remain a concern and continue to affect implementation progress and quality of supervision. A second extension of the closing date by another 6 months was processed while an official request for a follow on operation was received from MoF.


58

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

Mar-06

May-06

Jul-0

6

Sep-06

Nov-06

Jan-0

7

Mar-07

May-07

Jul-0

7

Sep-07

Nov-07

Jan-0

8

Mar-08

May-08

Mill

ion





59

12. Kabul/Ayabak/Mazar-e-Sharif Power Project (TF091120) Contact: Mr. Sunil Khosla Approved: 10/04/2007

Effective: 12/26/2007 Closing: 12/31/2009 [email protected]

Allocated: US$57 million Disbursed: US$0 Available: US$57 million

Objective: The development objective of the project is to help provide reliable and quality power to the consumers in the target areas of the cities of Kabul, Aybak, and Mazar-e-Sharif Component 1: MEW/300/3: Kabul LV Rehabilitation – The Contract between MEW and Messrs. Angelique India was signed on 23 March 2008 (US$ 16.6 m). Performance Guarantee and the Advance Payment Security with invoice were submitted by the contractor. A kick off meeting is expected next week. Component 2: MEWS-503: 220/20KV 50MVA expansion of Mazar-e-Sharif Substation and a new 16MVA Substation at Aybak – The bidding process is on. Pre-bid meeting held with prospective bidders. The bids would be submitted in June, 2008. Component 3: MEWS-502: Mazar-e-Sharif Distribution Rehabilitation Project –Contract award (US$ 20.5 million) to Associated Transrail Structures Limited (ATSL), India (Lead Partner) and Afghan Electrical Power Corporation (AEPC), Afghanistan (Joint Venture) notified. Component 4: Institutional capacity building and project management support ongoing. SMEC is providing Procurement and project management support. The consultants were funded under EPRP project. Implementation Progress Component 1: Yet to start at field. Component 2: Yet to start at field. Component 3: Yet to start at field. Issues and Actions: The budget allocation need to be enhanced to cover full cost of all LCs. Budget unit of MoF has assured help in this regard. Due to beginning of the year budget processes, the advance payment has been delayed. SMEC, the project management consultant are following us and it is hoped the matter would be resolved successfully soon.


60


61

ANNEX 2: Recurrent Cost Financing


62

ARTF Quarterly Report (March 20, 2008)

63

ANNEX 2: Recurrent Cost Financing 1. Overview of the Monitoring Process The Administrator’s oversight of the ARTF’s recurrent cost financing includes the services of a Monitoring Agent (MA), employed by the Administrator. Figure 15 gives an overview of the monitoring process. MA reviews recurrent cost expenditures through (i) desk review of all expenditures; and (ii) site visits to test a sample of expenditures. Desk Reviews Desk reviews are applied to 100 percent of all recurrent budget transactions recorded in the centralized integrated financial management system. Desk reviews are carried out before the government’s reimbursement request is submitted to the Administrator. Any identified inadmissible expenditures are deducted from that month’s request for reimbursement. Site Visits Site visits provide assurance that expenditures reimbursed by the ARTF comply with the fiduciary standards agreed between the Administrator and the Ministry of Finance. Ineligible expenditures detected during site visits are deducted from subsequent payment requests to be sent to the Administrator. This system ensures that all identified ineligible expenditures are promptly regularized and recovered from the Ministry of Finance, normally in the month following their detection in a site visit. Compliance Testing The MA verifies expenditure eligibility against three main sets of criteria:

• Government of Afghanistan (GoA) standards • ARTF Provisions (Legal agreement/Grant Agreement) • Fiduciary Standards (efficiency standards set by the Administrator)

Non-compliance with any of the above-mentioned sets of standards renders an expenditure ineligible for reimbursement from the ARTF. There are various eligibility sub-criteria under each of the three broad sets of standards mentioned above; for instance head-count caps under GoA standards. All payroll head-counts are compared to authorized levels; payroll costs of head-counts above authorized levels are ineligible. If a certain ministry shows high trends of ineligibility in payroll, the MA then increases the frequency of site visits, thereby capturing and reviewing a larger share of the expenditures on site. Risk-based Approach The historic trends of ineligibility over the past four years provide a good basis for planning O&M monitoring on a risk basis, tailoring the approach based on each line ministry’s performance and by the cause of ineligibility. The resulting coverage puts greater emphasis on high risk entities and high risk operations. For example, expenditures from line ministries with a history of greater ineligibility are more intensely reviewed. Reporting The MA reports to the Administrator on a monthly basis, detailing its activities. These reports provide insight into the usage of funds and findings arising from the MA’s examination of expenditures. A summary report of the MA’s findings is also shared with the Ministry of Finance.


64

Figure 15: ARTF Recurrent Cost Monitoring Process 2. Frequently Asked Questions on the ARTF Recurrent Costs Financing Why does the ARTF support the recurrent costs of the government? The government is gradually improving its own revenue base, through customs and taxation, so that it can pay its recurrent expenditures fully in the future. Improvements in revenue collection are being made. However it will take some time before the government is fully able to support its recurrent expenditures by domestic revenues. According to the MTFF (Medium-Term Fiscal Framework) as of March 2007, the government plans to cover 82 percent of recurrent expenditures by domestic revenues in SY1388. Therefore, ARTF finances part of the government’s approved recurrent expenditures except for security-related costs and land purchases. The annual budget is first approved by the Cabinet and, since SY1385, subsequently by the Parliament. At the beginning of the fiscal year the Administrator and ARTF donors agree with the government on the volume of the financing gap in the recurrent expenditures budget to be financed by the ARTF. Why does the ARTF not fund military or security related expenses? The Articles of Agreement of the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) (together, “the Bank”) prohibit the Bank from

Government incurs and pays recurrent cost

expenditures, comprising wages

(75%) and O&M (25%)

Monitoring Agent (MA) performs an automated Desk

Review of 100% of the recurrent cost

expenditures

Expenditures for non-qualified activities (e.g., military) and identified

ineligible expenditures by MA are deducted and a

Statement of Expenditure (SOE) is prepared for the

expenditures of the eligible activities

SOE is submitted to the Administrator and the Special (Working Capital) Account is

reimbursed

Monitoring Agent performs a risk-

based review of the SOE expenditures

Identified ineligible expenditures are

deducted from future Special (Working Capital) Account reimbursements

by the Administrator

Impact of External Audit: Ineligible expenditures identified in the annual external audit of the Government’s financial statements are reviewed by the Administrator and Monitoring Agent and deducted from future

Statements of Expenditures.


65

involvement in the political affairs of its member countries. In addition, the Articles of Agreement spell out the purposes of the Bank, which purposes have been interpreted by the Bank’s Board of Executive Directors not to permit involvement in military or security related activities of member countries. The Bank in its capacity as the trustee of the ARTF is guided by the overall purposes of the Bank, the political prohibition clause and the other provisions in the Articles of Agreement. Funding military or other security-related expenditures would be outside the Bank’s mandate and would violate the political involvement prohibition. What kinds of recurrent costs are financed by the ARTF? Each fiscal year the government and ARTF donors agree a proportion of government’s recurrent budget to be financed by the ARTF. Expenses up to this agreed amount are reimbursed by the ARTF during the year, as long as they adhere to the government's financial management regulations and the fiduciary standards stipulated in the ARTF Grant Agreement. To date, approximately 72 percent of recurrent costs have been for payroll expenses and 28 percent for operations and maintenance expenses. Of the 28 percent for operations and maintenance, 75 percent was incurred in Kabul and 25 percent in the provinces. How does the ARTF Administrator monitor use of these funds? The Administrator has a contract with PriceWaterhouseCoopers (PWC) to serve as a Monitoring Agent (MA), which is responsible for reviewing expenses submitted to the ARTF by the government. The MA checks compliance with (i) government's internal controls; (ii) ARTF requirements; and (iii) efficiency standards. The MA reviews all of the expenditures codes to ensure they are eligible for ARTF funding and in line with the budget. The MA also reviews some expenses in more detail. The MA decides which expenses to examine more thoroughly by applying a carefully designed risk-based approach to monitoring. Is it possible that some expenditures are entirely unchecked by the MA? No, all expenditures are subject to certain minimum checks. How does the Bank monitor the work and performance of the Monitoring Agent? The MA is under contract with the Administrator which works closely with the MA to monitor their performance and work outputs. They meet regularly to review findings and determine follow up actions. In addition, as part of the Administrator's fiduciary framework for all operations (whether financed by the World Bank or the ARTF), an annual independent audit is conducted. The Bank follows up with the government and the MA on audit findings. The most recent audit covering SY1385 (March 21, 2006 – March 20, 2007), has been received by the administrator and reported on to the donors. What are 'ineligible expenditures'? Firstly, as noted above, any security related expenditures are ineligible for ARTF financing. In addition, any expenditure that does not adhere to the government's budget and procurement rules, or to the reporting and cash management standards agreed with the Bank, would be ineligible. When an expenditure is found to be ‘ineligible’ it does not necessarily imply misuse or wrongdoing. Does the ARTF directly finance the government’s recurrent budget? No. The government first funds its recurrent budget and after an initial review of eligibility by the MA, then submits expenditure details to the Administrator which reimburses government for the eligible amounts authorized by the MA. Ineligible expenditures are frequently detected by the MA


66

before any reimbursement takes place. However, the monitoring process reviews expenditures at later stages to detect any further ineligible expenditure which may have been reimbursed to the government at the first stage. What is the mechanism for recouping ineligible expenditures and for that matter, misused funds after they have already been paid by the ARTF? After ineligible expenditures are detected by the MA, they are deducted from the other eligible reimbursements made by the ARTF to the government. Sometimes this happens in the same month the expenditure is submitted but often it happens later due to the lag in the monitoring process. For this reason the ineligible expenditures reported each month can vary as amounts are reconciled through an ongoing process. The same process is followed if funds have been misused but in such cases the ARTF brings the issue to the direct attention of the Ministry of Finance so that controls may be strengthened in the future. Is the government's overall performance with regard to expenditure eligibility improving? The overall trend is improving gradually. Improvements have been made in the government's compliance with agreed fiduciary standards, as well as government's own control procedures. The Bank is providing capacity-building support to the Ministry of Finance and the Control and Audit office to further improve compliance. 3. Financial Management in the National Government Audit of SY1385 The audited financial statements for the recurrent cost and investment trust funds were presented to the Administrator in December 2007. The Administrator found the reports acceptable and circulated to the donors on March 21 the results of its review. Public Financial Management Over the last three years the government of Afghanistan established a new framework for Public Finance Management (PFM) comprising: the national budget as the main policy instrument; a commitment to transparency; centralization of accounting and payments in MoF; and a centralized computerized system to issue checks and record revenues and expenditures of the ordinary and development budgets. Parallel improvements have been made in the Da Afghanistan Bank (DAB) payment systems. The government also established a Treasury Single Account (TSA) which ensures strong fiduciary controls (including regular sweeping of revenues to the center and bank reconciliations). External audit capacity was also developed; consequently, the 2004/5 financial statements of ARTF and IDA–financed operations have been audited to international standards. Procurement Management The government established a central facility for procurement that has finalized more than 527 contracts, with a total value above US$1.5 billion, using internationally accepted standards. Audit The Ministry of Finance has developed work practice tools and has carried out classroom training for 100 Internal Auditors with on-the-job-training to continue through 2008. Other ministries are developing similar programs.


67

Analytical and Advisory Work A major review of Afghan public financial management/PEFA indicators was performed in 2005 by the Administrator. This PEFA study was updated to December 31, 2007 and the detailed report has been shared with the Donors and is available on the ARTF website. The main findings of the assessment suggest that:

Revenue Mobilization: On “sound and fair revenue policies; revenue projection”, revenue projections are regularly updated and they are incorporated into the budget process. However, key tax policy measures have not commenced as parliament has not yet approved the amendment to the income tax law. On “effective revenue administration”, the performance of the Large Taxpayer Office (LTO) has significantly improved and it currently collects 35 percent of domestic tax revenues. The Income Tax Law stipulates that basic enforcement powers for the Revenue Department of the Ministry of Finance and Mustufiats (provincial branches of the Ministry of Finance).

Budget Formulation: On “strategic, realistic, predictable multi-year framework”, the Medium-

Term Fiscal Framework (MTFF) was first formulated in 2005 to strengthen medium-term fiscal projections. The link between the Afghanistan National Development Strategy (ANDS) and the national budget is likely to be strengthened through the ongoing costing exercises. Also, the Ministry of Finance has been piloting initiatives on ‘program budgeting’ and ‘provincial budgeting’. With regard to “comprehensive, fully integrated budget”, the inclusion of data on municipalities and State-Owned Enterprises (SOEs) in the budget documentation requires further progress. On “orderly, open, participative budget process and revisions”, the budget circular must include indicative budget ceilings for the primary budgetary units and the budget process needs to be planned in such a way that the ministries and agencies have sufficient time to prepare their budget submissions. Also, despite progress on the part of the Ministry of Finance, strengthening capacities in the line ministries to prepare budget proposals is essential. On “adequate legislative scrutiny of the Annual Budget Law”, the Finance and Budget Commission is now providing training to its budget analysts and the members of the Commission.

Budget Execution: On “effective cash management”, the cash management unit of Ministry of

Finance has annual cash plan with monthly update. And all discretionary funds flows are fully consolidated through Treasury Single Account (TSA). However, cash management of line ministries and Mustufiats has little progress. On “effective debt and guarantee management”, the Ministry of Finance completed a debt management strategy in October 2005 and debt review finished a fully reconciled. On “smooth, predictable budget implementation”, a survey of arrears as well as asset registry has not yet been conducted. On “internal controls”, capacity building of internal controllers of line ministries remains an issue. On “internal audit”, in the Ministry of Finance, PRR in the internal audit department of Ministry of Finance was implemented and 200 staff was trained. Capacity building of line ministries and municipalities are still of concern. On “payroll”, the coverage of Individualized Salary Payments was increased from 23,000 in 2005 to 88,000 in 2007. On “procurement”, the Procurement Policy Unit (PPU) was established in August 2006 and Rules of Procedures for Public Procurement was issues in April 2007. Nevertheless, capacity constraints have prevented line ministries to progressively take responsibility for procurement transactions.

Accounting and Reporting: On “accounting, in-year reporting”, reconciliation of government

accounting records with banking data and TSA is performing satisfactory. Undertaking roll-out of AFMIS to Mustufiats has been completed in two provinces and planned for 12 more provinces. However, developing accounting capacity of municipalities and SOEs has little progress. On “transparent and accessible external financial reporting”, the Harmonized reporting and financial reviews by the Aid Coordination Unit of Ministry of Finance in late 2007 has contributed to


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capture and report accurate expenditures of donor implemented projects. A remaining agenda is disclosure of SOEs annual financial results.

Treasury Operations at Present Treasury operations are advancing. Most middle management positions have been staffed. Similarly, the review of the internal controls being carried out by the MA indicates that the bank reconciliations has improved although weaknesses in payments and payroll persist. Progress on the extension of the Verified Payroll Program (VPP) has fallen short of plans. These problems are being addressed. Internal Control at MoF All payment requests are subject to internal control by the MoF. The main procedures are as follows: • All payment request forms are reviewed at the line ministries by the independent MoF controllers.

Treasury will only accept payment authorization forms that are authorized by the independent controllers.

• Budget availability is verified at the MoF prior to issuance of checks. • A check authorization process is in place. 4. Capacity Building in Public Financial Management The leading cause of ineligibility is non-compliance with procurement rules. To address this problem, the MoF engaged a procurement capacity-building consultant, Charles Kendall Partners. This firm has completed a needs assessment and begun the dissemination of the procurement law and training to procurement staff.


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ANNEX 3: ARTF Financial Tables

These tables show the financial situation of ARTF at March 19, 2008. The tables are updated monthly and are available at the ARTF web site

http://www.worldbank.org/artf


70


71

SY 1387

SY 1381 SY 1382 SY 1383 SY 1384 SY 1385 SY 1386 SY 1381-87

SY 1381-87

SY 1381-87

SY 1381-87

Donor Total Total Total Total Total Total Total Signed Un-signed Total % of Total Total % of

TotalPaid-in Paid-in Paid-in Paid-in Paid-in Paid-in Paid-in Pledges Pledges SY 1387 SY 1387 Paid-in Paid-in

Australia 0.000 2.635 6.268 7.654 5.836 2.089 0.000 0.000 0.000 0.000 0.0% 24.482 0.8% 24.482 1.0%Bahrain 0.000 0.504 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 0.504 0.0% 0.504 0.0%Canada 11.998 50.093 5.491 72.343 58.863 213.461 0.000 0.000 106.645 106.645 16.9% 518.894 17.4% 412.249 17.6%Denmark 5.000 5.000 3.163 3.916 4.343 8.426 0.000 0.000 0.000 0.000 0.0% 29.848 1.0% 29.848 1.3%EC/EU 15.871 52.720 47.595 58.771 52.720 73.615 0.000 0.000 17.352 17.352 2.8% 318.644 10.7% 301.292 12.9%Finland 2.792 2.451 6.126 0.000 2.418 5.404 0.000 7.887 0.000 7.887 1.3% 27.079 0.9% 19.192 0.8%Germany 10.068 11.443 15.941 1.230 20.474 55.992 0.000 15.775 31.549 47.324 7.5% 162.471 5.5% 115.148 4.9%India 0.200 0.200 0.000 0.400 0.200 0.200 0.000 0.000 0.000 0.000 0.0% 1.200 0.0% 1.200 0.1%Iran, Islamic Repu 0.000 0.989 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 0.989 0.0% 0.989 0.0%Ireland 1.000 1.699 1.814 0.612 1.276 1.458 0.000 0.000 0.000 0.000 0.0% 7.858 0.3% 7.858 0.3%Italy 17.000 0.000 6.539 0.000 9.223 8.804 0.000 0.000 0.000 0.000 0.0% 41.565 1.4% 41.565 1.8%Japan 5.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 5.000 0.2% 5.000 0.2%Korea, Republic o 2.000 2.000 2.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 6.000 0.2% 6.000 0.3%Kuwait 5.000 5.000 5.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 15.000 0.5% 15.000 0.6%Luxembourg 1.000 0.000 0.000 0.605 1.563 1.070 0.000 1.262 0.000 1.262 0.2% 5.500 0.2% 4.238 0.2%Netherlands 33.667 41.151 46.415 29.664 50.805 39.765 0.000 2.500 42.788 45.288 7.2% 286.755 9.6% 241.467 10.3%New Zealand 0.000 0.000 0.000 0.000 0.628 0.000 0.000 0.000 0.000 0.000 0.0% 0.628 0.0% 0.628 0.0%Norway 6.818 29.630 9.913 22.544 23.215 30.980 0.000 17.615 6.266 23.881 3.8% 146.982 4.9% 123.101 5.3%Poland 0.000 0.000 0.000 0.000 0.290 0.270 0.000 0.000 0.000 0.000 0.0% 0.560 0.0% 0.560 0.0%Portugal 0.000 0.457 0.725 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 1.182 0.0% 1.182 0.1%Russian Federatio 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.000 4.000 0.6% 4.000 0.1% 0.000 0.0%Saudi Arabia 10.000 5.000 5.000 0.000 5.000 0.000 0.000 0.000 0.000 0.000 0.0% 25.000 0.8% 25.000 1.1%Spain 0.000 0.000 0.000 0.000 0.000 22.038 0.000 0.000 0.000 0.000 0.0% 22.038 0.7% 22.038 0.9%Sweden 3.103 5.982 25.905 12.839 14.680 20.178 0.000 3.003 18.311 21.314 3.4% 104.000 3.5% 82.686 3.5%Switzerland 0.673 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 0.673 0.0% 0.673 0.0%Turkey 0.500 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 0.500 0.0% 0.500 0.0%UNDP 0.000 2.411 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.0% 2.411 0.1% 2.411 0.1%United Kingdom 15.079 47.096 103.062 131.473 128.487 151.052 0.000 22.470 162.413 184.883 29.3% 761.132 25.6% 576.248 24.6%United States 38.000 20.000 89.591 62.000 73.900 0.000 0.000 52.500 118.000 170.500 27.0% 453.991 15.3% 283.491 12.1%

TOTAL 184.768 286.461 380.548 404.050 453.921 634.803 0.000 123.012 507.325 630.336 100.0% 2974.887 100.0% 2344.550 100.0%

Total % of Total

Table 1 - Actual and Expected Donor ContributionsPaid-In, Committed, Pledged (US$ Million)

SY 1387

19-Mar-2008

1. Unsigned pledges are recorded based on a communication from the Donor to the ARTF Administrator. 2. Signed pledges are commitments recorded based on countersigned legal documents confirming the pledged amount. 3. Paid amounts reflect receipt of funds and conversion to US dollars.


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SY 1381

SY 1382 SY 1383 SY 1384 SY 1385Donor Curr Program Paid-in Paid-in Paid-in Paid-in Total Expressed Of which

US$ US$ US$ US$ Own Curr. US$ Est. Own Curr. US$ SY 1386 Preference Paid-inNorway NOK Civil Service Capacity Building 0.000 2.918 3.102 0.000 0.000 0.000 0.000 0.000 0.000 6.020 6.020United States USD Civil Service Capacity Building 0.000 4.300 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.300 4.300

Total Civil Service Capacity Building 0.000 7.218 3.102 0.000 0.000 0.000 0.000 10.320 10.320Canada CAD Education - EQUIP 0.000 0.000 0.000 0.000 0.000 0.000 30.000 29.797 29.797 29.797 29.797Germany EUR Education - EQUIP 0.000 0.000 0.000 0.000 10.000 15.775 0.000 0.000 15.775 15.775 0.000Netherlands USD Education - EQUIP 0.000 0.000 0.000 0.000 0.000 0.000 4.000 4.000 4.000 4.000 4.000Norway NOK Education - EQUIP 0.000 4.607 0.000 0.000 0.000 0.000 30.000 5.130 5.130 9.738 9.738

Total Education - EQUIP 0.000 4.607 0.000 0.000 15.775 38.928 54.702 59.310 43.535Canada CAD Horticulture and Livestock Program 0.000 0.000 0.000 0.000 0.000 0.000 4.000 3.531 3.531 3.531 3.531United Kingdom GBP Horticulture and Livestock Program 0.000 0.000 0.000 0.000 0.000 0.000 1.000 1.977 1.977 1.977 1.977

Total Horticulture and Livestock Program 0.000 0.000 0.000 0.000 0.000 5.508 5.508 5.508 5.508Australia AUD Microfinance for Poverty Reduction 0.000 0.000 0.000 0.778 0.000 0.000 1.250 1.045 1.045 1.823 1.823Canada CAD Microfinance for Poverty Reduction 4.708 5.491 12.847 24.165 0.000 0.000 40.000 38.832 38.832 86.043 86.043Denmark DKK Microfinance for Poverty Reduction 0.000 0.000 1.625 2.110 0.000 0.000 8.000 1.465 1.465 5.201 5.201Finland EUR Microfinance for Poverty Reduction 0.000 0.000 0.000 0.000 0.000 0.000 1.000 1.367 1.367 1.367 1.367Netherlands USD Microfinance for Poverty Reduction 0.000 0.000 0.000 0.000 0.000 0.000 2.500 2.500 2.500 2.500 2.500Sweden SEK Microfinance for Poverty Reduction 0.000 2.220 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.220 2.220United Kingdom GBP Microfinance for Poverty Reduction 0.000 3.782 14.542 9.312 0.000 0.000 5.000 9.846 9.846 37.482 37.482United States USD Microfinance for Poverty Reduction 0.000 5.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 5.000 5.000

Total Microfinance for Poverty Reduction 4.708 16.493 29.015 36.365 0.000 55.055 55.055 141.636 141.636Australia AUD National Emergency Employment Program 0.000 0.000 0.000 0.778 0.000 0.000 0.000 0.000 0.000 0.778 0.778Canada CAD National Emergency Employment Program 0.000 0.000 0.000 1.277 0.000 0.000 3.300 3.363 3.363 4.640 4.640United Kingdom GBP National Emergency Employment Program 0.000 0.000 18.238 13.909 0.000 0.000 0.000 0.000 0.000 32.147 32.147United States USD National Emergency Employment Program 0.000 0.000 2.000 0.000 21.100 21.100 0.000 0.000 21.100 23.100 2.000

Total National Emergency Employment Program 0.000 0.000 20.238 15.964 21.100 3.363 24.463 60.665 39.565United Kingdom GBP National Justice Program 0.000 0.000 0.000 0.000 1.500 3.008 0.000 0.000 3.008 3.008 0.000

Total National Justice Program 0.000 0.000 0.000 0.000 3.008 0.000 3.008 3.008 0.000Australia AUD National Solidarity Program 0.000 0.000 0.000 0.778 0.000 0.000 0.000 0.000 0.000 0.778 0.778Canada CAD National Solidarity Program 10.985 0.000 14.339 17.830 0.000 0.000 80.000 77.238 77.238 120.392 120.392Denmark DKK National Solidarity Program 0.000 0.000 0.000 0.000 0.000 0.000 20.000 3.663 3.663 3.663 3.663EC/EU EUR National Solidarity Program 0.000 9.694 21.568 13.180 0.000 0.000 15.000 22.077 22.077 66.519 66.519Finland EUR National Solidarity Program 0.000 0.000 0.000 0.000 0.000 0.000 1.000 1.367 1.367 1.367 1.367Germany EUR National Solidarity Program 0.000 6.131 0.000 0.000 0.000 0.000 16.000 22.397 22.397 28.528 28.528Norway NOK National Solidarity Program 0.000 0.000 3.102 9.018 0.000 0.000 30.000 5.130 5.130 17.250 17.250Sweden SEK National Solidarity Program 0.000 0.000 0.000 3.670 0.000 0.000 35.000 5.236 5.236 8.906 8.906United Kingdom GBP National Solidarity Program 5.723 0.000 16.394 9.312 0.000 0.000 15.000 30.252 30.252 61.681 61.681United Kingdom USD National Solidarity Program 0.000 0.000 0.000 0.000 13.445 13.445 0.000 0.000 13.445 13.445 0.000United States USD National Solidarity Program 0.000 10.000 0.000 25.000 15.000 15.000 0.000 0.000 15.000 50.000 35.000

Total National Solidarity Program 16.707 25.825 55.403 78.789 28.445 167.361 195.805 372.530 344.085Germany EUR Private Sector Development 0.000 0.000 0.000 3.199 0.000 0.000 0.000 0.000 0.000 3.199 3.199

Total Private Sector Development 0.000 0.000 0.000 3.199 0.000 0.000 0.000 3.199 3.199Germany EUR Public Admin Reform 0.000 0.000 0.000 3.199 0.000 0.000 0.000 0.000 0.000 3.199 3.199

Total Public Admin Reform 0.000 0.000 0.000 3.199 0.000 0.000 0.000 3.199 3.199Norway NOK Rural Water Supply and Sanitation 0.000 0.921 2.326 0.000 0.000 0.000 0.000 0.000 0.000 3.248 3.248United States USD Rural Water Supply and Sanitation 0.000 0.000 0.000 0.000 0.400 0.400 0.000 0.000 0.400 0.400 0.000

Total Rural Water Supply and Sanitation 0.000 0.921 2.326 0.000 0.400 0.000 0.400 3.648 3.248United States USD Technical Assistance Feasibility Studies 0.000 1.500 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.500 1.500

Total Technical Assistance Feasibility Studies 0.000 1.500 0.000 0.000 0.000 0.000 0.000 1.500 1.500Grand Total 21.415 56.565 110.084 137.516 68.728 270.214 338.942 664.522 595.794

Pledged Paid-inSY 1386 Total SY 1381-86

Table 2 - Expressed Donor Preferences By Projects Paid-In, Committed, Pledged

March 19, 2008(US$ Million)


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As of:SY1381-86

Comm Disbursed Comm Disbursed Comm Disbursed Comm Disbursed Commited Disbursed Comm Disbursed SY1381-86 19-Mar-08 Last MonthSY1381 SY1381 SY1382 SY1382 SY1383 SY1383 SY1384 SY1384 SY1385 SY1385 YTD ¹ YTD ¹ Total Total Disbursed Available Disb.

Year End Year End Year End Year End Year End Year End Year End Year End Year End Year End SY1386 SY1386 Commited Disbursed Rate(a) (b) (c) (c) (d) (e) (g) (h) (g) - (h) (h) / (g)

TF050577 - Recurrent & Capital Costs ComponentWages 40.953 145.769 179.321 174.213 216.199 203.000 959.455 0.000 - O&M 13.655 51.164 55.277 79.035 84.015 87.550 370.696 0.000 - Debt Service, IMF 0.767 0.000 0.000 0.000 0.000 0.000 0.767 0.000 - Debt Service, IDA 2.770 3.870 0.000 0.000 0.000 0.000 6.640 0.000 - Debt Service, ADB 0.000 0.557 0.000 0.000 0.000 0.000 0.557 0.000 - Bulk Contracts 1.067 12.782 0.557 0.000 0.000 0.000 14.405 0.000 - Disbursements(A) 59.212 214.144 235.155 253.248 300.213 290.550 1352.521 0.000 Special Account(Opening) Balance (B) 0.000 51.500 50.603 50.000 50.000 50.000 50.000

Net Disbursements(Incl. Advances & Adjustments) (C) 155.000 110.712 195.000 213.246 258.000 234.553 280.000 253.248 299.000 300.213 286.000 290.550 1473.000 1402.521 0.000 70.479 95% Updated Special Account Balance * 51.500 50.603 50.000 50.000 50.000 50.000 50.000

TF050578 - Monitoring Agent [2] 2.000 0.668 0.777 1.407 2.311 2.641 4.640 2.158 7.001 2.534 3.500 4.798 20.229 14.206 0.914 6.023 70%

Closed Investment Projects [3]TF050855 - UNDP Police Pr. 1 & 2 4.836 4.836 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.836 4.836 0.000 0.000 100%TF052081 - Microfinance for Poverty Reduction 0.000 0.000 1.000 0.358 0.000 0.335 0.000 0.306 0.000 0.000 0.000 0.000 1.000 1.000 0.000 0.000 100%TF052366 - UNDP Police 3 0.000 0.000 16.800 16.800 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 16.800 16.800 0.000 0.000 100%TF052475 - Telecom & Microwave Link 0.000 0.000 3.000 0.150 3.130 1.029 0.000 3.069 0.000 1.522 -0.119 0.241 6.011 6.011 0.000 0.000 100%TF052482 - Kabul Roads and Drainage System 0.000 0.000 3.000 0.000 0.000 2.910 0.000 0.000 -0.172 -0.113 -0.031 0.000 2.797 2.797 0.000 0.000 100%TF052735 - Strengthening Financial Capacity of the Government 0.000 0.000 5.100 2.046 0.000 0.255 0.000 1.380 -1.041 0.378 0.000 0.000 4.059 4.059 0.000 0.000 100%TF053939 - National Solidarity Program 0.000 0.000 0.000 0.000 27.000 26.618 59.900 47.582 58.500 82.038 13.100 12.454 158.500 168.692 0.000 -10.192 106%

Subtotal Closed Investment Projects [3] 4.836 4.836 28.900 19.354 30.130 31.147 59.900 52.337 57.287 83.825 12.950 12.695 194.003 204.195 0.000 -10.192 105%

Current Investment Projects [4]TF050970 - Technical Assistance Feasibility Studies 0.000 0.000 8.000 2.523 6.000 3.881 4.500 2.905 0.000 3.281 0.000 3.024 18.500 15.614 0.177 2.886 84%TF050973 - National Emergency Employment Program 0.000 0.000 16.620 8.310 0.000 8.310 20.200 0.000 16.000 20.200 0.000 15.119 52.820 51.939 0.000 0.881 98%TF052452 - Microfinance for Poverty Reduction 0.000 0.000 4.000 2.202 12.000 12.635 38.300 21.207 32.000 48.477 33.000 34.585 119.300 119.107 4.883 0.193 100%TF052541 - Kabul Power Supply 0.000 0.000 7.435 0.000 0.000 2.901 0.000 1.508 0.000 1.402 0.000 1.029 7.435 6.840 0.000 0.595 92%TF053940 - Civil Service Capacity Building 0.000 0.000 0.000 0.000 0.000 0.000 8.000 2.384 5.000 4.243 0.000 4.979 13.000 11.605 0.610 1.395 89%TF054718 - Rehabilitation of Naghlu Hydropower Plant 0.000 0.000 0.000 0.000 20.000 0.000 0.000 0.000 0.000 0.160 0.000 0.071 20.000 0.232 0.009 19.768 1%TF054729 - Urban Water Supply and Sanitation 0.000 0.000 0.000 0.000 20.000 0.000 21.000 3.628 0.000 3.475 0.000 11.506 41.000 18.610 1.290 22.390 45%TF054730 - Education - EQUIP 0.000 0.000 0.000 0.000 0.000 0.000 5.000 0.000 0.000 0.490 27.000 6.512 32.000 7.002 0.000 24.998 22%TF055447 - Rural Water Supply and Sanitation 0.000 0.000 0.000 0.000 0.000 0.000 5.000 0.000 0.000 0.590 0.000 0.633 5.000 1.223 0.118 3.777 24%TF090077 - Management Capacity Program 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 10.000 0.000 10.000 0.000 0.000 10.000 0%TF090205 - National Solidarity Program 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 171.500 136.325 171.500 136.325 63.667 35.175 79%

Subtotal Current Investment Projects [4] 0.000 0.000 36.055 13.035 58.000 27.727 102.000 31.632 53.000 82.320 241.500 213.784 490.555 368.497 70.754 122.058 75%

TOTAL COMMIT & DISB. [1+2+3+4] 161.836 116.217 260.732 247.042 348.441 296.067 446.540 339.375 416.288 468.892 543.950 521.827 2177.787 1989.419 71.667 188.367 91%

(US$ million).

Table 3 - ARTF Commitments & DisbursementsMarch 19, 2008


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Table 4: Consolidated Sources and Uses of the ARTF As of March 19, 2008

SY 1381 SY 1382 SY 1383 SY 1384 SY 1385 SY 1386 SY 1387

Total Total Total Total Total Total TotalActual Actual Actual Actual Actual Actual Forecast ²,3

SOURCES OF FUNDS (A+B)A. Net Donors Contributions (A1-A2) 184.240 284.382 378.954 404.094 459.996 654.246 715.000

A.1. Donors Contributions 184.768 286.461 380.548 404.050 453.921 634.803 700.000 A.2. IDA fees minus Investment Income (5) 0.527 2.079 1.594 -0.044 -6.076 -19.443 -15.000

B. Cash Carried-Over (=D previous year) 119.524 155.966 238.250 302.969 294.073 426.493USES OF FUNDS (C+D)C. Disbursements (C1+C2+C3+C4) ¹ 64.717 247.940 296.670 339.375 468.892 521.827 580.750

C.1 Recurrent window - Disbursed by DAB 59.212 214.144 235.155 253.248 300.213 290.550 276.000 Wages (6) 40.953 145.769 179.321 174.213 216.199 203.000 O&M 13.655 51.164 55.277 79.035 84.015 87.550 Other 4.604 17.210 0.557 0.000 0.000 0.000 C.2. Investment window 0.000 15.589 58.873 83.969 166.145 226.479 300.000 C.3. Pass-through to LOTFA (UNDP Police) 4.836 16.800 0.000 0.000 0.000 0.000 0.000 C.4. Fees to monitoring agent 0.668 1.407 2.641 2.158 2.534 4.798 4.750

D. Cash Balance (end-of-period) (A+B-C=D1+D2) 119.524 155.966 238.250 302.969 294.073 426.493 560.743 D.1. Committed Cash Balance: 97.120 109.913 161.684 279.849 227.244 306.367 542.466

to recurrent window special account 51.500 50.603 50.000 50.000 50.000 50.000 50.000 to recurrent window Trust Fund 44.288 26.042 49.489 76.242 75.029 70.479 70.000 undisbursed investment window balance 0.000 32.566 61.822 150.753 94.895 179.866 416.466 to Monitoring Agent 1.332 0.702 0.372 2.854 7.321 6.023 6.000

D.2. Unallocated Cash Balance (4) 22.404 46.053 76.566 23.120 66.829 120.125 18.277(1) Advance disbursements reported following standard World Bank practice.(2) Assumes all pledges collected, and estimates of future allocations and disbursements are met.(3) SY1386 forecasted balance (previous balance + new commitments - disbursements) is based on projected contributions, commitments and disbursements. (4) The Microfinance Program allocation of US$14 million was effected just after the SY close.(5) Amounts paid into the Trust Fund, but not yet disbursed, are managed by the Trustee, which maintains an investment portfolio (the “Pool”) for all of the trust funds administered by the World Bank Group. The Pool is subdivided into sub-portfolios to which allocations are made based on fund specific investment horizons and risk tolerances and other eligibility requirements set by the Bank. Generally, the Pool is invested in liquid financial instruments such as money market instruments, government and agency obligations, mortgage-backed securities, and other high-grade bonds. Based on the Bank's investment strategy for trust funds, each sub-portfolio is invested in a combination of these asset types consistent with the applicable risk tolerance for the sub-portfolio. Share in Pooled Cash and Investments represents the Trust Fund’s pro-rata share of the Pool’s fair value at the end of the reporting period. The fair value is based on market quotations, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The corresponding proportionate interest income and investment gains/losses, accrue to the Trust Fund in the period in which they occur.


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Documents

Afghanistan Reconstruction Trust Fund Public Disclosure …documents.worldbank.org/curated/en/117741467994659827/... · 2016-07-08 · Donor Contributions: This report presents the