world bank document filecurrency equivalents (exchange rate effective as of april 4, 2006 for dpc 1)...

Document of The World Bank

Report No: ICR00001315

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41770)

ON

TWO CREDITS

IN THE AMOUNTS OF SDR 62.7 MILLION/ US$ 90 MILLION AND SDR 86 MILLION/US$ 130 MILLION EQUIVALENT

TO

THE ISLAMIC REPUBLIC OF PAKISTAN

FOR A

FIRST AND SECOND NORTH WEST FRONTIER PROVINCE DEVELOPMENT POLICY CREDITS

April 29, 2010

Human Development Sector Unit South Asia Region

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CURRENCY EQUIVALENTS (Exchange Rate Effective as of April 4, 2006 for DPC 1)

Currency Unit = Pakistan Rupee PKRs 1.00 = US$ 0.0165 US$ 1.00 = PKRs 60.25

(Exchange Rate Effective as of April 1, 2007 for DPC 2)

Currency Unit = Pakistan Rupee PKRs 1.00 = US$ 0.0166 US$ 1.00 = PKRs 60.7

FISCAL YEAR July 1 – June 30

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Services CAS Country Assistance Strategy COA Chart of Accounts DFID Department for International Development (U.K.) DPC Development Policy Credit EDO Education District Officers GDP Gross Domestic Product GoNWFP Government of North West Frontier Province HMIS Health Management Information System HRM Human Resource Management NAM New Accounting Model NFC National Finance Commission NWFP North West Frontier Province PGD Program Document PDL Petrol, Diesel and Lubricants PFAA Provincial Financial Accountability Assessment PIFRA Project to Improve Financial Reporting and Accountability PPSC Provincial Public Service Commission PRSP Poverty Reduction Strategy Paper PSD Private Sector Development PSLMS Pakistan Social and Living Standards Measurement Survey SAC Structural Adjustment Credit

Vice President: Isabel M. Guerrero

Country Director: Yusupha B. Crookes

Sector Director: Michal Rutkowski

Sector Manager: Mansoora Rashid

Task Team Leader: Harsha Aturupane

ICR Team Leader: Chris Parel

THE ISLAMIC REPUBLIC OF PAKISTAN

FIRST AND SECOND NORTH WEST FRONTIER PROVINCE DEVELOPMENT POLICY CREDITS

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Program Performance in ISRs H. Restructuring 1. Program Context, Development Objectives and Design................................................................1

1.1. Context at Appraisal ...............................................................................................................1 1.2. Original Program Development Objectives (PDO) and Key Indicators (as approved)..........6 1.3 Revised PDO (if any, as approved by original approving authority) and Key Indicators, and

Reasons/Justification ..............................................................................................................7 1.4 Original Policy Areas Supported by the Program (as approved)............................................8 1.5 Revised Policy Areas (if applicable) ....................................................................................12 1.6 Other significant changes .....................................................................................................12

2. Key Factors Affecting Implementation and Outcomes ................................................................13 2.1 Program Performance ...........................................................................................................13 2.2 Major Factors Affecting Implementation .............................................................................18 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization ......................18 2.4 Expected Next Phase/Follow-up Operation (if any) .............................................................19

3. Assessment of Outcomes .............................................................................................................19 3.1 Relevance of Objectives, Design and Implementation .........................................................19 3.2 Achievement of Program Development Objectives..............................................................20 3.3 Justification of Overall Outcome Rating ..............................................................................27 3.4 Overarching Themes, Other Outcomes and Impacts ............................................................28 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops.....................31

4. Assessment of Risk to Development Outcome ............................................................................32 5. Assessment of Bank and Borrower Performance.........................................................................32

5.1 Bank Performance ................................................................................................................32 5.2 Borrower Performance..........................................................................................................33

6. Lessons Learned...........................................................................................................................33 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ..............................34

Annex 1 Bank Lending and Implementation Support/Supervision Processes.......................................35 Annex 2. Beneficiary Survey Results....................................................................................................38 Annex 3. Stakeholder Workshop Report and Results ...........................................................................39 Annex 4. Summary of Borrower’s ICR and/or Comments on Draft ICR..............................................40 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders................................................41 Annex 6. List of Supporting Documents...............................................................................................42

MAP ......................................................................................................................................................43

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A. Basic Information

Program 1

Country Pakistan Program Name NWFP First Development Policy Credit

Program ID P090689 L/C/TF Number(s) IDA-41770

ICR Date 05/24/2010 ICR Type Core ICR

Lending Instrument DPL Borrower GOVERNMENT OF PAKISTAN

Original Total Commitment

XDR 62.7M Disbursed Amount XDR 62.7M

Implementing Agencies Government of NWFP

Cofinanciers and Other External Partners

Program 2

Country Pakistan Program Name Pakistan NWFP Development Policy Credit Two

Program ID P097471 L/C/TF Number(s) IDA-43160

ICR Date 05/24/2010 ICR Type Core ICR

Lending Instrument DPL Borrower GOVERNMENT OF PAKISTAN

Original Total Commitment

XDR 86.0M Disbursed Amount XDR 86.0M

Implementing Agencies NWFP Finance Department Government of North-West Frontier Province Government of North-West Frontier Province MOF, Govt of North West Frontier Province

Cofinanciers and Other External Partners B. Key Dates NWFP First Development Policy Credit - P090689

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 09/27/2005 Effectiveness: 06/07/2006

Appraisal: 02/15/2006 Restructuring(s):

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Approval: 06/01/2006 Mid-term Review:

Closing: 06/30/2007 06/30/2007 Pakistan NWFP Development Policy Credit Two - P097471

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 11/01/2006 Effectiveness: 06/14/2007

Appraisal: 03/27/2007 Restructuring(s):

Approval: 06/07/2007 Mid-term Review:

Closing: 12/31/2007 12/31/2007 C. Ratings Summary C.1 Performance Rating by ICR NWFP First Development Policy Credit - P090689

Outcomes Satisfactory

Risk to Development Outcome Moderate

Bank Performance Satisfactory

Borrower Performance Satisfactory Pakistan NWFP Development Policy Credit Two - P097471

Outcomes Satisfactory

Risk to Development Outcome Moderate

Bank Performance Satisfactory

Borrower Performance Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) NWFP First Development Policy Credit - P090689

Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Satisfactory

Overall Bank Performance

Satisfactory Overall Borrower Performance

Satisfactory

Pakistan NWFP Development Policy Credit Two - P097471

Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Satisfactory

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Agency/Agencies: Overall Bank Performance

Satisfactory Overall Borrower Performance

Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators NWFP First Development Policy Credit - P090689

Implementation Performance

Indicators QAG Assessments

(if any) Rating:

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA)

None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA)

None

DO rating before Closing/Inactive status

Satisfactory


Implementation Performance

Indicators QAG Assessments

(if any) Rating:

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA)

None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA)

None

DO rating before Closing/Inactive status

Satisfactory

D. Sector and Theme Codes NWFP First Development Policy Credit - P090689

Original Actual

Sector Code (as % of total Bank financing)

Agricultural extension and research 5 5

Central government administration 47 47

General education sector 21 21

General industry and trade sector 12 12

Health 15 15

Theme Code (as % of total Bank financing)

Administrative and civil service reform 22 22

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Education for all 22 22

Health system performance 22 22

Other financial and private sector development 11 11

Public expenditure, financial management and procurement

23 23


Original Actual

Sector Code (as % of total Bank financing)

General education sector 50 50

Health 20 20

Other social services 10 10

Sub-national government administration 20 20

Theme Code (as % of total Bank financing)

Education for all 25 25

Gender 13 13

Health system performance 25 25

Other financial and private sector development 13 13

Public expenditure, financial management and procurement

24 24

E. Bank Staff NWFP First Development Policy Credit - P090689

Positions At ICR At Approval Vice President: Isabel M. Guerrero Praful C. Patel Country Director: Yusupha B. Crookes John W. Wall Sector Manager: Mansoora Rashid Ijaz Nabi Task Team Leader: Harsha Aturupane Paul Wade ICR Team Leader: Chris Parel ICR Primary Author: Chris Parel Naoko Ohno

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Pakistan NWFP Development Policy Credit Two - P097471 Positions At ICR At Approval

Vice President: Isabel M. Guerrero Praful C. Patel Country Director: Yusupha B. Crookes Yusupha B. Crookes Sector Manager: Mansoora Rashid Mansoora Rashid Task Team Leader: Harsha Aturupane Harsha Aturupane ICR Team Leader: Chris Parel ICR Primary Author: Chris Parel Naoko Ohno F. Results Framework Analysis

Program Development Objectives (from Program Document)The program has four over-arching development objectives: (a) accelerating human development; (b) improving fiscal stability and public expenditure management; strengthening governance; and (d) promoting economic growth. Revised Program Development Objectives (as approved by original approving authority) NA (a) PDO Indicator(s) NWFP First Development Policy Credit - P090689

Indicator Baseline

Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Outcome: Improved access to primary school education Indicator: Gross primary school enrollment ratio, %

Value (quantitative or Qualitative)

77 83 83

Date achieved 06/30/2002 03/31/2008 06/30/2008 Comments (incl. % achievement)

Target achieved and sustained. Data source: 2007-08 PSLM

Indicator 2 : Outcome: Improved access to middle school education Indicator: Gross middle school enrollment ratio, %


38 52 52



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Indicator 3 : Indicator: Antenatal coverage of pregnant women by health professionals, % Value (quantitative or Qualitative)

34 50 48


Target almost achieved. Data source: 2007-08 PSLM

Indicator 4 : Full immunization, % of children 12-23 months Value (quantitative or Qualitative)

54 100 74


Progress has been made towards 100% coverage but not reached the target yet. Data source: 2007-08 PSLM

Indicator 5 : Provincial real GDP growth rate, in % Value (quantitative or Qualitative)

4 7 6.6


No further information after 2006 available.


Indicator Baseline

Value


approval documents)

Formally Revised Target Values



Indicator 1 : Increase primary school enrolment. Value (quantitative or Qualitative)

Gross primary school enrolment rate 81 percent.





Indicator 2 : Improve the gender balance in primary and secondary education.


Ratio of girls to boys in primary and secondary education: 47 girls to 100 boys.




Target exceeded. Data source: Annual Statistics Report 2008-09 (EMIS)

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Indicator 3 : Sustain universal coverage of TB-DOTS


Proportion of population with access to TB Control (DOTS) 100 %




Target almost achieved. No further information after 2007 available. Data source: WHO TB Database

Indicator 4 : Increase the proportion of the NWFP budget spent on development


Share of development expenditures: 31 percent




Target exceeded. Data source: White Paper 2009-10

Indicator 5 : Establish a new, improved accounting model in the province.


Reconciled fiscal data using the new accounting model: 96 %




Target achieved.

Indicator 6 : Increase economic growth. Value (quantitative or Qualitative)

6.2 percent growth. 7 to 7.5 percent growth.

6.6 percent growth.


No further information after 2007 available.

(b) Intermediate Outcome Indicator(s)

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NWFP First Development Policy Credit - P090689

Indicator Baseline Value


approval documents)

Formally Revised

Target Values



Indicator 1 :

PSD and Economic Growth: Reorient the role of the state from operator to facilitator. Indicator: Number of industrial esta tes under private management (handed over from government).


0 of 15 18 of 18 18 of 18


Target achieved.


Indicator Baseline Value


approval documents)

Formally Revised

Target Values



Indicator 1 : Transition rates from primary to middle school increased for both boys and girls.


Transition rates 75% for boys and 67% for girls.




Target partially achieved. Data source: Annual Statistics Report 2008-09 (EMIS)

Indicator 2 : Increase provincial tax revenue as % of provincial GDP. Value (quantitative or Qualitative)

Tax revenue at 8 percent.




Target achieved.

G. Ratings of Program Performance in ISRs NWFP First Development Policy Credit - P090689

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 09/28/2006 Satisfactory Satisfactory 93.04

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No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 12/19/2007 Satisfactory Satisfactory 129.36 H. Restructuring (if any)

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Program Context, Development Objectives and Design

1.1. Context at Appraisal The period to be covered in the original three credit DPC series was mid-2006 to mid-2008. By the approval of DPC 2 the closing date of DPC 3 had slipped to mid-2009. However, the DPC series ended after DPC 2, as the security situation in the province precluded a third DPC.

Event DPC 1 DPC 2 Board Approval 6/1/2006 6/7/2007 Effectiveness 7/7/2006 6/14/2007 Closing 9/28/2006 12/19/2007

These operations were preceded by a two credit Structural Adjustment Credit (SAC) series. The third SAC credit was substituted by the DPC series. DPC 1 continued much of the SAC focus and the upcoming SWAp builds upon DPC 2. Overview The first decade of the new millennium has been tumultuous for Pakistan and the North West Frontier Province (NWFP). Early in the decade, Pakistan’s development record improved and growth from 2003/4 through 2006/7 averaged 7.3 percent annually. Because over 90 percent of provincial funding comes from the central government, the provinces benefitted directly from Pakistan’s strong economic performance. In FY05/6, owing primarily to a devastating earthquake (see Box), growth dipped to 3.8 percent but rebounded in FY06/7 to 6.3 percent. At the time of DPC 2 (May 2007), the province had enjoyed five years of growth and improved governance. Nevertheless, in November, 2007 - six months after DPC 2 was approved by the Board – a state of emergency was imposed and the Constitution suspended. In 2008, democracy was restored and a president and new parliament were elected. However, a nascent insurgency took hold in parts of Pakistan, including the NWFP increasing Pakistan’s financial and security burdens. In addition, the worldwide recession hit Pakistan hard in 2008. The deteriorating economic and political environment ultimately resulted in the cancelation of the third credit in the programmatic series and substitution of DPC 3 by a multi-sector SWAp which is currently under preparation.

Box: The October 8, 2005 Earthquake

The 7.8 magnitude quake--considered one of the world’s 15 most destructive--devastated about a quarter of the geographical area of NWFP, affecting 3.5 million people or a sixth of the province’s population. The official death toll for all affected regions is 79,000. More than 22,500 people died in NWFP and twice this number was injured. Nearly 4,000 schools were destroyed or damaged and thousands of school children died. Extensive damage was caused to public infrastructure and private property. The loss in employment and output in the affected districts of NWFP was estimated to be as high as 25 percent and overall impact on the provincial GDP in 2005/6 about 3.6 percent. The replacement cost of the damage in NWFP alone was estimated at $1.5 billion or 12 ½-13 percent of its GDP. The Federal Government stepped in and

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shouldered the bulk of reconstruction but the drain on provincial revenue from reduced economic activity and earthquake related expenditures created a huge NWFP fiscal burden.

The Bank responded swiftly with a PRSC Supplemental Financing of US$150 million, disbursed in November, 2005. A damage and needs assessment was also undertaken. The quake and its aftermath affected DPC1 preparation (Board date, April, 2006) and the credit’s final configuration.

Poverty is widespread in NWFP. While there has been considerable progress since 2002 and social indicators have improved, the province is highly dependent upon the Pakistan economic and political environment and upon Federal transfers. Reaching into the districts to improve service delivery where poverty and social services lag is difficult, and this has been exacerbated by the 2005 earthquake, a flagging economy and political turmoil and insurgency. As a result, NWFP is the one of the Pakistan’s poorer provinces. Economic Developments Pakistan’s development record was strong for part of this decade. The economy grew at 7.3 percent on average per year from 2003/4 through 2006/7, driven by solid performances in the services and industrial sectors. The manufacturing sector grew fast during the earlier part of the period, but slowed due to capacity, human capital and infrastructure constraints. At the same time, the services sector, catering primarily to domestic demand, grew steadily. The primary growth factors included a benign external environment, availability of external financing, and political and macroeconomic stability. External debt was renegotiated with the Paris Club creditors, debt was pre-paid and there was a greater reliance on concessional borrowing for new loans and a concomitant liberalization of the financial sector. Growth translated into rising household incomes, with per capital income growing to US$878 in 2006/7, an 18 percent increase over US$742 two years earlier. However, this growth was in part driven by heavy reliance on external financing and on an expansionary fiscal stance, while revenues and savings remained stagnant. A surge of capital inflows from abroad allowed the government to finance rising fiscal deficits at a low cost. The consolidated fiscal deficit increased from 2.3 percent of GDP in 2003/4 to 4.3 percent by 2006/7 while domestic tax collection remained weak. The effect of expansionary fiscal policy was compounded by loose monetary policy, which together led to a sharp increase in domestic demand from 2002/3 onwards.Prior to 2003/4 economic growth had been sustained by external demand, thereafter it was consumption-driven until 2006/7. Not surprisingly, strong growth in money supply contributed to the acceleration of inflation from 3.5 percent in 2001/2 to 7.8 percent by 2006/7. Pakistan’s savers continued to receive low returns, below the rate of inflation. This discouraged private savings and fuelled asset-price bubbles as households sought higher returns by buying shares and property. With domestic demand outpacing domestic output, the current account deficit reversed from a surplus of 4.8 percent of GDP in 2002/3 to a deficit of 4.9 percent

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in 2006/7 which was financed by ample capital inflows. Reliance increasingly on external financing left the economy vulnerable to external shocks. The IMF supported Poverty Reduction and Growth Facility (PRGF) was concluded in December 2004 and the Government of Pakistan did not request a successor IMF program. Between 2005 and October 2008 Pakistan was on a standard Article IV surveillance schedule which concluded in December when the widening current account deficit was highlighted as the economy’s main vulnerability. While not germane to DPC 1-2, the deterioration of the economic situation after 2006/7, as well as deterioration of security situation and insurgency, contributed to the decision to abandon DPC 3 in favor of a different credit modality. Growth in 2006/7 fell from 6.8 percent to 5.8 percent in 2007/8 and the economy lurched towards a melt-down. The sharp rise in international oil and food/commodity prices (specifically wheat) accounted for 80 percent of the increase in fiscal deficit. Internal political turmoil and policy inaction gave rise to worsening fiscal and current account balances—the latter increasing to 8.4 percent of GDP in 2007/8 compared to 4.8 percent in 2006/7. Growth slowed and inflation increased. The fiscal deficit grew from 4.3 percent of GDP in 2006/7 to 7.4 percent in 2007/8 and by end 2008 the State Bank of Pakistan foreign exchange reserves had dropped to US$8.6 billion, a fall of about US$5.7 billion since October 2007. Following intense negotiations, the IMF agreed in November to a 23 month Standby Agreement and US$7.6 billion loan approved in November, 2008 to avoid a balance of payments crisis and default on foreign debt payments. The program supports the macroeconomic stabilization program in 2008/9 and 2009/10 to reduce inflation and the external current account deficit and to support the medium-term macroeconomic framework. Political Developments Parliamentary elections were held in 2002 with the Pakistan Muslim League (PML- Q) winning a plurality in the National Assembly followed by Pakistan’s other leading party, the Pakistan People’s Party. On November 3, 2007, the president, acting as the Chief of Army, imposed the state of emergency and suspended the Constitution. At the end of November 2007, the president relinquished the Army Chief post and took the oath as a civilian president for another five-year term. Soon thereafter the emergency was lifted, and Parliamentary elections announced. One of the leading candidates, the former Prime Minister Benazir Bhutto was assassinated at the end of December 2007. Parliamentary elections were held in February 2008 and widely considered to be free and fair. The main opposition parties won the elections by a wide margin, and a new coalition government comprising the leading political parties was formed. The new President of Pakistan assumed office in September, 2008. Human Development In 2006, when DPC 1 was approved, the total population of Pakistan stood at nearly 160 million (65 percent urban) and the GNI per capita at US$770. Some 35 percent of the population was below the national poverty line and life expectancy was 65 years.

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The NWFP is one of the poorer provinces in Pakistan. With approximately 14 percent of total population, it also suffers from political, social and institutional problems that exacerbate development. The SAC operations targeted critical health, education and governance/financial management sectors. Despite progress, at the time of DPC 1, the NWFP’s sectoral performance still lagged the Sindh and Punjab (see Table 1) and was further compromised by the severe earthquake and worsening political situation. With the existing frameworks/predecessor multi-sector approach of two SAC programs, the multi-sector approach has been continued to support the NWFP government’s effort in the long-term investment in human capital.

Table 1: NWFP Social Indicators Status (%)* 2001/2 2004/5 2006/7 Rank** Education: Net primary enrollment ratio female 33 40 41 3 Net primary enrollment ratio male 48 53 56 2-3 tied Literacy rate - female 20 26 28 3 Literacy rate – male 57 64 67 3 Health: Immunization rate, 12-23 months 57 76 76 2 Pre-natal consultation at health care facility 22 39 46 3 Post-natal consultation at health care facility 4 21 22 2-3 tied *Source: “Pakistan Integrated Households Surveys and Social and Living Standards Measurement Surveys, 2001/2, 2004/5 and 2006/7. ** Denotes provincial rank. There are four Pakistan provinces, Punjab, Sindh, Balochistan and NWFP. The first two are significantly larger and wealthier.

The World Bank’s efforts--which included 2003 and 2006 country-wide PRSPs--and its DPC 1 and 2 operations played an important catalytic roll in NWFP’s improving education and health status. It should be noted that the improvement from 2001/2 to 2006/7 has been significant across all indicators and in a relatively short time frame. Progress in four of the indicators over the five year period was very impressive as follows:

• 24percent increase in net primary female enrollment ratio • 40percent increase in female literacy rate • 109percent in pre-natal consultations at health care facilities • 4.5times more post-natal consultations at facilities

(Source: PSLM 2001/02 and 2006/07)

These are generally not indicators that improve quickly as they depend upon a myriad of cultural factors and service delivery. Nevertheless, and despite the earthquake and a worsening political climate, the improvements are surprisingly good. The NWFP government responded well to the Bank’s intensive engagement during the period including the PRSPs, Structural Adjustment Credits, emergency and other operations. The PRSPs were instrumental in orienting the NWFP reform agenda providing comparisons across provinces and sectors and highlighting areas of particular weakness. In response to increase demand for improvement in the highlighted weak

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areas, the NWFP introduced a range of policy reforms to expand primary school attendance, especially among girls. It also innovated tuition free education, free textbooks, improved facilities such as classrooms, sanitation and boundary walls for security, and increased numbers of teachers. Important steps were taken to improve access to primary healthcare including expanding preventive services such as TB observation and therapy sessions (DOTS), maternal and child health services, and family planning. Education and health budgets were increased substantially from 2002 onwards.1

DPC Precursors: NWFP Structural Adjustment Credit (SAC) Projects

The Program Document (PGD) for DPC 1 in its “Objective and Description” section defines the DPC in the following terms:

“…a transition operation that will complete the series of three IDA credits that assisted the government’s fiscal reform agenda, and will also commence a new series of IDA support for the government’s medium-term reform program”.

There were two NWFP SACs. Both were single tranche, US$90 million operations. The first SAC was approved in mid 2002 and the second three years later in 2005. Both SACs were fully disbursed upon declaration of effectiveness.2

These operations had as their overarching objective to support the medium-term Provincial Reform Program (PRP 2001-2004). The PRP had five pillars: (i) fiscal reforms, (ii) public financial management and accountability reforms, (iii) reforms to accelerate human development, (iv) governance reforms to achieve an efficient, accountable and service-oriented civil service, and (v) measures to promote growth and private sector development. The SAC operations significantly influenced the structure of the two DPC operations that followed. Ten of fifteen DPC 1 indicators are closely linked to the proposed SAC 3 indicators –SAC 3 essentially merged into DPC 1. Three of eight DPC 2 indicators are also closely linked to these DPC 1/SAC 3 indicators. In Table 1 below, the SAC linked indicators are denoted with an asterisk (*). Continuing the work launched in the SAC series supported the NWFP’s efforts to consolidate reforms and is one of the DPC series design strengths.

1 Both education and health budgets have significantly increased every year since 2002. For instance, the provincial education budget allocated to the districts increased annually by about 14 percent on average since 2002-03. This trend is consistent with the recent increases in total provincial level current expenditure for education and health: education increased from Rs. 3,070 million in 2008-09 (revised estimate) to Rs. 3,942 million in 2009-2010 while health expenditures increased from Rs. 2,704 million to Rs. 2,989 million over the same period. (Source: White Paper 2009-2010)

2 A US$50 million supplemental SAC 2 finance was quickly prepared and approved following the earthquake, part of a Bank emergency support package totaling nearly $500 million.

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1.2. Original Program Development Objectives (PDO) and Key Indicators (as approved)The DPC 1 and 2 were designed as a series o f three DPCs at the beginning to assist the NWFP policy reform program. The central goal of the NWFP reform program was to improve living standards through policy reforms that accelerated human development, improved fiscal stability, strengthened governance and promoted growth. It was aligned with the Provincial Development Strategy and adopted the Strategy’s four pillars: (a) accelerating human development (education and health); (b) improving fiscal stability and reform and public expenditure management; (c) strengthening governance; and (d) promoting economic growth. Each of the pillars is subdivided (DPC 2) into key themes enumerated below.

I. Accelerating human development to reduce poverty and raise the quality and standard of life of the people. Specifically this meant improving the coverage and quality of education, health and social protection services which were seen as critical for sustained and inclusive economic growth.

o Improve access, equity, quality and governance of the education system o Increase the utilization and quality of care, and strengthen stewardship

functions in the health sector, and o Reduce the risk and vulnerability to the human capital of the poor through

a sound social protection system. II. Improving fiscal stability and public expenditure management to strengthen

and sustain investment to support the medium-term reform program. Sustained public investment over a number of years—required to improve human development and reduce poverty—was seen to demand prudent management of fiscal resources.

o Improve macroeconomic stability o Improve fiscal sustainability of the reforms o Improve planning and monitoring of public expenditures.

III. Strengthening governance by improving accountability, especially in financial management and procurement.

o Improve public financial management and accountability o Improve transparency and accountability in public procurement, and o Obtain reliable and timely human resources data for planning, budget

preparation and control of establishment expenditure, and to monitor compliance with legal and policy stipulations.

IV. Promoting private sector development to raise incomes and reduce poverty, and to increase employment opportunities in productive and sustainable economic activities within the province.

o Institutionalize the public private dialogue o Reorient the role of the state from operator to facilitator, and o Improve private participation in economic activities

In the DPC 1 PGD, there are 15 prior actions plus 16 “selected monitoring indicators”. In DPC 2, there are 11 prior actions/triggers and a similar list of 11 “key performance and monitoring indicators”. In what follows the 27 (16 + 11) key performance and monitoring indicators are termed “PDO/key performance indicators” and they are enumerated in Table 2 below.

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In Section 1.4, we provide a panorama of the broad policy areas supported by the DPC series. Hence, it includes the prior conditions, the 27 key performance indicators and summarizes the numerous policy matrix activities from Annex 2 (Policy Matrix) that are neither prior conditions nor key performance indicators. In the ICR, we refer to these as “monitoring indicators” and they number 74 for DPC 1 and DPC 2 – DPC 3 was not included in the count. While information is not available to confirm whether these indicators were met, the mere fact that they figure in the DPC series and were being discussed with the NWFP government is indicative of the series’ very broad and deep scope.

Table 2: DPC1-2 Key Performance Indicators* DPC1 DPC2

Improving Fiscal Stability and Public Expenditure Management Common indicators: • Provincial GDP growth rate • Provincial tax revenue growth • % of budget spent on development expenditures • Reconciled fiscal data using the new accounting model

• Poverty head count • Pro-poor PRSP expenditure

Accelerating Human Development: Education Common indicators: • Gross Enrollment Rate—Primary school (male & female)

• Primary school dropout rates • Girls schools with essential facilities

• Ratio of girls to boys in primary and secondary school

• Transition rate from primary to middle schools by gender

Accelerating Human Development: Health Common indicators: • Full Immunization among children 12-23 months • % of population with access to TB DOTS • Contraceptive prevalence rate

• Antenatal consultations • Access to safe drinking water

• % of births attended by skilled health personnel

The 15 DPC 1 prior actions and 11 DPC 2 prior actions/triggers are enumerated in Table 3. Key performance indicators reasonably reflected the DPC series objectives are congruent with NWFP’s reform program pillars. When prior conditions/triggers are added (see section 1.4 below), this conclusion is reinforced.

1.3 Revised PDO (if any, as approved by original approving authority) and Key Indicators, and Reasons/Justification

There was no change in overall DPC series objectives. There were some changes in Key Performance Indicators and prior conditions between DPC 1 and DPC 2. This is because Bank DPC guidelines changed and the number of prior actions and PDOs/Key Performance Indicators was limited (see Section 1.5). Also, DPC 2 dropped Urban, Agriculture and Water sectors and indicators from the DPC 1 formulation. After DPC 2, the DPC series was discontinued because the IMF program for Pakistan did not go

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through in FY08. Instead, a Sector Investment Credit using a multi-sector Sector-Wide Approach (SWAp) has been proposed because, in addition to political instability and risky economic environment which NWFP has faced, the province needed close implementation support and dedicated technical assistance which can be provided better through a SIL than a DPC.

Original Policy Areas Supported by the Program (as approved) The four pillars with their themes, prior actions and triggers defining the policy agenda addressed by DPC 1 and 2 are summarized in the preceding sections. In what follows, prior indicators plus the key performance and 74 monitoring indicators (from the DPC1-2 policy matrices -Annex 2) are presented. Note that --at the risk of adding too much detail-- this is the only place in the ICR where we have presented all of the indicators. It is expressly done to demonstrate the impressive breadth and debt of the DPC series scope and its support of CAS objectives and client pillars. Pillar 1: Accelerating human development by improving delivery of education and health services.

A. The Education policy reforms purport to do the following. (i) Increase access and coverage in primary education and improve transition to

middle and higher levels of education. Specific indicators are as follows.

Prior Conditions: free textbooks to all primary, middle and high school students in government schools; stipends for girl students in grades 6-10 in 7 districts where enrollment rates below 12%; partnership agreements (TOPs) with 50% of district governments re. sector reforms.

Key Performance Indicators: Gross primary school enrollment ratio and rates of girls to boys in primary and secondary education; transition rate in government schools from primary to middle school by gender, primary school dropout rates; girls schools with essential facilities.

Monitoring Indicators: tuition free education; primary school in each village with adequate facilities; managed teacher ratio of 40:1; improve preschool Katchi quality to reduce drop out (30 percent); revise the Institutional Reform Program; draft a 5-year education sector development plan; use vacant government buildings for classrooms; take Katchi school census; increase number of secondary schools including schools for girls; continue teacher recruitment rules to combat absenteeism; appoint 4,000 teachers on school specific contract basis; conduct sample-based student assessment in 2 subjects and pilot in 2; National Education Assessment System baseline assessment of learning in grade 4—math and language; establish baseline of existing school infrastructure and education indicators by district, develop a plan for additional classrooms and teachers based on EMIS analysis and provide budget allocations, assess EEF and FEF work program, including financing.

(ii) Improve the quality of education. Key prior actions and monitoring indicators include the following:

Prior conditions/triggers: policy framework for teacher development notified.

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Monitoring indicators: strengthen teacher development through career development stream, pay and training; improve management competencies of school heads by creating a new position, setting standards, and defining head teacher relationships with teachers and management; implement regular class room testing with results being disseminated and used to upgrade education; develop a program to build capacity of head teachers and principals; train at least 20% additional head teachers and headmasters; consider privatizing college administration; establish committees to review textbooks content.

(iii) Strengthen governance and service delivery in the education system. Key prior and monitoring indicators include:

Prior conditions/triggers: notified and made budgetary allocations for an Education Sector Reform Unit in Department of Education; functional PTAs with authority to monitor teacher attendance and utilize IM&R funds in primary schools, 20% of middle and high schools, and IM&R funds released by districts to PTAs; revised guidelines for PTA use of funds and to undertake capacity-building activities.

Monitoring indicators: promote private sector participation through public private partnerships and government funding—especially at the secondary and college levels; strengthen the M&E and studies capability to gauge performance especially through the ESRU; designate PITE as an institution to train district supervisory and management officials; approve a revised policy for teacher recruitment including female teachers and underserved areas.

B. The health policy reforms purport to do the following: (i) Strengthen primary health care. Key indicators include the following

Prior Conditions/triggers: The coverage of TB daily observation therapy sessions (DOTS) has been extended; 2,500 new lady health workers have been deployed.

Key Performance Indicators: proportion of births attended by skilled health personnel, proportion of children aged 12-23 months fully immunized, proportion of population with access to TB Dots control, contraceptive prevalence rate, antenatal coverage of pregnant women by health professionals, population with access to safe drinking water.

Monitoring Indicators: contracting out health care management to NGOs in 9 districts, increase autonomy of EDOs, provide performance based incentives, and establish indicators, baselines and M&E against standards, continue the TB DOTS program in all districts, implement HIV/AIDS services for vulnerable population sub-groups; develop management innovations model targeting under-performing districts; open 50 new centers and expand community based workers in districts for immunization program; implement a community midwifery program; establish outcomes/outputs baselines in districts; initiate implementation of management innovations programs in selected districts.

(ii) Strengthen secondary healthcare. Key monitoring indicators include the following:

Monitoring indicators: experiment with hospital autonomy and improve hospital management; fill additional posts for female nurses at hospitals and deploy 130 female nurses; finalize assessment of hospital autonomy initiative; develop policy framework for district and tehsil autonomy; continue to implement

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standardized schemes to monitor progress and impact and disseminate findings; contract out quality of care assessments in secondary care facilities.

(iii) Improve governance and service delivery. Prior conditions and monitoring

indicators include the following:

Prior conditions/triggers: The NWFP has executed partnership agreements with at least 5 district governments and a NGO to implement certain management innovations; contracts have been entered into between NWFP and at least 3 NGOs/private sector organizations, for the provision of HIV/AIDS preventive services; NWFP has entered into consultancy contracts to carry out baseline studies of quality of care assessments in primary and secondary health-care facilities at the district level.

Monitoring indicators: enhancing monitoring and evaluation functions, strengthening partnerships with the private and NGO sector, strengthening regulation of the private sector through the development of a regulatory framework and a Health Regulatory Authority; approve plan for expanding scope of health foundation; approve program for financing NGOs and private sector for TB DOTs, and MCH; prepare/approve strategy for regulation of private sector including financing and staffing of health regulatory authority; conduct annual analysis of health system performance by district and disseminate findings; establish baseline indicators for each district based on household survey and HMIS data; agree on targets with provincial program managers and districts; quarterly review of health sector performance held by DOH with key stakeholders; initiate implementation of pilot to strengthen and expand the scope of District HMIS; prepare and approve three year reform and financing plan; development budget increased in line with MTDF; provincial and district budget shows an increase in non-salary allocation; system established to track health expenditures at the provincial and district level.

C. The social protection policy reforms purport to initiate the following. Key monitoring indicators include:

Monitoring indicators: complete a ‘stock-taking’; design a sound set of fiscally sound, sustainable and well targeted social safety net programs and an action plan; establish a Social Protection Reform Unit in the Department of Social Welfare to plan, manage and monitor interventions.

Pillar II: Improving fiscal stability and public expenditure management

Key performance indicators include the following.

Prior conditions: The 2005/6 budget is aligned with the MTBF to contain fiscal deficit within the target level of 0.8 percent of GDP and maintains throw-forward ratio of development projects below 3.0 years while containing establishment cost to 3.6 percent of GDP. NWFP’s fiscal budget (FY2007) is (a) consistent with the MTBF, and (b) reflects accepted devolution principles by transferring salary budgets to district accounts; tax administration reform creates a system of bonuses to staff linked to revenue collection performance and establishes tax facilitation centers with private sector support. Key performance indicators: provincial tax revenue growth; increased share of development expenditures in budget; reconciled fiscal data using the new accounting model; GDP growth rate; poverty head count (caloric); pro-poor PRSP expenditures.

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Monitoring indicators: contain establishment cost; maintain throw-forward ratio of development projects; budget outcome in line with MTBF; bonus payments to excise and taxation staff linked to revenue collection performance; Tax Facilitation Centers for collection of selected taxes; integrate the medium-term fiscal reform strategy integrated with the human development and inclusive growth strategy; full implementation of the 2001 fiscal reform emphasizing own resource mobilization through its tax base and fee structure; create fiscal space through implementing its prudent debt management strategy; complete detailed costing of provincial reforms in education, health, agriculture and link to the MTBF and provide adequate O&M allocations; retire expensive debt while increasing own revenues and control expenditures; prudent debt management; rationalization of provincial based taxes and duties, mutation fee; complete survey of properties; increase yield of UIPT; develop an inventory of provincial surplus physical assets; transfer alary budgets of districts to Account IV; devolve electricity budget funds and spending authority to districts; consider conditional performance based grants for districts to improve service delivery; pilot performance contracts; strengthen Provincial Finance Commission; track and report quarterly fiscal data for education and health; post quarterly summaries of provincial and each district’s fiscal accounts on government web site; expand land records computerization and computerize UIPT record; pilot computerization of agricultural land records.

Pillar III: Strengthening governance by improving accountability

Key prior conditions and monitoring indicators include:

Prior conditions/triggers: achieve operational IT connectivity and productivity for 20 District Finance and District Accounts office sites using uniform chart of accounts under the New Accounting Model; publish the provincial budget for the fiscal year in New Chart of Accounts format; prepare a road map satisfactory to the Bank for revision of the Procurement Law to align it with international best practice and implement an action plan; develop, computerize and put into operation a HRM database for provision of reliable and timely data; inconsistencies in designation of appointing authority for different levels of officers and staff of the departments devolved to the districts have been removed; 20 District Finance offices and 20 District Accounts offices within the province have (i) achieved operational connectivity using new IT and introduced uniform charts of accounts under a New Accounting model; the third phase of a procurement action plan has been implemented including identifying areas for improvements and adopting current market rates in place of a composite schedule of rates for government contracts. Monitoring Indicators: maintaining provincial secretaries and other officers in their posts for a minimum time; creating/strengthening the HRM database including payroll; continue implementing the public financial management reforms (as outlined in the PFAA action plan); modernizing civil service administration through use of an upgraded HR data base; involve stakeholder groups in consultation on investment project planning; improve local stakeholders coordination with government on M&E of public investment projects; improve M&E of investment projects; build capacity for project design, appraisal and M&E in the provincial P&D Department and line departments; Urban: establish an urban Apex Steering Committee for Policy and Strategy formulation chaired by the Chief Minister and with stakeholders; reform urban institutes; update existing urban land records and legal framework for E&T Department; Agriculture & Water: prepare proposal for autonomous research system; strengthen Farm Services Centers; facilitate establishment of Milk Producers Association; establish a horticultural core group including producers, processors and traders at the provincial level, Revise and approve Agricultural Produce Act and Seed Act; Initiate a study on a fruit and vegetable marketing strategy that would strengthen the PPP, continue to re-align public expenditures with Agriculture Policy priorities.

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Pillar IV: Accelerating economic growth and promoting private sector development

Key prior conditions and monitoring indicators include the following.

Prior conditions/triggers: set up public-private collaborative bodies: Investment Facilitation Council and Committee under the Chief Minister; Make Sarhad Development Authority the secretariat for the aforementioned; create management committees for industrial estates consisting of, and led by, private sector representatives; establish a single-window investor facilitation center coordinated by the private sector and corresponding line agencies; reduce government share holding of Bank of Khyber; implement demand driven approach to technical and vocational schools aligned with labor market with private sector representation; establish an autonomous agricultural research system; establish multi-stakeholder District Agricultural Coordination Forums. Monitoring Indicators: Realign public expenditures with the priorities set out in the agriculture Policy (2005); transfer management of industrial estates to the private sector; complete inventory of government assets with indicative privatization list; notification of Mining Concession Rules and a Mines Magistrate; lease out remaining hydro projects; develop framework for private provision of power; introduce new exemption based system of labor inspection; facilitate private provision of power and other activities including municipal services through a new PPI law; restructuring the technical and vocational training systems consistent with labor demand.

Revised Policy Areas (if applicable)During the preparation of DPC 2, the Bank guidelines for DPCs was changed to state that a DPC should have no more than 10 prior actions and 20 key performance indicators The Government of NWFP, too, complied of the excessive complexity of the DPC series with a large number of prior actions and milestones. As a consequence, the Bank team, in discussion with the Government of the NWFP, reduced the number of prior actions and milestones in the DPC 2 operation. The strategic focus on human development was retained in the choice of DPC 2 prior actions and key performance indicators. The DPC 1 areas “Urban Management” and “Agriculture and Water Sector” were dropped from Pillar 4 in DPC 2. Also, as explained above, DPC 3 was rejected owing to the deteriorating economic and political situation, the absence of an IMF program in FY08, and the need for close implementation support to improve the human development outcomes in NWFP. Instead, a policy decision was made by Bank management to provide future support to the NWFP though investment lending and technical assistance. A performance based SWAp operation which continues much of the DPC series sectors and emphasis is currently under preparation.

Other significant changes There were no other significant changes.

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Key Factors Affecting Implementation and Outcomes

Program Performance

Policy Matrix Performance Program performance with respect to fulfilling actions identified in the policy matrix was very good. All prior conditions/triggers (Table 4) were met and disbursement occurred soon after Board approval.

Table 4: DPC 1-2: Prior Actions Met

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Prior Actions for DPC 1 List prior actions from Legal Agreement/ Program Document Status I. Accelerating Human Development 1. Free textbooks have been distributed to all primary school students, and all girl

middle and high school students, in government schools. Completed

2. With a view to improving the quality of education: (a) it has been ensured that functional PTAs with authority to monitor teacher attendance and utilize IM&R funds will continue to exist in all primary schools; (b) PTAs have been made fully functional with similar authority in twenty percent (20%) of middle and high schools; and (c) IM&R funds have been released by the districts to all existing PTAs.

Completed

3. The coverage of TB (tuberculosis) daily observation therapy sessions (DOTS) has been extended from 17 to 24 districts, and 2500 new lady health workers have been deployed.

Completed

4. Contracts have been entered into between NWFP and at least three (3) NGOs/private sector organizations, for the provision of HIV/AIDS preventive services.

Completed

II. Improving Fiscal Stability and Public Expenditure Management 1. With a view to achieving fiscal sustainability and sound expenditure composition,

the FY2005/06 budget outcome has been aligned with the medium term budget framework so as to: (a) contain the overall fiscal deficit within the target level of 0.8 percent of PGDP or Rs.4.3 billion; (b) maintain the throw-forward ratio of development projects at or below the FY2004/05 level of 3.0 years; and (c) contain the establishment cost within the FY2004/05 level of 3.6 percent of PGDP.

Completed

2. With a view to improving tax administration and strengthening the revenue base: (a) a system of bonus payments to excise and taxation staff linked to revenue collection performance has been introduced; and (b) tax facilitation centers with support from the private sector for the collection of selected taxes have been opened.

Completed

III. Strengthening Governance 1. The NWFP provincial budget for FY2005 has been published in a format based on

the new chart of accounts. Completed

2. A road map has been prepared satisfactory to the Association for procurement reform, including the revision of the Procurement Law to better align it with international best practice, specifying the time-frame, resources and responsible staff needed for such reform.

Completed

3. A computerized human resource management database has been developed and put into operation for the provision of reliable and timely data for personnel management and planning.

Completed

4. Inconsistencies in the designation of the appointing authority for different levels of officers and staff of the departments devolved to the districts have been removed.

Completed

IV. Promoting Economic Growth through Private Sector Development 1. The Investment Facilitation Council and the Investment Facilitation Committee

have been established. Completed

2. In furtherance of a demand driven approach to the operation of technical and vocational training institutes, representatives of the private sector have been included in, and appointed chairpersons of, the management committees of such institutions.

Completed

3. With a view to promoting investment, the Sarhad Development Authority has: (a) been restructured to include an investment facilitation center; (b) become the secretariat to the Investment Facilitation Council and the Investment Facilitation Committee; and (c) created management committees for industrial estates consisting of, and led by, private sector representatives.

Completed

4. NWFP’s shareholding in the Bank of Khyber has been reduced to 65 percent. Completed 5. With a view to strengthening the agricultural sector: (a) public expenditures for

agriculture have been realigned with the priorities set out in the Agricultural Policy; (b) steps have been initiated to establish an autonomous agricultural research system consistent with said priorities; (c) at least 75 Farm Services Centers have been established; and (d) District Agricultural Coordination Forums have been established in all districts.

Completed

Triggers/Prior Actions for DPC 2 List prior actions from Legal Agreement/ Program Document Status I. Accelerating Human Development 1. From Fiscal Year 2007, NWFP will make available stipends for girl students

enrolled in grades six through ten in seven districts where the middle and secondary enrollment rates for girls are below 12 percent.

Completed

2. The provincial government of NWFP has executed partnership agreements regarding education sector reforms with at least 50 percent of the district

Completed

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Key Factors Affecting Policy Matrix and Key Performance Indicators The positive impact of economic growth in the early part of the decade followed by the earthquake, political instability and economic decline are documented elsewhere. Notwithstanding the changing environment, DPC 1 and 2 performance across the four pillars and multiplicity of prior conditions, key performance and monitoring indicators was impressive. All prior conditions for disbursement were met and many of the key performance indicators—the milestones reflecting desired progress across the four pillars of the policy reform program at the end of the third DPC--were met by the second DPC (see Section 3). This was possible in large measure because the earlier SAC operations had clearly established and consolidated the direction and measure of the desired sector reforms. The provincial government understood the Bank programs and that they were supporting its own policy reform agenda. The SAC operations allowed DPC1 and DPC2 to continue and deepen the desired reforms, working with a committed and experienced counterpart. Pillar I: Accelerating Human Development by Improving Delivery of Education and Health Services. Education. By the conclusion of SAC 2 the government had achieved significant progress in providing missing facilities for girls’ schools including latrines (96 percent), boundary walls (90 percent), water supply (64 percent), and additional classrooms (50 percent). Free public education was expanded through secondary level and provision of free textbooks to girls of all grades and boys up to grade-2 in all government primary schools was achieved. Systems to monitor teacher attendance to reduce chronic absenteeism were being implemented including EDOs taking disciplinary action based on timely reports and in turn forwarding reports to the Directorate for Schools and Literacy. Finally, hiring of teachers was devolved to the District level. Under the DPC series the government provided free textbooks to all primary school students and girls through middle and high school. Furthermore, textbooks were distributed prior to the commencement of the school year in 2006-7 which was not the case in previous years. It also focused on strengthening PTAs, ensuring that they were functional in all primary schools and receiving recurrent budget funds that had been increased. In addition, PTAs of almost 50 percent of all middle and secondary schools were made functional. DPC 2 added new dimensions to education with the inauguration of a stipend program for girls enrolled in grades 6-10 in seven districts where girls’ enrollment rates were below 12 percent. DPC2 also focused more on deepening education management reforms through interventions such as partnership agreements regarding education sector reforms with 50 percent of district governments, a policy framework for teacher development, revised guidelines for PTAs governing utilization of their development budgets, and established an education sector reform unit with planning and monitoring functions under its Department of Education.

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Health. Under the SAC 2 operation the TB DOTS program was expanded from 10 to 17 districts. In addition, 1,800 new lady health workers were deployed and 200 new female nurses were employed at district hospitals. DPC 1 extended daily TB observation therapy sessions (DOTS) from 17 to all 24 districts and deployed 2,500 new Lady Health Workers to district hospitals. In addition, contracts were consummated between the government and at least three NGOs/private sector organizations for the provision of HIV/AIDS preventive services. Under DPC 2, DOTS was deemed functional in all districts through service provision by public health facilities and joint programs being implemented with private and non state sector entities. Provision of HIV/AIDS services had all been expanded to IDUs, jail inmates and other high risk populations. Also under DPC 2 expanded healthcare management was further emphasized by (i) executing partnership agreements with at least five district governments and a designated NGO in the provinces to implement certain management innovations, and (ii) contracting baseline studies of quality-of-care assessments in primary and secondary health-care facilities at the district level. Pillar II: Fiscal and Expenditure Reforms SAC 2 undertook a number of activities relevant to the DPC 2 series including reprioritizing the project portfolio in the FY04 investment project budget to reduce the throw-forward ratio to below 3.2 years, transfer funds for district government staff salaries to districts via account IV, raising the monthly financial reconciliation rate of provincial activities (receipts, expenditures, suspense accounts, intergovernmental accounts) and diminishing reporting lags. Building on this, DPC 1 incorporated a number of prior actions. The throw-forward ratio was reduced to below 3.0 years. Fiscal sustainability and accountability were also emphasized. DPC 1 contained the overall fiscal deficit within the target level of 0.8 percent of GDP and establishment cost within the FY2004/5 level of 3.6 percent of GDP. It improved tax administration by approving a system of bonus payments for staff linked to revenue collection and launched tax facilitation centers for the collection of selected taxes. DPC 2 continued and in some cases institutionalized the DPC1 policies—for instance, the revenue measures in the DPC 1 trigger were established in policy and practice. The bonuses to excise and taxation staff continued to be linked to revenue collection performance and Tax Facilitation Centers continued operations with new ones coming on line. Pillar III: Governance Reforms SAC 2 launched procurement reform with a new law, regulations, and Standard Bidding Documents. It also revised District Rules of Business and devolved recruitment authority of teachers to district governments. Under DPC 1 further progress was made in procurement reform building on the new law: a time bound, resourced roadmap for revising and better aligning the law with international best practice was developed. DPC 2 extended this work, implementing a third phase of reform in procurement rules while taking action to adopt current market rates to substitute the composite rates schedule in

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use at the time for government contracts. In the area of human resources, work continued on removing inconsistencies in the designation of appointing authorities for different levels of officers and staff of the departments devolved to the districts. Furthermore, the provincial cabinet took steps to create a district cadre of professional/managerial staff (BPS 1-15) as well as ensuring that provincial secretaries were kept in their posts for at least 20 months. A human resources management database was created and operating including important improvements in payroll capability. Under DPC 1, the NWFP provincial budget for FY2005 was published in a format based upon a new chart of accounts and this was consolidated through DPC 2 to be presented in this way. DPC 2 further ensured that at least 20 District Accounts Offices had achieved operational IT connectivity and introduced uniform charts of accounts under a New Accounting Model. Pillar IV: Accelerating Economic Growth and promoting Private Sector Development Under SAC 2 the importance of private sector lead growth was recognized by publishing a private sector development policy statement and approving an agricultural growth strategy. As part of this effort three small hydro projects were leased to the private sector and work was progressing on processes for five more and the refurbishing of a sixth. DPC 1 was especially active in expanding private sector initiatives. Public expenditures for agriculture were aligned with sector priorities established in the Agricultural Policy and steps were taken to establish an autonomous agricultural research system consistent with those priorities. Furthermore, at least 75 Farm Services Centers were established and District Agricultural Coordination Forums were established in all districts. DPC 2 was somewhat restricted in its follow-on activities due in large measure to new rules restricting the numbers of DPC triggers. Hence, no new agriculture sector initiatives were included among prior actions. DPC 1 introduced important organizational reforms to enhance private sector development including the creation of an Investment Facilitation Council and an Investment Facilitation Committee. The Sarhad Development Authority was restructured to include an investment facilitation center. It was also designated the secretariat to the Investment Facilitation Council and the Committee. To further this work, management committees were created for the industrial estates that were lead by private sector representatives. Private sector representatives were also included in and appointed chairpersons of the management committees of technical and vocational training institutes. One significant new DPC 2 contribution under this pillar was the establishment and operationalization of a single-window investment facilitation center coordinated by the private sector and corresponding line agencies within the provincial government. Finally, under DPC 1 government shareholding in the Bank of Khyber was reduced to 65 percent. While not a DPC 2 trigger, the government continued to divest shares in the Bank of Khyber and government holding was restricted to 51 percent. Summary of Achievements. The two DPC programs built upon the earlier SAC programs, successfully meeting 15 prior actions in DPC 1 and 11 in DPC 2 and disbursing within two weeks of signing the credits. Many key performance indicators were met or nearly met after only two of the three DPC operations. And an impressive array of monitoring indicators was also addressed (see Section 1.4). The quality of the indicators is congruent

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with good practice operations elsewhere. Moreover, the program impacted importantly on poverty, gender, social and institutional strengthening (Section 3.4) and the gains were incremental -- without the DPC series it is likely that significant portions of the program would not have been carried out or would have experienced significant delays (Section 3.2).

Major Factors Affecting Implementation As has been amply documented above, DPC 1 was a continuation of the SAC 1 and 2. Hence, it benefitted enormously from the SAC program and all of the accumulated preparatory work and implementation experience. The SAC operations strengthened the province’s financial management and facilitated work under all four of the pillars as demonstrated above. The DPC series also benefited from strong ownership and commitment by the NWFP Government resulting in all prior actions being met prior to signing in addition to substantial progress in meeting the key performance and numerous monitoring indicators. DPC 1 also had the benefit of a two year preparation period, the PRSP work and earthquake emergency operation all of which assisted the Bank and client to better define and support the DPC. In the end, the fact that the reforms were firmly embedded in the NWFP pillars and built upon the SAC operations were doubtless key factors affecting successful implementation.

The operation also benefitted from a capable and competent NWFP management cadre, and a country-wide consensus and commitment to reform dating roughly from 2002. This was abated by economic growth a corresponding increase in GoP financial support to the provinces for high profile education, health and management reforms.

Monitoring and Evaluation (M&E) Design, Implementation and Utilization As was noted above, the DPC series built upon the SAC operations. Hence, many of the prior conditions and key performance indicators continued what had been done in the SACs and a culture of monitoring and reporting sector results presumably had been implanted. Consequently, reporting outcomes for the discrete DPC indicators should have posed few problems. In fact, as we shall see in Section 3, there are anomalies in progress reporting against key performance indicators in the documentation. For prior conditions was evidence of compliance satisfactory to the Bank presented by the client and vetted by the Bank and in both operations disbursement was effected soon after. Because these DPLs, Two issues need to be discussed here, the Bank’s reporting and DPC M&E. Regarding the Bank’s reporting of results, there are anomalies in reporting on Key Performance Indicators –they are not all included in the ISRs and consequently what is downloaded in the ICR does not always match what is in the PGD and the Credit Agreement. A subsidiary issue is that one of the pillars—supporting growth through private sector strengthening—does not have any Key Performance Indicators-although it does include significant prior conditions and monitoring indicators. With regard to the DPC series, it would have been very useful to know what sort of permanent M&E reporting arrangements had been installed in the NWFP to track the very rich venue of indicators, including the 74 monitoring indicators, throughout the DPC series and afterwards.

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M&E was the responsibility of the Department of Finance’s Reform Support Unit. This arrangement reportedly worked well. More importantly, the Health and Education MIS systems were strengthened to support monitoring and environment over the course of DPC 1 and 2. Organizationally, the establishment under the DPC of the Education and Health Reform Support Units contributed to the consolidation of a ‘M&E’ culture. Monthly progress reports were emitted and information compiled and reported on specific issues relating to sector progress. Hence, improvements were made but whether this was sustained and covered the rich menu of DPC indicators is not clear. Finally, related activities were taking place in NWFP and in Pakistan that contributed to a growing awareness of the need for data, monitoring and evaluation. These included surveys, censuses and Bank operations like PIFRA. The Bank’s Project to Improve Financial Reporting and Accountability (PIFRA) in the provinces strengthened monitoring and evaluation capability. NWFP’s performance was especially strong in improving the reliability and accuracy of financial information using the new chart of accounts, achieving 100 percent IT connectivity, reducing reporting lags and strengthening audit capacity and timeliness.

Expected Next Phase/Follow-up Operation (if any)The DPC series was originally to be three operations. However, DPC 3 has been replaced by a Sector Investment Credit using a multi-sector Sector-Wide Approach (SWAp) modality which is currently under preparation. This was necessitated by the deterioration in the federal and provincial fiscal environment, and to bring greater focus on strengthening implementation of reforms and achieving the results. The Sindh and Punjab education DPCs were also truncated and converted to SWAps for similar reasons. The type of SWAp instrument chosen for all three credits is a variation used fairly widely in Brazil and increasingly elsewhere. It is more performance based incorporating disbursement conditions that apply to (i) actual government expenditure of targeted budget programs (eligible expenditure programs-EEP) and (ii) performance indicators. It also allows for much needed directed technical assistance. The SWAp and DPCs target essentially the same sectors and the disbursement conditions, currently under development, will draw upon the original DPC pillars, prior action and key performance/PDO indicators. Hence, the NWFP investment operation is expected to provide continuity to the NWFP DPCs as it will prioritize the education, health and social protection sectors and also focus on strengthening key institutions.

Assessment of Outcomes

Relevance of Objectives, Design and Implementation Rating: Satisfactory The DPC series is fully aligned with the Board approved June, 2002 CAS, the April, 2004 CAS Progress Report, and the June, 2006 CAS as well as the PRSP. Summarizing, these documents essentially support Federal and provincial level strengthening of macroeconomic stability and government effectiveness, improving the business

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environment for growth and reducing poverty and improving equity through pro-poor and pro-gender equity policies and programs aligned with the PRSP. Several strategic principles for aiding provinces were advanced in the CASs including (i) client ‘pull’ and selectivity based upon a credible track record of fiscal and economic reform and desire for Bank assistance; (ii) adoption of a programmatic approach; and (iii) reliance on partnerships. NWFP had demonstrated a good track record, desire for Bank assistance and a willingness to undertake a programmatic approach through the SAC series and this was continued with its willingness to undertake the DPC series. The DPC series also has numerous instances of partnerships embedded in its approach and monitoring indicators. In the health sector this includes piloting greater autonomy for hospitals and expansion of NGO and private partnerships for health service delivery. In education the role of PTAs were expanded including budgetary authority to forge closer community partnerships and PPPs were to be expanded especially for secondary and university education. Both PGDs affirm that DPC 1 and DPC 2 are fully aligned with their respective CASs and with client priorities. And a review of the DPC series’ prior actions/triggers, key performance and monitoring indicators confirms this. Undertaking a multi-sector DPC series with a combined 26 prior actions, 27 key performance indicators and 74 monitoring indicators was very ambitious — probably there are very few such DPC programmatic operations. The two credits are noteworthy also for the relevance and quality of their indicators and their potential sectoral impact. The choice of sectors is judicious and builds upon previous SAC operations and a clear understanding of social inclusion and growth priorities. It is also noteworthy that multi-sector SWAps done elsewhere also customarily include health and education and often add public sector management and growth components which speaks to an emerging consensus regarding priorities in multi-sector operations.

Achievement of Program Development Objectives Rating: Satisfactory

Monitoring Results for Key Performance Indicators DPC 1, which was also SAC3, carried forward the key performance indicators/PDOs from the SAC series. DPC 2 modified these indicators in line with the Bank requirement that a DPC have no more than 10 prior actions and 20 milestones. As such, all indicators in DPC1 which reflected the old SAC series and were not relevant to the DPC series going forwards were omitted.

The key performance indicators for the two credits are presented in Table 5 below and discussed in what follows. The overall conclusion is that progress through DPC 2 probably justifies a “Satisfactory” rating even with incomplete information and using DPC 3 key performance indicator targets. This is reinforced by the fact that all of the prior conditions were met.

Table 5: PDO/Key Performance Indicators from DPC 1 and 2* DPC1 DPC2

Improving Fiscal Stability and Public Expenditure Management

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Common indicators: • Provincial GDP growth rate • Provincial tax revenue growth • % of budget spent on development expenditures • Reconciled fiscal data using the new accounting model

• Poverty head count • Pro-poor PRSP expenditure

Accelerating Human Development: Education Common indicators: • Gross Enrollment Rate—Primary school (male & female)

• Primary school dropout rates • Girls schools with essential facilities

• Ratio of girls to boys in primary and secondary school

• Transition rate from primary to middle schools by gender

Accelerating Human Development: Health Common indicators: • Full Immunization among children 12-23 months • % of population with access to TB DOTS • Contraceptive prevalence rate

• Antenatal consultations • Access to safe drinking water

• % of births attended by skilled health personnel

*Source: DPC1 selected monitoring indicators” (p. 38); DPC 2 “key performance and monitoring indicators” (p. 39).

Improving Fiscal Stability and Public Expenditure Management The key indicators tracked under this heading and results included the following.

• Provincial growth rate. Evidently, the growth rate is determined by factors that go well beyond the scope of the NWFP DPC series. This is exemplified by the high statistical correlation between Pakistan and provincial transfers and growth and the impact of externalities such as political instability, recession, and natural disasters. DPC 1‘s baseline was set at 4 percent based upon inputted 2002 data—it is not clear why more recent data was not used as the baseline. In mid 2005, growth was 6.2-6.3 percent (DPC 1 Board approval was mid 2006). The end of series target (December, 2008) was projected at 7 percent. At mid 2007, corresponding to DPC 2 Board approval, provincial growth stood at a respectable 6.3 percent. The provincial growth rate for 2008-09 is not available. However, the national GDP growth rate is revised at 2.2 percent due to bleak economic situation for 2008-09, therefore, it is expected that the provincial GDP growth rate is also decreased.

• Provincial Tax Revenue. The baseline is 8 percent in mid 2004 and the target for is 18 percent by mid 2008. The end-March, 2007 percentage is reported as 18 percent indicating that the target had probably been met by the close of DPC 2. This indicator is not used in ISR for monitoring purpose.

• Share of budget spent on development expenditures. The mid 2005 baseline is 31 percent and the end of series 2008 target is 33 percent. The target was met by mid 2007 at the time of DPC 2 approval. The trend has been sustained and reached to 39 percent in 2009.

• Reconciled fiscal data using the new accounting model. The mid 2005 baseline was 96 percent reconciled. Both the DPC 3 target and the DPC 2 actual are 100 percent

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indicating that the new chart of accounts and accounting model had been successfully implemented.

• Poverty head count and Pro-poor PRSP expenditure (DPC 1 only). There is no data in Section F of the ICR nor in the ISRs on the targets or actuals baselines were recorded at 46.2 percent (2002) and 38 percent (June 2004-05).

While the incomplete reporting is unfortunate—and taking into account that these indicators were dropped from DPC 2—the performance of the DPC series through DPC 2 against the end-of-DPC 3 target is satisfactory. While the provincial growth rate indicator is doubtless beyond the scope of a DPC to influence, increase in tax revenue, budget spent on the development agenda and successful implementation of a new accounting model resulting in 100% reconciliation are both under the control of the provincial administration and significant and demanding improvements. Accelerating Human Development: Education Health and education are the two areas contributing key performance indicators/PDOs. Under education the following indicators were tracked.

• Gross primary school enrollment ratio. DPC 1 provided a 2002 benchmark of 77 percent. The end of series target in 2008 at DPC 1 was 83 percent and 85 percent at DPC 2. By the time of DPC 2 in mid 2006, 83 percent had already been achieved. In fact, the DPC 1 ISR indicates that 83 percent was achieved at the time of DPC 1, so apparently there was little improvement in the period between the two DPCs. According to the latest data, the target value of 83 percent has been sustained but with no further improvement.

• Gross middle school enrollment ratio (DPC 1 only). Once again, the DPC 1 operation provided a 2002 baseline of 38 percent. The ratios at the close of DPC 1 and DPC 2 stood at 52 percent.

• Ratio of girls to boys in primary and secondary education (DPC 2 only). The baseline at the end of 2005 at DPC 1 is 47 girls to 100 boys. The 2008 end of series target is set as 50 girls to 100 boys. As of October 2008, the level achieved is 60 girls to 100 boys, which has greatly surpassed the original target.

• Primary school dropout rate and girls schools with essential facilities (DPC 1 only). This is one of the key performance indicators that appear in the PGD, however, its progress was not monitored in ISR, and the indicator is dropped from the DPC 2 key performance indicators list.

• Transition rates from primary to middle school for boys and girls (DPC 2 only). This indicator is presented in the ISR as an intermediate outcome indicator. The baseline at mid 2005 was 75 percent for boys and 67 percent for girls. The 2008 end of DPC series target was set at 77 percent for boys and 70 percent for girls. The available data from the EMIS indicates that transition rates for boys and girls reached 80 percent and 74 percent respectively for 2007-08 indicating that both targets were exceeded. However, the 2008-09 EMIS signaled that boys and girls rates dropped to 75 percent and 70 percent, respectively. The girls' DPC3 target continues to meet the DPC3 target despite the decline. For boys the DPC3 target was met in 2007-08 but declined thereafter to 75 percent which is the 2005 baseline. One may speculate the provincial recession brought on by the global recession and the insurgency may have

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contributed to lower rates but without further study it is not possible to know at this time.

While the missing key performance indicators are troubling, progress measured by key performance, against the target at the end of DPC series in 2008 is probably reasonable in 2006-7 when data is recorded. Accelerating Human Development: Health The key health performance indicators are likewise presented below. Given the insurgency and macroeconomic issues in NWFP, the result is considered to be reasonable.

• Full immunization among children 12-23 months of age. Once again a 2002 baseline is provided at 54 percent. The end of series 2008 target is 100 percent. In mid 2005, the rate had climbed to about 76 percent which is the percentage registered in mid 2007, and the current rate is 74 percent for 2008. While 100 percent is very likely too optimistic for NWFP, the 50 percent increase between 2002 and 2008 is impressive. What is more difficult to explain is why the rate did not increase after 2005. It should be noted, however, that the full immunization coverage at the national level has been also stagnated in the recent years.

• Percentage of population with access to TB DOTS. DPC 2 reports a benchmark of 100 percent for the end of 2004. The target for 2008 was likewise 100 percent, and the DPC 2 reported rate in mid 2007 was 99 percent. Hence, it appears that access was nearly sustained throughout the DPC series.

• Antenatal consultations of pregnant women by health professionals (DPC 1 only). DPC 1 records a baseline 2002 level of 34 percent. The DPC 1 rate in mid-2006 is 46 percent, and the level achieved in 2008 is 48 percent. The end of series target in 2008 is 50 percent, thus, it has apparently made a good progress towards the goal.

• Contraceptive prevalence rate. This indicator is proposed as a key indicator in both DPC 1 and DPC 2 PGDs but there is no extant data to confirm baselines or progress.

• The percentage of births attended by skilled health personnel and quality of water (DPC 2 only). These indicators are also proposed in the PGD with no baseline or progress recorded.

While these achievements are remarkable, is should be noted that there has been some inconsistency in reporting progress on outcome indicators in ISR between DPC 1 and 2, as some indicators were omitted in DPC 2 and the baseline or target values or dates did not always match across the two operations.

‘Incremental Contribution’ of DPC Series While not a part of the standard ICR format, the ‘incremental contribution’ of the DPC series is worthy of mention. In researching this operation it became apparent that the two year development period prior to the first DPC and the intervening year prior to the second were used to develop with the client a program that essentially did not exist prior to the DPC. In other words, the DPC program’s 15 prior actions (DPC 1) and 11 triggers (DPC 2) innovated, reorganized and reoriented activities and hence can be said to have been in large measure incremental to existing programs. For example, a number of the

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education reforms were developed prior to or simultaneous with similar work carried out in the Sindh and Punjab education DPC series which also morphed into SWAps. The table below briefly summarizes NWFP SWAp prior actions that appear to be innovative. A great deal was going on during the period spanned by the DPC series and better reporting of progress, perhaps including monitoring indicators, would doubtless have enriched the list of incremental contributions.

Table 6: DPC 1-2 Incremental Contribution

Prior Actions for DPC 1 Triggers/Prior Actions for DPC 2 Incremental Contribution

Accelerating Human Development • Education Sector 1. Free textbooks have been

distributed to all primary school students, and all girl middle and high school students, in government schools.

1. From Fiscal Year 2007, NWFP will make available stipends for girl students enrolled in grades six through ten in seven districts where the middle and secondary enrollment rates for girls are below 12 percent.

Free education and free textbooks delivered at the beginning of the school year grew out of the SAC credits and was expanded and consolidated in the DPCs. Girls stipends was new to the GoP and ushered in with the DPC series in the Sindh, Punjab and NWFP

2. With a view to improving the quality of education: (a) it has been ensured that functional PTAs with authority to monitor teacher attendance and utilize IM&R funds will continue to exist in all primary schools; (b) PTAs have been made fully functional with similar authority in twenty percent (20%) of middle and high schools; and (c) IM&R funds have been released by the districts to all existing PTAs.

2. The provincial government of NWFP has executed partnership agreements regarding education sector reforms with at least 50 percent of the district governments in NWFP.

Idem above. Neither Partnership Agreements nor PTA ‘empowerment’ seem to have existed prior to the DPC series.

3. NWFP has notified a policy framework for the professional development of teachers within the province.

Idem above. Teacher training had been done on a largely ad hoc basis when done at all.

4. NWFP has issued revised guidelines for parent teachers associations to utilize their development budgets and to undertake capacity-building activities.

Idem above. PTA empowerment was a DPC series innovation.

5. NWFP has notified and made budgetary allocations for an education sector reform unit with planning

There was no SRU prior to the DPC series. Similar units were established through the Sindh and the Punjab

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and monitoring functions under its Department of Education.

education SWAps

• Health Sector 1. The coverage of TB

(tuberculosis) daily observation therapy sessions (DOTS) has been extended from 17 to 24 districts, and 2500 new Lady Health Workers have been deployed to district hospitals.

1. The provincial government of NWFP has executed partnership agreements with at least five district governments and a Designated Non-governmental Organization in the province to implement certain management innovations. (contracting with NGOs).

Partnership agreements were entirely new to NWFP administration. This has also encouraged the Government to explore other PPP models in the health sector. TB DOTS was in an initial phase of implementation and the Lady Health Workers program did existed but their expansion would doubtless have lagged without the DPC series.


2. NWFP has entered into consultancy contracts to carry out baseline studies of quality-of-care assessments in primary and secondary health-care facilities at the district level.

The studies --the first in Pakistan to assess service quality-- were essential to benchmarking care. The DPCs facilitated HIV/AIDS contracts execution and were necessary to ensure provision of services to vulnerable population sub-groups.

• Improving Fiscal Stability and Public Expenditure Management 1. With a view to achieving

fiscal sustainability and sound expenditure composition, the FY2005/06 budget outcome has been aligned with the medium term budget framework so as to: (a) contain the overall fiscal deficit within the target level of 0.8% of PGDP or Rs.4.3 billion; (b) maintain the throw-forward ratio of development projects at or below the FY2004/05 level of 3.0 years; and (c) contain the establishment cost within the FY2004/05 level of 3.6% of PGDP.

1. NWFP’s fiscal budget for the Fiscal Year 2007 is : (a) consistent with the province’s medium term budgetary framework and (b) reflects accepted devolution principles by transferring salary budgets for district governments to designated district accounts in accordance with the Provincial Finance Commission’s award.

The establishing of performance targets in DPC 1 and DPC 2 was an important financial management innovation backed up by loan disbursement.

2. With a view to improving tax administration and strengthening the revenue base: (a) a system of bonus payments to excise and taxation staff linked to revenue collection performance has been introduced; and (b) tax facilitation centers with

Idem above

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support from the private sector for the collection of selected taxes have been opened.

• Strengthening Governance 1. The NWFP provincial

budget for FY2005 has been published in a format based on the new chart of accounts.

1. NWFP has ensured that at least 20 District Finance Offices and 20 District Accounts Offices within the province have: (i) achieved operational connectivity and productivity in information technology and (ii) introduced uniform charts of accounts under a New Accounting Model.

Connectivity and budget publication using a new Chart of Accounts was innovated by the DPC series although it would eventually have been done.

2. A road map has been prepared satisfactory to the Association for procurement reform, including the revision of the Procurement Law to better align it with international best practice, specifying the time-frame, resources and responsible staff needed for such reform.

2. NWFP has implemented the third phase of a procurement action plan to ensure that its procurement practices are able to conform to international standards. To this end, NWFP has identified areas of improvements in its government 5 procurement rules and taken action to adopt current market rates in place of a composite schedule of rates for government contracts.

The Procurement Law came out of the SAC series. The Procurement Action Plan and continuous refinement of the regulations consolidated and advanced the reform agenda.


A DPC series consolidation of the SAC series devolution of authorities to sub-provincial government levels.

4. A computerized human resource management database has been developed and put into operation for the provision of reliable and timely data for personnel management and planning.

Some work had been done on the HRM data base and a HRMIS would have eventually occurred. Nevertheless, it is significant that this was done under the DPC series.

• Promoting Economic Growth through Private Sector Development 1. With a view to promoting

investment, the Sarhad Development Authority has: (a) been restructured to include an investment facilitation center; (b) become the secretariat to the Investment Facilitation

1. NWFP has established and made operational a single-window investment facilitation center coordinated by the private sector and corresponding line agencies within the provincial government.

The SAC series also included important private sector innovations. However, the organizational changes introduced under the DPCs were innovative and substantially restructured the sector.

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Council and the Investment Facilitation Committee; and (c) created management committees for industrial estates consisting of, and led by, private sector representatives.

2. The Investment Facilitation Council and the Investment Facilitation Committee have been established.

Committees did not exist prior to the DPCs.

3. NWFP’s shareholding in the Bank of Khyber has been reduced to 65%.

A DPC innovation to open up Bank ownership.

4. In furtherance of a demand driven approach to the operation of technical and vocational training institutes, representatives of the private sector have been included in, and appointed chairpersons of, the management committees of such institutions.

Private sector representatives were not included in management committees prior to the DPCs

5. With a view to strengthening the agricultural sector: (a) public expenditures for agriculture have been realigned with the priorities set out in the Agricultural Policy; (b) steps have been initiated to establish an autonomous agricultural research system consistent with said priorities; (c) at least 75 Farm Services Centers have been established; and (d) District Agricultural Coordination Forums have been established in all districts.

This exercise had not been rigorously carried out previously. SAC2 included an agricultural growth strategy. However, no autonomous agricultural research system existed nor the Farm Service Centers or Coordination forums.

Justification of Overall Outcome Rating Rating: Satisfactory

“Relevance” and “Achievement of Objectives” are rated ‘Satisfactory’ in Sections 3.1 and 3.2 respectively. The DPCs are impressive for their ambitious and opportunistic multi-sector design, the relevance of the prior actions/triggers, the impressive array of key performance and monitoring indicators and the progress made despite the DPC series having been terminated after only two operations. The rating might have been higher except that the reporting of a number of key indicators appearing in the PGD were not

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adequately monitored and reported on by Bank staff. In Section 3.4 a/b below institutional interventions in support of poverty reduction and gender equity, social and institutional impact are found to have generally significant impact and involve appropriate risk taking. In Section 3.6 the indicators are found to be innovative and contributing incrementally to reform. Finally, the continuance of the DPC series using a different credit modality under extremely stressful circumstances also is evidence of the high value accorded the DPC framework by the Bank and NWFP Government.

Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development: The education and health components (Pillar I) were by definition poverty targeted. It is also noteworthy that girls’ stipends, textbook delivery and school upgrading clearly targeted girls in a society where it is needed and not easy. Reviewing the Prior Actions table (3.4-b) below, the actions contributing to poverty (P), gender (G) and social impact (SI) impact are indicated. Four DPC 1 and six DPC 2 prior actions directly generate such impacts. (b) Institutional Change/Strengthening: Important changes have been introduced under this program, many with longer-term capacity and institutional development impacts. In support of this finding, each prior action has been rated in the table below according to social inclusion content (poverty, gender, social impact) and institutional content (impact and riskiness in terms of sustainability). The first rating assesses the potential social impact, e.g. the extent to which the indicator will contribute to an important policy change and/or overall related institutional strengthening. The second rating assesses the potential institutional impact of the intervention and the risk of its being reversed, ignored, under-funded or otherwise diluted and hence not achieving its expected impact. There are enough high impact ratings and medium to low risk ratings to give comfort that longer term capacity and institutional development will result from the DPC series. Similar ratings if applied to the numerous secondary indicators enumerated in 1.4 above would reinforce this conclusion. The conclusion is that the operation contributed significantly to institutional change/strengthening.

Table 7: DPC 1&2 Prior Actions with Poverty, Gender, Social Impact Consequences and

that Contribute to Institutional Change/Strengthening* *Poverty (P), Gender (G) and/or Social Impact (SI) content is italicized in bold and indicated in parenthesis at the end of each prior action. The Institutional Change/Strengthening ratings denoting impact and risk are provided as the last line, in parenthesis, of each prior action box

Prior Actions for DPC 1 Triggers/Prior Actions for DPC 2 Accelerating Human Development Education Sector 1. Free textbooks have been distributed to all

primary school students, and all girl middle and high school students, in government schools.

• Content: P,G,SI • Institutions: High Impact, Low Risk

1. From Fiscal Year 2007, NWFP will make available stipends for girl students enrolled in grades six through ten in seven districts where the middle and secondary enrollment rates for girls are below 12 percent.

• Content: P,G,SI • Institutions: High Impact, Low Risk

2. With a view to improving the quality of 1. The provincial government of NWFP has

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education: (a) it has been ensured that functional PTAs with authority to monitor teacher attendance and utilize IM&R funds will continue to exist in all primary schools; (b) PTAs have been made fully functional with similar authority in twenty percent (20%) of middle and high schools; and (c) IM&R funds have been released by the districts to all existing PTAs.

• Content: P,SI—empowers poor districts/poor children in public schools

• Institutions: Medium Impact, High Risk

executed partnership agreements regarding education sector reforms with at least 50 percent of the district governments in NWFP.


• Institutions: Medium Impact, Medium Risk

3. NWFP has notified a policy framework for the professional development of teachers within the province.

• Content: P,SI—empowers poor districts/ poor children in public schools

• Institutions: Low Impact, Low Risk 4. NWFP has issued revised guidelines for parent

teachers associations to utilize their development budgets and to undertake capacity-building activities.


• Institutions: Medium Impact, High Risk 5. NWFP has notified and made budgetary

allocations for an education sector reform unit with planning and monitoring functions under its Department of Education.

• Institutions: High Impact, Low Risk Health Sector 1. The coverage of TB (tuberculosis) daily

observation therapy sessions (DOTS) has been extended from 17 to 24 districts, and 2500 new lady health workers have been deployed to district hospitals.

• Content: P —TB treatment primarily assists poor

• Institutions: High Impact, Low Risk

1. The provincial government of NWFP has executed partnership agreements with at least five district governments and a Designated Non-governmental Organization in the province to implement certain management innovations. (contracting with NGOs).

• Content: P,SI—poor use public facilities • Institutions: Medium Impact, High Risk


• Content: P,SI—public treatment will be used primarily by poor and NGOs will impact delivery


2. Contract out baseline studies of quality of care assessments in PHC facilities at district level.

• Content: P,SI—poor use public facilities • Institutions: High Impact, Low Risk

Improving Fiscal Stability and Public Expenditure Management 1. With a view to achieving fiscal sustainability

and sound expenditure composition, the FY2005/06 budget outcome has been aligned with the medium term budget framework so as to: (a) contain the overall fiscal deficit

1. NWFP’s fiscal budget for the Fiscal Year 2007 is : (a) consistent with the province’s medium term budgetary framework and (b) reflects accepted devolution principles by transferring salary budgets for district governmentsto

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within the target level of 0.8% of PGDP or Rs.4.3 billion (Medium Impact, High Risk);(b) maintain the throw-forward ratio of development projects at or below the FY2004/05 level of 3.0 years (Medium Impact, Medium Risk); and (c) contain the establishment cost within the FY2004/05 level of 3.6% of PGDP (Medium Impact, High Risk)

designated district accounts in accordance with the Provincial Finance Commission’s award.

• Institutions: Medium Impact, Medium Risk

2. With a view to improving tax administration and strengthening the revenue base: (a) a system of bonus payments to excise and taxation staff linked to revenue collection performance has been introduced; and (b) tax facilitation centers with support from the private sector for the collection of selected taxes have been opened.

• Institutions: Medium Impact, Low Risk Strengthening Governance 1. The NWFP provincial budget for FY2005

has been published in a format based on the new chart of accounts.


1. NWFP has ensured that at least 20 District Finance Offices and 20 District Accounts Offices within the province have: (i) achieved operational connectivity and productivity in information technology and (ii) introduced uniform charts of accounts under a New Accounting Model.

• Institutions: High Impact, Low Risk 2. A road map has been prepared satisfactory to

the Association for procurement reform, including the revision of the Procurement Law to better align it with international best practice, specifying the time-frame, resources and responsible staff needed for such reform.

• Institutions: High Impact, Medium Risk

• NWFP has ensured that at least 20 District Finance Offices and 20 District Accounts Offices within the province have: (i) achieved operational connectivity and productivity in information technology and (ii) introduced uniform charts of accounts under a New Accounting Model.



• Institutions: Medium Impact, High Risk 4. A computerized human resource

management database has been developed and put into operation for the provision of reliable and timely data for personnel management and planning.

• Institutions: High Impact, Low Risk Promoting Economic Growth through Private Sector Development 1. With a view to promoting investment, the

Sarhad Development Authority has: (a) been restructured to include an investment facilitation center; (b) become the secretariat to the Investment Facilitation Council and the Investment Facilitation Committee; and (c)

1. NWFP has established and made operational a single-window investment facilitation center coordinated by the private sector and corresponding line agencies within the provincial government.


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created management committees for industrial estates consisting of, and led by, private sector representatives.


2. The Investment Facilitation Council and the Investment Facilitation Committee have been established.

• Institutions: Medium Impact, Low Risk 3. NWFP’s shareholding in the Bank of Khyber

has been reduced to 65%. • Institutions: Medium Impact, Low Risk 4. In furtherance of a demand driven approach

to the operation of technical and vocational training institutes, representatives of the private sector have been included in, and appointed chairpersons of, the management committees of such institutions.

• Institutions: Low Impact, Low Risk 5. With a view to strengthening the agricultural

sector: (a) public expenditures for agriculture have been realigned with the priorities set out in the Agricultural Policy; (b) steps have been initiated to establish an autonomous agricultural research system consistent with said priorities; (c) at least 75 Farm Services Centers have been established; and (d) District Agricultural Coordination Forums have been established in all districts.

• Institutions: High Impact, High Risk

(c) Other Unintended Outcomes and Impacts (positive or negative): Certainly attitudes towards delivery of education and health services –and especially to women, fiscal management and accountability and governance have improved. With improved results come expectations that gains will be consolidated and further improvements should be forthcoming. That the follow-on SWAp operation is able to build on the DPC framework and indicators despite the insurgency and economic stress speaks to a general acceptance and ownership of the program. The question is whether and to what extent improved management, service delivery and governance lends support and credibility to the NWFP government in these difficult times.

Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops There was no Beneficiary Survey or Stakeholder Workshops. The political instability and growing insurgency in Pakistan and the NWFP precluded the conducting of beneficiary surveys and stakeholder workshops. The credits did benefit from a number of studies including a nationwide rural factor markets study, the national Growth and Competitiveness Study, the Country Gender Assessment and the nationwide Administrative Barriers study—all in 2005-6. Also in 2005 a NWFP Economic Report was done which underpinned the DPC series. In 2003-4

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there were a number of supporting studies including a PFAA, CPAR, Devolution Study, Pakistan PER, and a Damage and Needs Assessment of the October, 2005 earthquake.

Assessment of Risk to Development Outcome Rating: Satisfactory (Assessment), Modest (Development Outcome) The DPC 2 Risk Assessment and Mitigation Measures were comprehensive and the risk rating was ‘moderate’. Essentially, the same risks to sustainability persist: macroeconomic, fiscal, political and fiduciary management, implementation capacity for provincial and district governments and external shocks. The scaled up insurgency and worldwide recession came afterwards and could not have been predicted. Hence, the matrix and assessment is rated ‘Satisfactory’. The risks to the Development Outcome are more complicated. Most of the institutional strengthening and policy interventions encompassed by the prior actions/triggers and monitoring indicators have been institutionalized and will be permanent. However, the macroeconomic situation and the insurgency will doubtless curtail the reach and depth of these reforms, especially in the FATA agencies and some NWFP districts where the insurgency is strongest. Displaced persons will also pose new financial and service delivery burdens. The new NWFP SWAp operation is probably going to have to triage unstable districts and rely upon NWFP and third party supervision. However, since most of the population resides in districts firmly under government control, the decision to proceed with preparing the SWAp and incorporating many of the same programs and reforms targeted by the DPC series gives comfort that the policy and institutional reforms and many of the service delivery improvements can and will continue. Hence, given that DPC series policy and institutional reforms are institutionalized, service delivery improvements should be continued in most of NWFP and the SWAp should be delivered this fiscal year, the Development Outcome is rated ‘Modest’. The one caveat is if external shocks--the insurgency and political instability--significantly worsened.

Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory Given the Satisfactory ratings for “relevance”, PDO achievement, overall outcome plus the ambitious and innovative nature of the DPC series and the fact that it is being continued using a SWAp mechanism despite a difficult political economy environment a ‘Satisfactory’ rating is justified. The credit built on a solid SAC series and was comprehensive and judicious in its design.

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(b) Quality of Supervision (including M&E arrangements) Rating: Satisfactory Supervision for a programmatic DPC series is relevant primarily in terms of validating DPC 1 disbursement requirements and ensuring that DPC 2 indicators are congruent with DPC 1 results. The design and timely disbursement of both operations justify a ‘Satisfactory’ rating. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank put together an innovative and ambitious multi-sector operation that built upon gains in an earlier SAC series, identified and addressed critical sectors and blanketed them with 26 prior actions and 72 key performance and monitoring indicators that are highly relevant. The indicators were met allowing for timely disbursement, were shown to have impact, and will be continued in a SWAp operation which replaces DPC 3 giving further comfort that the work was well done. Hence Bank performance is rated ‘Satisfactory’.

Borrower Performance

x Click here if the Government and the Implementation Agency is the same or indistinguishable

The operation was implemented by the Government. The Departments of Finance, and Planning and Development, were the focal points. Other key Government departments involved in the implementation of the operation were Health, Education and Social Welfare. Consequently the government and implementing agency are deemed sufficiently indistinguishable to justify rating only Overall Borrower Performance.

(a) Government Performance See “Borrower Performance” below. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory This innovative and ambitious operation including the numerous and highly relevant prior and complementary actions was only possible through the close cooperation and support of the NWFP Government. Agreeing to such a program and then working to ensure that the indicators were met in a timely manner to assure disbursement for both operations warrants, similar to the Bank, a ‘Satisfactory’ rating.

Lessons Learned

• Including fiscal, and governance indicators in sector DPCs is also useful and feasible—too often sector DPCs neglect to use the credit vehicle as an opportunity to embrace cross-cutting PSM interventions.

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• There is no reason to constrain the number of prior indicators to an arbitrary number (#10) if client circumstances/sector needs and client capability dictate more. This is especially true of multi-sector DPCs. If capacity constraints are the motivation behind constraining the number of indicators, this is mitigated and risk diffused by increasing the number of sectors, each with many fewer than #10 indicators. One of the strengths of this operation is that it had more prior conditions/triggers.

• There is a huge benefit in requiring/working to include secondary conditions that have been met through credit preparation efforts. One of the strengths of this operation was the numerous secondary indicators that, combined with prior/trigger conditions, resulted in each sector having been accorded the same sort of comprehensive treatment that a single sector DPC might have received.

Comments on Issues Raised by Borrower/Implementing Agencies/Partners The only issue raised by the Government during implementation was the large number of milestones and prior actions in the DPC 1 policy matrix. The Bank responded in DPC 2 by streamlining somewhat the number of prior actions and milestones in line with Bank policy and to reflect the strategic focus on human development.

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Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P090689 - NWFP First Development Policy Credit

Names Title Unit Responsibility/ Specialty

Lending Supervision Paul Wade Senior Economist AFTP2 Task Team Leader Martyn Gordon Ambury Consultant SASEP Infrastructure Shahnaz Arshad Senior Urban Specialist SASDU Urban Harsha Aturupane Lead Education Specialist SASED Human development

Ismaila B. Ceesay Lead Financial Management Specialist AFTFM Financial management

Agnes Couffinhal Senior Economist (Health) ECSH1 Health Tekola Dejene Consultant AFTAR Infrastructure Inaam Haq Senior Health Specialist SASHN Health

Isfandyar Zaman Khan Financial Sector Specialist ECSF1 Private sector development

Tahseen Sayed Khan Operations Adviser SACBD Education Benjamin P. Loevinsohn Lead Public Health Specialist AFTHE Health Shaheen Malik Research Analyst SASEP Public expenditures Ambreen Iqbal Malik Operations Analyst SASDA Eric David Manes Senior Economist SASFP Ranjana Mukherjee Senior Public Sector Specialist SASGP Hanid Mukhtar Senior Economist SASEP Public expenditures Ameer Hussein Naqvi Consultant SASHD Education Naveed Hassan Naqvi Senior Education Economist SASED Education Arlene D. Reyes Senior Program Assistant GSDPR Uzma Sadaf Senior Procurement Specialist SARPS Procurement Irum Touqeer Program Assistant SASEP Team Assistance

P097471 - Pakistan NWFP Development Policy Credit Two

Names Title Unit Responsibility/ Specialty

Lending Supervision Harsha Aturupane Lead Education Specialist SASHD Task Team Leader Shaheen Malik, Research Analyst SASPR Public expenditures Benjamin Loevinsohn Lead Health Specialist SASHD Health

Ismaila B. Ceesay Lead Financial Management Specialist AFTFM Financial Management

Inaam Haq Senior Health Specialist SASHN Health Venita Kaul Senior Education Specialist SASHD Education Nasreen Shah Kazmi Team Assistant SASHD Team Assistance

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Mohammad Khalid Khan Program Assistant SASHD Team Assistance

Isfandyar Zaman Khan Financial Sector Specialist ECSF1 Private sector development

Tahseen Sayed Khan Operations Adviser SACBD Education Hanid Mukhtar Senior Economist SASPR Public expenditures Muhammad Iftikhar Malik Sr Social Protection Specialist SASSP Social Protection Amna W. Mir Program Assistant SASHD Team Assistance Naveed Hassan Naqvi Senior Education Economist SASED Education Ralph W. Rawlinson Consultant SASHD College Education Uzma Sadaf Senior Procurement Specialist SARPS Procurement

Furqan Ahmad Saleem Sr Financial Management Specialist SARFM Financial Management

Ernesto Sanchez-Triana Lead Environmental Specialist SASDI Environment Oleksiy A. Sluchynskyy Senior Economist SASSP Social Protection Kalanidhi Subbarao Consultant SASHD Social Protection Paul Wade Senior Economist AFTP2 Public Expenditures Ameer Hussain Naqvi Consultant SASHD Education Corinne Siaens Economist SASHD Public expenditures

(b) Staff Time and Cost P090689 - NWFP First Development Policy Credit

Staff Time and Cost (Bank Budget Only) Stage

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY05 28 90.10 FY06 79 286.95 FY07

Total: 107 376.28 Supervision FY05 0.00 FY06 3 16.05 FY07 0.00

Total: 3 16.05

P097471 - Pakistan NWFP Development Policy Credit Two Staff Time and Cost (Bank Budget Only)

Stage No. of staff weeks USD Thousands (including

travel and consultant costs)Lending FY07 85 300.38 FY08 1.84

Total: 85 302.22 Supervision FY07 0.16 FY08 33 99.00

Total: 33 99.16

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Annex 2. Beneficiary Survey Results

The DPC series directly funded the Government of NWFP. As such, the contribution of the Government to the ICR will contain the feedback from the direct beneficiaries. Separate beneficiary surveys with communities in NWFP could not be undertaken due to the security situation in NWFP.

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Annex 3. Stakeholder Workshop Report and Results Stakeholder workshops could not be held due to the security situation in the North-West Frontier Province.

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Annex 4. Summary of Borrower’s ICR and/or Comments on Draft ICR

The borrower did not send a contribution to the ICR.

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Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable.

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Annex 6. List of Supporting Documents Government of Pakistan, Federal Bureau of Statistics (2003). Pakistan Household Integrated Economic Survey (HIES) 2001/02. Government of Pakistan, Federal Bureau of Statistics (2006). Pakistan Household Integrated Economic Survey (HIES) 2004/05. Government of Pakistan, Federal Bureau of Statistics (2005). Pakistan Social and Living Standards Measurement Survey (PSLM) 2004/05. Government of Pakistan, Federal Bureau of Statistics (2008). Pakistan Social and Living Standards Measurement Survey (PSLM) 2006/07. Government of Pakistan, Federal Bureau of Statistics (2009). Pakistan Social and Living Standards Measurement Survey (PSLM) 2007/08.

Government of Pakistan, Ministry of Finance (2003). Poverty Reduction Strategy Paper (PRSP), “Accelerating Growth and Reducing Poverty, The Road Ahead”. Government of NWFP, Finance Department (2009). White Paper 2009-2010.

Government of NWFP, Elementary and Secondary Education Department (2007). Annual Statistics Report of Government Schools 2006-07.

Government of NWFP, Elementary and Secondary Education Department (2008). Annual Statistics Report of Government Schools 2007-08.

Government of NWFP, Elementary and Secondary Education Department (2008). Annual Statistics Report of Government Schools 2008-09. World Bank (2006). Pakistan Country Assistance Strategy (CAS) for FY06-09, April 4, 2006 (Report No. 35718-PAK) World Bank (2002). Program Document: First Structural Adjustment Credit for the North West Frontier Province. World Bank (2004). Program Document: Second Structural Adjustment Credit Project for the North West Frontier Province. World Bank (2006). Program Document: First Development Policy Credit for the North West Frontier Province. World Bank (2007). Program Document: Second Development Policy Credit for the North West Frontier Province. World Bank (2003). Implementation Completion Report: First Structural Adjustment Credit for the North West Frontier Province. World Bank (2005). Implementation Completion Report: Second Structural Adjustment Credit Project for the North West Frontier Province.

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MAP