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Document of The World Bank Report No: ICR00003665 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8500) ON A GRANT IN THE AMOUNT OF SDR 13.4 MILLION (US$20 MILLION EQUIVALENT) TO THE KINGDOM OF LESOTHO FOR A FIRST GROWTH AND COMPETITIVENESS DEVELOPMENT POLICY GRANT December 19, 2016 Macroeconomics and Fiscal Management Global Practice AFCS1 Africa Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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Page 1: Report No: ICR00003665 IMPLEMENTATION COMPLETION AND RESULTS …€¦ · IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8500) ON A GRANT IN THE AMOUNT OF SDR 13.4 MILLION (US$20

Document of The World Bank

Report No: ICR00003665

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-H8500)

ON A

GRANT

IN THE AMOUNT OF SDR 13.4 MILLION

(US$20 MILLION EQUIVALENT)

TO THE

KINGDOM OF LESOTHO

FOR A

FIRST GROWTH AND COMPETITIVENESS

DEVELOPMENT POLICY GRANT

December 19, 2016

Macroeconomics and Fiscal Management Global Practice

AFCS1

Africa Region

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ii

CURRENCY EQUIVALENTS

(Exchange Rate Effective as of June 30, 2014)

Currency Unit = Maloti

Maloti 1.00 = US$0.07

US$ 1.00 = 10.62Maloti

FISCAL YEAR

April 1 – March 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank

AGOA African Growth and Opportunity Act

AIDS Acquired Immune Deficiency Syndrome

BEDCO Basotho Enterprises Development Corporation

BoS Bureau of Statistics

CAS Country Assistance Strategy

DFID Department for International Development from United Kingdom

DPO Development Policy Operation

ECF Extended Credit Facility

EU European Union

FDI Foreign Direct Investment

FIA Financial Institutions Act

FIRST Financial Sector Reform and Strengthening Initiative

GDP Gross Domestic Product

GNI Gross National Income

GoL Government of Lesotho

GPOBA Global Partnership for Output-Based Aid

GTZ German Technical Corporation

HBS Household Budget Survey

HIV Human Immunodeficiency Virus

HMIS Health Management Information Systems

HRH Human Resources for Health

IBRD International Bank for Reconstruction and Development

ICT Information and Communication Technologies

IDA International Development Association

IFMIS Integrated Financial Management Information System

IMF International Monetary Fund

LDHS Labor and Demographic Health Survey

LNDC Lesotho National Development Corporation

LRA Lesotho Revenue Authority

MCC Maseru City Council

MDA Ministries, Departments and Agencies

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iii

MDGs Millennium Development Goals

M&E Monitoring and Evaluation

MDP Ministry of Development Planning

MoF Ministry of Finance

MoH Ministry of Health

MoSD Ministry of Social Development

MTEF Medium-Term Expenditure Framework

NISSA National Information System for Social Assistance

NPAB National Planning Advisory Board

NSDP National Strategic Development Plan

OBFC One Stop Business Facilitation Center

PAF Performance Assessment Framework

PEFA Public Expenditure and Financial Accountability

PMT Proxy Means Test

PPAD Procurement Policy and Advice Division

PPP Public/Private Partnerships

PSCEDP Private Sector Competitiveness and Economic Diversification

Project

PFM Public Finance Management

PRS Poverty Reduction Strategy

R&D Research and Development

SACU Southern African Customs Union

SADC Southern African Development Community

SCD Systematic Country Diagnostic

TVET Technical and Vocational Education Training

Vice President: Makhtar Diop

Country Director: Catherine Signe Tovey

Senior Practice Director: Carlos Felipe Jaramillo

Practice Manager: Mark R. Thomas

Task Team Leader: Asli Senkal

ICR Team Leader: Asli Senkal

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KINGDOM OF LESOTHO

First Growth and Competitiveness Development Policy Grant

Contents A. Basic Information ........................................................................................................... vi B. Key Dates ....................................................................................................................... vi C. Ratings Summary ........................................................................................................... vi D. Sector and Theme Codes ............................................................................................... vii

E. Bank Staff ...................................................................................................................... vii F. Results Framework Analysis ......................................................................................... vii

G. Ratings of Program Performance in ISRs ....................................................................... x H. Restructuring (if any) ..................................................................................................... xi 1. Program Context, Development Objectives and Design ................................................. 1

1.1 Context at Appraisal .................................................................................................. 1 1.2 Original Program Development Objectives (PDO) and Key Indicators (as

approved) ......................................................................................................................... 2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators,

and Reasons/Justification ................................................................................................. 3 1.4 Original Policy Areas Supported by the Program (as approved) ............................... 4 1.5 Revised Policy Areas (if applicable).......................................................................... 5 1.6 Other significant changes ........................................................................................... 5

2. Key Factors Affecting Implementation and Outcomes ................................................... 6

2.1 Program Performance (supported by a table derived from a policy matrix) ............. 6 2.2 Major Factors Affecting Implementation: ................................................................. 7 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: ........ 11

2.4 Expected Next Phase/Follow-up Operation (if any): ............................................... 12 3. Assessment of Outcomes ............................................................................................... 12

3.1. Relevance of Objectives, Design and Implementation ........................................ 12

3.2. Achievement of Program Development Objectives ............................................ 13 3.3. Justification of Overall Outcome Rating ............................................................. 20 3.4. Overarching Themes, Other Outcomes and Impacts ........................................... 20 3.5. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ... 22

4. Assessment of Risk to Development Outcome .............................................................. 22

5. Assessment of Bank and Borrower Performance .......................................................... 23 5.1 Bank Performance .................................................................................................... 23

5.2 Borrower Performance ............................................................................................. 25 6. Lessons Learned............................................................................................................. 26 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners................ 26 MAP IBRD 33434R1 ......................................................................................................... 36

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v

ANNEXES

Annex 1: Bank Lending and Implementation Support/Supervision Processes ..................... 28 Annex 2: Beneficiary Survey Results .................................................................................... 29

Annex 3: Stakeholder Workshop Report and Results ............................................................ 30 Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR .............................. 31 Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders ................................ 32 Annex 6: List of Supporting Documents ............................................................................... 33

TABLES

Table 1: Prior Actions for First Growth and Competitiveness DPO ...................................... 7

Table 2: Links between the DPO and Prior Analytical Work ................................................ 9

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A. Basic Information

Country: Lesotho Program Name: LS- First Growth and

Competitiveness DPG

Program ID: P128573 L/C/TF Number(s): IDA-H8500

ICR Date: 07/01/2016 ICR Type: Core ICR

Lending Instrument: DPF Borrower: KINGDOM OF

LESOTHO

Original Total

Commitment: XDR 13.40M Disbursed Amount: XDR 13.40M

Revised Amount: XDR 13.40M

Implementing Agencies: Ministry of Finance and Development Planning

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/17/2013 Effectiveness:

Appraisal: 04/08/2013 Restructuring(s):

Approval: 06/03/2013 Mid-term Review: 02/03/2014 03/31/2014

Closing: 06/30/2014 06/30/2014

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Moderately Unsatisfactory

Risk to Development Outcome: High

Bank Performance: Moderately Unsatisfactory

Borrower Performance: Moderately Unsatisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Moderately

Unsatisfactory Government:

Moderately

Unsatisfactory

Quality of Supervision: Moderately

Unsatisfactory

Implementing

Agency/Agencies: Not Applicable

Overall Bank

Performance:

Moderately

Unsatisfactory Overall Borrower

Performance:

Moderately

Unsatisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating:

Potential Problem

Program at any time

(Yes/No):

No Quality at Entry

(QEA): None

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Problem Program at any

time (Yes/No): Yes

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status:

Moderately

Unsatisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 60 60

General industry and trade sector 20 20

Other social services 20 20

Theme Code (as % of total Bank financing)

Economic statistics, modeling and forecasting 20 20

Public expenditure, financial management and

procurement 40 40

Regulation and competition policy 20 20

Social Protection and Labor Policy & Systems 20 20

E. Bank Staff

Positions At ICR At Approval

Vice President: Makhtar Diop Makhtar Diop

Country Director: Catherine Signe Tovey Asad Alam

Sr. Practice Director Carlos Felipe Jaramillo

Practice Manager: Mark Roland Thomas John Panzer

Program Team Leader: Asli Senkal Christian Yves Gonzalez Amador

ICR Team Leader: Asli Senkal

ICR Primary Author: Maria Teresa Benito-Spinetto

F. Results Framework Analysis

Program Development Objectives

The operation's development objective is to assist the Government in implementing a

reform program aimed at promoting growth, competitiveness and public sector efficiency.

The DPO supports progress towards the Country Assistance Strategy objectives of fiscal

adjustment and public sector efficiency and enhanced competitiveness and diversification.

Revised Program Development Objectives Program Development Objectives were not revised.

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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target

Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Number of sub-leases per year

Value

(quantitative or

Qualitative)

8 64 10

Date achieved 12/31/2012 01/01/2016 03/31/2016

Comments

(incl. %

achievement)

Not met. The number of sub-leases (which refers to land sub-leases), were 10

from April 1, 2015 to March 31, 2016, therefore not meeting the target.

Indicator 2 : Number of days to obtain a construction permit

Value

(quantitative or

Qualitative)

330 240 179

Date achieved 12/31/2012 01/01/2016 01/01/2015

Comments

(incl. %

achievement)

Met (100%) The target was achieved earlier than expected. Per Doing

Business 2015, it took 179 days to obtain a construction permit Since then, the

time has remained constant per DB, 2016 and 2017 draft

Indicator 3 : Number of days to register a firm

Value

(quantitative or

Qualitative)

40 7 7

Date achieved 12/31/2012 01/01/2016 01/01/2016

Comments

(incl. %

achievement)

Met (100%). Doing Business Report 2016 report that it takes 7 days to register

a firm. Therefore, the target was met.

Indicator 4 : Number of days required to obtain manufacturing and trading licenses

Value

(quantitative or

Qualitative)

1-5 3

3

2 days to obtain an

industrial license

+1 day for trading

license.

Date achieved 12/31/2012 01/01/2016 06/01/2016

Comments

(incl. %

achievement)

Met (100%). Doing Business Reports 2014 and after do not measure this

indicator any longer. However, the number of days that it takes to obtain an

industrial license according to Director of Industry, is currently 2 days if there

are no queries on the application. In addition, it takes 1 day to obtain a trading

license.

Indicator 5 : Number of days required for import clearance

Value

(quantitative or

Qualitative)

4.5 days 1 day 7 hours

Date achieved 12/31/2012 01/01/2016 01/01/2015

Comments Met (100%). DB Reports 2015 and 2016 measure this indicator in hours and

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(incl. %

achievement)

separates the times to obtain Border Compliance and Documentary

Compliance. Both added to 7 hours which was considered to be one day and

therefore, the indicator was met.

Indicator 6 : Number of days required for export clearance

Value

(quantitative or

Qualitative)

4.7 days 1 day 7 hours

Date achieved 12/31/2012 01/01/2016 06/02/2014

Comments

(incl. %

achievement)

Met (100%). The target was met earlier than expected. DB Reports for 2015

and 2016 measure this indicator in hours and separates the times to obtain

Border Compliance and Documentary Compliance. Both added to 7 hours and

therefore the indicator was judged met.

Indicator 7 : Number of months delay in publishing the audit reports on public accounts

Value

(quantitative or

Qualitative)

18 months

Zero (this is

interpreted as less

than one month)

24 months for

2013/14 Public

Accounts and over

12 months for

2014/15 Public

Accounts

Date achieved 12/31/2012 01/01/2016 9/31/2015

Comments

(incl. %

achievement)

Not Met The delay for the 2013/14 accounts was 24 months and for the

2014/15 accounts, 12 months, therefore, indicator was not met.

Indicator 8 : Timely and reliable budget expenditure data from the Integrated Financial

Management Information System (IFMIS).

Value

(quantitative or

Qualitative)

No quarterly

expenditure reports

reconciled from IFMIS

Zero delays

No quarterly

expenditure reports

reconciled from

IFMIS

Date achieved 12/31/2012 01/01/2016 06/10/2016

Comments

(incl. %

achievement)

Not Met By June 2014, still there weren't reconciled quarterly expenditure

reports from IFMIS. Currently there are some reconciliation, but reports are

not reliable. Therefore, this indicator is judged not met.

Indicator 9 : Medium term budget policy statement and a medium term fiscal framework

approved by Cabinet.

Value

(quantitative or

Qualitative)

Not approved by

Cabinet

Approved by

Cabinet

Informal approval

by Cabinet

Date achieved 12/31/2012 01/01/2016 06/15/2016

Comments

(incl. %

achievement)

Met. The Medium term budget policy and medium term fiscal framework are

not approved by Cabinet separately. However, the budge ceilings which are

approved by cabinet include a budget policy statement and MTFF Therefore,

one can argue that the MTFF has implicitly been approved by Cabinet deeming

this indicator as met.

Indicator 10 : Number of waivers allowing non-competitive bidding approved

Value

(quantitative or

Qualitative)

79 30 79

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Date achieved 12/31/2012 01/01/2016 06/30/2015

Comments

(incl. %

achievement)

Not met. The number of waivers allowing non-competitive biddings approved

was 48 in June 2014, but went back to 79 by mid-2015 which is latest

information available according to the register at the Ministry of Finance.

Indicator 11 : Number of waivers allowing non-competitive bidding not approved

Value

(quantitative or

Qualitative)

40 70 56

Date achieved 12/31/2012 01/01/2016 03/31/2015

Comments

(incl. %

achievement)

Mostly met (80%). Number of waivers allowing non-competitive bidding not

approved were 31 in June 2014, but increased to 56 by March 2015. Not

further information is available.

Indicator 12 : Number of households in NISSA reached through the Childs Grant

Programme(CGP)

Value

(quantitative or

Qualitative)

6,920 25,000

19,500 (April 1,

2014)

25,400 (End 2015)

Date achieved 12/31/2012 01/01/2016 09/29/2015

Comments

(incl. %

achievement)

Met. Latest available data is that 25,400 children where reached. In April

2014 19,500 were reached. Therefore, indicator was achieved.

Indicator 13 : Number of ministries using harmonized concepts and definitions

Value

(quantitative or

Qualitative)

Zero 14 Not available

Date achieved 12/31/2012 01/01/2016 06/10/2016

Comments

(incl. %

achievement)

Not met. The BoS no longer follows up on the ministries’ progress on the

usage of harmonized concepts and definitions. Therefore, the indicator is

considered not met.

Indicator 14 : Percentage of population issued with National ID cards

Value

(quantitative or

Qualitative)

Zero 100 percent

43% (April 2016)

Date achieved 12/31/2012 01/01/2016 04/30/2014

Comments

(incl. %

achievement)

Partially met (43%). 43% of the population were issued National ID cards by

April 2016. This program continues to be implemented.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

G. Ratings of Program Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

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(USD millions)

1 05/03/2014 Moderately

Unsatisfactory

Moderately

Unsatisfactory 20.54

H. Restructuring

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1. Program Context, Development Objectives and Design

1. This Implementation Completion and Results Report (ICR) assesses the achievements

of expected results of the programmatic series “Growth and Competitiveness

Development Policy Grants” to the Kingdom of Lesotho. The DPO series intended to

support the Government of the Kingdom of Lesotho in implementing a reform program

aimed at promoting growth, competitiveness and public sector efficiency. The first

operation of SDR 13.4 million (US$ 20 million equivalent) was approved by the World

Bank’s Board of Directors on June 3, 2013. The second operation was planned to be

presented to the Board on April 2015, but it was stopped on January 28, 2015 due to the

inadequacy of the macroeconomic framework. Subsequent operations in the series never

materialized.

1.1 Context at Appraisal

2. At appraisal, the Government showed commitment to fiscal consolidation to restore

macroeconomic stability. After a sharp decline in SACU revenues from 33.1 percent of

GDP in 2009/10 to 15.8 percent of GDP in 2010/11, in 2010 the authorities had

embarked on an ambitious fiscal consolidation program supported by the IMF ECF in

response to fiscal pressures and volatility of SACU transfers through cutting expenditures

by 11 percent of GDP. The Government had successfully completed the Fifth Review

under the Extended Credit Facility (ECF) arrangement and the program remained broadly

on track. Despite the drought and declining diamond prices, authorities continued the

adjustment efforts. Financial aid by Lesotho’s international partners helped mitigate the

impact on fiscal and external balances. This operation was aimed at assisting the

Government, in close collaboration with Lesotho’s development partners and

stakeholders, to implement its reform agenda.

3. Macroeconomic developments were judged positive at appraisal. Despite the global

financial crises the economy had grown by 5.4 percent in FY 2011/12 (April to March)

driven mainly by public investment. And in 2012/13, despite lower agricultural

production caused by the drought and weak diamond prices, the economy grew by 3.5

percent fueled by construction and mining. The construction sector had grown

significantly, driven by large infrastructure projects, and the mining sector was expanding.

Inflation was continuing to subside since the beginning of 2012 reaching 5.1 percent by

the end of February 2013. External balances were improving aided by large financial

inflows and the government’s fiscal consolidation efforts. The improved external balance

allowed for a rebuilding of external reserves reaching 4 months of imports by the end of

February 2013.

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4. Fiscal consolidation was moving forward. The non-SACU deficit1 was estimated to

have reached 20 percent of GDP in FY 2012/13, compared with 22.6 percent in 2011/12

and the overall deficit was estimated at 4.8 percent of GDP in 2012/13, down from 10.3

percent of GDP a year earlier. In 2012/13, recurrent spending declined slightly to 39

percent of GDP (down from 39.6 percent a year earlier) as the government embarked in a

program to contain the wage bill which stood at 19.3 percent of GDP in 2011/12 and

2012/13. Capital expenditures increased slightly by 0.2 percentage points in 2012/13 to

21.7 percent of GDP, caused by delays in the implementation of some investment

projects during the transition period after the election. Revenue collection increased as

SACU revenues almost doubled in 2012/13 to 28.9 percent of GDP partly as

compensation for underpayments in previous years. The magnitude of the SACU revenue

volatility had made budget management challenging and a priority. As a key element of

the medium term macroeconomic program adopted by the Government in 2010,

containing expenditures to levels consistent with revenue flows, while safeguarding

social spending for the poor and vulnerable groups, became increasingly important.

Rational for Bank Assistance

5. This operation was designed to assist the Government in implementing a reform

program aimed at promoting growth, competitiveness and public sector efficiency. The

operation as part of the DPL series was envisaged in the Country Assistance Strategy

covering FY2010-2014, discussed by the Board in July 2010. Specifically, the operation

supported three areas that were central to the reform program: (i) improve private sector

competitiveness, through implementing key investment climate reforms; (ii) improve the

sustainability and efficiency of public spending, through fiscal consolidation and public

financial management and public procurement system reforms; and (iii) improve social

protection and monitoring systems, through improving the targeting of social safety net

programs and strengthening the statistical system. The operation supported three strategic

goals of the National Strategic Development Plan (NSDP): (i) pursue high, shared and

employment creating economic growth; (ii) improve health, combat HIV and AIDS and

reduce (social) vulnerability; and (iii) promote peace and democratic governance and

build effective institutions. It also contributed to two pillars of the three CAS’s Pillars2:

(i) fiscal adjustment and public-sector efficiency; and (ii) competitiveness and

diversification.

1.2 Original Program Development Objectives (PDO) and Key Indicators

6. The operation’s development objective was to assist the Government in implementing

a reform program aimed at promoting growth, competitiveness and public sector

efficiency.

1 Non-SACU fiscal deficit is equal to the overall budget deficit minus the SACU revenues.

2 The CAS programme was constructed around three strategic pillars, six results clusters,

and 22 outcomes.

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7. The key indicators as approved were grouped under three pillars. The three pillars of

the DPO were (i) improve private sector competitiveness, through implementing key

investment climate reforms; (ii) improve the sustainability and efficiency of public

spending, through fiscal consolidation and public financial management and public

procurement system reforms; and (iii) improve social protection and monitoring systems,

through improving the targeting of social safety net programs and strengthening the

statistical system. The DPO supported progress towards the Country Assistance Strategy

objectives of fiscal adjustment and public sector efficiency and enhanced competitiveness

and diversification. Although the Program development objectives as originally approved

don’t refer to these three pillars clearly, the key indicators in this document will be

analysis under these themes which reflect the PDOs intention of assisting the

Government of Lesotho with promoting growth, competitiveness and efficiency of the

public sector.

Pillar I: Improving Private Sector Competitiveness

i. Number of sub-leases per year.

ii. Number of days to obtain a construction permit.

iii. Number of days to register a firm.

iv. Number of days required to obtain manufacturing and trading licenses.

v. Number of days required for import clearance.

vi. Number of days required for export clearance.

Pillar II: Improving the Sustainability and Efficiency of Public Spending

vii. Number of months delay in publishing the audit reports on public accounts.

viii. Timely and reliable budget expenditure data from the Integrated Financial

Management Information System (IFMIS).

ix. Medium term budget policy statement and a medium term fiscal framework

approved by Cabinet.

x. Number of waivers allowing non-competitive bidding approved.

xi. Number of waivers allowing non-competitive bidding not approved.

Pillar III: Social Protection and Monitoring Systems

a. Strengthening Social Protection

xii. Number of households in NISSA reached through the Child’s Grant Programme.

b. Improving Data and Information Monitoring Systems

xiii. Number of line ministries using harmonized concepts or definitions.

xiv. Percentage of population issued with National ID cards.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators,

and Reasons/Justification

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8. The DPO and key indicators were not revised.

1.4 Original Policy Areas Supported by the Program (as approved)

9. The program supported three main policy areas:

i. Improving private sector competitiveness. The DPL supported the

government’s efforts to continue improving the business environment as an

essential area for attracting new FDI, in particular investment coming from new

sources (such as South Africa), flowing into new sectors (with emphasis on low-

skill production), and with greater focus on the South African market. Lesotho’s

was ranked 136th

among 185 countries in terms of Ease of Doing Business among

185 countries and there were significant constraints in almost every stage of

business such as access to land, obtaining construction permits, access to finance,

and cross-border trade. Focusing on areas of competitiveness that were under

control of the Government was very important given that the Government did not

have control over key policies to improve competitiveness, such as: exchange

rate policy, which is determined by the Maloti’s peg to the Rand; and trade policy,

which is decided at the SACU level. \

ii. Improving the sustainability and efficiency of public spending. PEFA report

of 2012 documented several weaknesses in credibility, comprehensiveness and

transparency of the budget, predictability and control in budget execution and

audits. The DPL supported the government’s PFM reforms developed in detail in

the PFM Action Plan approved by the PFM Improvement and Reform Steering

Committee (IRSC) in March 2013. The Action Plan was developed in close

collaboration with development partners. It sought to develop more effective PFM

systems, including improvements in planning, budget execution, procurement

accounting, reporting, audit and oversight. The PFM Action Plan included

activities to fully control and commit the budget through IFMIS. The DPL

supported the IFMIS to improve financial control and reporting weaknesses. It

supported the government steps to improve the availability and reliability of

financial information, including the timely publication of reliable budget

expenditure data and audit reports. The DPL also supported the government’s

plans to further strengthen the public procurement system, starting with the

establishment of the Public Procurement Tribunal and its appointed members.

iii. Improving social protection and monitoring systems. The DPL supported the

government efforts to strengthen social protection and improving data and

information monitoring systems. In 2012 a separate Ministry of Social

Development was created which demonstrated the government’s growing

emphasis on social protection. Despite higher spending on social programs

relative to comparator countries, due to poor targeting social spending did not

translate into better outcomes for the poor and the vulnerable. To improve

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targeting the Government created a national registry for the households receiving

payments through transfer programs called National Information System for

Social Assistance (NISSA).The system was designed to cover several key social

protection programs, including the Child Grants Programme (CGP), the Old Age

Pension Program, the Public Assistance Program, and the Orphan Vulnerable and

Children Bursary Program (OVC).

1.5 Revised Policy Areas

10. The policy areas and key policy areas were not revised.

1.6 Other significant changes

11. There were no significant changes in design, scope and scale, implementation

arrangements and schedule, or funding allocations for DPO1.

12. The second operation was stopped when the budget for FY 2014/15 presented to the

parliament deviated from the previous agreements between the World Bank and

government. Table 1 below displays the macroeconomic framework at DPO1 and at the

time of the budget speech of February 20, 2014. Lesotho abandoned the fiscal

consolidation efforts that started in FY 2010/11 due to political instability and higher than

expected SACU revenues and grants. The macroeconomic framework envisioned was

very different than the macroeconomic framework in the presentation to the Board at the

launch of the DPO series and the completion of the IMF’s ECF program. Non-SACU

budget deficit in 2013/14 was higher by 2 percentage points of GDP. The non-SACU

balance was expected to deteriorate by 7.2 percentage points of GDP in 2014/15, 9.8

percentage points of GDP in 2015/16, and 9.6 percentage points of GDP in 2016/17

compared to the deficit expected at the launch of the DPO1.

13. The envisioned reduction in the non-SACU deficit never materialized due to

increased expenditures that surpassed the increased revenues.3

According to the

economic update April 2014, the wage bill increased from 19.3 percent of GDP in FY

2012/13 to 21 percent of GDP in FY 2013/14, contrary to the supported policy actions to

help reduce the recurrent expenditures. The high wage bill in Lesotho, an estimated 22

percent of GDP in 2015/16, continues to be one of the most important structural problems,

Lesotho is facing in the years to come. Similarly, the use of goods and services increased

from 12.1 percent of GDP in FY 2012/13 to 13.6 percent of GDP in FY 2013/14 mostly

due to the subventions to the Queen Mamahato Hospital.

3 At DPO1 SACU revenues were expected to be at 25.4 in 2013/14, 21.9 percent of GDP in 2014/15, and

19.2 percent in 2015/16. According to the FY 2014/15 budget fiscal framework SACU revenues were

estimated to be 27.5 percent of GDP in 2013/14, 28.7 percent of GDP, and 27.4 percent of GDP.

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Table 1: Macroeconomic Framework, 2013/14 to 2016/17

(As percentage of GDP)

Source: Lesotho Economic Update April 2014

2. Key Factors Affecting Implementation and Outcomes

14. The program was supported by one single tranche operation. The First Growth and

Competitiveness Development Policy Grant was approved subject to the implementation

of five prior actions each (see Table 2). All prior actions were satisfactorily met before

Board approval on June 3, 2013.

2.1 Program Performance

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Table 2: Prior Actions for First Growth and Competitiveness DPO

Prior actions from Legal Agreement/ Program Document Status

Pillar I: Improving Private Sector Competitiveness

Prior Action 1: The Government through its Ministry of Trade and Industry,

Cooperatives and Marketing, submitted the Industrial Licensing Bill 2012 to its

Parliament.

Met

Pillar II: Improving the Sustainability and Efficiency of Public Spending

Prior Action 2: The Government has, through: (a) its Ministry of Finance,

submitted the revised Fiscal Year (“FY”) 2009/10 public accounts to the Office

of the Auditor General; and (b) its Office of the Auditor General, published the

audit report on the FY2008/09 public accounts.

Met

Prior Action 3: The Government has, through its Ministry of Finance,

established the Public Procurement Tribunal and appointed its members. Met

Pillar III: Improving Social Protection and Monitoring Systems

a. Strengthening Social Protection

Prior Action 4: The Government has, through its Ministry of Social

Development, developed and adopted the National Information System for

Social Assistance (“NISSA”) and is piloting said NISSA through the Child

Grants Programme.

Met

a. Improving Data and Information Monitoring Systems

Prior Action 5: The Government has, through its Ministry of Development

Planning, submitted to the Ministry of Finance a FY 2013/14 Budget

Framework Paper for the Bureau of Statistics.

Met

2.2 Major Factors Affecting Implementation:

Adequacy of government’s commitment`

15. There was government commitment to the program at the start of implementation, but

political instability weakened that commitment. In June 2014 after the suspension of the

parliament, the political instability continued until February 2015 when snap elections

were held to resolve the parliamentary crisis. The coalition government that took power

in June 2012 had endorsed the NSDP, which stressed the importance of fiscal

sustainability through promoting fiscal consolidation, containing the wage bill, increasing

public sector efficiency as well as improving the business climate. These reform areas

were supported by the DPL. However, political instability that manifested at the

beginning of 2014 was an important element that slowed down this operation’s

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implementation.4 In addition, the already weak capacity to implement reforms was

exacerbated by new comers without experience in public sector affairs.

Soundness of background analysis

16. Applied Lessons from Previous Operations. Four main lessons from previous Poverty

Reduction Support Credit series (FY2008-11) were incorporated into this operation: (i)

Government ownership of reforms as a critical aspect for a successful outcome; (ii)

Effective donor coordination during project preparation and implementation; (iii) Strong

analytical underpinnings and links to Bank investment lending provide the foundation for

a well-designed operation, and (iv) Strong links to other Bank technical capacity and

investment operations as a critical aspect for a successful implementation of the program.

A continued technical and policy dialogue with the authorities and their technical team

was important in maintaining the country's ownership and commitment. To avoid

conflicting policy advice and provide a stronger voice in the policy dialogue with the

Government, it was important to coordinate with the AfDB, IMF, EU, and other donors

during program preparation and implementation. The key pieces of Economic and Sector

Work (ESW) and the Public Expenditure and Financial Accountability (PEFA) Reports

not only contributed to the design of previous and this lending operation, but also helped

shape the Government's reform efforts and supported a fruitful policy dialogue.

17. In past operations, the prior actions that were not linked with any other Bank

operation resulted in poor program outcomes. In a country with weak institutional

capacity, it would be better if the prior actions were supported by a capacity building

operation. Therefore, this operation was supported by Bank investment operations, trust

funds, and technical assistance operations.5

18. Analytical work. The preparation of this DPL series was based on extensive

analytical work carried out by the Bank, the government, and other partners. A

substantial body of analytical work provided the basis for an in-depth dialogue with the

Government and supported the design of the DPO. 3 below shows the links between the

components included in the DPO and the recommendations from prior analytical work.

4 On February 10, 2014, turmoil in the cabinet triggered a realignment of political interests in Parliament,

which resulted in an attempt to pass a “vote of no-confidence” against the Prime Minister on March 20,

2014. The “vote of no-confidence” failed, but raised public concerns about the survival of the coalition

Government. In February 2015, Lesotho held snap general elections to resolve its parliamentary crisis, and

a new coalition government formed in April 2015.

5 Some of the operations that supported this one were: the Private Sector Competitiveness Loan II, and the

Lesotho Public Financial Management Reform Support Program (P143197), all three under preparation at

time of appraisal. The Bank’s Private Sector Competiveness and Economic Diversification Project

(PSCEDP) provided technical assistance in the preparation of the Industrial Licensing Bill; and through the

Lesotho-RSA Customs Collaboration Trust Fund (P125780), the Bank provided technical assistance in the

design and implementation of the Customs Modernization Program.

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Table 3: Links between the DPO and Prior Analytical Work

Analytical Reports – Findings and Recommendations Links to DPO Prior

Actions

I. Improving Private Sector Competitiveness

Selected Policy Notes (WB 2012)

The report recommends: “To further reduce the time to register a business, it is

necessary to fully implement the Companies Act of 2010 and the amended Trading

Enterprises Regulations. In addition, it is important to approve and implement the

Industrial Licensing Bill, which will eliminate the requirement for approval of

manufacturing licenses by the Pioneer Industrial Board, which meets only once every

two weeks, and adds an unnecessary layer to the process.”

The Government through its

Ministry of Trade and

Industry, Cooperatives and

Marketing, submitted the

Industrial Licensing Bill

2012 to its Parliament.

II. Improving the Sustainability and Efficiency of Public Spending

Selected Policy Notes (WB 2012)

The report recommends continuing with the implementation of the PFM

Action Plan.

The Government has,

through: (a) its Ministry

of Finance, submitted the

revised Fiscal Year

(“FY”) 2009/10 public

accounts to the Office of

the Auditor General; and

(b) its Office of the

Auditor General,

published the audit report

on the FY2008/09 public

accounts.

Selected Policy Notes (WB 2012)

The report recommends: “Government urgently needs to set up the

Procurement Tribunal to provide the private sector with recourse to an

independent complaint-handling process.”

The Government has,

through its Ministry of

Finance, established the

Procurement Tribunal and

appointed its members.

Public Expenditure Review (WB 2012)

The report recommends: “Monitoring is also severely hindered by

weaknesses in Lesotho's financial reporting and procurement systems. The

limited availability of budget information constrains oversight by the

legislature, civil society, and the media.”

The Government has,

through its Ministry of

Finance, established the

Public Procurement

Tribunal and appointed its

members.

III. Improving Social Protection and Monitoring Systems

Lesotho: A Safety Net to Protect Extreme Poor and Build Human Capital

(WB 2013)

The report recommends: “Lesotho implements a number of social transfer

programs, but these are not well coordinated and there is a need to better

define the overall priorities and objectives of the safety net.” Specific actions

should include:

The Government has,

through its Ministry of

Social Development,

developed and adopted

the National Information

System for Social

Assistance (“NISSA”)

and is piloting said

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“Establish a national safety net strategy for the next 5-10 years that spells

out the country’s broad poverty reduction objectives, desired target groups

and coverage, and program choices.

Eliminate any duplication of coverage—for example, between the OAP, the

CGP, and PA, and the creation of an integrated beneficiary register.

Establish a central body with policy oversight and expenditure planning

authority over all transfer programs.

-Continue a gradual expansion of the NISSA once a clear vision for the

system has been developed and careful consideration has been made as to

how the expansion would/should take place. The system should also be

continuously monitored to determine whether it is in fact an effective way to

improve coordination and targeting.”

NISSA through the Child

Grants Programme.

Selected Policy Notes (WB 2012)

The report recommends strengthening data quality by accelerating

implementation of the National Strategy for the Development of Statistics as

outlined in the NSDP.

The Government has,

through its Ministry of

Development Planning,

submitted to the Ministry

of Finance a FY 2013/14

Budget Framework Paper

for the Bureau of

Statistics.

Lesotho: Sharing Growth by Reducing Inequality and Vulnerability:

Choices for Change. A Poverty, Gender, and Social Assessment (WB 2010)

The report recommends: “Lesotho’s fight against poverty and exclusion is

hampered by a lack of adequate quality data or disaggregated data on

household demographics, assets, livelihoods, earnings and income, shocks,

such as deaths or other major life events access to services, and social

indicators. As a result, the impact of growth and public policy is hard to

identify.”

The Government has,

through its Ministry of

Development Planning,

submitted to the Ministry

of Finance a FY 2013/14

Budget Framework Paper

for the Bureau of

Statistics.

Assessment of the operation’s design

19. The operation’s design included strong country ownership through close cooperation

and technical assistance, close coordination with other development partners (especially

the EU and IMF), alignment of the operation with the Government’s reform timetable,

and selection of critical structural reforms that would yield medium- to long-term benefits.

However, the scope of the reforms supported by this operation lacked direct support to

fiscal consolidation through structural reforms aimed at cutting expenditures and

mobilizing revenues. Given that fiscal consolidation was and still is a key element in the

sustainability of the country’s macroeconomic framework, the design overlooked actions

that would have supported fiscal consolidation more directly.

Relevance of the risks identified at appraisal and effectiveness of mitigation

20. Three main risks were identified at appraisal and were mitigated as follows:

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i. On the institutional side, the main risk stemmed from the weak capacity of

Government institutions to implement the reform program. To reduce this risk,

the Bank worked with other donors to support the Government’s reform program

ongoing operations. During the operation technical assistance was provided

through the ongoing operations, however no separate technical assistance

operation was implemented. One venue for this coordination was the Joint Budget

Support Review meeting of February 2013. This meeting was held annually

amongst donors to coordinate budget support and to follow up on agreed

indicators.

ii. On the political side, the main risk emanated from the new Government's

unproven capacity to muster broad consensus and be able to approve and

complete the implementation of the politically difficult aspects of the reform

program. The new administration faced the challenge of managing a complex

multi-party coalition government. This arrangement limited the Government's

ability to build consensus around reforms that were critical for the sustenance of

economic growth and its capacity to mobilize enough political support to

implement its programs. To mitigate this risk, the Bank prepared a set of policy

notes on the major reform areas that were delivered to the new Government. The

Bank continued to foster policy dialogue through this operation using its

analytical work, investment operations, and coordination with other development

partners.

iii. On the economic front, the main risk centered on the possibility of further

worsening of the global economic environment. Under this scenario, the country’s

shock-absorption capacity could have faced important limitations, particularly in

applying effective countercyclical macroeconomic policies and suitable social

safety nets. However, this risk never materialized as the SACU revenues and

grants increased followed by an increase in expenditures by the government. The

operation, by not focusing more directly on measures to consolidate the fiscal

situation, was unable to mitigate the risk to the macroeconomic framework caused

mainly by high expenditures. The operation underestimated the risks to fiscal

consolidation.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:

21. Design. The 14 indicators selected by the operation were chosen to monitor progress

towards the program development objectives aimed at promoting growth,

competitiveness and public sector efficiency. They were grouped under three Pillars, but

these did not match the original PDOs. The DPOs could have been more clearly stated to

match the pillars under which the indicators were categorized. Nevertheless, the pillars

embodied the intensions of these series. Furthermore, although the indicators were

aligned to the objectives, they were weak in supporting the objective related to improving

the sustainability and efficiency of public sector spending. The selected indicators were

relatively easy to monitor. Indicators related to Pillar 1 (Improving private sector

competitiveness) were part of the Doing Business Report indicators. Indicators for Pillar

2 (Improving the sustainability and efficiency of public spending) and Pillar 3 (Improving

social protection and monitoring systems) were designed to be mostly monitored through

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the Performance Assessment Framework (PAF) of the Joint Budget Support (JBS)

system. The JBS was developed under Government leadership supported by the EU and

IDA. However, PAF was not adjusted and the following operations were cancelled due to

macroeconomic inadequacy. The objectives of the DPO was in line with NDSP.

22. Implementation. The Ministry of Finance led the implementation of M&E. The

institutional arrangements for implementing this operation fell within the framework of

the Joint Budget Support structure, but the PAF never adjusted to the second PRSP, the

NSDP, so most of the operations indicators that were initially expected to be monitored

through it, could not be monitored through it. The PAF was intended to be the basis for

the program’s monitoring and evaluation, but only a few of the DPO indicators were part

of the PAF, such as, the number of days to receive trading license and the timely auditing

of public accounts.. The monitoring an evaluation of the indicators measured by the

Doing Business Report, could only be followed up periodically as the Doing Business

Reports were completed.

23. Utilization. The data and information provided by the Joint Annual review of the

General Budget Support in March 2014 provided guidance regarding the state of

indicator 4 (number of days required to obtain manufacturing and trading licenses) and

indicator 12 (number of households in NISSA reached through the Child Grant

Programme). This information in addition to the one obtained through the Doing

Business platform and directly from the NMES, was utilized during the ISR to encourage

the authorities to advance with the implementation of the program. Likewise, the

information regarding the macro-fiscal situation during implementation of the first

operation initially led to in delay the second operation and eventually halted the

remaining operations in the series.

2.4 Expected Next Phase/Follow-up Operation:

24. None expected at this time.

3. Assessment of Outcomes

3.1. Relevance of Objectives, Design and Implementation

Overall relevance rating: Modest

Objectives: High.

25. The objectives of the DPO emphasizing private sector competitiveness, efficiency of

public spending and social protection and monitoring systems remains relevant to

Lesotho’s current priorities. They support the goals of the Lesotho Vision 2020 and the

National Strategic Development Plan (NSDP) for 2012–2017. These goals are also

consistent with the priorities identified in the Systematic Country Diagnostic (SCD) of

the World Bank. The two priority interventions to achieve progress on the twin goals

outlined in the SCD are redefining the role of the state through increasing the efficiency

and effectiveness of the public sector and better fiscal management and shifting to a new

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growth model with an outward oriented private sector through improving the business

climate. They also support the WBG Country Partnership Framework for 2016-20, which

is scheduled to be approved by the Board in June 2016. Under the 2016-20 CPF the

WBG assistance will support two focus areas: (i) improving efficiency and effectiveness

of the public sector, and (ii) promoting private sector job creation. There is currently an

urgent need to increase the efficiency and effectiveness of the public sector (Pillar 1 of

DPL) to create space for the private sector to become an engine of growth and generate

enough jobs. Improving the overall business environment (Pillar of DPL) will be

essential for attracting new FDI, promoting domestic private-sector growth, and creating

new jobs.

Design: Modest

26. The DPL was designed so the prior actions selected were relevant steps to attaining

the medium term objectives of improving private sector competitiveness, improving the

sustainability and efficiency of public spending, and improving social protection and

monitoring systems. The policy areas were aligned with the PDOs; however, the design

of the DPO indicators related to supporting public sector efficiency and effectiveness

could have focused more on enhancing the effectiveness of spending. The PDOs were in

line with the NSDP. Given the country’s conditions and risks at the time of the operation

designed, they were adequate. As stated in the current CPF: “Public sector fiscal

consolidation is a prerequisite in restoring macroeconomic stability, but it could weigh on

future growth if not matched by enhanced effectiveness of spending and service delivery

institutions”. The design of the DPL took into account the potential risks for the success

of the reforms supported by the operation, but underestimated the risks to fiscal

consolidation, the key element in maintaining an acceptable macroeconomic framework.

Implementation: Modest

27. The institutional arrangements for implementing this operation fell short of initially

planned arrangements. The institutional arrangements for implementing this operation

were within the framework of the JBS structure; however, the PAF never adjusted to the

second PRSP, so most of the operations indicators could not be monitored through it.

Nevertheless, due to political uncertainty it was important to work within the framework

of the JBS and buy-in at the political level. Currently, there is no IMF program. The EU

cancelled its budget support operation in March 2016 under the EDF10 and suspended

possibilities of support under EDF11.

3.2. Achievement of Program Development Objectives

Overall Rating: Modest

28. The Program Development Objectives Results are summarized in the data sheet at the

beginning of this report and addressed in this section. The program development

objectives related to the improvement of private sector competitiveness (Pillar I) were

mostly met. Doing Business report shows a significant improvement in various areas

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including the ones measures by the selected indicators of this operation. Only indicator 1

related to the number of sub-leases was not achieved. PDOs for improving the

sustainability and efficiency of the public sector (Pillar II) have generally not been met.

In addition, progress in the PDOs related to the strengthening of social protection and

improvement of data and information systems had mixed results, The NISSA program

surpassed expectations, while issue related to data and information monitoring systems

progressed more slowly. Therefore it is concluded that given the significant

shortcomings in this operation’s achievement of objectives, it is rated moderately

unsatisfactory.

Pillar 1. Improving Private Sector Competitiveness. (Substantial)

29. In the past few years, the Government has made some progress in implementing

reforms to alleviate constraints on the private sector. The Companies Act of 2010 was a

step forward in reducing the number of procedures to register a new firm; it was

supported by Private Sector Competitiveness and Economic Diversification (PSCEDP,

P088544) Project and Second Private Sector Competitiveness and economic

Diversification Project (P144933). The Trading Enterprises Regulations of 1999 were

amended in December 2011 to make it easier to obtain trade licenses through the

establishment of a One Stop Business Facilitation Center (OBFC). The revised law also

replaced prior inspections with post inspections for selected businesses with low health

and environmental risks. Both these reforms were supported by the PSCEDP. The OBFC

brings several functions under one roof. These include issuance of trading enterprise

licenses, industrial licenses, work permits, and import permits/rebates and export visas (a

restricted list of products still requires approval from various ministries). Already,

through the Ministry of Trade and Industry, Cooperatives and Marketing, the

Government issued the regulations to implement the Industrial Licensing Bill and rolled

out OBFC services in Maputsoe6 (triggers for DPO2). Rolling it out to other districts was

expected to follow.

30. The process for getting a permit to start a business in Lesotho was streamlined. The

Ministry of Trade and Industry, Cooperatives and Marketing, submitted the Industrial

Licensing Bill 2012 to Parliament (prior action #1). The Industrial Licensing Bill of

2014 was approved by Parliament on September 5, 2014.7 The Bank’s PSCEDP

provided technical assistance in the preparation of the Industrial Licensing Bill. Its

purpose is to facilitate and promote industrial development of small, micro, and medium

enterprises (SMMES) through a new regulatory regime that is simple, short, and cost

effective. Licensing powers are vested in the Director of Industry, making processing

shorter and simple. Currently, the Pioneer Industrial Board must approve manufacturing

licenses. The board meets once every two weeks, adding an unnecessary layer to the

6 The One Stop Business Facilitation Centre (OBFC) substation was launched at Maputsoe on January 28,

2015. From Lesotho Trade Portal at: http://www.lesothotradeportal.org.ls/?r=site/display&id=180

7 http://www.lesotholii.org/ls/legislation/bill/2014/47/.

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process. The Industrial Licensing Bill eliminates Pioneer Industrial Board approval,

reducing the number of days required to obtain manufacturing licenses. However, by

April 2014, the number of days to obtain manufacturing and trading licenses was still 5

days, as the baseline of Indicator 4. Currently, recent Doing Business reports do not

measure this indicator. However, according to the Director of Industry, it currently takes

2 days to obtain an industrial license if there are no queries on the application. In

addition, it takes one day to obtain a trading license. Therefore, this indicator is judged

met.

31. The Industrial Licensing Bill eliminated the Pioneer Industrial Board approval. This

also cut the process of registering a firm to 7 days according to the Doing Business 2016.

Lesotho has also improved its ranking in registering and starting a business. In 2012, the

average days to start a business in Sub-Saharan Africa was at 37 days as opposed to 40

days in Lesotho. Today, Lesotho stands at 112 in the ranking of 189 economies, better

than the regional average (Sub-Saharan Africa) of 128. Therefore, Indicator 3, reduce

number of days to register a firm from 40 to 7 days by 2016, was met).

32. Regarding the number of days to obtain a construction permit (Indicator 2) the target

was surpassed. Doing Business report of 2015 and 2016 report that it takes 179 days to

obtain a construction permit. It took 330 days in 2012 and the target for 2016 was 240.

The Government took measures to reduce the number of days to obtain a construction

permit. According to the World Bank (2013), dealing with construction permits required

11 procedures, 330 days, and cost 950 percent of per capita income. Various regulations

supported by this operation streamlined the process: The Government issued regulations

and guidelines to require environmental impact assessments only for construction

projects for industries that pose high environmental risk, rather than for all projects

(Trigger for DPO2). This is in line with international best practices which recommend a

risk-based approach. This one measure alone is estimated to have cut 25 days off the

process of obtaining construction permits for most firms. Under Component 1 of the

Second Private Sector Competiveness and Economic Diversification Project the

government is working with the World Bank for the construction permits reform. The

Task Team of Chief Legal Officers from MCC and various bodies has been established.

The automated system to obtain permits is not yet live, but complete. The user testing

training took place in July 2016 and the system is expected to go live in September 2016.

33. The Government has taken steps to reduce barriers to land access by investors,

including foreigners. Subleasing is now possible under the amended Land Act of 2010.

The Land Act of 2010 gives specific rights to lessees but not to subleases. The

authorities have submitted to Parliament a sectional title bill, which allows citizens to sell

or transfer a section of their property with an accompanying title for ownership.

However, the Government has not yet submitted to Parliament the Amendments Land

Bill of 2013 which has specific clauses that give rights to subleases8 (Trigger for DPO2)

8 In the Land Act 2010 - the duties on subleases are no longer charged as was the case in

the repealed Land Act of 1979 - an improvement both on the lead time and cost. But the

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and provides them greater certainty and security in occupational rights. As a result of

these changes, it was expected that the number of subleases would have increased from 8

in 2012 to 64 by 2106 (Indicator 1). However, the number of sub-leases in the FY April

2015 to March 2016 was only 10. Therefore, it is considered that this indicator was not

met.

34. Trading across borders has shown some improvements before and during the

implementation period of this operation. Time to import has been reduced from 49 days

in 2007 to 35 days in 2013 and to 33 days by 2014; the number of procedures has been

cut from eight in 2007 to seven by 2014. Time to export has been reduced from 44 days

in 2007 to 31 days in 2013 but has remained the same through 2015.9 The number of days

required for import clearance (Indicator 5) and export clearance (Indicator 6) were

expected to be reduced from 4.5 and 4.7, respectively to 1 day by 2016. Although, the

way this indicators is measured has changed10

, it takes. 7 hours to obtain and import or

export clearance according to DB 2015 and 2016. Therefore, we judged indicators 5 and

6 to have been achieved. The trigger for DPO2 linked to these indicators was completed.

Through the Lesotho Revenue Authority, the government has completed the Preferred

Trader Program Pilot11

at the end of March 2014 and reported on recommendations for

implementation of the full scheme.

Pillar 2. Improving the Sustainability and Efficiency of Public Spending (Negligible)

35. Results in this area have been slow, with some progress recorded more recently. This

pillar of the DPO was closely linked to the PFM Reform Project (P143197) approved by

the Bank Board on February 2014.12

Political turmoil in 2014 also delayed the

implementation of this project. Nevertheless, the Office of the Accountant General

progressed during the second half of 2014 with the implementation of various issues

related to IFMIS, which allowed for: (i) the link between the IFMIS and the Central

Bank for electronic payments to be functional, and the planning to pilot such payments in

the MoF and Ministry of Development Planning (MoDP) to advance; (ii) data cleaning

on the IFMIS to progress to such an extent that the FY14 Public Accounts were

sub-lessees rights are still not in included in the Land Act 2010 as amended - inter alia is

the recent High Court Judgement that has set precedence and entrenched the sublease's

rights

9 The last year that the Doing Business report measured these indicators was 2015. For imports and

exports, the mentioned indicators have remained unchanged.

10 Doing Business Reports in 2015 and 2016 measures these indicators in hours and separates the time to

obtain Border Compliance and time to obtain Documentary Compliance.

11 http://www.sacu.int/docs/pr/2014/pr0724a.pdf

12 Became effective July 25, 2014.

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submitted within the legal timeframe, although revisions from the Auditor General

delayed the process somewhat. Indicator 8 aimed at a timely and reliable budget

expenditure data from IFMIS and aimed at having reconciled quarterly reports from it.

Currently there is some reconciliation, but reports are not reliable, deeming the indicator

as not achieved. Fiscal reporting is still hampered by the lack of reliable information,

because of data and reconciliation problems.

36. Indicator 7, reducing the number of months delay in publishing the audit reports on

public accounts to zero showed progress, but was partially achieved. The PFM Act

determines in section 37 that audited consolidated financial statements need to be

presented to Parliament within 8 months after the end of the financial year they relate to.

So the “delay” is calculated as the time taken to present it to Parliament beyond 8 months

of the end of the fiscal year to which it relates. The FY 13 (end March) public accounts

should have been submitted by end November 2013, and the FY 14 public accounts by

end November 2014. For FY13 the delay was therefore 24 months, and it reduced to 12

months (and not zero) for the FY14 public accounts. The Public Accounts for 2014/15

were received for auditing by the Ministry of Finance on September 1, 2015, and have

not yet been published as of June, 2016, although they are expected to be published very

soon. Public sector auditing is carried out in accordance with standards set by INTOSAI

and the International Auditing Standards. However, the operations of the Office of the

Auditor General are hampered by, amongst other things, significant weaknesses in the

fiduciary systems in the country. Accounts, and in turn audits, are therefore still prepared

with delays. However, under the PFM reform program supported by this operation13

and

the PFM project, both the backlog of audited accounts and the time publish the accounts

have been reduced. The Auditor-general is also receiving support from an operation

already approved by the AfDB. Prior action and trigger for DPO2 were completed.14

37. According to the SCD the Medium Term Fiscal Framework process is still weak.

Projects and programs are not always linked to the NSDP priorities. The MTFF’s outer-

year spending plans are seldom used in preparing subsequent years’ budgets, and the

approach to budgeting remains largely incremental and line item-based. Indicator 9

calls for the MTFF and medium term budget policy statement to be approved by the

Cabinet. There is no separate formal approval of the budget policy statement and the

MTFF by the cabinet, but the budget ceilings which are approved by cabinet include a

budget policy statement and MTFF. Therefore, one can argue that the MTFF has implicitly

been approved by Cabinet deeming this indicator as met.

13 The PFM Reform is being supported by the World Bank, EU, AfDB and IMF.

14 The Government through the Office of the Auditor General publishes the audit report on the FY2009/10,

FY2010/11 and FY2011/12 public accounts.

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38. Regarding Indicator 10 (reduction of number of approved waivers allowing non-

competitive bidding to 30 by 2016 from 79 in 2012), the limited progress registered by

June 2014 when they decreased to 48, regressed back to 79 by July 2015. Therefore, this

indicator was not achieved. Indicator 11 (increase in the number of non-approved

waivers allowing non-competitive bidding to 70 by 2016 from 23 in 2012), was partially

achieved. It became worse by mid-2014 (31), although it improved somewhat by mid-

2015, to 56 non-approved waivers for non-competitive biddings. The trigger for DPO2,

that is, the publicizing of contract awarded above 100,000 maloti on the web and media

through the Ministry of Finance is not currently being done.

Pillar 3. Improving Social Protection and Monitoring Systems (Modest)

I. Strengthening Social Protection

39. Lesotho’s spending on social transfer programs is relatively high, but targeting is

weak, resulting in poor outcomes in terms of reducing vulnerability and poverty.

Coverage of social protection transfers is small, especially among the poorest households.

However, since 2012 the Government has taken some important steps in improving the

performance of the sector, creating a Ministry of Social Development (MSD) to lead and

coordinate the social protection agenda and introduced a National Information System for

Social Assistance (NISSA) to serve as a national registry for beneficiaries of safety-net

programs and piloted the NISSA through the Child Grants Programme (CGP) (Prior

Action 4). Before establishment of the new ministry in June 2012, the Department of

Social Welfare in the Ministry of Health and Social Welfare led the social-protection

agenda. The new MSD runs three of the six main social protection programs, the Child

Grants Programme, the Nutrition for Malnourished and Other Vulnerable Groups (OVC),

and the Public Assistance Program (PA). The MSD also elaborated the National Social

Protection Strategy (NSPS), which was endorsed by Cabinet in December 2014 and

officially launched in February 2015.

40. NISSA is at the basis of harmonization of program delivery, which the NSPS

identifies as the back bone of the social protection system. The social registry of NISSA

contains social-economic information for around 100,000 households in the country

(roughly a quarter of the population), representing the basis for targeting of the CGP. The

World Bank and EU/UNICEF, carried out reviews of the NISSA, which provide evidence

of the quality of the targeting tool and describes the potential of the NISSA as the basis

for a harmonized mechanism for selecting poor households for all social assistance

programs. Based on the recommendations of the most recent NISSA review, MSD is

revisiting the strategy of community-based targeting to strengthen its importance in the

beneficiary selection process.

41. Furthermore, data from the Continuous Multipurpose Survey (CMS) of 2013/14

suggest that the CGP is the most effective program at reaching the poor, with 65% of its

beneficiaries belonging to the bottom two quintiles. By end 2013, the number of

households in NISSA had reached through the CGP 19,500 households, up from 6,920 in

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2012. Most recent data shows that number at 25,400, above the target for 2016 of 25,000

(Indicator 12).15

Therefore, this indicator was fully achieved.

II. Improving Data and Information Monitoring Systems

42. Lack of accurate and timely information hampers the Government’s decision-making.

Data from household surveys, ministries, public service delivery units, and public-sector

spending reports are sporadic and vary in quality, imposing constraints on the ability of

decision-makers to assess alternative policies and make informed decisions. As a result,

decisions regarding the allocation of scarce resources and options for reforming and

improving public services often lack a sound analytical foundation, and program

evaluation is at best difficult.

43. The Government recognizes this weakness. It has taken important steps to improve

the quality of its statistics. The Bureau of Statistics (BoS) published a definitions and

concepts manual in August 2013, which harmonized concepts and definitions with

international standards. This operation’s indicator 13 aimed at having 14 line ministries

using the harmonized concepts or definitions by 2016. This indicator was not made

available to the Bank, because the progress is not regularly followed up by the BoS.

Hence, the progress towards the harmonized concepts and definitions with international

standards is considered to be on halt. Therefore, we consider this indicator not achieved.

44. In addition, the BoS has adopted in early 2014 the 2008 System of National

Accounts methodology (trigger DPO2). Following the new methodology, the BoS has

already incorporated the effects of innovation and R&D as well as the central bank’s

output into the GDP estimation. The BoS has undertaken an Economic Census to get

additional data needed to fully implement the 2008 Systems of National Accounts

methodology. However, amendments to the Statistics Act of 2001 (trigger for DPO3)

which will grant autonomy to the BoS, has not yet been submitted to Parliament.

45. The Government has already taken the first steps toward giving administrative

autonomy to the Bureau of Statistics. The Government has, through its Ministry of

Development Planning, submitted to the Ministry of Finance a FY 2013/14 Budget

Framework Paper (BFP) for the Bureau of Statistics (Prior Action 5) and allocated

resources to activities leading to its administrative autonomy. The BFP calls for:

(i) reviewing the Statistics Council’s terms of reference to ensure the body’s

appropriateness and relevance for governing an autonomous BoS; (ii) amending the

Statistics Act 2001 to grant the BoS operational autonomy to enhance its effectiveness in

managing and coordinating the country’s statistical activities; and (iii) reviewing and

15 The trigger for DPO2 was completed, that is, that through the Ministry of Social

Development, the Government has increased coverage of NISSA reached through the

CGP by an additional 10,000 households.

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aligning all relevant laws of other agencies to make them consistent with the amended

Statistics Act.

46. Most citizens lacked a national ID when this operation was launched. The only

formal ID was a passport which was available to a very small number of people. This

hindered targeting of service delivery and social transfers and access to credit, among

other things. The national ID system is linked to the Credit Bureau since December 2014

and still is expected that it will be linked to the National Voter’s Registry, NISSA and the

Health Service Database. This operation supported the establishment of a national ID

system and aimed that a 100% of the population would have it by 2016 (Indicator 14).

By April 2014, only 5 percent of the population were issued an ID. Two years later,

information from April 2016 shows that 43 percent of the eligible population (16 years

and above) have been issued National ID cards. The NPR has 58 percent of the

population registered. The Government has recently procured 6 mobile registration units

to help reach out to the rural areas. It is expected by the end of the current Lesotho’s

financial year (March 31, 2017), there will be about 80% of the population into the NPR

and about 60% to 70% of eligible population issued ID cards16

. Although this indicator

has been partially achieved (43%) the likelihood of achieving it in the next two years

seems to be high. Furthermore, the priority is currently on Registration of Births and

issuance of ID while the other variables, namely Registration of Marriages, Deaths,

Divorce, Adoptions and Orphans are registered on a voluntary basis. The NPR is

currently piloting registration of deaths in selected health facilities and they hope to roll

out in all health centers and mortuaries soon.

3.3.Justification of Overall Outcome Rating

Rating: Moderately Unsatisfactory

47. With the program remaining highly relevant in terms of objectives, moderately

relevant in terms of design and implementation, and moderately unsatisfactory for

achievement of objectives, the overall outcome rating is moderately unsatisfactory

3.4.Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development 48. The policy actions supported by this proposed operation were expected to have

positive poverty and social impacts. Actions under Policy Area I, Improving Private

Sector Competitiveness, were expected to lead to higher private-sector investment and

growth in the medium and the long run. Hence, higher growth was expected to lead to an

16 Once the percent of population covered reached 50%, then trigger for DPO3 would be

completed. Trigger for DPO2 was completed, that is to roll out the ID program and cover

10% of the population.

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acceleration in poverty reduction. However, private sector investment appears to have

fallen due to AGOA uncertainty, political instability, and lower global and regional

growth prospects. Lesotho lacks reliable poverty estimates and the poverty statistics are

based on estimated data. Based on the estimated data from the 2010/11 household

surveys, there has been almost no progress in poverty and unemployment reduction,

despite the considerable spending on social sectors and transfers. The latest data shows it

at 57 percent of total population.

49. Policy actions under Policy Area II could have helped reduce poverty, however

almost no progress was made. Therefore, the fiscal space needed to protect the social

safety net program in case of an external shock was mostly absent. The financial

management reforms would have allowed the Government to have a better control and

management of its resources. Potential savings in the management of these resources

could have been used to improve and expand services in rural areas where poverty is

concentrated.

50. Policy actions under Policy Area III had positive social impact. The CGP had positive

impact on food security, health and education according to a rigorous impact evaluation

conducted in 2013-14 by Oxford Management Policy. While the CGP is an unconditional

cash transfer, in practice beneficiaries receive a very effective messaging that the cash

transfer should be spent on children, which was closely followed by beneficiary

households. The CGP contributed to retaining children ages 13-17 in primary school,

particularly boys who would have otherwise dropped out. It contributed to a 15

percentage point reduction (from a baseline of 39 percent) in the proportion of both boys

and girls ages 0-5 who suffered from an illness (generally flu or cold) in the 30 days prior

to the survey. The program reduced the number of months by 1.5 during which

households experienced extreme food shortage, and the proportion of CGP households

that did not have enough food to meet their needs at least for one month in the previous

12 months decreased by five percentage points. The CGP was not associated with a

significant reduction in poverty rates amongst beneficiary households two years after the

introduction of the pilot in the study areas, however beneficiaries’ welfare has improved

and trends are encouraging.17

This DPO reforms were expected to be gender neutral.

(b) Institutional Change/Strengthening

51. This operation strengthened the Cabinet Level Committee which was created to

oversee the business environment. It brought to the attention of the Cabinet the

importance of the initiatives to improve the business climate in Lesotho. The Deputy

Prime Minister which was part of the previous government, still is part of this Committee.

(c) Other Unintended Outcomes and Impacts

17 World Bank, September 2015. Draft PAD for Social Assistance Project, Report No: PAD1377.

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52. The DPO supported one of the weakest areas in need for reform that is, procurement

reform, through the establishment of the Procurement Tribunal. However, what was

intended as a punctual reform went beyond what was envisioned. The creation of the

tribunal changed the mentality of this unit, which started simple, but they went beyond

their mandate by, for example, monitoring newspaper publication of bids. This led to the

AFDB to become more engaged and pave the way to their support through an investment

loan.

3.5. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

N/A

4. Assessment of Risk to Development Outcome

Rating: High

53. The risk that developments outcomes will not be maintained or realized is high and is

associated with three main risks: political, economic, and institutional.

54. On the political side, the main risk derives from the Government's ability to approve

and complete implementation of the reform program, fiscal consolidation reforms.

Lesotho’s first coalition government, which came into power in 2012, collapsed in 2014

amidst much turmoil, including the suspension of parliament and conflict among the

security services. Despite early elections in February 2015 and a smooth transition to a

new coalition government, tensions once again escalated a few months later, particularly

within the army. In addition, opposition party leaders fled the country. Implementation of

Lesotho’s National Strategic Development Plan 2012/13-2016/17 (NSDP) has stagnated

in this environment, while disruptions in parliamentary procedures have delayed a

number of legislative proposals. Business investment has slowed and, most recently,

some development partners have expressed concerns that political and security

developments could dampen their economic support for Lesotho.18

The Bank has

continued to maintain policy dialogue through its analytical works, investment operations,

and coordination with other development partners.19

55. On the economic front, the main risk centers on Lesotho’s ability to respond in a

timely manner to the current effects of reduced SACU revenue and other spillovers from

South Africa’s slower growth. Lesotho’s shock-absorption capacity faces important

limitations because of much reduced fiscal space. Without an appropriate fiscal

adjustment, the magnitude and duration of the drop in SACU revenues would lead to

unsustainable fiscal deficits, which would jeopardize debt sustainability and the

18 IMF, February 2016. Staff Report for Article IV Consultation.

19 When this DPO series was approved, the Bank had prepared a set of policy notes on the major reform

areas that was delivered to the Government to assist them with their reform agenda.

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maintenance of adequate international reserves. For Lesotho, the main transmission

channels of the shock are likely to be the same as they were in the 2008 crisis. First, the

United States and South Africa were Lesotho’s largest trade markets, and exports fell

significantly. Second, workers’ remittances from abroad were about 30 percent of GDP,

and 90 percent of them originated in South Africa. Like exports, they declined. Third,

official development assistance was limited. In addition, there is a drought emergency

currently in Lesotho. To reduce macroeconomic risk, the Government had committed to

maintaining macroeconomic stability and Lesotho’s current stock of international

reserves mitigates them temporarily. The Bank and other development partners, including

the IMF, are providing analytical support and policy dialogue to aid the Government to

face these shocks. The recent IMF Article IV conveys that there was broad Government

agreement to undertake the necessary fiscal adjustment in steps, as recommended by

Fund staff. However, recently, the EU has pulled out its budget support from Lesotho.

56. On the institutional side, the main risk stems from the weak capacity of Government

institutions to implement the reform program. To reduce this risk, the Bank has been

working with other donors to support the Government’s reform program through

technical assistance and ongoing operations. In particular, the Lesotho-RSA Customs

Collaboration Trust Fund was supporting technical assistance in implementing reforms

aimed at improving trade facilitation, and the Technical Assistance to the National

Information System for Social Assistance is supporting reforms aimed to strengthen the

social safety net. The Bank’s Public Financial Management Reform Support Project aims

to provide technical assistance for implementing reforms in public financial management

and public procurement. Finally, the Second Private Sector Competitiveness Project is

supporting the implementation of reforms aimed at improving private-sector

competitiveness.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Unsatisfactory

57. The DPO supported the government’s reforms under the National Strategic

Development Plan. The program supported three strategic goals of the NSDP: (i) pursue

high, shared and employment creating economic growth; (ii) improve health, combat

HIV and AIDS and reduce (social) vulnerability; and (iii) promote peace and democratic

governance and build effective institutions. It also supported the CAS’s two of the three

pillars: (i) fiscal adjustment and public-sector efficiency; and (ii) competitiveness and

diversification. The DPO series was fully aligned with the Bank’s Africa Region Strategy.

58. The operation was underpinned by solid analytical work conducted by the Bank, IMF,

and others. The substantial body of analytical work provided the basis for an in-depth

dialogue with the Government and supported the design of the DPO series (see Table 2).

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Continuous dialogue with the Lesotho authorities and development partners were carried

out during preparation of the program. It was prepared within the joint framework of

budget support developed under Government leadership supported by the EU and IDA.

AfDB, WHO, UNICEF, UNAIDS, Irish Aid, and GTZ were not providing direct budget

support, but they participated in the process.

59. The design of the operation applied lessons learned from the previous Poverty

Reduction Support Credits series (FY2008-11). The lessons included the need to ensure

that the operation: (i) exclusively supported Government-led initiatives; (ii) had strong

analytical underpinnings and links to Bank investment lending; (iii) coordinated with

donors effectively during project preparation and implementation; and (iv) had strong

links to other Bank technical capacity and investment operations. With these lessons in

mind, during preparation, and implementation, there was continued technical and policy

dialogue with the authorities and their technical teams to try maintaining the country’s

ownership and commitment. To avoid conflicting policy advice and provide a stronger

voice in the policy dialogue with the Government, it was important to coordinate with the

AfDB, IMF, EU, and other donors during program preparation and implementation. In a

country with weak institutional capacity, the prior actions must be supported by a

capacity building operation. Therefore, this operation was supported by Bank investment

operations, trust funds, and technical assistance operations. Moreover, key pieces of

Economic and Sector Work (ESW) and the Public Expenditure and Financial

Accountability (PEFA) Reports helped shape the Government’s reform efforts and

supported a fruitful policy dialogue.

60. The main shortcoming during preparation was the difficulty in choosing reforms that

were thought to be the ones that could move forward with most success. On one hand,

there was a very energetic new government that wanted to implement reforms. On the

other hand, there were many new and inexperienced officials that could not deliver a

reform package. The team struggled somewhat with the government in choosing reforms

that were relevant and plausible to implement at the same time.

(b) Quality of Supervision

Rating: Moderately Unsatisfactory

61. Supervisor focused on monitoring the development of development objectives and

outcome indicators. There were several economic monitoring missions in 2014 and 2015

that aided the follow up of this operation and preparation of the following one that never

materialized.20

Since the first quarter of calendar year 2014, there already was

acknowledgement that Pillar 2 objectives were not been met. The ISR of April 2014

concluded that the operation had achieved moderately unsatisfactory results in general,

and the objectives for Pillar 2 had not been met. The Bank maintained a continuous

20 Macroeconomic monitoring missions took place on the following dates: Jan 26-31, 2014; Feb 10-14,

2014; March 19-20, 2014; April 1-4, 2014.

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dialogue with the authorities to try keep their engagement and commitment, but the

political situation made it difficult to maintain the momentum. The continued

engagement identified in time that the macro framework was not keeping up with

previous commitments. Efforts to improve it were not successful given the political

obstacles. As a result, this DPO series was cut short of initially programmed. The main

shortcoming during supervision was the complicated political situation which did not

allow the government to address the macroeconomic challenges, in particular, fiscal

consolidation.

(c) Justification of Rating for Overall Bank Performance

Rating: Moderately Unsatisfactory

62. Given that the Bank performance for quality at entry and quality of supervision is

rated moderately unsatisfactory, the overall Bank Performance is rated moderately

unsatisfactory.

5.2 Borrower Performance

(a) Government Performance

Rating: Moderately Unsatisfactory

63. The Government failed to maintain macroeconomic stability, and therefore,

jeopardized the attainment of the development objective to “improve the sustainability

and efficiency of public spending through fiscal consolidation and public financial

management and public procurement reforms”. The fiscal consolidation did not take

place as envisioned at the launching of the DPO series. The prior actions, indicators and

even the triggers for the operations were thought to be relatively easily attainable, but the

Government failed in the macroeconomic arena and in attaining several of the indicators

and envisioned triggers21

. Nevertheless, the Government’s commitment to Pillar 1 and 3,

were more robust and various development objectives related to the improvement of the

private sector competitiveness and improvement of social protection were attained.

Currently, the situation has not yet improved for re-engagement of the Bank through

programmatic lending. Moreover, it has proven difficult to obtain information to assess

some of the indicators despite efforts by the Bank to obtain answers from the authorities.

Therefore, the Government performance is rated moderately unsatisfactory.

21 For example, trigger for DPO2 on the amendments to the Land Act of 2010 to facilitate

the use of sub-lases did not materialized. In the Land Act 2010, the sub-lessees rights are

still not in included in the Land Act 2010 as amended - inter alia is the recent High Court

Judgement that has set precedence and entrenched the sublease's rights. Another example

is the DPO2 trigger related to the publication of all tenders and contracts awarded above

1000,000 Maloti on the web or print media which has not been done yet.

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(b) Implementing Agency or Agencies Performance (see Borrower Performance)

(c) Justification of Rating for Overall Borrower Performance (see Borrower

Performance)

6. Lessons Learned

64. There were three main lessons learned from this operation that could aid future ones

and could have wider general application.

Lesson 1. Future DPOs should chose indicators that support the objective of fiscal

consolidation more directly and should address components of fiscal spending and

revenues. If future DPOs support fiscal consolidation, then they should support structural

reforms specifically aimed at cutting expenditures and mobilizing revenues. This DPO

envisioned a fiscal consolidation framework but it did not provide the support needed to

attain it. For example, Lesotho with a wage bill of 22 percent of GDP has one of the

highest wage bills in the world, however there were no indicators on the wage bill.

Recent evidence shows that the composition of fiscal spending is favoring recurrent

expenditures as opposed to capital expenditures, which might have adverse consequences

on long term growth potential of Lesotho.

Lesson 2. Programmatic lending limited to no more than 2 year programs could give

more flexibility to adjust the program to changing circumstances. Lesotho’s economy is

very dependent on the external environment because of its dependence on SACU

revenues and remittances. When faced with a more favorable environment, the

government tends to relax fiscal conditions which leads to delays in the reform agenda.

Lending that is limited to more than 2 year programs can help in adjusting to the

changing political and external economic conditions.

Lesson 3. In the context of Lesotho, which has low capacity of implementation, all

operations should include capacity building or should be linked to other ones that

provide it. Most critical is providing capacity building in the area of fiscal policy given

the central role that fiscal consolidation plays in the sustainability of the countries macro-

framework.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/Implementing agencies

65. GOL endorsed this ICR and noted the appreciation of the GOL for World Bank’s

support in various development programs.

(b) Cofinanciers- None

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(c) Other partners and stakeholders- None

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Annex 1: Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Macmillan Ikemefule Anyanwu Senior Country Officer SACAA

Christian Yves Gonzalez

Amador Senior Economist AFCS1

Carolina Biagini Majorel E T Consultant LCSPE -

HIS

Melis Ufuk Guven Senior Social Protection Econo GSPDR

Fernando Gabriel Im Economist GMFDR

Melanie Jaya Program Assistant AFCS1

Smita Kuriakose Senior Economist GTCDR

Tuan Minh Le Senior Economist GMFDR

Phindile Abigail Ngwenya Research Analyst GMFDR

Pedro Olinto Program Leader LCC5C

Gert Johannes Alwyn Van Der

Linde Lead Financial Management Spec GGODR

Supervision

(b) Staff Time and Cost

Stage

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending/ Supervision/ICR

Total: 44.4 247,715.5

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Annex 2: Beneficiary Survey Results

Not applicable

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Annex 3: Stakeholder Workshop Report and Results

Not applicable

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Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR

Incorporated in the main text in Section 7.

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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

World Bank, Doing Business Reports 2013, 2014, 2015 and 2016.

World Bank, Doing Business Profile 2016.

World Bank, April 2014 and June 2015. Lesotho Economic Update, Africa Poverty

Reduction and Economic Management – AFTP1.

World Bank, May 2014. Lesotho - Review of the National Information System for Social

Assistance (NISSA), Report No. ACS14183.

World Bank, December 17, 2013. Lesotho- ICR for Private Sector Competitiveness and

Diversification Project, Report No. ICR00002957.

World Bank, March 2016, Lesotho: Aid Memoire for Second Competitiveness and

Economic Diversification Project.

World Bank, September 29, 2015, Lesotho: Credit for a Social Assistance Project, Report

No. PAD1377

World Bank, October 6, 2014. Letter to Minister of Development Planning and Minister

of Finance from WB Country Director.

World Bank, June 2, 2016, Country Partnership Framework, Report No. 97823-LS

World Bank, June 25, 2015, Lesotho: Systematic Country Diagnostic

World Bank (2013) LESOTHO: A Safety Net to End Extreme Poverty and World Bank

(2015), A Lesotho: Review of Public Assistance and the OVC Bursary Scheme; and

World Bank (2015), Lesotho Old Age Pensions Program Diagnostic.

Aide memoire of Joint Annual Review of General Budget Support, March 31-April 1,

2014.

UNCEF/EU, April 2014, Review of the National Information System for Social

Assistance (NISSA) in Lesotho. Analysis of NISSA and current PMT, Carraro, L. and

Marzi, M. (2014).

IMF, various Article IV documents.

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Annex 7: The Status of Prior Actions and Triggers

Prior Actions Status The Government through its Ministry of Trade and

Industry, Cooperatives and Marketing, submitted the

Industrial Licensing Bill 2012 to its Parliament.

Complete

The Government has, through: (a) its Ministry of

Finance, submitted the revised Fiscal Year (“FY”)

2009/10 public accounts to the Office of the Auditor

General; and (b) its Office of the Auditor General,

published the audit report on the FY2008/09 public

accounts.

Complete

The Government has, through its Ministry of Finance,

established the Public Procurement Tribunal and

appointed its members.

Complete

The Government has, through its Ministry of Social

Development, developed and adopted the National

Information System for Social Assistance (“NISSA”)

and is piloting said NISSA through the Child Grants

Programme.

Complete

The Government has, through its Ministry of

Development Planning, submitted to the Ministry of

Finance a FY 2013/14 Budget Framework Paper for the

Bureau of Statistics.

Complete

Triggers for DPO2 Status The Government through the Lesotho Land Authority

Administration has submitted to its Parliament

amendments to the Land Act of 2010 to facilitate the use

of sub-leases. In particular, the amendments will define

the rights of a sub-lessee.

Incomplete

The Government through the Ministry of Tourism,

Environment and Culture has issued regulations and

guidelines to require environmental impact assessments

only for construction projects in industries with high

environmental risks.

Complete

The Government, through its Ministry of Trade and

Industry, Cooperatives and Marketing, issued the

regulations to implement the Industrial Licensing Bill

and rolled out OBFC services in Maputsoe.

Complete

The Government through its Lesotho Revenue Authority

has completed the Preferred Trader Program Pilot and

reported on recommendations for implementation of the

full scheme.

Complete

The Government through its Ministry of Public Service

has reconciled the establishment list with the payroll in

at least one ministry.

Incomplete

The Government through the Office of the Auditor

General publishes the audit report on the FY2009/10

public accounts.

Complete

The Government through its Ministry of Finance has

issued the regulations detailing responsibilities,

procedures, controls and systems covering all stages of

the budget cycle (as outlined in the PFM Act of 2011)

and developed training needed to implement them.

Incomplete

The Government through its Ministry of Finance

publicizes all tenders and contracts awarded above

M100,000 on the web and in printed media.

Partially complete

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Through its Ministry of Social Development, increase

the coverage of the NISSA reached through the Childs

Grants Programme by an additional 5,000 households.

Complete

The Government through the Bureau of Statistics has

published the Definitions and Concepts Manual and has

adopted the 2008 System of National Accounts

methodology.

Complete

The Government through its Ministry of Home Affairs

has rolled out the National ID and covers at least 10

percent of the population.

Complete

Triggers for DPO3 Status The Government through the Lesotho Land Authority

Administration has submitted to its Parliament the

Sectional Titles Bill.

Complete

The Government introduces streamlined procedures to

better integrate approvals from the various utility bodies

prior to obtaining building permits from the Maseru City

Council.

Partially complete

The Government, through its Ministry of Trade and

Industry, Cooperatives and Marketing, submitted to its

Parliament the Business Registration Bill.

Partially complete

The Government started to roll out the Preferred Trader

Program and has adopted an Integrated Border

Management Strategy.

Complete

The Government through its Ministry of Public Service

has: i) reconciled the establishment list with the payroll

in at least two additional ministries; and ii) adopted an

action plan based on a study on civil service

restructuring.

Incomplete

The Government through the Office of the Auditor

General publishes the audit reports on the FY2010/11

and FY2011/12 public accounts.

Complete

The Government has taken actions to implement the

recommendations of the Audit Report to the FY 2008/09

public accounts.

Complete

Reconciled quarterly expenditure reports are produced

from IFMIS to monitor budgetary targets. Incomplete

The Government implements an annual mid-term budget

review. Incomplete

The Government through its Ministry of Finance

monitors the waivers that allow non-competitive

bidding.

Complete

The National ID System covers at least 50 percent of the

population. Partially complete

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MAP IBRD 33434R1

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