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World Bank Document Document of The World Bank Public Disclosure Authorized Report No. 16475 AM STAFF APPRAISAL REPORT Public Disclosure Authorized REPUBLIC OF ARMENIA HEALTH FINANCING AND PRIMARY HEALTH CARE DEVELOPMENT PROJECT Public Disclosure Authorized June 30, 1997 Public Disclosure Authorized Municipal and Social Services Country Department IV Europe and Central Asia Region CUR-RENCY EQUIVALENTS (as of May, 1997) Dram I = US$0.0021 US$1 Dram 470 ABBREVIATIONS AND ACRONYMS ASIF A:rmenia Social Investment Fund BBP Basic Benefits Package BoD lBurdenof Disease CAS Country Assistance Strategy CEE Central and Eastern Europe EU/TACIS Iluropean Union Technical Assistance to CIS countries ECA Europe and Central Asia FSU lFormerSoviet Union FY l'iscal Year FM/GP l'amily Medicine/General Practice GDP (iross Domestic Product GoA (iovernment of Armnenia HCE hlealth Care Expenditures IDA International Development Association IMF International Monetary Fund MCH Maternal and Child Care MoH Ministry of Health MoFE Ministry of Finance and Economy NGO Non-Governmental Organization NIH National Institute of Health OM Operational Manual PER Public Expenditure Review PHRD P'olicy and Human Resources Development Fund IJapanese Grant Facility) PHC PlrimaryHealth Care PHCDP Plrimary Health Care Development Program PIP P'roject Implementation Plan PMU PlrojectManagement Unit SAC Structural Adiustment Credit SATAC Structural Adjustment Technical Assistance Credit SHA State Health Agency SMU State Medical University TA rechnical Assistance UNDP iJnited Nations Development Program UNICEF United Nations Children Fund USAID UJSAgency for International Development WHO/EURO World Health Organization Europe Office FISCAL YEAR: January I - December 31 Vice President, Europe and Central Asia Region: Johannes Linn (ECA) Director, Europe and Central Asia Country Department IV: Basil Kavalsky (EC4DR) Chief, Municipal and Social Services Division: ThomnasA. Blinkhorn (EC4MS) Team Leader: Alexandre Marc (EC4MS) TABLE OF CONTENTS I. ECONOMIC AND SECTOR BACKGROUND. ........................................................... 1 A. Recent EconomicDevelopments ................................................................. I B. Health Sector................................................................. 2 C. HealthCare ReformStrategy ................................................................. 6 D. Rationalefor Bank Involvement................................................................. 8 II. PROJECT DESCRIPTION............................................................ 9 A. Objectives................................................................. 9 B. ProjectDescription ................................................................ 10 C. ProjectComponent 1: StrengtheningPrimary Healtlh Care ........... ........................................10 D. Project Component2: StrengtheningHealth Financing System ............................................ 13 E. ProjectComponent 3: ProjectManagement ............................................... ................. 15 III. PROJECT COSTS AND FINANCING, PROCUREMENT, DISBURSEMENTS ............. 15 A. Cost Estimates................................................................ 15 B. Project Financing................................................................ 16 C. Procurement................................................................ 16 D. Disbursement................................................................ 20 E. Accountsand Audits................................................................ 21 IV. PROJECT IMPLEMENTATION........................................................... 21 A. Organizationand Management................................................................ 21 B. Monitoring,Evaluation and Supervision............................ .................................... 23 V. SOCIO-ECONOMIC ANALYSIS........................................................... 24 A. Analysisof ProjectAlternatives ................................................................ 24 B. Fiscal Impactand Project Sustainability................................................................ 26 C. InstitutionalCapacity Analysis and LessonsLeamed from PreviousBank Operations in Armenia................................................ 28 D. Social Assessmentand StakeholderParticipation ................................................................ 29 E. Benefitsand Risks................................................................ 30 H. PovertyImpact ................................................................ 31 I. EnvironmentalImpact ................................................................ 31 VI. AGREEMENTS AND RECOMMENDATIONS........................................................... 31 A. AgreementsReached During Negotiations ..................................... ........................... 31 B. Conditionsof Effectiveness........................................................... 32 TABLES Table 1.1: The top three causes of DALYs lost in Armenia in 1995 3 Table 3.1: Summary of project cost estimates by component 15 Table 3.2: Project Financing Plan 16 Table 3.3: Project Costs by Expenditure Category 19 Table 3.4: Allocation of Credit Proceeds by Disbursement Category 20 Table 3.5: Estimated Disbursements 20 Table 5.1: Projections of public sector health care expenditures 26 Table 5.2: Project risks 30 ANNEXES Annex 1: Health Sector Indicators Annex 2: Primary Health Care Strategy Annex 3: Health Financing Strategy Annex 4: Executive Summary of Social Assessment in Health and Education Sectors Annex 5: Outlines of Project Implementation Plan and Primary Health Care Development Program Annex 6: Detailed Cost Tables Annex 7: Summary of Procurement Arrangements Annex 8: Project Monitoring Indicators Annex 9: Documents in Project Files MAP IBRD No. 28874 This report is based on the findingsof preparationmissions and a pre-appraisalmission which visitedArmenia since July 1995. The core team,Alexandre Marc (Task Manager)and ToomasPalu (Co-TaskManager and HealthSpecialist) were assistedby WorldBank staffwith expertisein areasrelated to the project components, including:Margaret Grosh (PRDPH),Laura Rose (EC4MS),Mary Schmidt(ENVSP), Seema Manghee (EC4MS),Wolfgang Munar (Consultant),Tamara Kanterman(EC4MS). The preparationof the projectwas carriedout by two working groupsat the Ministryof Healthcomposed of representativesfrom various stakeholders,including the Ministriesof Financeand Economy. The projectconcept was discussedin a workshopcomprising representatives from the central,regional and local levels of Government,health care providers,and NGOsactive in the sector. The localpreparation team was assistedby a project preparationunit based in the Ministryof Healthand externalconsultants financed through a PHRDgrant and other Trust Funds. The DepartmentDirector is Basil Kavalsky,the DivisionChief is ThomasBlinkhorn. Peer Reviewersare Chris Lovelace(ECI/2HR); AlexandreAbrantes (LASHD); Logan Brenzel (HDD). REPUBLIC OF ARMENIA HEALTH FINANCING AND PRIMARY HEALTH CARE DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower Republic of Armenia Implementing Agency Ministry of Health Beneficiaries Ministry of Health, communities receiving grants to upgradePHC facilities, primary health care providers, population in the PHC Development Program intervention areas through improved quality of health care. Population at large through improved access to essential health care services IDA Credit Amount SDR 7.2 million (US$10 million equivalent) Credit Terms Payable in 35 years with 10 years grace period at standard IDA terms. Commitment Fee 0.50% on undisbursed credit balances less waiver, beginning 60 days after the date of signing the Credit Agreement. Environmental Aspects The project has been rated as environmental category C. Poverty Aspects Limited impact on the poor through improved access to basic health care services and the Basic Benefits Package focus on diseases and health problems affecting the poor. Staff Appraisal Report 16475 AM Map IBRD No. 28874 Project ID AM-PA-50 140 REPUBLIC OF ARMENIA HEALTH FINANCING AND PRIMARY HEALTH CARE DEVELOPMENT PROJECT STAFF APPRAISAL REPORT I. ECONOMIC AND SECTOR BACKGROUND A. RECENr ECONOMICDEVELOPMENTS 1.1 A landlockedcountry covering29,800 squarekilometers and with a populationof 3.75 million, Armeniahas few natural resources. Its people have survivedthrough strong traditionsof education and entrepreneurship.Following the break up of the Soviet Union and independencein 1991,Armenia inheriteda distorted,inefficient economy whichwas badly affectedby the collapse of the central planning system and disruptionof traditionaltrading patterns. Economicand social problems were compoundedby the devastationof the 1988 earthquake,and by the economicsiege resulting from politicalconflicts in Georgiaand the dispute with Azerbaijanover Nagorno-Karabakh. A catastrophicdecline in economicoutput followed,accompanied by hyper-inflationwhich acceleratedto 900% in the last two months of 1993 and continuedthrough the first half of 1994, averagingslightly over 1,500%a year. 1.2 Since 1994 Armeniahas made huge strides in economicreform and establishinga suitable policy framework. The stabilizationprogram, sustainedsince spring 1994, broughtthe budget deficit down to 7 percent of GDP in 1996,less than a sixth of the 1993figure. Annualinflation has fallento less than 10 percent. After a year's collapse,GDP grew by 5.4% in 1994,almost 7 percent in 1995 and 5.8 percent in 1996. At the heart of
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