Districts of Adjumani, Moyo Arua, Lamwo, Yumbe and Kiryandongo in Nofthern Uganda That Are Currently Hosting the Iargest Number of Refugees in the Country

THE REPUBLIC OF UGANDA

BRIEF TO PARLIAMENT

THE PROPOSAL TO BORROW UP TO SDR L74.6 MILLTON (US$ 251 MILLION EQUIVALENT) FROM THE INTERNATIONAL DEVELOPMENT ASSOCIATION OF THE WORLD BANK GROUP FOR FINANCING THE INTEGRATED WATER MANAGEMENT AND DEVELOPMENT PROJECT

PURPOSE

1 This brief is for the purpose of seeking authorization of Parliament and as required under Article 159 of the Constitution, to allow the Government to borrow up to SDR L74.6 Million from the International Development Association of the World Bank Group for financing the Integrated Water Management and Development Project.

INTRODUCTION

2 Rt. Hon, Speaker, the Integrated Water Management & Development Project (IWMDP) was designed with the goal to provide safe water and sanitation services in the project areas of; Gulu Municipality, Adjumani Town Council, Pakele, Ciforo and Dzaipi (as well as the parishes of Agojo and Mungula), Busia Town Council, Namungalwe-Kaliro, Kyegegwa- Mpara-Ruyonza, Namasale, Mbale Municipality, Butaleja- Busolwe and Budaka - Kadama-Tirinyi-Kibuku. The project will provide water supply through solar powered schemes in 30 selected Rural Growth Centres across the country.

3 The project will also suppoft provision of water and sanitation services to refugees and refugee hosting communities in districts of Adjumani, Moyo Arua, Lamwo, Yumbe and Kiryandongo in Nofthern Uganda that are currently hosting the Iargest number of refugees in the country. In addition, the project will strengthen the national water resource monitoring and information system.

4 The Project estimated total cost is US$313 million. The World Bank will provide US$280 million, of which US$29 million is a grant. Germany - KfW will co-finance with US$25 million to finance the water intake and a Water Treatment Plant at Karuma. The KfW financing has already been secured by the GoU. Government will provide counterpart financing of US$8 million to cover land acquisition and compensation of project affected persons and part of the operating costs.

5 The project will be implemented by the Ministry of Water and Environment (MWE) and National Water and Sewerage Corporation (NWSC).

BACKGROUND

6 Rt. Hon. Speaker, as you are aware, the Government of Uganda in the early 1990s implemented significant poliry reforms, including the commercialization and modernization of the National Water and Sewerage Corporation. These reforms, coupled with significant capital investments, have led Uganda to remarkable improvements in water supply service provision, especially in urban areas where coverage increased from 43 percent in 1990 to 77 percent in 2017.

7 However, Uganda's population of 35 million is expected to reach 80 million by 2040. Uganda's annual urban growth rate of 5.2 percent is among the highest in the world, and the urban population is expected to grow from 6.4 million (2014) to 22 million by 20a0, About 60

2 percent of the current urban population, lacks basic amenities, such as decent housing and Water Supply and Sanitation Services, In addition, many smalltowns and ruralgrowth centers (RGCs) have emerged around the country, creating greater demand for services,

8 Similarly, Uganda achieved remarkable results in poverty reduction in the country however, poverty rates remain high in the Northern and Eastern regions of Uganda. Approximately 84 percent of Ugandat poor (living below US$1.90 per day) reside in the Northern and Eastern regions, where 43 percent of the residents live on less than US$l a day, Economic growth in these regions has been affected by inadequate infrastructure, civil conflict in South Sudan, significant land degradation, an influx of refugees, and climate change.

9 Land resources, water resources, and basic services have been further strained by the influx of refugees, Uganda is the largest refugee-hosting country in Africa and one of the top five in the world. About 75 percent of these refugees are from South Sudan and approximately 70 percent have settled in the West Nile area of nofthern Uganda, predominately in five districts (Yumbe, Arua, Moyo, Adjumani, and Lamwo). These districts are among the poorest areas in the country and are in the early stages of recuperating from a protracted civil conflict,

10, In response to these challenges, Government has prioritized basic infrastructure investments in several large towns in the Nofthern and Eastern regions to achieve more integrated and balanced economic development, The National Water and Sewerage Cooperation and the Ministry of Water and Environment are prioritizing Water Supply and Sanitation investments in the municipalities of Gulu and Mbale, given their contributions to the country's economy and the water security

3 challenges in the area.

THE PROIECT AND COUNTRY STRATEGY

11. The proposed Project will support the Uganda Vision 2040 and the Second National Development Plan (NDP II). The NDP II, which is aligned with Vision 2040, focuses on promoting inclusive economic growth and achieving the United Nation's Sustainable Development Goals (SDGs), including SDG 6, 'Ensure availability and sustainable management of water and sanitation for all.'

72. Water is at the center of the NDP II, which highlights interventions focused on (a) improving Water Supply and Sanitation services in priority, northern large towns envisioned as economic regional hubs; (b) expanding Water Supply and Sanitation access to the poor and vulnerable in underserved areas, including districts hosting refugees; and (c) strengthening water sector institutions to improve Integrated Water Resource Management and service delivery.

13. The NRM Manifesto 2016 - 2021 aims at reducing urban poverty during the next term through provision of quality social services such as roads, water and sanitation, health and education. The project will contribute to the implementation of the NRM Manifesto through provision of improved safe water and sanitation to the urban poor,

4 STATEMENT OF THE PROBLEM

14. Despite considerable progress in the Water Supply and Sanitation Sector, Uganda still faces challenges to improve Water Supply and Sanitation delivery in small towns and Rural Growth Centers, ensure water security, and provide adequate sanitation in large towns.

15. In urban areas, 48 per cent of households use piped water, but that number falls to 33 per cent in small towns and to 9 per cent in rural areas. Most of the country relies on community water sources such as protected springs and people still travel long distances to fetch water. Populations with insufficient potable water oftentimes use unsafe water sources, triggering cholera, typhoid fever, and diarrhoea outbreaks as well as adverse social consequences, such as sexual and domestic violence.

16. In the districts hosting refugees, water demand far exceeds available water supply. The poor location of boreholes, frequent pump breakdowns, and distribution challenges in scattered refugee zones compromise water service and supply. t7. Sanitation coverage poses another significant challenge. Sewerage coverage is less than 7 percent in large towns and negligible in small towns. In refugee settlements, sanitation coverage is low given insufficient pit latrines and communal sanitation facilities. Sanitation coverage in the West Nile is about 34 percent. Sanitation coverage at household level in districts hosting refugees such as Yumbe, Arua, and Moyo is 24o/o, 22o/o, and 67o, respectively. These deficiencies have caused severe water pollution and related environmental and public health issues.

5 JUSTIFICATION

18. The Project expects to benefit approximately 1,403,000 people (including 99,000 refugees, 173,000 hosting community citizens).

19. It will increase the availability of safe drinking water, reduce the distance people must travel to access safe Water Supply and Sanitation systems, protect water source catchment areas to ensure sustainable supply, and improve sanitation conditions at selected institutions, household and community levels, and provide regional faecal sludge treatment facilities.

20. The investments in water supply and sanitation infrastructure will; (a) reduce the incidence of waterborne diseases; and (b) diminish absenteeism from work and school and the associated lost income and opportunity costs. In addition, the Project will bringing Water Supply and Sanitation services to the residents of the underserved in the Northern (including refugees and refugee hosting communities), Eastern and Western Uganda.

21. Sanitation interventions in schools, institutions and urban setting and the accompanying faecal sludge plants with desludging units will have tremendous impacts on the existing challenge of emptying toilets and septic tanks in schools and informal settlements. 22. The Project will also strengthen the resilience of the water supply infrastructure to water-related shocks resulting from climate change. The water and sanitation Service providers (i.e. Water Authorities including the National Water & Sewerage Corporation) will strengthen their

technical, fi nancial and operational performance.

6 THE PROJECT

23. Project Objective: To improve access to water supply and sanitation services, integrated Water resgurces management, and operational performance of seruice providers in Project areas.

24. Project Location: The Integrated Water Management & Development Project (IWMDP) targets to provide safe water and sanitation services in Gulu Municipality, AdjumaniTown Council, Pakele, Ciforo and Dzaipi (as well as the parishes of Agojo and Mungula), Busia Town council, Namungalwe-Kaliro, Kyegegwa-Mpara-Ruyonza, Namasale, Mbale Municipality, Butaleja- Busolwe and Budaka - Kadama-Tirinyi-Kibuku.

ZS. The project shall also support provision of water and sanitation services to refugees and refugee hosting communities in the districts of Adjumani, Moyo, Arua, Lamwo, Yumbe and the Mid-west district of Kiryandongo, which is currently experiencing large inflows of refugees from South Sudan.

26. Project Description: The Project comprises four components namely: Component 1 - WSS in Small Towns and RGCs and Support to Districts Hosting Refugees (US$ 161.5M); Component 2 - WSS in Large Towns and support to District Hosting Refugee (us$ 120.5M); Component 3 - Water Resource Management (US$ 25'50); and, Component 4 - Project Implementation and Institutional Strengthening (US$ 5.50M) as shown in table below:

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TABLE 1: PROJECT COMPONENT AND DESCRIPTION I No. Component name Est. cost (US$ Component description million) t

1 WSS in Small Towns US$151.5 mill Subcomponent 7,7; Supportto Small Town and Rural Growth and Rural Growth Centerc t Center (RGCs) and Of which (a) constructing and rehabilitating Water Support to Districts (rDA 18 Supply and Sanitation facilities, as well as Hosting Refugees National Credit providing associated services, including T us$114.s engineering, environmental and social million, studies; (b) supervision of construction activities; I IDA 18 RW (c) preparing and implementing sanitation Credit US$ 21.5 plans in selected small towns; mill (d) strengthening the capacity of Umbrella t Water Authorities in the areas of IDA 18 RW operational and financial management, I Grant US$ 21,5 including the establishment of a remote Mill monitoring system for rural water systems; and T GoU US$ 4.Omill (e) carrying out environmental and social management-related activities to protect water sources and sensitize communities. T

Subcomponent 7,2; Support to Districts Hostino Refuoees I This subcomponent will support activities to improve Water Supply and Sanitation in selected districts hosting refugees. Activities consist I of: (a) constructing and rehabilitating Water T Supply and Sanitation facilities, as well as providing associated services, including engineering, environmental and social I studies, (b) supervision of construction activities; (c) preparation and implementation of I sanitation plans; (d) strengthening the capacity of selected I Umbrella Water Authorities in the areas of operational and financial management, including the establishment of remote I monitoring system for rural water systems; (e) carrying out environmental and social I management-related activities i.e: (i) protect water sources and sensitize communities; and I 8 I t I

I No. Component name Est. cost (US$ Component description million) t (ii) address the specific needs of host communities and refugees; and (fl) Strengthening the capacity of the Ministry I of Water and Environment to develop and carry out Water Supply and Sanitation sector policies and programs that promote I more sustainable and efficient service delivery at refugee settlements. T 2 Water Supply and US$120.5 mill Subcomponent 2.1: WSS in Urban Large Sanitation in Large Towns: I Towns and Support Of which (a) constructing and rehabilitating Water to a District Hosting (rDA 18 Supply and Sanitation infrastructure in Refugees National Credit the municipality of Mbale; t US$77.5 million, (b) constructing water supply system for the municipality of Gulu; RW (c) undertaking construction supervision T IDA 18 Credit US$ 7.5 activities; mill (d) strengthening the capacity of the T National Water and Sewerage IDA 18 RW Corporation in the areas of operational Grant US$ 7.5 and financial management to support T Mill improved performance in the project suppoted areas; and GoU US$ 3.0mill (e) carrying out environmental and social T management-related activities with a KFW for Gulu view to protecting water sources and communities. T usD 2s Mill) sensitizing Subcomponent 2.2t Support District I Hostinq Refuoees This subcomponent will support activities to I imprcve water supply and sanitation in Adjumani Town. The activities consist of: (a) constructing and rehabilitating water t supply and sanitation facilities, as well as providing associated servlces, including engineering, environmental and social I studies; (b) supervision of construction activities; (c) preparation and implementation of I sanitation plans; and (d) carrying out of environmental and social T management related activities to protect water sources and sensitize communities.

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T I

No. Component name Est. cost (US$ Component description I million)

3 Water Resources US$ 25.5 mill This component will support catchment I Management management and restoration activities in of which (IDA selected subcatchments. Activities consist of : 18 National I Credit US$ 25.0 L undertaking catchment management million) measures, including soil and water T conservation, flood mitigation, riverbank protection and restoration, and GoU USD 0.5 ii. providlng alternative livelihoods for T Miil affected communities. iii. preparing a water resources strategy for the Albeft Water Management Zone, T iv. preparing Catchment Management Plans for priority hot spot subcatchments. undertaking a national groundwater I management study, and vi. strengthening water resource monitorlng and information systems, including: I (a) rolling out of the Water Information System (WIS) at the national and WMZ T levels, (b) installation of hydrologic monitoring systems, and I (c) (iii) rehabilitation of the National Water Quality Reference Laboratory. 4 Project us$ s.s Mill This component will finance Project I Implementation and implementation and coordination support Institutional activities. Activities consist of; Strengthening (Of which (a)coordinating, planning, monitoring, t reporting, and supervision of the IDA 18 National Project; t Credit US$ 5.0 (b) providing training to implementing mill agencies (IAs) on World Bank FM, procurement, environmental and soclal T policies and procedures; and GoU US$ 0.s (c) establishing the Project Support Team mill) (PSD. I

The component will also support institutional strengthening activities, including: I i. preparing a Water Supply and Sanitation sector financing study to support the implementation of the recipient's Sector I Strategic Investment Plan (SSIP) and ii. strengthening the MWE's regulatory t functions at the regional level. 10 I I No. Component name Est. cost (US$ Component description million)

PRO]ECT COST AND FINANCING PLAN

27. The Project's estimated cost is US$313 million. IDA will provide US$280 million, of which US$ 29M is a grant. Government will provide US$8 million in counterpart financing to cover a part of operating costs, land acquisition, and any compensation due to people affected by the Project. The KfW Development Bank will finance US$25 million of the new water supply scheme in Gulu. Table 1 provides a summary of the cost estimates and proposed financing arrangements.

rABrE 2. PROTECT COST ESTTMATES AND FINANCTNG (us$ Mill) IDA 18 Total Total IDA I8 IDA 18 Counterp Kfw Nation Proj ect IDA RW RW art for Project Description al Amount Credit Grant Funding Gulu Cost Credit Component l: WSS in Small Towns and RGCs and 161.5 157.5 I14.5 2t.s 21.5 4.0 Support to Districts Hosting Refuqees -MWE Support to Small Towns l.l 108.0 105.5 I 05.5 2.5 and RCCs [ .2 Support to Districts 53.5 52.0 9.0 21.5 21.5 1.5 Hostin Re ees Component 2: WSS in Large Towns and Support to 120.5 92.5 77.5 7,5 1.5 3.0 25.0 Districts Hosting Refugee - NWSC 2.,l WSS in Urban Large 102.5 74.5 '74.5 0.0 0.0 2.5 25.0 Towns Gulu & Mbale 2.2 Support to District Hosting 't.5 18.5 r 8,0 3.0 7.5 0.5 Refu ees (Ad umanl Component 3: Water Resources Management - 25.5 25.0 25.0 0.0 0.0 0.5 MWE Component 4: Project and Implementation 5.5 5.0 5.0 0.0 0.0 0.5 Institutional Strengthening - rvlwE & NWS Total Project Costs 313 280.0 222.0 29.0 29.0 8.0 25.0 TABLE 3: FINANCING COST BYSOURCE World Bank Group Financing

IDA Loan 251.00 IDA Grant 29.00 SUBTOTAL 280.00 Non-World Bank Group Financing

GERMANY : KREDITANSTALT FUR WIEDERAU FBAU (KFW) 25.00

GoU (counterpaft funding) 8.00 SUBTOTAL 33.00 TOTAL 313.00

LOAN TERMS AND CONDITIONS

28. The IDA Standard facility has the following terms;

Loan Amount SDR 174.6 million (US$ 251 million) Maturity Period 38 years including 6 years of grace period Service Charge 0.75o/o per annum on the principal amount disbursed and outstanding Commitment Fee 0.5% on the undisbursed amounts of the loan (shall begin to accrue 120 days after the date of signature of the Loan Financing Agreement) Conditions 29. In addition to the entry in to force of the loan agreement by the submission to IDA of the Hon. Attorney General's legal Opinion on the legal validity of the loan documentation to the Uganda, the following condition is attached to the loan; (a) Opening in Bank of Uganda a foreign currency Special Account for the deposit of the proceeds of the Loan, (b) Subsidiary Agreement dully executed between Government and National Water and Sewerage Corporation. (c) Government has completed and adopted the project implementation manual and an adequate refugee protection framework.

OTHER ISSUES

30. Environmental and Social Safeguards: Significant adverse environmental and social impacts are not expected due to the nature of the proposed activities. During preparation, an environmental and social screening of the proposed Project activities was conducted, The screening showed that the anticipated negative impacts are expected to be localized, site-speciflc, and ranging from small to moderate in scale.

31. The Ministry of Water and Environment prepared the Environmental Social Management Framework (ESMF) and Resettlement Poliry Framework (RPF) and improved requirements on Environmental, Social, Health, and Safety (ESHS) applicable for works contracts, as wellas the requirements of the Uganda National Environment Management Authority and National Land Commission. These documents have been consulted upon, approved and disclosed in-country (ESMF on March 22, 2018 and RPF on March 13, 2018).

32. Women and Youth: Women and girls bear the heaviest burden for water collection. Long walks to water sources trigger Gender Based Violence, such as sexual assaults of women and girls, physical and verbal abuses of women and children from husbands. The Project will address these challenges through construction of infrastructure to improve accessibility to Water Supply and Sanitation, thus reducing the overall distance that women and girls must walk for water collection. The sanitation facilities supported by the Project will be gender segregated in

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schools and public spaces and will include menstrual hygiene T management and hand washing facilities. t

33, Involuntary Settlement: The Project is expected to have minimal land I take and physical displacement of Project Affected Persons (PAPs), Most of the works will consist of pipe installation that will lead to temporary I impacts and be confined to existing road reserves and as such, minimal I land take is expected with main impacts consisting of disruption of economic activities, The Resettlement Policy Framework outlines the I principles and legal and institutional procedures to be followed in the event of land acquisition, impact on assets, and/or loss of livelihoods. t

34. Consultations: During Project Design, consultations were made with I various stakeholders including; the Ministry of Water and Environment, I National Water and Sewerage Construction, National Environmental Management Authority, United Nations High Commission for Refugees, T Ministry of Gender Labour and Social Development, water and environment sector NGOs, local government representatives, community T leaders, local communities, and water service providers. The I consultations for the Environmental and Social Management Framework (ESMF) and Resettlement Poliry Frameworks were conducted in January, T 2018, The Project will undertake further consultations with the relevant stakeholders to ensure that the design of the water infrastructure I considers the associated risks. I

35. Sustainability: To ensure the sustainability of the Project's I infrastructure investments and the services they provide, the Project will suppoft the implementation of sustainability-focused service t management models. National Water and Sewerage Corporation will I continue managing the large towns of Gulu and Mbale, Busia, as well as 14 t

T Adjumani Town. The Ministry of Water and Environment will transfer management responsibilities for, Mbale cluster of small towns, and Namungalwe-Kaliro under Component 1 to the National Water and Sewerage Corporation after completion of the works,

36. To promote sustainability of the Project's investments in the districts hosting refugees, the Ministry of Water and Environment is collaborating with the United Nations Human Rights Commission for Refugees (UNHCR) to develop new water supply poliry for refugee settlements.

IMPLEMENTATION ARRANG EMENTS

37. The project will be implemented by Ministry of Water and Environment (MWE) and National Water and Sewerage Corporation (NWSC). The Ministry of Water and Environment (MWE) will have overall responsibility for Component 1, 3 & 4. National Water and Sewerage Corporation (NWSC) will be responsible for implementation of Component 2.

38. The NWSC has a close working relationship with the MWE that will enable harmonization in the implementation of related activities. The Project will also support the hiring of key personnel and provide training to build implementation capacity. A Subsidiary Agreement between NWSC and the Ministry of Finance, Planning, and Economic Development (MoFPED) will be signed to facilitate Project implementation.

39. The Loan and the Current Debt Situation of the Country: As at end March 2018, the outstanding total public debt, including publicly guaranteed debt, amounted to USD 10,5 billion, Out of which domestic was USD 3,35 billion while external debt was USD 7.18 billion. Nominal debt as a per cent of GDP was 38.1ol0, of which domestic debt was 72.Lo/o

15 and external debt 260lo. Source: Directorate of Debt and Cash Policy, MoFPED.

CONCLUSION

40. In light of the above, I request Hon. Members to:- a) Note the need to acquire financing for the Integrated Water Management and Development Project (IWMDP);

b) Endorse the request by Government to borrow up to SDR L74.6 million (US$ 251 Million Equivalent) from the International Development Association (IDA) for flnancing the Integrated Water Management and Development Project (IWMDP); and

c) Authorize the Government by passing a Resolution in line with the requirements of Article 159 of the Constitution, to borrow SDR 174.6 million (US$ 251 Million Equivalent) from the International Development Association (lDA) to support the implementation of the Integrated Water Management and Development Project (IWMDP) upon the terms and conditions stated above.

Ministry of Finance, Planning and Economic Development P.O. BOX 8L47 KAMPALA

October,2018