The Palestinian Recovery and Development Plan (PRDP) MULTI-DONOR TRUST FUND Completion Report 2008–2021 TF071607 and TF072593 February 1, 2022 Acknowledgment The Palestinian Recovery and Development Plan (PRDP) MDTF Completion Report has been prepared by the World Bank as the administrator of the trust fund. The team wishes to recognize the contributions and cooperation of all the development partners—Australia, Canada, Finland, France, Japan, Kuwait, Norway, Poland, and the United Kingdom—throughout the lifespan of the trust fund since March 2008. A special note of recognition and acknowledgment goes to the donors who were active until the fund’s closure: France (AFD and Ministry of Economy and Finance), Japan, Kuwait, and Norway. TABLE OF CONTENT Executive Summary 4 1. Overview of the PRDP MDTF 8 1.1. Objectives 8 1.2. Origins 9 1.3. Extension and Evolution 10 1.4. Organization and Governance 11 2. Country Context 12 2.1.  Economic Development Context 12 2.2. Risks and Mitigation Measures 14 3. Key Results and Impact 16 3.1. Results Framework 16 3.2.  Key Outcomes and Highlights of DPGs 17 3.3.  Impact – Long-term Policy Reforms 21 3.4. Cross-cutting Theme – Gender 23 4. Financial Data 24 4.1. Contributions 24 4.2. Disbursements 26 5. Moving Forward 28 Annexes Annex 1. The World Bank’s DPGs leveraged by PRDP MDTF (US$, millions) 30 Annex 2. Results Framework 31 Annex 3. Tranche Releases from the PRDP MDTF by Year (US$) 34 Annex 4. Yearly Contributions by Donor (US$, millions) 36 LIST OF TABLES Table 1. PRDP MDTF Trustee-level Funds Table 2. Selected Macroeconomic Indicator of the Palestinian Economy, 2007-2020 Table 3. Summary of Main Ratings from ICRs (DPG I – DPG IX) Table 4. PRDP Total Financial Contributions Table 5. Total PRDP Disbursements LIST OF BOXES Box 1. The PA’s key reform achievements supported by DPGs across various sectors Box 2. Palestinian Companies Law Box 3. Zooming in on procurement reform in the context of DPGs LIST OF FIGURES Figure 1. Donor Contributions to PRDP MDTF by Calendar Year (US$, millions) Figure 2. Budget Support Disbursed to the PA through PRDP MDTF by Calendar Year (US$, millions) Figure 3. The Declining Trend in Support to the PA (US$, millions and %) 2 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund ABBREVIATIONS AND ACRONYMS AML/CFT Palestinian anti-money laundering and combating financing of terrorism AS Assistance Strategy ASA Advisory Services and Analytics DPG Development Policy Grant DRU Dispute Review Unit FCV Fragility, Conflict, and Violence GoI Government of Israel HCPPP Higher Council for Public Procurement Policies ICRR Implementation Completion and Results Report IFMIS Integrated Financial Management Information System IMF International Monetary Fund IPF Investment Project Financing LDP Letter of Development Policy MDTF Multi-Donor Trust Fund MoEF Ministry of the Economy and Finance NDP National Development Plan PA Palestinian Authority PDO Project Development Objective PEFA Public Expenditure and Financial Accountability Assessment PFM Public Financial Management PMA Palestine Monetary Authority PM&A Program Management and Administration PPL Public Procurement Law PRDP MDTF Palestinian Recovery and Development Plan Multi Donor Trust Fund PURSE Palestinian Umbrella for Resilience Support to the Economy SMEs Small and Medium Enterprises TA Technical Assistance TFGWB Trust Fund for Gaza and West Bank WB&G West Bank and Gaza The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund ● 3 Executive Summary Since its establishment, the Palestinian Recovery and Development Plan Multi Donor Trust Fund (PRDP MDTF or MDTF) has been instrumental as a channel for donors’ resources to the Palestinian Authority (PA), supporting critical institutional reforms. The MDTF operated for 13 years between April 11, 2008, and August 1, 2021, disbursing US$1.6 billion in non-earmarked budget support to the PA. Disbursements from the MDTF were linked to the completion of prior conditions and measurable objectives set out in successive budget support programs, World Bank Development Policy Grants DPGs.1 The DPGs provided a series of key reforms that donors decided to support by channeling funds through the MDTF. Donors’ contributions through budget support aimed at enhancing policies and institutional reforms for economic growth and sustainable poverty reduction, including by strengthening public financial management and improving the business environment and service delivery. With its long duration, and innovative structure, 1 DPGs are a form of Development Policy Financing, by means of which the World Bank provides budget support to a client government upon the achievement of a list of agreed reform-oriented prior actions by the government. 4 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund the MDTF succeeded in providing predictable budget support to the PA through an incredibly challenging period, although funding eventually declined as donor priorities shifted. Furthermore, the prior conditions contained in the DPGs produced tangible changes in several policy areas—including (a) procurement, (b) anti-money laundering regulations, (c) private sector reforms, and (d) the reduction of the public sector wage bill, among others. Donors’ budget support through the MDTF contributed to alleviating the PA fiscal pressure by providing reliable disbursements on a regular basis. While sharpening the DPG impact, including small amounts of funding for technical assistance (TA), the MDTF leveraged substantial additional resources to support important elements of the PA’s overall development priorities. Although the ten DPGs were standalone operations, their linkage to the PRDP gave the succession of DPGs a programmatic character. The main results achieved during the 13 years of operations are the following: a)  Contributing to the PA’s fiscal improvement. To tackle the fiscal position, both the expenditure and revenue aspects were addressed by (i) contributing to reduce fiscal costs, such as the wage bill, (ii) placing significant importance over domestic revenue through building and strengthening systems and functions, and (iii) increasing public transparency of PA operations (placing tax and budgeting information online in the public realm). b)  Increasing the PA’s transparency and accountability through improved governance. This was achieved through improving the efficiency and transparency of the budget preparation process, and adoption of various reforms on public procurement. It was also achieved through supporting the Palestine Monetary Authority’s efforts towards upgrading the Palestinian anti-money laundering and combating the financing of terrorism (AML/CFT) system to be more in line with international practices. c)  Improving the Palestinian business environment. The PA’s efforts in this area included facilitating the land registration process, modernizing the Companies Law, streamlining procedures for issuance of business licenses, and adopting regulations for licensing payment service providers, which would enable the establishment of new electronic payment systems to foster competition and reduce costs. Considering the impact realized and challenges faced by the PRDP MDTF, there are important lessons to be learned from this experience. The MDTF’s Implementation Completion and Results Report (ICRR) that was produced and shared in 20192 emphasized several lessons learned, including: a)  With strong donor commitment, the multi-donor trust fund vehicle can be effective in promoting a reform agenda over a long time period, even when utilized in an unstable environment such as the West Bank and Gaza (WB&G). The PRDP MDTF provided a fiduciary instrument to streamline financing by donors of budget support operations through helping reduce the transaction costs for the PA. Given the limited implementation capacity of the PA, this benefit was important as it allowed the PA to focus on the reform agenda, tied directly to its own National Development Plan (NDP), and prepare a single report on its quarterly progress rather than meet separate requirements of different donors and the World Bank. Another 2 To access full version of the ICRR, refer to the following link: https://projects.worldbank.org/en/projects-operations/ project-detail/P110690?lang=en Executive Summary ● 5 major advantage was that by having a centralized mechanism for support, additional donor funding could be encouraged. The establishment of this fiduciary structure leveraged the direct World Bank financing to the DPGs with more donor support, eventually achieving a leverage factor of 3.9/1, with US$1.58 billion in donor support building on US$411 million in direct World Bank support (See Annex 1). b)  Linkage of the standalone DPG operations to the counterpart’s national development plan is key to realizing the kind of medium- and long-term benefits that can be achieved in a programmatic budget support series. The PRDP MDTF was linked directly to the PA’s three-year development strategies, which gave it a programmatic character. In addition, the three-year extensions of the MDTF also helped replicate the programmatic character by ensuring donor commitment over the medium- and long-term. Given the medium- and long-term nature of the objectives—fiscal sustainability, effectiveness and transparency in public finances, and improvement of the business climate—the standalone design ensured programmatic characteristics by maintaining the reform areas and sequencing the reform actions consistent with previous operations. In addition, program implementation was enhanced when the MDTF was directly linked to measures that had already been vetted and committed to by the authorities in a formal development plan. c)  The Bank-executed advisory services and analytics (ASA) is critical to maximize the impact of development policy financing, especially if it can be sustained over a long period. The analytical and TA work financed by various resources—including the World Bank-administered Palestinian Partnership for Infrastructure Development Multi-Donor Trust Fund (PID MDTF)3 and the Norway West Bank and Gaza Support TF4 —underpinned overall World Bank budget support as well as the PA’s policy and sector reform. For instance, governance and institutional reforms in the energy and water sectors needed for the success of investment operations were incorporated in relevant DPG operations, which were also informed by TA. This was also evident in the public financial management (PFM) engagement, where the ASA activities—financed by the Public Financial Management Improvement (PFMI) MDTF5 —were able to inform and shepherd reforms from design to implementation. d)  Within a FCV context, the achievement of all desired results is not guaranteed, hence flexibility is crucial. Under the DPGs, reforms in a wide range of sectors were pursued, with more success in some areas than in others. Had the support to reforms focused on a narrow set of fiscal issues in such an unstable environment, there would have been less likelihood of a successful outcome after thirteen years of engagement. By widening the range of reforms, within specific topic areas such as PFM and fiscal policy, and across areas such as private sector development, energy, and water sector reform, it was possible to build significant capacity in a number of areas, even as some areas faced bottlenecks. Without the support of the MDTF, the scope to remain flexible across a broader set of reforms would be more limited. 3 The PID MDTF has provided co-financing for infrastructure projects and programs as well as TA in the water, urban development, and energy sectors since its inception in 2012. The PID MDTF has participation from eleven donors with contributions of $285 million. 4 The Norway West Bank and Gaza Support TF has financed activities to strengthen the analytical base for the development community, enhanced donor coordination efforts, and supported the World Bank’s role as secretariat of the Ad-Hoc Liaison Committee, a semi-annual, policy-level meeting for development assistance to the Palestinian people. 5 Since 2018, the PFMI MDTF has enhanced the expenditure controls, financial accountability and procurement management of the PA and selected municipalities. 6 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund ● 7 1 Overview of the PRDP MDTF 1.1. OBJECTIVES The overall objective of the PRDP MDTF as stated in the Administration Agreement (AA) was “to provide budget and development support for the PA’s policy agenda as expressed in the PRDP in the period from 2008 until 2010.” In addition, the program aimed at: a) Pooling different donor funds into one administrative mechanism to reduce the transactions costs for the PA; b) Helping to alleviate the PA’s fiscal pressure by providing reliable disbursements on a regular basis; c) Improving public financial management; and d) Improving the environment for the private sector. Donors provided non-earmarked, reliable, budgetary support to the PA in concurrence with the implementation of the DPGs, providing fiscal stability in a politically and economically volatile context, while simultaneously reducing the administrative burden for donors. 8 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund 1.2. ORIGINS In December 2007, the PA presented the Palestinian Recovery and Development Plan (PRDP 2008-2010) to the Paris Donor Conference. In 2008, President Abbas established a technocratic “Caretaker Government,” which was intended to act as a provisional administration until new elections were held. The PRDP 2008-2010 identified various measures intended to re-start economic growth and rebuild confidence in PA institutions. International donors were supportive and pledged US$7.5 billion to support the plan.6 As donors expressed a preference for channelling budget support through the World Bank to ensure transparency and accountability, the World Bank set up a trust fund account (TF071011) in 2008. Five donors—Australia, Finland, France, Norway, and the United Kingdom—pledged a total of US$109 million to the PRDP MDTF. As agreed in the AA, disbursement of the funds was tied to the policies set out in PRDP and planned within a three-year framework consisting of the first three DPGs of the project. TABLE 1 PRDP MDTF Trustee-level Funds Approval March 4, 2008 TF071011 Activation April 2, 2008 End of disbursement August 1, 2011 Approval March 4, 2008 TF071607a Activation March 11, 2011 End of disbursement August 1, 2021 Approval April 12, 2016 TF072593 b Activation June 7, 2016 End of disbursement August 1, 2021 Note: a. The PRDP MDTF was amended in 2011 to accommodate the corporate requirement of a change in fees, particularly since the TF had significantly exceeded original expectation of its maximum size. TF071011 was succeeded by TF071607 in 2011. b. In order to apply the World Bank’s new cost recovery provisions, the World Bank established a new parallel trust fund account (TF072593) for purposes of receiving contributions for the PRDP MDTF, which is administered in parallel with the original trust fund account. 6 Note that the US$7.5 billion was for total budget support of which the PRDP MDTF was only one of a number of vehicles. Overview of the PRDP MDTF ● 9 1.3. EXTENSION AND EVOLUTION Since 2008, the MDTF was extended four times, reflecting the PA’s changing priorities: a 3-year extension (from August 1, 2011 through August 1, 2014), a 3-year extension through August 1, 2017), a 3-year extension (through August 1, 2020), and a 1-year extension for a smooth transition to the Palestinian Umbrella for Resilience and Support to the Economy (PURSE) MDTF, which was launched in June 2021 (through August 1, 2021). See more detail on the PURSE in sections 2.2. and 5. During the first three years, donors’ contributions through the MDTF were vital to the success of key reforms highlighted in DPGs I, II, and III (WBG Support for Fiscal Sustainability and Public Financial Management). On DPG implementation, the PA exceeded its targets on public sector wage bill reduction, electricity sector reform, and social safety net improvement. This led to the extension of the donor-funded budget support for three additional years beyond the original timeframe of the MDTF. To reduce administration and transaction costs, the World Bank pooled the new donor funds into a single structure, and as a result the long-term structure of the MDTF was created. Between 2011-2013, the World Bank Group-funded budget support was renewed annually. The DPGs adopted a standard structure consisting of two pillars: (a) support for policies that could improve the PA’s fiscal position, and (b) support for reforms that would increase transparency and accountability in the PA. The MDTF continued to disburse in response to the implementation of the DPGs. With the 3-year extension of the MDTF in 2014 to synchronize with the PA’s National Development Plan (NDP) for 2014-2016, the DPGs scope was expanded. Alongside the objectives of improving the PA’s fiscal resilience and enhancing transparency of the PA, a third pillar was added to DPG VI (PRDP Support IV ): improving the business climate. DPG VI (Palestinian National Development Plan DPG VI ) was also notable for playing a role in the recovery from the 2014 Gaza Conflict. Additional financing was added that year both to fund a damage and needs assessment and to top-up funds for existing Gaza infrastructure projects. Between 2017-2020, donors’ contributions were leveraged to support the PA’s reform efforts in both public finances and private sector development, in line with the World Bank Group’s Assistance Strategy for the West Bank and Gaza.7 In 2019, DPG VIII (Fiscal Stability and Business Environment ) targeted the strengthening of the intragovernmental revenue system, laying the foundations for the digital economy and the creditworthiness of local service providers. Moreover, DPG IX (Strengthening Fiscal Resilience and Business Environment ) targeted public sector procurement reform, reforms in water and health sector governance, and measures to improve the stability of the financial sector. 7 World Bank Group’s Assistance Strategy for the West Bank and Gaza: FY 18-21 (World Bank, November 2017). 10 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund 1.4. ORGANIZATION AND GOVERNANCE The PRDP MDTF benefited from the World Bank Group’s strong presence on the ground in the WB&G. Having staff representation in Jerusalem strengthened coordination with donor partners and the PA, while facilitating information sharing. Between 2008 and July 2021, the task team reported to the World Bank Group’s Country Director for the WB&G. Consultation and briefing meetings with donors, the PA and the International Monetary Fund (IMF) took place periodically. The meetings were scheduled to review progress reports and monitor developments impacting reforms and exchange information on the reform agenda. Meetings were first held quarterly, then semi-annually then with the decline in donor aid, meetings were eventually held annually. Disbursement decisions and performance monitoring were based on quarterly reports, which contained a summary of fiscal performance and reform progress. The quarterly reports, which are disclosed in line with World Bank policy on development policy financing, provide an analysis on the: (a) satisfactory progress achieved in the reform program (as spelled out in the DPG); and (b) on the adequacy of the macroeconomic policy framework. If these reports indicated insufficient progress, disbursement could be withheld. For transparency, monitoring and evaluation purposes, the impact of the donors’ contributions through the MDTF was captured in the World Bank’s ICRR. At the close of an operation, the ICRR is prepared by the World Bank to (a) provide accountability for and transparency on the performance and results of the operation; and (b) capture and disseminate lessons and experience from operational design and implementation to improve the design and implementation of future operations. Particularly, the ICRR (a) covers the degree to which the DPG’s PDOs and anticipated results have been achieved; (b) examines the overall DPG program performance, including the relevance of prior actions and achievement of the targets for the results indicators; and (c) provides lessons learned. To date, nine ICRRs (one for each DPG to have closed, DPGs I – IX) have been produced, shared with the donors and disclosed to the public. Overview of the PRDP MDTF 11 2 Country Context  CONOMIC DEVELOPMENT 2.1. E CONTEXT The Paris Protocol, the economic annex to the peace agreement signed in 1994, that regulates the economic relations between Israel and the PA limits the range of policy instruments to effectively manage economic policies. Under the current economic framework, in practice, the PA does not control monetary and exchange rate policies, and macroeconomic policies are limited to fiscal policies. Even in the case of the latter, although the PA has full control of public expenditures, it does not control the full range of fiscal policies. For example, as a member of a Customs Union, the PA does not have any meaningful way to influence decisions and instruments on trade policy according to its priorities and main development policy objectives. In addition, the clearance revenues (i.e., import tariffs revenues) that the Government of Israel (GoI) collects on behalf of the PA represents two-thirds of total government revenues. Table 2 presents the basic macroeconomic indicators of the period. 12 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund The growth and development performance of the Palestinian economy has been also constrained by Israeli policy restrictions, which have affected growth, job creation, and poverty reduction. First, Palestinian economic growth and PA revenue potential remain significantly depressed by movement and access restrictions, including in Area C. Second, external trade is controlled by Israel and subject to a range of costly non-tariff barriers that have reduced the competitiveness of Palestinian exports, one of the key potential drivers of growth, and contributed to the large external trade deficit.8 At the same time, internal challenges have affected prospects for growth. The political division between the WB&G since 2007 has prevented policy coordination, further fragmenting the already limited economic space and also negatively impacting public finances. For example, the PA currently spends 33 percent of its budget in Gaza while collecting less than 10 percent of its revenues there. Despite a gradual but continuous improvement in institution building and governance over the years, policy reforms remain necessary in many areas. Therefore, the PA needs to advance the structural reform agenda. Reforms should continue to focus on improving revenues, rationalizing spending, and strengthening governance, including the PFM system. Finally, the business environment, inadequate infrastructure, and skill mismatches in the labor market also hold back private sector development and can be improved with PA efforts. The policy restrictions have a significant impact on economic performance, and ultimately, contributing to a fragile fiscal situation. The World Bank analysis using a Computable General Equilibrium (CGE) model suggests that if a set of external and internal constraints related to those discussed above were addressed, the Palestinian territories could achieve growth rates as high as 6 percent in the West Bank and 8 percent in Gaza by 2025 along with the creation of new jobs over and above the rapid population growth. Overall, alleviating external restrictions could raise real GDP by some 36 percent in the West Bank and 40 percent in Gaza by 2025. The removal of the Israel restrictions on Area C alone could bring about additional cumulative growth for the West Bank economy equal to 33 percent by 2025.9 While reforms by the PA would have much less impact than relaxing the Israeli restrictions, they are nevertheless important and would significantly increase the positive impact of any lessening in the Israeli restrictions. Yet, reforms by the PA—to improve the internal business environment, strengthen its fiscal position, and enhance governance and transparency—would significantly reinforce the positive impact of alleviation of Israeli restrictions. It could generate additional cumulative growth in the range of 24 percent in the West Bank by 2025, and even higher at 30 percent in Gaza due to a lower base effect. High growth would lead to a reduction in the very high rates of unemployment and poverty, particularly in Gaza, and at the same time dramatically reduce the dependence on foreign aid. 8 World Bank Group. 2017a. Unlocking the Trade Potential of the Palestinian Economy: Immediate Measures and a Long- Term Vision to Improve Palestinian Trade and Economic Outcomes. World Bank, Washington, DC. © World Bank. https:// openknowledge.worldbank.org/handle/10986/29057 License: CC BY 3.0 IGO. 9  World Bank (2017): Prospects for Growth and Jobs in the Palestinian Economy: A General Equilibrium Analysis. Niksic, O., N. Nasser Eddin, and M. Calì. 2014. Area C and the Future of the Palestinian Economy. Report 89370. Washington, DC: World Bank. Country Context ● 13 Consequently, in the absence of change on policy restrictions, and given the importance of fiscal policy as the main macroeconomic policy for the Palestinian economy, support to an adequate macroeconomic framework is fundamental. To achieve this, joint efforts between international organizations—such as the World Bank—and the donor community remain critical. Donors’ budget support through the PRDP MDTF contributed in two fundamental ways. On the one hand, the MDTF provided budget support for the PA’s policy agenda while contributing to alleviating fiscal pressures. On the other hand, this support was linked to critical areas for fiscal policy as well as broader development and growth instruments—such as public financial management, private sector development, and service delivery, which exhibited important and positive policy reforms. TABLE 2 Selected Macroeconomic Indicator of the Palestinian Economy, 2007–2020 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Real GDP growth, at constant 3.8 7.4 8.6 5.8 9.6 6.1 4.7 -0.2 3.7 8.9 1.4 1.2 1.4 -11.3 market prices Private Consumption 7.5 -0.5 6.5 3.1 20.3 9.7 -1.7 1.7 3.5 9.9 -1.1 1.1 4.1 -13.1 Government Consumption 1.2 7.5 8.2 5.5 8.5 2.5 -1.7 5.0 6.4 2.6 -13.7 7.3 -3.5 0.3 Gross Fixed Capital -21.9 33.8 18.4 -5.9 15.8 20.3 1.9 -5.3 14.3 10.9 6.9 2.5 -2.6 -20.9 Investment Exports, Goods and Services 18.7 17.2 6.7 1.6 25.4 0.5 4.4 9.6 -3.2 -1.6 13.9 2.5 2.0 -11.2 Imports, Goods and Services -2.0 5.8 8.9 -6.6 6.5 14.4 -5.6 4.0 10.3 2.0 1.3 4.5 1.4 -14.2 Real GDP growth, at constant factor prices Agriculture -18.6 33.5 7.9 -9.6 4.9 5.0 -3.4 2.7 -4.0 10.4 -6.0 1.6 0.9 -9.1 Industry -1.2 19.4 20.6 19.4 12.3 6.0 10.1 -18.1 -5.0 13.7 11.6 2.2 -0.5 -19.4 Services 6.3 -1.8 6.7 6.5 14.7 6.7 4.7 2.9 4.9 7.8 -2.2 1.8 2.0 -10.0 CPI (year-average) 1.9 9.9 2.8 3.7 2.9 2.8 1.7 1.7 1.4 -0.2 0.2 -0.2 1.6 -0.7 Current Account Balance % of -7.6 5.7 -15.7 -13.5 -18.5 -14.9 -14.8 -13.6 -13.9 -13.9 -13.2 -13.1 -10.4 -6.9 GDP Net Foreign Direct Investment 0.3 -0.8 -2.9 -1.3 -4.3 -0.2 -1.7 0.2 -0.2 -2.2 -1.2 -1.7 -1.1 -0.7 % of GDP Overall balance (including -21.7 -23.4 -22.6 -1.8 -5.9 -6.3 -1.5 -2.6 -4.4 -2.0 -2.7 -2.4 -7.5 -7.5 grants) % of GDP Source: Palestinian Central Bureau of Statistics. 2.2. RISKS AND MITIGATION MEASURES The PRDP MDTF was implemented in an environment of high overall risks. Political instability and economic volatility are core characteristics of the WB&G context, leading to uncertainties around the medium to long-term macroeconomic framework, growth, job creation and poverty reduction prospects. Implementation has been affected by the political stalemate, and fiscal sustainability and donor fatigue are major sources of risk. The stalled negotiations between Israel and the PA, the persisting internal divide between the Gaza Strip and the West Bank, 14 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund the failure to hold legislative and presidential elections and the sporadic social unrest in the WB&G have been risk factors throughout the MDTF’s implementation. The eruption of several escalations and conflicts was also experienced during the MDTF’s lifespan. A further major source of exogenous risk is the amount and volatility in donor aid flows, particularly budget support, in a highly aid-dependent economy. Budget support from donors has significantly declined in recent years and funds remain insufficient to close the large financing gap of the PA. As a share of GDP, aid to the budget fell from 24 percent in 2008 to 2.3 percent in 2020 and to around 1 percent for 2021 (latest estimates). This challenging context affected the progress of reforms. The political and economic contexts have adversely impacted the PA’s ability to effectively implement reforms. Further, the COVID-19 pandemic diverted the PA’s attention to an emergency situation and away from the reform agenda. These key risks were considered in the DPG operation’s design. Mitigation mechanisms, to the extent possible, were put in place. First, simplicity in reform design and alignment with the PA’s own strategy helped to mitigate risks. Second, DPGs were based on appropriate analytical and advisory activities conducted by the World Bank Group, IMF and other donors to develop the reform program and the results framework. The design of the operation also accounted for lessons learned from the previous DPGs, continued the medium-term reform agenda, and leveraged the ongoing investment operations and TA financed by the World Bank, IFC and other development partners to support the reform implementation. Third, an intensification of work on public financial management was implemented to counter the high fiduciary risks. The mitigation plan for this risk was to design reforms to lower fiduciary risk combined with TA and intensive dialogue. For example, the World Bank-financed Public Financial Management Improvement (PFMI) Project addressed some of the risks in the PFM system by: (a) improving budget expenditure management and control, (b) improving financial accountability of the PFM system, and (c) modernizing public procurement. The MDTF disbursement has declined steadily after the peak of US$224.2 million in 2012. This risk has been mitigated through regular contact with all donor partners for updates on their strategy and plans for future support. Despite close contact with the donors, shifting priorities, political dynamics, and development strategies have led to significant declines, especially for budget support. Given the pandemic’s negative effect on the world economy, donors’ priorities and resources channeled through the World Bank may further decrease. The World Bank has recently established the PURSE MDTF to channel donors’ resources to the Palestinians, and donor consultations helped shape the design of the MDTF to fit the evolving priorities. This umbrella MDTF has replaced most of the existing MDTFs—including the PRDP MDTF—for a more strategic response to the development challenges in the WB&G. Other than enhancing the quality of the program, the PURSE MDTF is also to improve and streamline the results reporting to all stakeholders concerned. Moreover, the World Bank, in close coordination with the international donor community, will continue to work with the PA to help with the implementation of the structural reform agenda—such as improving revenues, rationalizing spending, strengthening governance, and creating a more conducive environment for the private sector. Country Context ● 15 3 Key Results and Impact 3.1. RESULTS FRAMEWORK The overall outcome rating of DPGs supported by the PRDP MDTF is assessed as satisfactory.10 As presented in the ICRR produced in 2019, the outcomes across the first seven DPGs were rated moderately satisfactory with an average score of 4.1 across all operations. DPGs VIII and IX were also rated moderately satisfactory (See Table 3).11 It is worth noting that DPG performance is used as a proxy for the MDTF performance. The Independent Evaluation Group has agreed that the DPG performance ratings can act as an accurate measure of the MDTF’s performance as it disbursed only with a satisfactory or moderately satisfactory rating of the DPGs. 10 The overall outcome can be considered Satisfactory, as all DPGs are rated—based on the World Bank rating scale—as Moderately Satisfactory or better (that is, Moderately Satisfactory or Satisfactory). 11 ICRR for DPG X is currently under preparation. 16 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund TABLE 3 Summary of Main Ratings from ICRs (DPG I – DPG IX) DPG DPG DPG DPG DPG DPG DPG DPG DPG DPG Average Category VI - I II III IV V VI VII VIII IX Rating AF Outcome S MS MS MS MS MS MS MS MS MS MS (4.1) Bank S S S MS S S S S S MS S (4.8) Supervision Bank Overall S S S MS S MS MS MS MS MS MS (4.4) Note: S – Satisfactory, MS – Moderately Satisfactory DPG-X ICR is under preparation. Project results were monitored through several sources, most importantly, through analysis done by the World Bank’s team on the ground monitoring the fiscal performance and progress in the reform agenda on a quarterly basis. These efforts were also complemented by the PA’s own reporting, in addition to projects’ ICRR, but also Public Expenditure and Financial Accountability (PEFA) scores and specific targets, for example: (a) days to issue a business license (part of Objective 5: Improve the environment for private sector development) or (b) reducing the cost of healthcare referrals (part of Objective 3: alleviate fiscal pressure on the PA). A full explanation of the results framework can be found in the following Section 3.3. KEY OUTCOMES AND HIGHLIGHTS 3.2.  OF DPGS The DPGs, leveraged by donors’ resources through the PRDP MDTF, served as an important instrument to support the PA’s national development priorities, advancing policy dialogue and supporting the PA’s budget. The PA confronts a structural deficit, which requires progress on resolving the internal divide, accompanied with the easing of Israeli restrictions, to allow economic growth and ultimately improve revenue generation and tax collection. Although the PA has managed to reduce the size of the fiscal deficit (before grants), significantly, from 21 percent of GDP in 2006 to below 9 percent currently, the PA continues to face a difficult fiscal situation. Since 2019, the fiscal situation has dramatically deteriorated due to a triple crisis: (a) the COVID-19 pandemic, (b) a severe economic slowdown caused by domestic policy response and the global decline in economic activity, and (c) political standoff over clearance revenues in 2019 and 2020. Key Results and Impact ● 17 The PA’s key reform achievements supported by DPGs BOX 1  across various sectors In the energy sector, reforms focused on direct authority of the General Directorate for making it more financially viable through Health Insurance, and then moving it under supporting the establishment of the Palestinian the direct authority of the Minister of Health’s Energy and Regulatory Commission as the office. Further, the PA established a framework main regulator, supporting the establishment that governs referrals to Israeli as well as local of distribution companies, and setting financial medical facilities. and technical performance targets to monitor On social protection, the PA adopted reforms the performance of these distributors. to integrate all cash assistance programs under In the water sector, reforms focused on the Ministry of Social Development and verify improving governance through strengthening households in the database for targeted social the role of the regulator and also on reducing assistance, and those reforms were supported non-payment for water services amongst by various DPGs across the years. consumers. In response to COVID-19, the last DPG In the health sector, the PA efforts supported operation supported the PA’s efforts to through multiple DPG operations targeted an facilitate recovery from COVID-19, while also area that weighs heavily on public finances: ensure stronger resilience in the face of future Outside Medical Referrals. This was done pandemics through reforms in the health, through centralizing the referral process and social, and water sectors. bringing the referral audit function under the Although the ten DPGs were standalone operations, their linkage to the PRDP gave the succession of DPGs a programmatic character. As a result, the successive DPGs were both a combination of deepening and upgrading reforms consistent with the PRDP PDO, as well as the incorporation of new areas of reform (See Box 1). To achieve the PDO, three following areas were addressed: a)  Improving fiscal position. To tackle the fiscal position, both the expenditure and revenue sides were addressed, for example, (a) keeping the wage bill down (DPG I) and (b) improving payments for electricity services (from DPG I to VII [Palestinian National Development Plan - DPG VII]), along with (c) an increasing emphasis on enhancing domestic revenue (DPG IV, VI, and VII). On the PFM side, for example, fiscal tightening has been supported through building systems Integrated Financial Management Information System (IFMIS) 18 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund and functions (General Accountant and Central Treasury Account, auditing), then strengthening these functions and finally increasing public transparency of government operations (placing tax and budgeting information online in the public realm). To improve targeting of social safety nets and ensure that the most vulnerable populations were protected, DPG III supported reforms to integrate all cash assistance programs under the Ministry of Social Affairs and verify households in the database for targeted social assistance. On the revenue side, the DPGs focused on unifying different tax departments and enhancing the efficiency of the collection efforts. Finally, in DPG VI, the program added private sector development prior actions. As a result, the Investment Promotion law was revised to reduce the scope of tax incentives for new investments and limit their duration. b)  Increasing the PA’s transparency and accountability through improved governance. This was achieved through improving the efficiency and transparency of the budget preparation process; launching a modern computerized accounting system in the Ministry of Finance (MoF); the publication of monthly reports by the MoF; and adoption of various reforms on public procurement supported by the DPGs. DPG X (Strengthening Fiscal Stability and Financial Integrity) supported the Palestine Monetary Authority efforts towards upgrading the Palestinian anti-money laundering and combating financing of terrorism (AML/CFT) system to be more in line with international practices. Efforts through different DPGs also focused on making the energy sector more financially viable through supporting the establishment of the Palestinian Energy and Regulatory Commission as the main regulator, supporting the establishment of distribution companies, and setting financial and technical performance targets to monitor the performance of these distributors. In addition, to improve governance in the water sector, the World Bank has supported strengthening the role of the regulator in making the financial and operational performance of the service providers transparent—including debt transparency. c)  Improving the Palestinian business environment. As was mentioned, DPG VI widened the focus to include business environment reforms. Efforts under the DPGs in this area included facilitating the land registration process, modernizing the Companies Law, streamlining procedures for issuance of business licenses, and adopting regulations for Licensing Payment System Providers, which would enable the establishment of new electronic payments systems to foster competition and reduce costs. (See 2 on Palestinian Companies Law for detail.) On occasion, the DPGs have included crisis support. There was unanticipated and urgent financing for the 2014 budget created by the July-August 2014 Gaza conflict to help the PA deal with the crisis and sustain the reform momentum. The hostility in Gaza caused significant losses in output, employment, and human lives. It undermined economic and social livelihoods and increased the number of internally displaced people. The World Bank responded by assisting in conducting a damage and needs assessment and subsequently provided supplemental financing to the DPG VI for the Gaza Emergency Response in the amount of $41 million in October 2014. Key Results and Impact ● 19 BOX 2 Palestinian Companies Law The PA enacted a new Companies Law on ● introduces the concept of single member December 30, 2021, replacing an outdated company, so that single entrepreneurs can framework from 1964. The new Companies benefit from limited liability and build their Law will significantly improve the Palestinian businesses in a way that responds to their business environment by offering small and needs, medium enterprises (SMEs), entrepreneurs, ● allows home-based businesses to be as well as local and foreign investors a legal registered, to support youth and women framework in keeping with international entrepreneurs, standards and corresponding to a digitalized and fast-paced business world.  ● provides better rules for larger businesses with multiple shareholders. It introduces The reform effort was heavily supported by the tools that the business community was World Bank, including through DPG-VIII and ASA, missing, such as mergers, divisions, and which advised the Ministry of National Economy transformation, that will allow businesses to on how to adapt international good practices in adapt their business model as they grow, the West Bank’s unique and challenging business environment since 2017. The enactment marked ● promotes women in leadership roles by a significant breakthrough after 4 years of reform requesting public companies to have 1/3 of efforts. the Board of Directors women, The new enacted Companies Law provides a more ● equips shareholding companies with new predictable and transparent business environment tools to address the diversity of situations by introducing new concepts and approaches. they face in their operation, such as different Specifically, the new Companies Law: types of shares, employee stock option plans, and convertible bonds, ● enables businesses to register online, ● introduces stronger protections for minority ● facilitates the incorporation of businesses by investors, such as clear rules on conflicts of removing unnecessary formalities, minimum interest, capital requirements, and the mandatory involvement of lawyers, ● enables entrepreneurs to close their businesses faster and through more ● enhances transparency of and accessibility to affordable and predictable procedures for businesses registration data, mandatory and voluntary liquidation, ● removes restrictions to foreign investors ● regulates SMEs only to the extent necessary such as foreign equity limits and local partner for the public interest and reduces the requirements, compliance cost by removing excessive ● introduces new types of company forms, requirements such as mandatory reserves such as the Limited Liability Company (LLC) and audited financial statements. that offer more flexibility to family owned- private businesses, 20 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund MPACT – LONG-TERM POLICY 3.3. I REFORMS Donors’ commitments to the PRDP MDTF encouraged durable reforms within the PA. This encouragement was particularly influential in the PFM and government procurement space, where a combination of consistent focus in the DPGs and Bank-executed TAs achieved tangible results. PEFA surveys provide useful evidence of the contribution of a series of DGPs to these results.12 The PEFA 2013 showed improvements in ten of eighteen indicators between 2007 and 2013, that focused on budget control, cash consolidation and reporting. This reflected the outcome of the reforms covered in the period through to DPG IV and into DPG V preparation. Significant progress was achieved in the areas related to comprehensiveness and transparency, control and audit, and some indicators related to accounting and reporting. The indicators were rated around B and C, and a few at A at sub- indicator level. Further progress, although uneven, was also reported in the PEFA 2019. This report assessed the impact of PFM systems on three main budgetary outcomes and found a mixed performance, but with some improvement over the PEFA 2013. Fiscal discipline was rated “reasonable” on the expenditure side (PI-1 – B), but revenue estimates were not accurate (PI-3, C). The latter is largely out of the control of the PA because of unrealized donor commitments and limited forward estimates of the monthly transfer of ‘clearance revenues’ (accounting for two- thirds of the PA’s budgetary revenue and which are collected by GoI on goods and services going to the WB&G). With respect to efficient use of resources, the PFM system is reasonable as indicated by the predictability of resource allocation. (PI-21, C+). The mechanisms to reduce the risk of losses such as payroll controls are rated only D+ (P23), likewise for procurement (PI-24), despite procurement law improvements. However internal control (PI-25, B), internal audit function (PI-26, C+) and accounting control mechanisms are reasonably good (PI-27, B+). Other achievements in terms of policy reform include measures to stimulate the private sector, for example: (a) the expansion of leasing to generate credit, (b) the standardization of the business license application process, and (c) a reduction in time needed to issue a business license from 36 to 7 days. This in addition to the already mentioned new Companies Law. Again, this was achieved through a combination of long-term prioritization in multiple DPGs and long-term Bank-executed TA. It is notable that the MDTF continued to contribute to success through the DPGs even into the very turbulent period since 2019. During this period which was dominated by the stand-off over clearance revenues, the global pandemic, and the May 2021 conflict, the quarterly reports from this period demonstrate that improvements were made in terms of laying the foundations for the public sector e-procurement and strengthening the financial sector regulatory regime. For example, at the end of 2020, the implementation of a single procurement portal was critical for promoting transparency and for making available necessary information on public procurement to all interested parties. The data generated from the portal is helping Higher Council for Public Procurement Policies (HCPPP) assess the performance of the procurement system against a set of indicators and to subsequently 12 The 2007 and 2013 PFM surveys operated on different methodologies. The 2013 and 2019 measure largely the same metrics, but the 2019 methodology is considerably simplified. Changes in scores cannot be attributed directly to DPGs, but to several factors which may influence the evolution of scores. Key Results and Impact ● 21 adjust procurement policies to achieve the best value for money. This is the first step towards the adoption of an e-procurement system. (See 3 on procurement reform efforts across DPGs for detail.) Moreover, in 2020, the Palestine Monetary Authority (PMA) undertook reforms to raise the minimum regulatory capital requirements of banks operating in the WB&G from 12 to 13 percent, in order to enhance the banking sector’s ability to absorb shocks from economic stress. This reform also carries a risk mitigation element since it enables supervisory intervention at earlier stages if a bank’s capital adequacy ratio drops to a level close to or below the new minimum. Based on PMA data, all 14 banks operating in the WB&G are already in compliance with the new regulatory capital requirement, meeting the target set by the DPG. Regarding the governance of the financial sector, the PMA made steady progress towards upgrading integrity standards across the financial sector. After conducting a self-assessment in early 2018, an AML/CFT internal controls strategy was adopted by the PMA later that year. As result the PMA instructed banks operating in the WB&G, to adopt strengthened AML/CFT internal controls. At the end of 2020, according to data provided by the PMA, banks operating in the WB&G were compliant with risk-based AML/CFT requirements. Zooming in on procurement reform in the context of DPGs BOX 3  The World Bank has been supporting reform consistent with international best practices. efforts in this area aimed at improving the The law was enacted in April 2014 and entered accountability, efficiency, and transparency of into effect in July 2016, and it applies to all the system, as well as preventing corruption public procurement entities at the central and increasing opportunities for the private and local levels of the PA. Also, the PPL is sector. Through DPG V, the World Bank considered highly inclusive as it envisages supported the establishment of the Higher the provision of equal non-discriminatory Council for Public Procurement Policies opportunities and fair and equal treatment to (HCPPP), which is the entity in charge of the all bidders and consultants, including women. development of the procurement system, Through DPG X, the World Bank supported including policy setting, institution building, reforms to mandate all procuring entities to procurement documentation, guidelines and use a single procurement portal and Standard manuals, training, and public awareness Bidding Documents. Finally, DPG XI, not part campaigns, as well as for oversight of all of DPGs supported by PRDP but built on public procurement activity. Through DPG VI, previous results, supported the institution the World Bank supported the PA’s efforts in of a Dispute Resolution Unit (DRU) to carry amending the Public Procurement Law (PPL) out administrative reviews of appeals from and adopting its implementing regulation, aggrieved bidders. 22 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund 3.4. CROSS-CUTTING THEME – GENDER The improvement in public revenue generation and the efficiency of public expenditures served as the prime avenue for benefiting women. One of the specific measures to benefit women and the poor was improvements in targeting for social assistance by verifying the households in the targeting data base. The benefit here was to reduce both exclusion error (to cover a greater number of poor households) and inclusion error (so that funds can be re-directed to those in greatest need). The reforms supported by DPG X created opportunities for female-led businesses by improving procurement systems and striving toward e-procurement. DPG X promoted transparency and leveled the playing field between male- and female-led enterprises to access business opportunities, ultimately bridging gaps in terms of information constraints and financial exclusion. According to data provided by the HCPPP, an average of only 3 female-owned businesses per year had been participating in the public bidding process prior to DPG X. Easier access to data on public bids through the portal will help increase this number. Key Results and Impact 23 4 Financial Data 4.1. CONTRIBUTIONS As of the end disbursement date, August 1, 2021, a total of US$1.6 billion had been channeled through the PRDP MDTF. Nine donors—the governments of Australia, Canada, Finland, France, Japan, Kuwait, Norway, Poland, the United Kingdom—contributed to the MDTF over the course of its operation (see Table 4), demonstrating the fund’s use in consolidating a large group of donors into a single structure13. However, the donors’ interest in providing budget support had dwindled (See Figure 1). While the MDTF was channeling an average of almost US$200 million per year in funding during 2010-2013, the average dropped to around US$30 million between 2017-2020. 13 Five donors made initial contributions and then withdrew from the PRDP MDTF; Canada and Poland in 2011, Finland in 2012, the UK in 2017, and Australia in 2019. 24 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund TABLE 4 PRDP Total Financial Contributions August 21 Pledged to Date - Total (in millions) Pledged Paid-in to date Contributors Currency Pledge Currency USD Pledge Currency USD Norway NOK 2,826.7 432.0 2,826.7 432.0 UK GBP 264.6 430.1 264.6 430.1 Australia AUD 188.5 171.3 188.5 171.3 Finland EUR 2.5 3.9 2.5 3.9 France USD 1.5 1.5 1.5 1.5 Canada CAD 30.0 29.1 30.0 29.1 Kuwait USD 295.2 295.2 295.2 295.2 Norway USD 58.3 58.3 58.3 58.3 Poland USD 0.5 0.5 0.5 0.5 France EUR 70.0 84.7 70.0 84.7 UK USD 0.3 0.3 0.3 0.3 Australia USD 0.1 0.1 0.1 0.1 Japan USD 99.0 99.0 99.0 99.0 Total (USD) — 1606.0 — 1606.0 Note: Australia, France, Norway, and the UK are mentioned twice in this table due to different pledge currencies. Financial Data ● 25 FIGURE 1 Donor Contributions to PRDP MDTF by Calendar Year (US$, millions) $300 M 247.6 $250 M 223.1 202.3 199.9 $200 M 161.9 157.0 $150 M 125.8 102.9 $100 M 59.9 43.9 $50 M 43.6 20.0 18.1 $0 M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 4.2. DISBURSEMENTS Over the 13 years of its operation, the PRDP MDTF oversaw the disbursements in the amount of US$1.59 billion in both recipient-executed and bank-executed activities. In general, the Program Management and Administration (PM&A) costs and Bank-executed disbursements (including refunds to those countries that left the MDTF) were substantially low. The PM&A disbursements totalled US$4.65 million (0.29% of total disbursements), and disbursements under PRDP MDTF Bank-executed ASA activities reached US$1.97 million (0.12%) over the course of the MDTF’s life (see Table 5). Table 5 Total PRDP Disbursements Recipient-executed Activities Bank-executed (Budget Support) ASA Activities PM&A Total TF071011 $588,969,729.00 $0.00 $752,249.27 $589,721,978.27 TF071607 $816,802,060.00 $1,891,819.08 $3,896,078.64 $822,589,957.72 TF072593 $177,917,120.00 $79,999.51 $0.00 $177,997,119.51 Total $1,583,688,909.00 $1,971,818.59 $4,648,327.91 $1,590,309,055.50 Percentage 99.58% 0.12% 0.29% 100% 26 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund The MDTF disbursed in 47 trance releases, a full account of which is provided in Annex 3.Annex 3. As the PA achieved concrete steps towards the DPG’s objectives, the MDTF disbursements were made throughout the funding period following DPG I-X. Annual tranche releases for the first seven years of the MDTF were much larger than the last six years. From 2008 to 2015, the average volume of annual disbursement was US$174 million. From 2016 to 2021, this number averaged just US$31 million. This decline was driven by changes in donor priorities (see Figure 2). Although most the donors still want to support the PA reform agenda, they prefer to do it through project grants and TA. Donors that remained active in the MDTF until its closure were France ( Agence Française de Développement [AFD] and Ministry of the Economy and Finance [MoEF]), Japan, Kuwait, and Norway.14 Budget Support Disbursed to the PA through PRDP MDTF FIGURE 2  by Calendar Year (US$, millions) $300 M $250 M 246.2 224.2 216.5 $200 M 188.2 164.6 162.3 $150 M 124.5 $100 M 79.2 51.4 47.9 $50 M 42.6 25.6 10.4 $0 M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 14 Since 2021, Norway and France (MoEF) have continued to provide budget support to the PA through the recently launched PURSE MDTF . Financial Data ● 27 5 Moving Forward Over the last ten years, donors’ contribution to budget support declined steeply, due to political concerns and shifting priorities and strategies amongst donors. Part of the shifting strategy amongst donors was to channel greater resources to development projects instead of budget support, and this was evidenced by record pledges were received by the World Bank’s PID MDTF.15 This trend of shifting toward financing development projects is partially explained by political concerns from some donors that budget support could be financing the PA’s payments to Palestinian prisoners in Israeli prisons, ex-prisoners, and families of those deceased—all as a result of violence against Israel. The overall declining aid trend is broader than the co-financing of the World Bank and extends across all avenues of international aid to the WB&G (See Figure 3). At the same time, the pressures of the COVID-19 pandemic and the May 2021 conflict have increased the PA’s needs for budget support, leading to a situation of fiscal instability and uncertainty. 15 During FY20 and FY21, a total of US$88.9 million was pledged to the PID MDTF. 28 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund The Declining Trend in Support to the PA (US$, millions and %) FIGURE 3  2500 30.00 25.00 2000 24.13 20.00 1500 15.00 13.13 1000 10.00 500 5.00 2.29 0 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Budget Support Total Budget Support/GDP % Source: based on Ministry of Finance, and PMA data. Yet, given the importance of an adequate macroeconomic framework for the stability of the Palestinian economy, in line with the World Bank Group’s FY22-25 AS, the World Bank intends to continue annual budget support operations to the PA. Furthermore, the World Bank recently launched the PURSE MDTF as part of the World Bank’s trust fund consolidation and reform agenda, shifting toward fewer and larger trust fund programs. With its objective of strengthening sustainable recovery, economic reform, and social resilience in the WB&G, the PURSE MDTF provides a central mechanism to channel funding to activities—including budget support as well as private sector development, digital development, human development, and social protection. As a result, beginning with the disbursements for DPG XI, all future budget support to the PA will be encompassed within the activities of the PURSE MDTF. As of January 2021, the PURSE MDTF has provided budget support in the amount of $18.7 million based on the FY21 Building the Foundations of a Digital Economy, Strengthening Resilience, and Supporting Governance DPG (DPG XI, P174975), which was approved in May 2021 to (a) support the digital foundations of the Palestinian economy; (b) strengthen recovery and resilience post COVID-19; and (c) improve governance and transparency in the areas of public procurement, wage bill control, and the health sector. Moving Forward ● 29 ANNEX 1 The World Bank’s DPGs leveraged by PRDP MDTF (US$, millions) PRDP Program TFGWBa Co- Approval Effective- Closing ID DPG # Project Name Financing financing Date ness Date Date WBG Support for Fiscal P111078 DPG I Sustainability and Public Financial 40 297.3 6/5/2008 6/9/2008 10/31/2008 Management WBG Support for Fiscal P113621 DPG II Sustainability and Public Financial 40 223.7 5/28/2009 7/17/2009 12/31/2009 Management WBG Support for Fiscal P118593 DPG III Sustainability and Public Financial 40 185.5 9/16/2010 10/5/2010 6/30/2011 Management P123437 DPG IV PRDP Support IV 40 284.7 3/6/2012 3/30/2012 6/30/2012 Palestinian National Development P129742 DPG V 40 166.7 5/23/2013 7/9/2013 9/30/2013 Plan, Development Policy Grant V Palestinian National Development P147687 DPG VI 40 216.2 5/20/2014 7/9/2014 3/31/2015 Plan Development Policy Grant VI DPG VI GZ Emergency Budget Support P152527 41 31.6 10/30/2014 11/26/2014 3/31/2015 AF Supplemental Palestinian National Development P156865 DPG VII Plan - Development Policy Grant 40 64.9 2/11/2016 5/11/2016 6/30/2016 VII West Bank and Gaza: Fiscal P161252 DPG VIII Stability and Business 30 70.5 5/12/2017 12/12/2017 4/30/2019 Environment Strengthening Fiscal Resilience P164427 DPG IX 30 34.2 2/7/2019 2/22/2019 6/1/2020 and Business Environment Strengthening Fiscal Stability and P171819 DPG X 30 8.3 5/8/2020 5/12/2020 10/31/2021 Financial Integrity Total 411 1,584 Note: a. The Trust Fund for Gaza and West Bank (TFGWB) was set up in 1993 to channel World Bank assistance to the Palestinians. 30 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund ANNEX 2 Results Framework PDO Indicators Formally Actual Original Revised Achieved at Indicator Name Unit of Measure Baseline Target Target Completion Disbursements from the PRDP TF are linked to the Yes/No Y Y Y Y Development Policy Grant and its indicators. Target achieved. All disbursements of the PRDP Comments (achievements TF were linked to DPG against targets): indicators as validated by quarterly reviews. Intermediate Results Indicators Formally Actual Original Revised Achieved at Indicator Name Unit of Measure Baseline Target Target Completion Macroeconomic outlook is Yes/No Y Y Y Y adequate Note: There were not specific results indicators established for the PRDP MDTF. The indicators above were system generated and the targets were achieved. Annex ● 31 Key Outputs by Component Objective/Outcome 1: Provide budget and development support for the Palestinian Authority’s policy agenda as expressed in the PRDP in the period from 2008 until 2010. 1. Provided 40 disbursements of budget support to the PA to support the PRDP Outcome Indicators 2. Provided seven development policy grants whose policy matrices tied in to the PRDP 1. Complete 40 quarterly reviews on which to assess progress of program Intermediate Results Indicators Identified results indicators that were revised with each DPG and were used to manage the 2.  program. Objective/Outcome 2: Alleviate the PA’s fiscal pressure by providing reliable disbursements on a regular basis. 1. PRDP TF provided US$1.47 billion in budget support. Outcome 2. DPG financing (WB) added another US$351 million in budget support. Indicators 3. Combined PRDP TF and DPG resources met an average of 11.7percent of total financing needs during 2008-17. 1. Domestic VAT revenue as % of GDP, fluctuated but overall increase. 2. Reduce wage bill, partial achievement. Intermediate 3. Increase share of electricity purchased from the IEC by LGUs, substantial achievement (95% vs. Results 100% target, from baseline of 86%) Indicators 4. Reduce LGU debts for bulk water purchase (reduced to $62 millions, a target of $275 million) 5. Reduce average annual growth of health referral costs (2% achieved vs. 14.5% target, thus exceeded) Objective/Outcome 3: Pooling different donor funds into one administrative mechanism that will reduce the transactions costs for the Palestinian Authority. 1. Number of disbursements reduced from 81 to 41 Outcome Indicators 2. Funding sources reduced from nine (the number of donors) to one (the PRDP TF) Intermediate Results N/A Indicators 32 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund Objective/Outcome 4: Improve public financial management 1. Improved PEFA scores Outcome 2. Gains in targeting social assistance through confirmation of eligibility list Indicators 3. Gains in budget planning and budget transparency 1. Increased use of SBDs and posting procurement plan-delayed 2. Improved cashflow planning and monitoring as indicated by improved PEFA score (to C level). Intermediate Results Indicators 3. Annual reports published on line reporting Ministry of Local Government’s (LGU) capital budget and adjustments by MoF. 4. Annex to report showing transportation fees by LGU. Objective/Outcome 5: Improve environment for Private Sector Development 1. Increased use of leasing to expand credit Outcome 2. Improved land registration function Indicators 3. Improved business environment 1. Increase in value of leasing contracts (above $25 million from $7.6million 2. Increase in leasing contracts from 198 to 769 Intermediate 3. Land registration notices filled in collateral registry increases from 0to 345. Results Indicators 4. Fee to license an activity is standardized at JD 25. 5. Days to issue business license lowered from 36 days to 7 days 6. Number of firms incorporated increased by 1.9%, but below target of 15%. Annex ● 33 ANNEX 3 Tranche Releases from the PRDP MDTF by Year (US$) Dates Donors Amounts T1 April 21, 2008 United Kingdom, Norway 83,860,000 T2 June 4, 2008 Australia 18,865,000 T3 June 2008  Finland, France 5,389,500 T4 August 2008 Kuwait, United Kingdom, Canada 120,796,580 T5 October 2008 Norway, Canada 17,257,000 T6 January 2009 Australia, Norway, Poland 39,114,000 T7 March 2009 United Kingdom 12,000,000 T8 August 2009 Australia, France, United Kingdom 28,098,394 T9 January 2010 Norway, Australia 24,500,000 T10 February 2010 United Kingdom 17,390,000 T11 March 2010 Norwaya 41,111,731 T12 May 2010 United Kingdom, Kuwait, Canada 90,644,326 T13 June 2010 France, Australia 21,963,000 T14 December 2010 United Kingdom 20,885,800 T15 February 2011 United Kingdom, Norway, Australia 47,094,398 T16 May 2011 Norway 36,362,184 T17 September 2011 Australia, United Kingdom 31,639,958 T18 October 2011 Kuwait 49,500,000 T19 March 2012 Australia, United Kingdom, Norway, France 63,919,618 T20 April 2012 Norway 42,083,636 T21 June 2012 Australia, United Kingdom 22,337,702 T22 September 2012 Australia, United Kingdom 14,258,700 T23 November 2012 Kuwait 49,500,000 T24 December 2012 Australia, United Kingdom, Norway 32,083,920 T25   2013 Norway, United Kingdom 60,552,855 T26   May 2013 Australia, Japan, United Kingdom 31,589,663 34 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund Dates Donors Amounts T27   September 2013 Australia, Kuwait, United Kingdom 72,179,910 T28   November 2013 United Kingdom  23,921,865 T29   March 2014 Norway, United Kingdom 38,997,675 T30   May 2014 Japan 29,700,000 T31  June 2014 Norway, United Kingdom 21,682,445 T32  August 2014 Australia, United Kingdom 17,720,010 T33  September 2014 France, Norway 22,600,412 T34  December 2014 Australia, Norway, United Kingdom 31,647,726 T35  May 2015 Australia, Japan, Kuwait,  Norway, United Kingdom 76,983,418 T36 September 2015 United Kingdom, Norway 25,543,462 T37 December 2015 France, Norway, United Kingdom 21,996,900 T38 July 2016 Japan, Australia 30,305,141 T39 October 2016 Norway 21,138,600 T40 January 2017 Norway 5,687,692 T41 April 2017 Japan 7,755,770 T42 December 2017 Norway, Australia 34,470,000 T43 May 2018 Japan, France (AFD) 10,436,923 T44 January 2019 Norway, France 25,563,490 T45 February 2020 Norway, France 25,115,679 T46 April 2020 Norway 9,111,517 T47 June 2020 France 8,332,308 Grand Total Disbursed    1,583,688,908 Note: a. $634,778 added from undisbursed 9th tranche (PLO 12) per Client Connection. Annex ● 35 ANNEX 4 Yearly Contributions by Donor (US$, millions) Contribution Year (Calendar Year) Grand Donor 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Australia 18.9 22.5 9.1 31.0 23.0 21.9 18.0 7.5 11.8 7.6       171.4 Canada 14.2   14.9                     29.1 Finland 3.9                         3.9 France MoEF 1.5 4.0 12.9 12.0     10.3 9.0     9.1 8.8 8.7 76.3 France AFD                     9.9     9.9 Japan           10.0 30.0 30.0 20.0 8.0 1.0     99.0 Kuwait 80.0   50.0 50.0 50.2 50.0   15.0           295.2 Norway 59.8 47.9 50.5 55.6 52.8 53.2 43.4 26.5 28.1 28.2   34.8 9.5 490.3 Poland 0.5                         0.5 UK 68.8 28.6 65.0 74.5 35.8 64.8 55.3 37.7           430.4 Grand Total 247.6 102.9 202.3 223.1 161.9 199.9 157.0 125.8 59.9 43.9 20.0 43.6 18.1 1,605.9 36 ● The Palestinian Recovery and Development Plan (PRDP) Multi-Donor Trust Fund © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank. 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