Regions and Countries

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p. 3 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Level

Country Strategy and Program Update 2002-2004: Bhutan

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III. Portfolio Management Issues

A. Portfolio Performance Implementation⁷

25. As of 30 April 2001, (i) 17 loans were approved totaling $94.8 million; and (ii) 6 loans were ongoing, amounting to $41.2 million, of which $31.7 million or 77 percent were undisbursed. Due to the small number of loans in the portfolio, the total size of contract awards and disbursements each year tends to fluctuate considerably depending on the maturity profile of individual loans in the portfolio. The current loan portfolio is “young” as 68.2 percent of the net loan amount represents three loans in their first year of implementation. The actual contract awards in 2000 exceeded the projected amount. The disbursement ratio of 16.3 compared to the ADB-wide average for Asian Development Fund (ADF) countries of 20.2 in 2000 needs to be interpreted in the context of the maturity profile of individual loans in the portfolio.

26. Compliance with loan covenants and assurances on social and environmental measures has been generally satisfactory. All audited financial statements were submitted on time. As of 30 April 2001, five of the six ongoing loans are rated satisfactory both in development objective and implementation progress; the exception is the financial sector program.⁸ The implementation progress was rated partly satisfactory due to the outstanding second tranche release conditions. Efforts are being undertaken to expedite the progress of the two outstanding conditions that are substantially complied with: the import licensing and foreign direct investment regulations.

B. Counterpart Funding

27. Counterpart finding is not a problem in Bhutan. The Government has provided adequate Government counterpart funds for all projects as agreed during project formulation. In addition, adequate funds for operations and maintenance were provided after the completion of the project. Government contribution will continue to finance more than 20 percent of total project cost as evidence of its commitment and ownership.

C. Monitoring and Evaluation

28. A road sector project⁹ was postevaluated in 2000, adding to the one successful and one partly successful project, which have been postevaluated since 1996. The overall project performance is rated successful although the project as a whole did not fully meet its objectives. Lessons learned include (i) project designs need to provide flexibility during implementation, (ii) such a project intervention needs to fit into a long-term sector program, (iii) professional construction supervision needs to be financed under such a loan, (iv) the road maintenance management system developed was rigid and not adapted to local conditions, and (v) economic evaluation for road maintenance projects should focus on the timeliness and cost-effectiveness of the proposed interventions. These findings and recommendations were appropriately incorporated in the formulation of the newly approved loan for road improvement.¹⁰

29. Apart from the aggregate of project-level assessment by individual funding agencies, the Government needs to take a central role in coordinating the timing and distribution of ministerial and external initiatives, and in periodically assessing the overall results achieved. The collective impact of ongoing initiatives must be monitored and, where necessary, tactical amendments introduced if poverty is to be reduced effectively. Until statistical capabilities have been strengthened, monitoring the impact of poverty reduction programs may have to be mainly qualitative rather than quantitative (footnote 6).

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