Core Diagnostic Reports

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Economic and Sectoral Work are original analytic reports authored by the World Bank and intended to influence programs and policy in client countries. They convey Bank-endorsed recommendations and represent the formal opinion of a World Bank unit on the topic. Core diagnostic reports are mandated by the World Bank before lending programs are begun.

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  • Publication
    Blended Finance for Climate Investments in India
    (Washington, DC: World Bank, 2024-03-13) International Finance Corporation
    The document collection focuses on the concept of blended finance for climate investments, emphasizing the need for innovative financial mechanisms to address climate change. It discusses the potential of blending public and private capital to mobilize investment in climate-related projects, aiming to achieve both environmental and financial returns. The collection explores various models and case studies to demonstrate the effectiveness of blended finance in driving sustainable development and combating climate change on a global scale.
  • Publication
    Kazakhstan: Strengthening Public Finance for Inclusive and Resilient Growth: Public Finance Review
    (Washington, DC: World Bank, 2024-03-08) World Bank
    The first three chapters of the PFR review the core fiscal policy and revenue mobilization issues. Chapter 1 discusses the fiscal landscape, fiscal framework, and progressivity of fiscal policy. Chapter 2 looks at the footprint of quasi-fiscal activities, which affects the overall fiscal stance and exposes certain fiscal risks. Chapter 3 discusses the stagnation in non-oil revenue and collection across taxes and outlines reform options to improve the tax regime. This PFR also covers education and social protection spending, constituting about 42 percent of generalgovernment budget spending, and is critical for Kazakhstan’s social agenda and long-term development goals. Chapter 4 analyzes the efficiency of public spending on education, discusses challenges in delivering equitable access to quality education, and offers options for enhancing spending effectiveness through institutional and policy changes. Chapter 5 discusses the efficiency and effectiveness of spending on the social protection system, particularly the coverage and targeting of social assistance programs, issues in implementing active labor market programs, and challenges in delivering social insurance. Because of data constraints, this PFR excludes analysis on social benefits, pensions, and the State Social Insurance Fund.The last two chapters cover the core system of public-finance management issues on budgeting and inter-governmental fiscal relations. Chapter 6 considers options for further improving budgeting, planning, and monitoring to deliver better fiscal outcomes for inclusive and resilient growth. While Chapter 7 examines emerging subnational fiscal issues and options to simplify and improve certainty in the transfer mechanism from central to SNGs and within the SNG hierarchy.
  • Publication
    Central African Republic Public Expenditure Review in Key Human Development Sectors
    (Washington, DC: World Bank, 2024-02-29) World Bank
    This Public Expenditure Review (PER) provides an analytical basis to decision makers and stakeholders for the formulation of ambitious yet fiscally responsible interventions to improve human capital outcomes in CAR. The PER examines public expenditure trends of the education, health, and SP sectors with a focus on adequacy,efficiency, and equity of expenditures as well as human resource management (HRM). The primary objective is to provide analytical insights for government policy development and prioritization strategy as it seeks to achievea resilient recovery, rebuild its education and health sectors, and establish a strong SP system that will help the poorest households invest and protect their own human capital. The PER can also serve as a useful source of knowledge and information to development partners seeking to deepen the impact of their support to thehuman capital development sectors. The recommendations put forth by the PER are those identified as fiscally sustainable and most important for rebuilding and strengthening human capital development sectors, including a focus on future human resource (HR) recruitment needed in the education and health sectors.
  • Publication
    Madagascar Poverty and Equity Assessment, February 2024: Navigating Two Decades of High Poverty and Charting a Course for Change in Madagascar
    (Washington, DC: World Bank, 2024-02-20) World Bank
    This report provides an account of the evolution of poverty and living conditions in the decade 2012- 2022. It finds that at the national level monetary poverty essentially stagnated while urban poverty, admittedly a much smaller in absolute and relative terms, dramatically increased. In 2022, monetary poverty affected about 75 percent of the population, a share slightly above the 73 percent in 2012. Rural poverty remained roughly unchanged at about 80 percent of the rural population, but urban poverty increased from 42 to 56 percent over the decade. The increase in poverty was especially dramatic in secondary cities, where poverty increased from 46 to 61 percent (chapter 1). A closer look at the drivers of poverty reveals that the trends of the last decade are explained by market and governance failures, climatic shocks and the COVID pandemic. Structurally, stubbornly high rural poverty is the legacy of long-term infrastructure underinvestment, isolation, and low internal demand (World Bank Group, 2022). But since 2013, this structural failure to launch has also affected urban employment and living conditions as private investment has persistently declined and competition was suffocated by special interests. Moreover, the COVID pandemic, which caused an exceedingly long border closure and wiped out tourism revenues until mid-2022, and a repeated string of cyclones wreaked havoc on the service economy, destroying as many as a quarter of jobs and slashing urban incomes (chapter 3). About three-quarters of the population suffers from food insecurity, and this share has remained broadly unchanged for a decade or more. Most households, especially in rural areas, lack access to reliable electricity, safe water, or adequate sanitation. Access to healthcare is inadequate while high fertility, teenage pregnancy (about one-third of girls 15-19 is a mother already) and low education completion (only about half of all children complete primary school) erode future human capital (chapter 4). Climate resilience is a cross-cutting challenge. Madagascar is highly vulnerable to extreme weather events such as tropical cyclones, heavy rains, droughts, and heatwaves (chapter 5).
  • Publication
    Maldives Country Environmental Analysis: Towards a More Sustainable and Resilient Blue Economy
    (Washington, DC: World Bank, 2024-02-20) World Bank
    Maldives’ past development path has led to significant improvements in physical capital (infrastructure and related services), and human capital (such as health and education). Over recent decades, the Maldives has witnessed remarkable economic growth. The nation doubled its real income per capita within a 20-year period, transitioned from low to middle-income status, and substantially reduced poverty. This economic growth path was complemented by considerable advancements in infrastructure, including developments in roads, harbors, and ports, as well as ensuring wider access to essential utilities like electricity, water, sanitation, and the internet. From 1966 to 2022, the Maldives inaugurated 17 airports and, achieved universal electricity access by 2014 (from 84 percent in 2000), showcasing its significant growth in produced capital. The country’s human capital has also seen marked progress, with notable achievements in key indicators within education and healthcare. For instance, life expectancy more than doubled from 1960 to 2020 and child mortality and maternal mortality drastically decreased. On the education side, educational attainment has significantly increased over the last decades and more than 9 in 10 people are literate in English. Maldives’ past development path has placed pressure on its blue natural capital (marine and coastal ecosystems). In addition to the cost to natural capital, there has also been a deterioration in fiscal and debt stability, due in parts to the financing of the infrastructure investments. Environmental degradation threatens key economic pillars like tourism and fishing. Moreover, natural capital is the first line of defense against disasters and climate change, especially sea level rise. Against this backdrop, the CEA of the Maldives documents the main sustainable natural resource and environmental management challenges and provides recommendations for transitioning to a more sustainable, resilient, and inclusive Blue Economy.
  • Publication
    Bosnia and Herzegovina Country Economic Memorandum, January 2024
    (Washington, DC: World Bank, 2024-02-13) World Bank
    Bosnia and Herzegovina (BiH) have made significant development progress since the last Country Economic Memorandum (CEM) in 2005, most notably in obtaining EU candidate status in 2022. Despite persistent political tensions, the country has enjoyed nearly three decades of peace. The infrastructure, severely damaged during the 1990s, has been rebuilt, with ongoing investments in improving road and rail connectivity. The policymaking process involves elected officials navigating a complex, politically fragmented landscape, characterized by national quotas, ensuring representation for Bosnia’s, Croats, and Serbs. The representation of individuals who do not identify with any of these three national groups has not been resolved yet. These factors make BiH unique in Europe, rooted in the Dayton Agreement of 1995, which brought an end to a devastating war that claimed approximately 100,000 lives and displaced over half of the population. Now, almost two decades after the last Economic Memorandum, BiH features as an EU candidate country. Macroeconomic policies have tended to favor short-term objectives at the expense of long-term growth, with a focus on fostering consumption rather than investment. Current budget spending, particularly on public wages, pensions, and social benefits has constrained capital expenditure over the past 10-15 years. Consequently, public capital expenditures in both entities are limited, with only half the size in comparison to their Western Balkan peers. Furthermore, there is a discernable lack of coordination across the entities within sectors such as transport infrastructure, particularly railways and roads that contribute to important intermediate input distortions, as well as digital and energy infrastructure. Moreover, while sharing the same priorities as reflected in the socio-economic reform package, the speed of reform implementation differs across entities. Foreign direct investment inflows, meanwhile, remain insufficient, and significantly below regional peers. Thus, a shift towards structural and fiscal reforms with medium- to long-term benefits, such as a more efficient social transfer system using social cards, as well as higher and more coordinated capital expenditures across the entities could pave the way for higher productivity and thus a more competitive economy.
  • Publication
    Cambodia Public Finance Review: From Spending More to Spending Better
    (Washington, DC: World Bank, 2024-02-12) World Bank
    During the last decade Cambodia succeeded in achieving significant domestic resource mobilization which in turn enabled a rapid expansion of social spending. During the next decade it should shift from spending more to spending better. This Public Finance Review (PFR) informs the next phase of the government’s public financial management (PFM) reform strategy (achieving performance accountability) and to provide analytical basis for the government’s fiscal reform efforts in the post-pandemic period. The PFR covers six main chapters. The first chapter (achieving fiscal resilience and building fiscal space) examines macro fiscal performance. The second chapter (enhancing quality of public spending) reviews public expenditure covering selected key ministries in social, economic and infrastructure sectors as well as administrative services and cross sectoral programs. The remaining four chapters provided a deep dive exploration into expenditure and public finance management in: Health, Agriculture, Irrigation and Water Resources, and a case study of Preah Sihanouk province.
  • Publication
    Djibouti Country Economic Memorandum, January 2024 - Djibouti Beyond the Ports and Bases: A Path to Prosperity for All
    (Washington, DC: World Bank, 2024-02-12) World Bank
    Over the past two decades, Djibouti’s economy has demonstrated remarkable growth, reaching the status of lower middle-income country. However, this remarkable performance was achieved despite the enduring presence of persistent structural challenges, notably the high cost of electricity and telecommunications, and a fragile business environment. In this context, economic growth has predominantly relied on debt-financed public investment and private investments with limited linkages to the broader economy or job creation. Furthermore, the positive impacts of economic growth have not been evenly distributed across all sections of society, raising concerns about inclusive development. Moreover, Djibouti is increasingly vulnerable to climate change. As Djibouti embarks on its second phase of development, it is crucial to ensure that the benefits of growth are felt by all segments of society, particularly women and youth. Addressing these issues is crucial to foster a more conducive environment for businesses and stimulate economic growth. Recognizing these challenges, the Government of Djibouti has recalibrated its development strategy through the “Djibouti 2035 Vision” and the National Development Plan (NDP) for 2020-2024. By effectively addressing these priorities Djibouti can pave the way to a transformative path toward a more dynamic, inclusive, and poverty-reducing future.
  • Publication
    Lao PDR 2023 - Forging Ahead: Restoring Stability and Boosting Prosperity
    (Washington, DC: World Bank, 2024-01-09) World Bank
    The Lao PDR is facing unprecedented macroeconomic challenges, which jeopardize hard-won development gains. Over the past two decades, the country attracted considerable foreign investment and fostered regional integration, which contributed to a long period of high economic growth. Many human development indicators improved during the period 2000–2019, including child and maternal mortality, school enrolment, income poverty, and gender equity. However, economic growth was predominantly driven by large-scale investments in capital intensive sectors, such as mining and hydropower, which created few jobs and entailed environmental costs. Moreover, many public investments were financed by external debt, gradually jeopardizing debt sustainability and macroeconomic stability. Long-standing structural vulnerabilities have been exacerbated by the impacts of the COVID-19 pandemic and adverse global macroeconomic conditions. Since 2021, the national currency has depreciated considerably, and inflation soared. This has had a large negative impact on living standards, with many households struggling to cope. Meanwhile, limited spending on education, health, and social protection is undermining human capital and thus economic growth prospects. Significant debt pressures, especially short-term external liquidity constraints, have pushed the country into debt distress. This Public Finance Review identifies priority reforms to restore macroeconomic stability and boost prosperity. The objective of this review is to assess recent macro-fiscal performance, evaluate emerging fiscal risks, and propose policy reforms to secure fiscal sustainability, restore macroeconomic stability, and promote shared prosperity. This report is comprised of five chapters covering the main aspects of fiscal management: chapter 1 evaluates recent macroeconomic performance while placing fiscal policy in the broader macroeconomic context. Chapter 2 assesses domestic revenue mobilization efforts and scope for reforms to enhance tax collection. Chapter 3 investigates the size and composition of public expenditure, as well as measures to increase its efficiency and effectiveness. Chapter 4 discusses reforms of state-owned enterprises with a view to improving their financial performance, operational management, and corporate governance. Chapter 5 documents the experience with public-private partnerships and provides recommendations to maximize value for money and reduce fiscal risks.
  • Publication
    Malawi Country Economic Memorandum: A Narrow Path to Prosperity
    (Washington, DC: World Bank, 2024-01-08) World Bank
    This Country Economic Memorandum (CEM) argues for a significant shift in policy to enable a virtuous cycle of sustained and inclusive economic growth, outlined infive building blocks. Chapter 1 identifies policy priorities to restore the macroeconomic fundamentals for growth through fiscal reform, debt sustainability, external rebalancing, and monetary stability. The following three chapters address three core structural constraints to growth and propose key reforms to accelerate agricultural commercialization and improve rural labor markets (Chapter 2), enable the private sector to drive productivity growth (Chapter 3), and catalyze exports and foreign investment (Chapter 4). Acknowledging that implementing key growth-enhancing policies—be they macroeconomic or structural—are the result of complex political economy and governance arrangements, Chapter 5 focuses on how past Malawian successes can inform future sectoral policies, reforms, and strategies to achieve the goals outlined in the Malawi 2063.