W OR L D BANK O PE RAT IO NS EVA L U AT IO N DE PART ME N T OED 23958 I s artnership January 2002 for Poverty Red uct on . - -- -- 7 T , ; X rt X _ SS j 4~~~~~~~~~~~~~~~~~~I(. - i--\ I ..-i.. F~~~~~~~~~~~~~~~~~~~E~'.J OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bankwork by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. WORLD BANK OPERATIONS EVALUATION DEPARTMENT (QD IDA's Partnership for Poverty Reduction An Independent Evaluation of Fiscal Years 1994-2000 Catherine Gwin 2002 The World Bank D http://www.worldbank.org/html/oed Washington, D.C. Copyright C 2002 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, USA All rights reserved Manufactured in the United States of America First edition January 2002 The opinions expressed in this report do not necessarily represent the views of the World Bank or its member governments. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally grant permission promptly. Permission to photocopy items for internal or personal use, for the internal or personal use of specific clients, or for educational classroom use is granted by the World Bank, provided that the appropriate fee is paid directly to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers MA 01923, U.S.A., telephone 978- 750-8400, fax 978-750-4470. Please contact the Copyright Clearance Center before photocopying items. For permission to reprint individual articles or chapters, please fax your request with information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the Office of the Publisher, World Bank, at the address above, or faxed to 202-522-2422. Cover photo: World Bank photo library. ISBN 0-8213-5052-8 Library of Congress Cataloging-in-Publication data has been applied for. NW Printed on Recycled Paper prv Contents vii Acknowledgments ix Foreword, Prefacio, Avant-Propos xiii Executive Summary, Resumen, Resume Analytique xxi Abbreviations and Acronyms xxiii Overview 1 Part I. The IDA Review and Its Context 3 1. Introduction 3 IDA1O-12 Replenishment Undertakings 4 IDA's Role in a Changing Development Environment 10 Reviewing IDA's Performance 13 Part II. The Program Dimension 15 2. Sharpening the Focus on Poverty Reduction 15 Strengthening the Poverty Focus of Country Assistance Strategies 16 Building in More Poverty Analysis and Monitoring 18 Increasing Poverty-Targeted Interventions and Social Sector Lending 23 3. Promoting Broad-Based Growth 23 IDA's Evolving Adjustment Operations 26 Lags in Agriculture and Rural Poverty Reduction 27 Strengthening Private Sector Development 30 Looking Ahead 31 4. Integrating Gender, Environment, and Governance 31 Addressing Gender 35 Enhancing Environmental Sustainability 40 Improving Governance 43 Lessons IDA's Partnership for Poverty Reduction 45 Part l1l. The Process Dimension 47 5. Improving Program and Country Selectivity 47 Enhancing the Role of the Country Assistance Strategy 50 Strengthening the System of Performance-Based Allocations 55 6. Building More Effective Partnerships 55 Moving Beyond Project Participation 57 Improving Aid Coordination 59 Directions for the Future 61 Part IV. Getting to Results 63 7. Corporate Issues 64 Accountability for Policy Compliance 65 Instrument Choice 67 Monitoring for Results 68 Alignment Between Resources and Strategic Program Priorities 71 8. Implications for the Future 71 Be More Selective 72 Focus on Governance and Capacity Building 72 Commit to Development Partnerships 73 Clarify Objectives and Strengthen Accountabilities 73 Better Align Resources with Priorities 74 Develop a Long-Term Vision, Focused on Results 74 Engage Developing Countries in Setting and Reviewing Replenishment Commitments 74 Define Commitments in Terms of Monitorable and Achievable Objectives and Take Account of Their Realistic Costing Annexes 75 Annex Al: IDA's Features 77 Annex A2: Evolution of IDA's Program 79 Annex B: Poverty and Social Indicators 80 Annex Cl: IDA Commitments and Disbursements by Region 82 Annex C2: IDA Commitments and Disbursements by Sector 84 Annex D: IDA Portfolio Performance 86 Annex E: Lending for Poverty-Targeted Interventions (PTIs) 87 Annex F: Lending by Instrument 89 Annex G: Methodological Note: Rating IDA's Development Performance 94 Annex H: Chairman's Summing Up-Meeting of the Executive Directors (May 29, 2001) 96 Annex I: Management Response 109 Endnotes 119 References iv Contents Boxes 4 Box 1.1. The IDA10-12 Replenishment Undertakings 5 Box 1.2. Poverty, Growth, and Conflict 6 Box 1.3. Trends in Official Development Assistance 7 Box 1.4. Country Examples of IDA's Assistance 8 Box 1.5. Three Key Initiatives of the Late 1990s 16 Box 2.1. IDA10-12 Commitments on Poverty 17 Box 2.2. Stakeholders' Views 17 Box 2.3. IDA's Contribution to Poverty Data Collection, Analysis, and Dissemination 18 Box 2.4. Where Did Increased Investments in the Social Sectors Go? 19 Box 2.5. Examples of IDA Support for Increased Social Service Expenditures 21 Box 2.6. Pooling Donor Funds in Support of Health Sector Reform in Ghana 24 Box 3.1. IDA10-12 Commitments on Improving the Poverty Impact of Adjustment Lending 24 Box 3.2. Poverty Impacts of Adjustment Lending in Uganda 25 Box 3.3. Weak Broad-Based Growth, Despite Improved Macroeconomic Stability, in Bolivia and Tanzania 26 Box 3.4. Programmatic Adjustment Lending to IDA Countries 27 Box 3.5. Pro-Poor Rural Development Projects in Bangladesh and India 28 Box 3.6. IDA10-12 Undertakings on Private Sector Development 29 Box 3.7. Bangladesh: Poverty Alleviation through Microfinance 32 Box 4.1. IDA10-12 Commitments on Gender 33 Box 4.2. Increasing Assistance for Girls' Education 34 Box 4.3. Maternal Health in Bangladesh 35 Box 4.4. Characteristics of Good Practices in Integrating Gender 35 Box 4.5. IDA10-12 Commitments on Environmental Sustainability 36 Box 4.6. Using the NEAP to Develop Strong Project Works 38 Box 4.7. Eritrean Environmental Guidelines: Doing the Right Thing Right 40 Box 4.8. IDA10-12 Replenishment Commitments on Governance 42 Box 4.9. Kenya: A Case Study of Withholding Lending to Foster Governance Reforms 48 Box 5.1. IDA10-12 Replenishment Commitments on Improving Development Effectiveness through Selectivity 49 Box 5.2. Joint IDA-IFC Country Assistance Strategies Highlight Private Sector Development 51 Box 5.3. The Performance-Based Allocation System 51 Box 5.4. A New Approach to IDA Allocations to Post-Conflict Borrowers 52 Box 5.5. Suggested Changes for the Performance Rating Systems 56 Box 6.1. IDA10-12 Replenishment Commitments on Improving Development Effectiveness through Partnerships 67 Box 7.1. Features of Alternative Lending Instruments v IDA's Partnership for Poverty Reduction Tables 37 Table 4.1. Direct IDA Lending for the Environment and Environmental Components, FY91-00 66 Table 7.1. Breakdown of Operational Country Service Costs by Activity (Direct Costs Only, in US$ millions) 66 Table 7.2. Due Diligence Economic and Sector Work in IDA Countries by Region (FY98-00) Figure 9 Figure 1.1. Improvements in Project Outcomes, Institutional Development, and Sustainability in IDA/Blend Countries vi Acknowledgments T his report was prepared by an inde- The report benefited throughout from advice pendent team, situated in the Corporate and intellectual guidance offered by an advisory Evaluation and Methods Group of the group of eminent experts: Nancy Birdsall, Inga Operations Evaluation Department (OED) under Bjork-Klevby, Kwesi Botchwey, Jalal Abdul the overall oversight of, initially, Wendy Jarvie Latif, Mohammed Syeduzzaman, and Bernard and, later, Nils Fostvedt. The team was led by Wood. It also benefited from the advice, com- Catherine Gwin (task manager and author of the ments, and provision of information from many report) and included Stephen Eccles (back- Bank colleagues, who are too numerous to ground study on IDA's performance-based allo- acknowledge by name, but whose inputs were cation system), John Eriksson (background study essential to the background studies and over- on aid coordination), Alison Evans (background all review. study on poverty reduction), Pierre Landell- Country consultations were held in Bangla- Mills (background study on governance), Mal- desh, Bolivia, Cambodia, Ghana, the Kyrgyz colm Rowat (background study on private sector Republic, Mozambique, and Vietnam. In addi- development), John Shilling (background study tion, input was drawn from OED consultations on environment), Olga Vybornaia (project carried out in India and Uganda as part of administration and research assistance), and ongoing Country Assistance Evaluations. These Georgia Wallen (country consultation report consultations involved the participation of share- and research assistance). holder groups including government officials, Additional substantive input was provided by nongovernmental organizations (NGOs), and Charlotte Jones-Carroll (budget), Alice Galenson private sector representatives, academics, and and John Nellis (private sector development), Gita donor agency representatives. The team is grate- Gopal (gender), Daniel Morrow (Country Assis- ful to the IDA country directors and other col- tance Strategies), Sverrir Sigurdsson (social sec- leagues in the country offices, who helped make tor development), and Warren van Wicklin the in-country consultations a success. (participation). Sohail Malik and Can Adamoglu Workshops were held at the beginning and contributed further statistical advice and research the end of the review. The first, held in Bonn support. Ted Rice, Sylvia Saborio, and Rita Trier- in December 1999 to discuss the evaluation Somazzi assisted with in-country consultations. design for the review, was hosted by the Cen- Annisa Cline-Thomas and Julia Ooro provided ter for Development Research and chaired by its invaluable administrative support. The team also director, Joachim von Braun. The second was acknowledges the help of Caroline McEuen in the held in November 2000 at World Bank head- drafting of the overview, and Meta de Coquereau- quarters to discuss emerging findings. The team mont and William Hurlbut in the editing of back- wishes to thank the many Bank and external ground papers and this report. experts who participated in these meetings, in vii IDA's Partnership for Poverty Reduction particular C. Sanjivi Rajasingham, who represented leader), Caroline McEuen (editor), and Juicy IDA management. Financial assistance for the Qureishi-Huq (administrative assistant). workshops and country consultations was pro- vided by the Royal Ministry of Foreign Affairs, Director-General, Operations Evaluation: Robert Picciotto Department of Evaluation, Government of Norway. Director, Operations Evaluation Department: The study was published in the Partnerships Gregory Ingram and Knowledge Group (OEDPK) by the Out- Operations Adviser, Operations Evaluation Department: reach and Dissemination Unit. The task team Nils Fostuedt includes Elizabeth Campbell-Page (task team Task Manager: Catherine Gwin viii Foreword FOREWORD PREFACIO AVANT- PROPOS In the face of increasingly En una coyuntura en que los Pendant la derniere complex development desafios para el desarrollo decennie, marquee par challenges, the past decade has resultan cada vez mas complejos, el des defis de plus en plus difficiles a witnessed a broadening of the pasado decenio se ha caracterizado relever, le programme de travail international development agenda por la ampliaci6n del programa de la communaute du and remarkable efforts by internacional de desarrollo y la developpement n'a cesse governments, voluntary realizaci6n de esfuerzos de s'allonger et les gouvernements, organizations, and external significativos por parte de los les organisations benevoles et les assistance agencies to learn from gobiernos, las organizaciones bailleurs de fonds ont deploye des experience and improve the voluntarias y los organismos de efforts remarquables pour tirer les effectiveness of development asistencia externa por aprender de le,ons de l'experience et ameliorer assistance. Against this la experiencia anterior y mejorar la 1'efficacite de l'aide au background, the IDA Deputies eficacia de la asistencia para el developpement. C'est dans ce commissioned this independent desarrollo. En esas circunstancias, contexte que les delegues a l'IDA review of the International los Suplentes de la AIF encargaron ont demand6 que soit realisee la Development Association (IDA)'s este examen independiente del presente evaluation independante performance in implementing the desempeno de la Asociaci6n pour examiner les resultats obtenus undertakings of the last three Internacional de Fomento (AIF) en el par l'Association internationale de replenishment agreements. cumplimiento de los compromisos developpement sur la base des The seven-year period covered de los acuerdos correspondientes a engagements pris dans le cadre des by the review has been one of las tres ultimas reposiciones. accords au titre des trois dernieres considerable change-both in En el periodo de siete afios a reconstitutions des ressources. borrower countries and in the que se refiere el estudio se han La periode de sept ans development system. IDA's producido cambios considerables, couverte par cet examen a et undertakings, while timely and tanto en los paises prestatarios une periode de mutations relevant, have continuously como en el sistema de desarrollo. profondes - dans les pays "raised the bar" on what was Los compromisos de la AIF, si emprunteurs et dans le systeme expected of both IDA and its bien oportunos y pertinentes, han mis en place pour le borrowers. It is therefore continuado "levantando el list6n" developpement. Les programmes commendable that the review de lo que se espera tanto de la entrepris par l'IDA, pour aussi rates IDA's compliance with more AIF como de sus prestatarios. Por pertinents et opportuns qu'ils than 150 replenishment ello, es encomiable que en el soient, n'ont cesse d'accroitre les undertakings as satisfactory, with estudio se califique la observancia pressions exercees sur l'IDA et sur qualifications. de la AIF con respecto a mas de ses bailleurs de fonds. II faut donc The review establishes that IDA 150 compromisos de reposici6n se feliciter que le respect de plus has significantly improved its como satisfactoria, con algunas de 150 des engagements lui portfolio performance, become reservas. incombant au titre des more selective in its lending En dicho examen se establece reconstitutions de ses ressources allocations, recast its mission to que la AIF ha mejorado ait et juge satisfaisant, malgre un address poverty reduction, significativamente el desempefio certain nombre de reserves. strengthened the Country de su cartera, se ha mostrado mas L'examen indique que l'IDA a Assistance Strategy (CAS) cycle, selectiva en las asignaciones considerablement ameliore la enhanced its responsiveness to crediticias, ha remodelado su performance de son portefeuille, ix IDA's Partnership for Poverty Reduction borrowers and partners' misi6n para centrarse mas a fait preuve de plus de needs, augmented its field en la reducci6n de la J selectivite dans le choix de presence, and diversified - pobreza, ha reforzado el I'appui aux pays, recentre its lending instruments. ciclo de estrategias de son action sur la lutte With IDA's help, a number asistencia a los paises, ha contre la pauvrete, renforce of IDA borrowers are in a mostrado mas flexibilidad le cycle de la Strategie better position now than at ante las necesidades de los d'aide-pays, accru sa the beginning of the IDA10 prestatarios y asociados, ha capacite d'adaptation aux period to achieve broad-based aumentado su presencia sobre el besoins de ses emprunteurs et de growth and poverty reduction. terreno y ha diversificado sus ses partenaires, renforce sa Yet poverty trends in most IDA instrumentos de financiamiento. presence sur le terrain et countries have been disappointing. Con ayuda de la AIF, varios diversifie ses instruments de pret. This confirms that there is still prestatarios de la Asociaci6n estan Grace a l'aide de l'IDA, plusieurs some way to go for IDA to fulfill ahora en mejores condiciones que emprunteurs de l'Association sont the ambitions of its owners and al comienzo de la decima aujourd'hui mieux a meme qu'au borrowers. In particular, the reposicion para conseguir un debut de la periode d'IDA 10 de linkages between country crecimiento de amplia base y la mettre l'accent sur la promotion programs and poverty outcomes reducci6n de la pobreza. d'une croissance largement need to be better articulated. No obstante, las tendencias de repartie et d'une reduction de Private sector development, la pobreza en la mayor parte de l'incidence de la pauvrete. gender, environmental, social, and los paises de la AIF han sido Pourtant, les progres accomplis rural development strategies need decepcionantes. Ello confirma que sur le front de la pauvrete sont to be clarified and mainstreamed es todavia mucho lo que queda decevants. L'IDA doit donc into country and sector assistance por recorrer para que la AIF poursuivre sa transformation afin strategies. More needs to be done responda plenamente a las de pouvoir repondre pleinement to enhance the quality of ambiciones de sus titulares y aux attentes de ses actionnaires et govemance and to build prestatarios. En particular, los de ses emprunteurs. En institutional capacity in specific vinculos entre los programas de particulier, des liens mieux definis country contexts. los paises y los resultados en la doivent etre etablis entre les Of course, IDA's performance lucha contra la pobreza deberian programmes destines aux pays et is only one of the factors that estar mejor articulados. El les resultats a obtenir sur le front affects the results observed on the desarrollo del sector privado, las de la pauvrete. Un plan plus clair ground. Exogenous factors, the cuestiones de genero y las de promotion du developpement pace of borrowers' reforms, and estrategias ambientales, sociales y du secteur prive, de la parite des the quality of non-IDA assistance de desarrollo rural deben sexes, de l'action sur le plan also intervene. On the whole, in clarificarse e incorporarse a las environnemental et social et du relation to the ambitious estrategias de asistencia a los developpement rural doit faire objectives of IDA country and paises y los sectores. Es preciso partie integrante des strategies sector programs, the review rates hacer todavia mas por mejorar la d'aide aux pays et aux secteurs. the development outcome of calidad de la gesti6n puiblica y Par ailleurs, les efforts doivent se IDA's programs as partially desarrollar la capacidad poursuivre pour ameliorer la satisfactory, with a trend toward institucional en el contexto de los qualite de la gouvernance et improvement. While the glass is paises concretos. renforcer les capacites more than half full and recent Naturalmente, el desempefno institutionnelles en fonction de la performance trends augur de la AIF es s6lo uno de los situation propre aux differents positively for the future, there is factores que influyen en los pays. no room for complacency. resultados observados en la De toute evidence, la In looking forward to IDA's practica. Intervienen tambien performance de l'IDA n'est que next replenishment, what is factores ex6genos, el ritmo de la l'un des facteurs qui determinent x Foreword needed most is to reforma en los paises les resultats sur le terrain, consolidate the IDA prestatarios y la calidad de ceux-ci tenant aussi a des mandates and to focus on la asistencia no procedente facteurs exogenes ainsi further improvements in ' de la AIF. En conjunto, en qu'au rythme des reformes the effective relaci6n con los ambiciosos menees par les implementation of CASs objetivos de los programas emprunteurs et a la qualite and programs in the de la Asociaci6n en los de l'aide des partenaires de context of Poverty paises y en los sectores, el l'institution. De maniere Reduction Strategy Papers examen califica sus resultados en generale, l'impact des prepared by IDA borrowers. This terminos de desarrollo como programmes de l'IDA au plan du will call for even greater country parcialmente satisfactorios, con developpement est juge and program selectivity, far more tendencia a mejorar. Si bien mas partiellement satisfaisant, et en effective donor coordination and de la mitad de la botella esta liena progres par rapport aux resultats harmonization, as well as y las tendencias de los resultados anterieurs. Bien que le verre soit systematic monitoring and recientes son prometedoras para plus qu'a moitie rempli et que evaluation, focusing on results el futuro, no hay lugar para la l'evolution recente de la situation and the Millennium Development complacencia. laisse bien augurer de l'avenir, il Goals. Mirando al futuro, hacia la ne faudrait pas pecher par exces pr6xima reposici6n de los d'optimisme. recursos de la AIF, lo que mas se Dans la perspective de la necesita es consolidar los prochaine reconstitution des mandatos de la Asociaci6n y ressources de l'IDA, il faudra concentrarse en la introducci6n surtout renforcer les missions de de nuevas mejoras en la l'Association et s'attacher a encore aplicaci6n eficaz de las estrategias ameliorer l'execution des de asistencia los paises y de los strategies et des programmes programas en el contexto de los d'aide aux pays dans le contexte documentos de estrategia de des Documents de strategie de lucha contra la pobreza (DELP) reduction de la pauvrete prepares preparados por los prestatarios par les pays emprunteurs. Ce del AIF. Ello requerira una dernier point passe notamment selectividad todavia mayor en par une plus grande selectivite au cuanto a los paises y programas, niveau des pays et des una coordinaci6n y armonizaci6n programmes, des mesures mucho mas eficaz de los resolues en faveur d'une donantes, asi como un coordination et d'une seguimiento y evaluaci6n harmonisation de l'aide, et un sistematicos, centrados en los travail systematique de suivi et resultados y en los objetivos d'evaluation, axe sur les resultats internacionales de desarrollo. et sur les objectifs internationaux de developpement. Robert Picciotto Director-General, Operations Evaluation Executive Summary EXECUTIVE RESUMEN RESUME I SUMMARY ANALYTIQUE Over the seven-year period Durante ese periodo de siete Au cours des sept annees covered by this review, IDA afios, la AIF aument6 couvertes par cette periode, significantly enhanced its relevance significativamente su relevancia y l'IDA a considerablement renforce and improved its portfolio mejor6 los resultados de su cartera. la pertinence de ses interventions et performance. It recast its mission, Remodelo su misi6n, revis6 sus a ameliore la performance de son repositioned its country assistance programas de asistencia a los portefeuille. Elle a recentre son programs, increased its paises, aument6 su capacidad de action, reoriente ses programmes responsiveness to borrowers, respuesta a los prestatarios, reforz6 d'aide aux pays, accru sa capacite strengthened its field presence, and su presencia sobre el terreno y d'adaptation aux besoins des diversified its lending instruments. diversific6 sus instrumentos de demandeurs, renforc6 sa presence Recently, it has intensified its aid financiamiento. Recientemente, ha sur le terrain et diversifie ses coordination efforts in the context of intensificado sus esfuerzos de instruments de pret. Dans le cadre the CDF and PRSP initiatives. coordinacion de la ayuda en el du CDI et des DSRP recemment Hence, IDA in FY00 is very contexto de las iniciativas del lances, elle a egalement redouble different from IDA in FY94. Still, Marco Integral de Desarrollo (MID) d'efforts pour permettre une disappointing progress in poverty y de los documentos de estrategia meilleure coordination de I'aide. reduction, especially in Africa, de lucha contra la pobreza (DELP). Aussi l'IDA s'est-elle points to the need to sustain the Por ello, en el ejercicio de 2000 profondement transformee entre transformation of IDA in order to la AIF es muy diferente de la AIF les exercices 94 et 00. Et pourtant, respond fully to new views of de 1994. No obstante, los le manque de progres sur le front country ownership, conditionality, decepcionantes progresos en la de la pauvrete, surtout en Afrique, and country-based programming reducci6n de la pobreza, sobre montre qu'il faut poursuivre cette of development assistance. Focus todo en Africa, revelan la necesidad transformation afin que l'aide on governance, capacity building, de continuar la transformaci6n de fournie reponde pleinement aux and development results; a move la AIF con el fin de responder nouveaux criteres d'adhesion, de from ad hoc to structured donor plenamente a las nuevas ideas conditionnalite et de pilotage par coordination; and an explicit role sobre la titularidad de los paises, la les pays. L'importance a accorder a for IDA at the global level remain condicionalidad y la programaci6n la bonne gestion des affaires critical to maintaining the positive de la asistencia al desarrollo basada publiques, au renforcement des momentum of IDA's development en los paises. La atenci6n al sistema capacites et aux resultats en termes effectiveness. de gobierno, el desarrollo de la de developpement, l'abandon des With IDA's help, a number of capacidad y los resultados del mesures ponctuelles au profit d'un its borrowers are in a better desarrollo; el paso de coordinaci6n mecanisme structure de position now than at the improvisada de los donantes hacia coordination de l'aide et le role beginning of the IDA10 period to una coordinaci6n mas estructurada, bien etabli que l'IDA doit jouer au focus on broad-based growth and y una intervenci6n explfcita de la niveau mondial restent en outre de poverty reduction goals. Still, the AIF en el plano mundial continuian puissants moteurs de l'amelioration linkages between country siendo elementos criticos para de l'efficacite du developpement. programs and poverty outcomes mantener el impulso positivo de la Grace a l'aide fournie par l'IDA need to be better articulated; eficacia de la AIF en terminos de pendant cette p6riode, plusieurs clearer private sector development, desarrollo. emprunteurs de l'Association sont gender, and environmental/social Con ayuda de la AIF, varios de aujourd'hui mieux a meme de sustainability strategies need to be sus prestatarios se encuentran en mettre l'accent sur la promotion xiii IDA's Partnership for Poverty Reduction well integrated into Country mejor situaci6n ahora que al d'une croissance largement Assistance Strategies (CASs); comienzo del periodo de la 3j repartie et d'une reduction and more needs to be done decima reposici6n para de l'incidence de la to integrate broad-based concentrarse en las metas pauvrete. Il n'en reste pas poverty reduction strategies, de reducci6n de la pobreza moins que des liens mieux governance, and y de un crecimiento de definis doivent etre etablis institutional development amplia base. No obstante, entre les programmes issues into macroeconomic deben articularse mejor los destines aux pays et les and sector strategies and vinculos entre los programas de los resultats a obtenir sur le front de interventions within specific paises y los resultados en la lucha la pauvrete; qu'un regime plus country contexts. contra la pobreza. Se necesitan clair de promotion du With management's attention to estrategias sobre el desarrollo del developpement du secteur prive, accelerating organizational sector privado, el genero y la de la parite des sexes et de la changes over this period, IDA's sostenibilidad ambientaVsocial que viabilite sur le plan social et country focus and responsiveness sean mas claras y esten mejor environnemental doit faire partie are stronger, with some 24 country integradas en las estrategias de integrante des strategies d'aide directors now in the field. asistencia a los paises. Hay que aux pays ; et que les efforts Innovations in lending instruments hacer todavia mrns para integrar las doivent se poursuivre pour que have increased flexibility and estrategias de amplia base para la les strategies de lutte contre la institutional development impact. reducci6n de la pobreza y las pauvrete et les questions liees a la Still, the translation of key IDA cuestiones relacionadas con el gouvernance et au objectives into monitorable sistema de gobiemo y el desarrollo developpement institutionnel programs and verifiable results is institucional en las estrategias soient prises en compte dans les largely an unfinished business. In macroecon6micas y sectoriales y strategies et les actions particular, corporate issues of en las intervenciones en paises macroeconomiques et sectorielles accountability for policy concretos. menees en fonction de la compliance, investment in Gracias a los cambios situation propre aux differents analytical work and capacity introducidos por la administraci6n pays. building, tracking progress, durante ese periodo, la atenci6n La direction s'etant attachee a evaluating results, and aligning de la AIF a los paises y su acc6lerer la reorganisation interne resources with program priorities capacidad de respuesta a los pendant la periode etudiee, all need closer attention and mismos son mas s6lidas, y ahora l'intervention de l'IDA est further action, as recent se encuentran sobre el terreno aujourd'hui mieux adaptee a management reviews and unos 24 directores a cargo de chaque emprunteur et sa capacite proposals indicate. paises. Las innovaciones de los d'ajustement est plus grande, instrumentos crediticios han grace notamment a l'affectation IDA in Context aumentado la flexibilidad y los sur le terrain de 24 des directeurs IDA is only one among many efectos del desarrollo d'operations pour les pays. Le external assistance agencies, institucional. No obstante, la lancement de nouveaux accounting for 14-18 percent of traducci6n de los objetivos clave instruments de pret a donne une official development assistance in de la AIF en programas que se plus grande souplesse the 1990s. The performance of puedan supervisar y en resultados d'intervention et a accru l'impact borrowers and other development comprobables es todavia una sur le developpement partners, as well as changes in the tarea pendiente. En particular, las institutionnel. La mise en place de global economic environment, all cuestiones institucionales de la programmes aux indicateurs play a role. IDA can and should rendici6n de cuentas sobre la mesurables et aux resultats be held accountable, however, for observancia de las politicas, la verifiables demeure toutefois un how well it makes hard choices inversi6n en estudios analiticos y objectif cle qui est loin d'etre and necessary tradeoffs in desarrollo de la capacidad, el atteint. Les responsabilites xiv Executive Summary deploying its concessional progreso del seguimiento, internes pour le respect resources in fulfillment of la evaluaci6n de los ' des politiques, les corporate commitments, - resultados y la investissements dans le ] including both its lending acomodaci6n de los travail d'analyse et le and nonlending advisory recursos a las prioridades renforcement des capacites, services, and how programaticas son aspectos le suivi des progres, effectively it shapes its que deben ser objeto de l'evaluation des resultats et assistance to the priorities atenci6n mas estrecha y de le couplage des ressources and circumstances of borrowers. nuevas medidas, como indican los aux actions prioritaires sont tous It is largely in these terms-of recientes examenes y propuestas des aspects qui demandent une IDA's relevance (that is, whether de la administraci6n. attention plus soutenue et des IDA "did the right things," taking mesures supplementaires, comme into account the actions of others) La AIF en contexto la direction le reconnalt elle- and its efficacy and efficiency La AIF es s6lo una de las muchas meme dans des propositions et (that is, did it "do things right")- organizaciones de asistencia examens recents. that this review evaluates IDA. externa. En el decenio de 1990, represent6 entre el 14% y el 18% L'aide de l'IDA dans son A Strengthened Poverty de la asistencia oficial para el contexte Orientation. IDA has sharpened desarrollo. El desempefno de los L'IDA, qui a contribue pour 14 a the poverty focus of its analytical prestatarios y otros asociados en el 18 % au total de l'aide publique work, policy dialogue, and desarrollo, asi como los cambios au developpement dans les lending. Broad-based growth, en el entomo econ6mico mundial, annees 90, n'est aussi qu'un human resource development, son factores influyentes. La AIF organisme d'aide exterieure parmi and protection of vulnerable puede y debe dar cuentas de de nombreux autres. La groups have become common c6mo toma decisiones dificiles y performance des emprunteurs et objectives of IDA CASs. IDA has llega a las necesarias soluciones de des autres partenaires pour le made a major contribution to compromiso cuando despliega sus developpement ainsi que poverty analysis and data. It has recursos concesionarios para l'evolution de la conjoncture established a strong presence in cumplir los compromisos economique mondiale jouent un the social sectors, introducing institucionales, incluidos los r6le important dans l'obtention new lending instruments and creditos y los servicios de asesoria, des r6sultats. L'IDA peut et doit approaches to better deal with y de c6mo adapta eficazmente su etre tenue responsable, toutefois, complex institutional asistencia a las prioridades y du degre d'efficacite avec lequel, development issues. It has also circunstancias de los prestatarios. au prix de choix difficiles et implemented its commitment to Es fundamentalmente desde esta d'arbitrages indispensables, elle improve the poverty and social perspectiva -relevancia de la AIF deploie ses ressources dimensions of structural para los objetivos basicos de concessionnelles pour remplir ses adjustment operations. Still, the desarrollo, y su eficiencia o engagements institutionnels (tant linkages between country eficacia en funci6n de los costos dans le cadre de ses services de assistance programs and poverty para conseguir los objetivos pret que de ses services de conseil outcomes need to be better declarados- como se evalia a la hors-pret), comme de l'efficacite articulated. AIF en el presente examen. avec laquelle elle adapte son assistance aux priorites et a la The Challenge of Broad-Based Una orientaci6n nias firme situation de ses emprunteurs. C'est Growth. IDA has helped many contra La pobreza. La AIF ha essentiellement en ces termes -a borrowers move into position to orientado de forma mas especifica savoir en termes de pertinence de direct greater efforts toward la lucha contra la pobreza en sus l'IDA, face aux grands objectifs du poverty reduction goals than at estudios analiticos, el dialogo sobre developpement, et de l'efficacite the beginning of the review politicas y los creditos. El et l'efficience dont elle a fait xv IDA's Partnership for Poverty Reduction period. In countries crecimiento de amplia base, preuve a cet egard - que committed to reform, IDA's el desarrollo de los recursos ' le present examen evalue i support has contributed to - humanos y la protecci6n de L'IDA. increased economic , los grupos vulnerables se stability, fewer distortions, han convertido en objetivos Une focalisation accrue and improved comunes de las estrategias sur la pauvrete. L'IDA a infrastructure development. de asistencia a los paises de recentre son travail But acceleration of broad- la AIE La Asociaci6n ha d'analyse, son dialogue sur based, job-creating growth realizado una importante I'action a mener et ses operations remains a major challenge. contribuci6n en forna de analisis y de financement sur le combat de presentaci6n de datos sobre la la pauvrete. Croissance largement The Critical Factor of pobreza. Ha establecido una firme repartie, valorisation des Governance. Good governance presencia en los sectores sociales, ressources humaines et protection affects all other areas of program mediante la introducci6n de des plus demunis font desormais emphasis. IDA was slow to nuevos instrumentos y conceptos partie des objectifs traditionnels comply with its IDA10 de financiamiento para hacer mejor de ses SAP. L'IDA a realise un governance undertakings, but frente a las complejas cuestiones important travail de collecte et de over the past four years it has del desarrollo institucional. Ha diffusion de donnees et d'analyses given priority to public sector hecho tambien realidad su sur la pauvrete. Elle est desormais reform in country assistance compromniso de mejorar las tres presente dans les secteurs programs. Lending for public dimensiones del ajuste estructural sociaux et a mis au point de sector reforms has increased, and relacionadas con la pobreza y los nouveaux instruments de pret et institutional development issues aspectos sociales. No obstante, es de nouvelles demarches pour are addressed in analytical work preciso articular todavia mejor los mieux faire face a des problemes and lending. Public sector vinculos entre los programas de complexes de developpement capacity building and asistencia a los paises y los institutionnel. L'IDA a egalement accountability remain major tasks, resultados frente a la pobreza. pris en compte la necessite and greater coordination among d'ameliorer la dimension sociale external agencies is needed to El desaflo del crecimiento de et les aspects lies a la pauvrete consistently cover the broad amplia base. La AIF ha ayudado dans les operations d'ajustement governance agenda. a muchos prestatarios a colocarse structurel. II n'en reste pas moins en situaci6n de orientar mas sus que des liens mieux definis Gender and Environmental esfuerzos a la reducci6n de la doivent etre etablis entre les Mainstreaming. IDA has made pobreza que al comienzo del programmes d'aide aux pays et limited progress in integrating periodo del examen. En los paises les resultats a obtenir sur le front gender and environment, in part comprometidos con la reforma, el de la pauvrete. because of a lack of country apoyo de la AIF ha contribuido a interest. But IDA has also lacked aumentar la estabilidad La difficulte de promouvoir clear accountability for gender and econ6mica, reducir las une croissance largement environmental mainstreaming. distorsiones y mejorar el repartie. Grace a l'appui de Where IDA's assistance has desarrollo de la infraestructura. l'IDA, nombre de ses emprunteurs contributed to strong results- Pero la aceleraci6n de un sont en mesure de deployer des notably in girls' education-there crecimiento de amplia base y efforts plus importants pour has been significant country generador de empleo continua atteindre les objectifs de reduction ownership, effective partnerships, siendo todavia un gran desafio. de la pauvrete qu'au debut de la and rigorous analytic work periode couverte par le present underpinning lending. In similar El factor critico de la gesti6n examen. Dans les pays determines circumstances, environmental publica. Un buen sistema de a entreprendre des reformes, les assistance has helped to increase gobierno es un factor critico que operations d'ajustement de l'IDA xvi Executive Summary public and government influye en todas las demas ont contribue a promouvoir interest, reversed land esferas contempladas en los l la stabilite degradation, improved - programas. La AIF tard6 en macroeconomique, a incomes from arid lands, - cumplir sus compromisos reduire les distorsions and strengthened en materia de gesti6n economiques et a ameliorer environmental capacity. publica formulados en la l'infrastructure du decima reposici6n de developpement. More Effective recursos, pero en los cuatro L'acceleration d'une Partnerships. To further increase uiltimos afios ha dado prioridad a croissance largement repartie et IDA's development effectiveness, la reforma del sector puiblico en los creatrice d'emplois reste IDA10-12 strengthened the link programas de asistencia a los neanmoins une tache redoutable. between building more effective paises. Los creditos para la reforma partnerships through participation de este sector han aumentado, y La gouvernance, une dimension and aid coordination. Progress las cuestiones del desarrollo cl. La bonne gestion des affaires was moderate during IDA10-11, institucional se consideran en los publiques est un facteur influant but the CDF and PRSP initiatives estudios analiticos y en las de facon determinante sur tous les introduced after the IDA12 actividades de financiamiento. El autres domaines prioritaires des negotiations have given significant desarrollo de la capacidad y la programmes. L'Association a tarde impetus to this aid reform agenda. rendici6n de cuentas del sector a honorer les engagements pris Greater aid coordination at the publico continuan siendo tareas pour IDA 10 sur le plan de la country level and increased policy importantes, y se necesita una gouvernance mais au cours des and procedural harmonization at mayor coordinaci6n entre los quatre dernieres annees, elle a the agency level are necessary. organismos extemos para abarcar donne la priorite aux reformes du el amplio programa pendiente en secteur public dans les Conclusions este terreno. programmes d'aide aux pays. Elle In looking forward to IDA's next a accru le volume de ses credits au replenishment, what is needed Integraci6n de las cuestiones titre de reformes du secteur public most is to consolidate the IDA relacionadas con el genero y el et elle s'attaque aux problemes de mandates, within the context of medio ambiente. La AIF ha renforcement institutionnel dans le CDF and PRSP implementation, realizado pocos progresos en la cadre de ses etudes analytiques et and to focus on further integraci6n de las cuestiones de ses operations de financement. improvements in the relacionadas con el genero y el Le renforcement des capacites du implementation of Country medio ambiente, en parte por secteur public et la necessite de Assistance Strategies and falta de interes de los paises. justifier de l'emploi des fonds programs. Improved Cuando la asistencia de la AIF ha publics dans les pays emprunteurs implementation needs to give contribuido a tener resultados continuent d'exiger des efforts particular attention to country and favorables -sobre todo en la considerables; il faudra par program selectivity; a determined educaci6n de las nifias-, ha ailleurs ameliorer la coordination move to donor coordination and habido una importante des interventions des organismes harmonization to reduce the identificaci6n de los paises con de financement exterieur pour burden of high aid transaction los programas, asociaciones s'assurer de la fourniture d'un costs on borrowers; as well as eficaces y rigurosos estudios appui systematique au vaste systematic monitoring and analiticos como base del programme de l'amelioration de la evaluation, focusing on results financiamiento. En circunstancias gouvernance. and the Millennium Development semejantes, la asistencia ambiental Goals. Full, multi-year funding of ha ayudado a aumentar el interes Prise en compte de la parite CAS lending and nonlending publico y gubernamental, ha des sexes et de services as well as new invertido la tendencia a la 1'environnement. Les progres commitments (including new IDA degradaci6n de la tierra, ha accomplis par l'IDA au plan de xvii IDA's Partnership for Poverty Reduction undertakings) is essential aumentado los ingresos l'integration de ces to align resources with procedentes de las tierras ' questions a ses program priorities. - aridas y reforzado la programmes ont et limites s Finally, the report capacidad ambiental. Pero en partie par le manque z suggests fine-tuning of the la AIF carece tambien de d'intert manifest par les _ replenishment process. un sistema claro de pays. L'appui de Although consistent with rendici6n de cuentas sobre I'Association a neanmoins the evolving development la integraci6n de las contribue a l'obtention de paradigm, replenishment cuestiones relacionadas con el bons resultats, notamment dans le undertakings have been perceived genero y el medio ambiente. domaine de l'education des filles, to be both overdetermined and du fait de la large adhesion des overloaded. Greater realism about Asociaciones mas eficaces. Para pays a l'action menee, de what IDA and its borrowers could conseguir una mayor eficacia de la l'efficacite des partenariats avec reasonably accomplish in a three- AIF en terminos de desarrollo, les autres intervenants, et des year period is desirable. Equally, entre la decima y duodecima bases solides fournies par un the replenishment process needs reposiciones se intensific6 el travail d'analyse rigoureux. Les stronger connections with all vinculo entre el establecimiento circonstances sont similaires pour development partners. IDA, in de asociaciones mas eficaces l'environnement, dans lequel consultation with its borrowers, mediante la participaci6n y la l'appui de l'IDA a aide a should develop a longer-term coordinaci6n de la ayuda. Este sensibiliser le public et les vision focused on results. It progreso fue moderado durante la autorites aux questions should engage developing decima y undecima reposiciones, environnementales et a contribue, countries in both setting pero las iniciativas del MID y los par exemple, a un renversement replenishment priorities and DELP introducidas despues de las de la tendance a la degradation monitoring IDA performance, and negociaciones de la duodecima des sols, a un accroissement des it should define commitments in reposici6n han dado considerable revenus tires des terres arides et a terms of monitorable and impulso a este programa de un renforcement des capacites. achievable objectives. reforma de la ayuda. Se necesita Mais l'IDA n'est pas non plus tambien una mayor coordinaci6n clairement comptable de l'action de la asistencia en los paises y qu'elle doit mener pour integrer una mayor armonizaci6n de ces deux dimensions a ses politicas y procedimientos en el activites. plano institucional. Batir des partenariats plus Conclusi6n efficaces. Pour accroitre encore De cara a la pr6xima reposici6n plus l'efficacite de l'aide de l'IDA, de los recursos de la AIF, lo que IDA 10-12 ont mis l'accent sur le mas se necesita es consolidar los renforcement du lien entre la mandatos de la Asociaci6n, en el constitution de partenariats plus contexto del MID y los DELP, y efficaces bases sur la participation concentrarse en la introducci6n de et la coordination de l'aide. Si nuevas mejoras en la aplicaci6n l'amelioration a ete faible pendant de los programas de asistencia a IDA 10-11, les initiatives du CDI los paises. Las mejoras en la et des DSRP lancees apres les aplicaci6n deben prestar especial negociations d'IDA 12 ont donne atenci6n a la selectividad de une forte impulsion a ces efforts paises y programas, a la de reforme. Il est necessaire de coordinaci6n y armonizaci6n de mieux coordonner l'aide au los donantes con el fin de reducir niveau des pays et de mieux xviii Executive Summary la carga de los elevados harmoniser les grandes costos de transacci6n de la ' orientations et les - ayuda que recae sobre los procedures au niveau des prestatarios, asi como a un organismes bailleurs de * mayor fortalecimiento de la fonds. capacidad y un seguimiento y evaluaci6n Conclusion sistematicos, centrados en Dans la perspective de la los resultados y en los objetivos prochaine reconstitution des internacionales de desarrollo. Para ressources de l'IDA, il faudra armonizar los recursos con las surtout promouvoir les missions prioridades de los programas es de l'Association, dans le cadre de necesario un financiamiento la mise en oeuvre du CDI et des completo y plurianual de los DSRP, et s'attacher a encore servicios crediticios y no ameliorer l'execution des crediticios de las estrategias de strategies et des programmes asistencia los paises, asf como el d'aide aux pays. Ce dernier point logro de nuevos compromisos passe notamment par une plus (tambi6n de la AIF). grande selectivite au niveau des Finalmente, en el informe se pays et des programmes, des aconseja la introducci6n de mesures resolues en faveur d'une pequehos ajustes en el proceso coordination et d'une de reposici6n de recursos. Si bien harmonisation de l'aide afin de en consonancia con el paradigma reduire la charge de couts de de desarrollo en evoluci6n, los transaction qui pesent lourdement compromisos de reposici6n sur les emprunteurs, et un travail parecen estar excesivamente systematique de suivi et determinados y sobrecargados. d'evaluation, axe sur les resultats Seria aconsejable un mayor et sur les objectifs internationaux realismo acerca de lo que la AIF y de developpement. Le sus prestatarios podrian conseguir financement integral et sur razonablemente en un periodo de plusieurs annees des activites de tres afnos. De la misma manera, el pret et des services hors pret des proceso de reposici6n necesita SAP ainsi que des nouveaux vinculaciones mas estrechas con engagements (y compris ceux pris los asociados en el desarrollo. La dans le cadre de la reconstitution AIF, en consulta con sus des ressources) est indispensable prestatarios, deberia establecer si l'on veut que des moyens una visi6n a mas largo plazo adequats soient affectes aux centrada en los resultados. actions prioritaires. Deberia conseguir que los paises Enfin, le rapport d'evaluation en desarrollo fijaran prioridades propose un ajustement du de reposici6n y supervisaran el processus de reconstitution des desempefio de la AIF, y deberia ressources. En effet, on a le definir los compromisos en sentiment que les engagements funci6n de objetivos que puedan pris en cette occasion sont ser objeto de seguimiento y surdetermines et trop lourds, asequibles. meme s'ils vont bien dans le sens de l'evolution du modele de xix IDA's Partnership for Poverty Reduction developpement. II serait I souhaitable de faire preuve d'un plus grand realisme lorsqu'on envisage ce que l'IDA et ses emprunteurs peuvent raisonnablement accomplir en trois ans. II faut aussi que ce processus se deroule en relation etroite avec tous les acteurs du developpement. En consultation avec ses emprunteurs, l'IDA doit donc definir une vision a long terme s'articulant autour des resultats souhaites. Elle doit associer les pays en developpement a la definition des priorites et au suivi de sa performance, et les engagements qu'elle prend doivent correspondre a des objectifs realisables, accompagnes . d'indicateurs de suivi. xx ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AFR Africa Region APL Adaptable Program Loan ARDE Annual Review of Development Effectiveness CAE Country Assistance Evaluation CAS Country Assistance Strategy CDF Comprehensive Development Framework CEM Country Economic Memorandum CFAA Country Financial Accountability Assessment CG Consultative Group CGAP Consultative Group to Assist the Poorest CPAR Country Procurement Assessment Review CPFA Country Profile of Financial Accountability CPIA Country Policy and Institutional Assessment DfID Department for International Development EAP East Asia and Pacific Region ECA Europe and Central Asia Region ESSD Environmentally and Socially Sustainable Development Network ESW Economic and sector work GEF Global Environment Facility GDP Gross domestic product GNP Gross national product HIPC Heavily Indebted Poor Country HNP Health, Nutrition, and Population Sector IBRD International Bank for Reconstruction and Development (World Bank) IDA International Development Association IFC International Finance Corporation LAC Latin America and Caribbean Region LIL Learning and Innovation Loan M&E Monitoring and evaluation MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region NEAP National Environmental Action Plan NGO Nongovernmental Organization OD Operational Directive ODA Official Development Assistance OECD Organisation for Economic Co-operation and Development OED Operations Evaluation Department PA Poverty Assessment PACT Partnership for Capacity Building PBA Performance-based allocation PER Public Expenditure Review PPP Purchasing power parity PREM Poverty Reduction and Economic Management Network PRSP Poverty Reduction Strategy Paper PSD Private sector development xxi IDA's Partnership for Poverty Reduction QAG Quality Assurance Group SA South Asia Region SPA Special Program with Africa SSP Sector and Thematic Strategy Paper SSR Social and Structural Review SWAps Sector-wide approaches WBI World Bank Institute WDR World Development Report xxii Overview The mission of IDA is to support efficient and effective programs to reduce poverty and improve the quality of life in its poorest member countries ... the focus must be on sustainability-to achieve enduring development impact with an environmentally sustainable framework-and equity-to remove barriers and open up opportunities for the disadvantaged. -IDA12 Replenishment Report The International Development Association (IDA) ment and governance. IDA has also assisted is a unique instrument of development cooper- with the unprecedented challenges faced by ation, focused on assisting the world's poorest countries in transition and the special needs of countries. The establishment of IDA in 1960-as countries emerging from conflict. While persistent a separately funded but integral component of the poverty, increasing inequality, and conflict char- World Bank Group-represented a bold innova- acterize the period, a number of countries where tion and an unprecedented commitment by the IDA programs are being implemented have international community to improving global wel- recorded declines in the incidence of poverty, fare. During the past 40 years, IDA has made sub- strengthened social development, and begun stantial and distinctive contributions to growth and to tackle governance and public sector reforms. poverty reduction in low-income countries At the request of IDA's donor governments through a combination of concessional finance, and its executive directors, this report reviews analytical work, and aid coordination services. the IDAJO-1 I program and, on an interim basis, During the seven-year period covered by this IDA12. It covers IDA's performance in imple- review (FY94-00), IDA committed just over $42 menting the undertakings set out in the Replen- billion to some 77 low-income borrower coun- ishment Reports for each of these periods. The tries. These resources have supported country methods used for this review are described in efforts to accelerate sustainable economic growth Annex G. The final report was presented to the and poverty reduction through improved eco- Board on May 29, 2001. A summary of the dis- nornic policies and investments; expanded access cussion at that meeting is attached as Annex H. to basic education, health, and other social ser- The Bank management response to the findings vices; and strengthened public sector manage- of the review is attached as Annex I. xxiii IDA's Partnership for Poverty Reduction Summary of Findings held accountable for country development out- The IDA10-12 replenishment undertakings (sum- comes. The performance of borrowers and other marized in box 1) have been highly relevant and development partners, as well as changes in timely. They encouraged IDA to adapt to a new the global economic environment, all play a development paradigm, embodying a compre- role in determining outcomes. IDA can and hensive approach to poverty reduction that should be held accountable, however, for how reflects the accumulated lessons of develop- well it makes hard choices and necessary trade- ment experience. Individually, each area of offs in deploying its concessional resources to operational emphasis makes sense. But together fulfill corporate commitments, including both its they have proved extraordinarily demanding- lending and its nonlending advisory services, and for both IDA and its borrowers. Even in coun- how effectively it shapes its assistance to the pri- tries where the commitment to poverty reduction orities and circumstances of borrowers. It is and sustainable development is strong, building largely in these terms-that is, of IDA's relevance consensus for change, reforming policies, and (whether IDA "did the right things," taking into strengthening institutional capacities are formi- account the actions of others) and its efficacy and dable tasks, which, in countries with limited efficiency (did it "do things right")-that this human and financial resources, require tough review evaluates IDA. (For a concise summary choices and tradeoffs. of the report, see box 2.) IDA 10-12 replenishment undertakings Compliance Overall, IDA's compliance with the formidable list of replenishment undertakings has been sat- isfactory, albeit with important qualifications. In evaluating IDA's performance, it is ihmpor- The implementation of IDA undertakings has tant to place its assistance in context. IDA pro- repositioned country programs to better respond vides a small share of the resources that countries to development priorities. IDA has sharpened the use to pursue their development priorities-the poverty focus of its Country Assistance Strategies largest share comes from the countries them- (CASs), analytical work, and lending. It has selves. IDA is also only one among many exter- made a substantial contribution to poverty data nal assistance agencies, accounting for 14-18 collection and analysis; established a strong percent of official development assistance in presence in the social sectors; and improved the the 1990s. It cannot 'determine the choices that poverty and social dimensions of its adjustment countries make, although it can and does sup- operations. More recently, IDA has markedly port and influence them. Nor can IDA alone be expanded its work in support of good gover- Box 1 IDA10-12 Replenishment Undertakings In broad terms, the three IDA replenitshment agreements-reports that set lorth IDA's goals for each three-year fonding cycle- endorse poverty reduction as IDA's overarching objective and instruct IDAtoAt * Sharpen the poverty focus of its support for country development. * Direct its assistance, in support of that objective, to expanding access to basic social services fostering broad-based growth, promoting good governance, and integrating gendar and environrmentail considerations into development efforts. 7:-lncrease its development effectiveness through more selective, more participatory, and better-coordinated country assistance programs. The specific undertakings related to these instructions center on six program priorities (poverty, social sectors, private sec- i-.t developmie gender, environment, and governance) and four processes (Country Assistance Strategies, performance- I based allocation system, participation, and aid coordination). xxiv Overview Box 2 The IDA Review at a Glance At the request of IDA's donor governments and its executive In moving forward, IDA should focus on implementation of directors, OED carried outa review of IDAs implementation per- its existing policy framework, align resources with strategic fonnance during IDAO-12. OEDfound the IDA1O12replenishment priorities, and consolidate its mandates. IDA should concen- commitmnt to be highly relevant and timely, but extraordinar- trate mote on its areas of comparative advantage-work atthe ity demanding for both IDA and its borrowers. The commitments strategic level in support of economy-wide, sector-wide, and include: (a) sharpening the poverty focus of support for country government-wide reforms-and make capacity building a development (b) expanding access to social services, fostering core dimension of every aspect of its work. With the full sup- broad-based growth, promoting good governance, and integtat- port of its shareholders, it should also play a more proactive ing gender and environmental considerations into development role in fostering aid harmonization and coordination-at the effortsand(c) increasing itsdevelopmenteffectivenessthrough global and country levelso reduce the high transaction more selective, more participatory, and better-coordinated CASs. costs of aid. Overall, OED finds IDA's performance in relation to its com- This will require even greatercountry andprogramselectivity; mitments to be satisfattory, but with qualifications. IDA has expanded work in the critical areasof public sector reform and done much to sharpen the poverty focus of its analytical work, institutional development, a joint commitment with partners to policy dialogue, and lending. The quality of lending and non- move from ad hoc to more structured coordination of aid pro- lending services has improved. Recently, it has brought gover- grams, and reinvestment in IDAs analytical work and full fund- nance to the fore. Yet it has made limited progress in integrating ing of approved Coutry Assistance Strategies. private sector development, gender, and environmental sus- IDA would also benefit from adjusting the replenishment tainability into its country programs. Taking account of a host of process. Three changes would improve the process: develop- factors not under IDA's control, the development outcomes of IDA ing a long-term vision focused en results, engaging developing programs are rated partially satisfactory. Much remains to be countries in setting priorities and monioring replenishment done by IDA and its partners to meetthe multifaceted challenge comnitments; and defining commitments in terms of monitorable of supporting sustained, pro-poor, broad-based growth. and achievable objectives, with realistic costing. nance as a key factor in country development Framework (CDF) and the Poverty Reduction efforts. Strategy Paper (PRSP) initiatives have provided To strengthen the effectiveness of its coun- new momentum in the past two years. try programs, IDA has also enhanced the role of its CASs as a tool for comprehensive diagnosis Development Outcomes and program planning. It has strengthened the Clearly, compliance with replenishment under- link between country performance and lending; takings and development outcomes are not the increased stakeholder participation in projects same. Nor is performance in the implementation and programs; and accelerated its efforts in aid of replenishment injunctions (which are stated coordination, especially in the past few years. largely in terms of inputs and outputs rather than These are major achievements. outcomes) the sole determinant of those out- Compliance, however, has been uneven comes. The global environment has been chal- across and within areas of program and process lenging for countries with weak institutions and emphasis. Governance only recently acquired poor governance, and poverty trends have been adequate weight in program priorities. There has disappointing. Against this background, the been only partial and halting progress in inte- improved development effectiveness of IDA grating critical private sector development (PSD), operations is notable, while the development gender, and environmental considerations into outcomes of IDA programs, assessed against its country assistance programs. And neither pro- ambitious goals, have been partially satisfactory.' gram selectivity nor coordination with devel- Although IDA has done well in helping many opment partners has been achieved to the degree countries lay the foundations for economic growth called for in the replenishment undertakings, and poverty reduction, the record of IDA coun- although the Comprehensive Development tries in sustaining growth at high enough levels, xxv IDA's Partnership for Poverty Reduction over long enough periods, and through measures the importance of growth and the central role sufficient to benefit the majority of the poor has of human resource development in bringing been mixed. This reflects a host of non-IDA influ- about significant and sustained improvements in ences on development outcomes, including living standards. regional conflicts, weak domestic capacities, The IDA10-12 replenishment undertakings mixed policy performance, variable quality of adopted the framework of the 1990 strategy, with aid, and exogenous shocks. But it also highlights a call to sharpen IDA's poverty focus. They areas where IDA's own performance, while gen- expanded the agenda to include gender, the erally satisfactory and improving, could be environment, and governance as part of a enhanced still further and contribute more posi- "broad-based framework for poverty reduction" tively to development outcomes. (IDA 1998). They also urged IDA to increase IDA made important innovations in its organ- effectiveness through increased country own- ization, lending instruments, and assistance ership and improved development partnerships. strategies to increase the responsiveness of its The diversified and complex policy content of operations to country development priorities. these commitments-a departure from the more Robust self-evaluation and policy recasting have general guidance embodied in previous replen- been put in place, contributing to increased ishment agreements-is the ultimate rationale for development effectiveness. More important, the this review. Has IDA acted responsibly to imple- performance of IDA lending has shown sub- ment its replenishment commitments? Has it stantial gains. But the linkage between institu- changed fast enough and in the right directions? tional priorities and country programs has not As a result, is it well equipped to assist borrower been strong, and weaknesses in lending and countries in today's era of rapid technological nonlending activities that impede IDA's opera- change, borderless private investment, and tional effectiveness at the project and country lev- increasingly fragile physical environment? These els remain. Declines in the funding of analytical are the questions that motivated the IDA work, the substantial challenge of expanding Deputies' call for an independent review of governance work, the slow pace of improvement IDA's record. in institutional development impact and support for capacity building, inadequate selectivity, and The Program Dimension insufficient monitoring and evaluation (M&E) at both the country and the project levels require A Sharpened Poverty Focus stronger remedial action, as acknowledged and, IDA has progressively strengthened the poverty in some cases, pinpointed by management's orientation of its analytical work, investment own self-assessments. lending, and adjustment operations since adop- tion of the 1990 poverty strategy. Both momen- Why This Review? tum and specificity have increased over While IDA's main goals and basic features have successive replenishment periods. Internal pol- remained consistent throughout its history, IDA icy and institutional changes, combined with has progressively refined and broadened its external contributions from IDA (and other approach. It reached an intellectual and pro- donors), have moved many IDA borrowers into grammatic watershed with the publication of the a position to direct greater efforts toward poverty World Development Report 1990 Poverty, which reduction goals than at the beginning of the advocated a strategy of poverty reduction review period. But substantial and sustainable through economic policy reforms and produc- results for the poor require consolidation and tive investments. The goal was to improve the deepening of development and aid reforms. incomes of the poor through labor-intensive growth and to expand their access to social Redirecting Country Assistance Strategies. services and social safety nets. The strategy IDA undertakings have emphasized poverty reflected empirical evidence that demonstrated reduction as their overarching objective, and xxvi Overview this goal has been increasingly reflected in IDA adjust pension and other social protection mech- CASs, particularly since 1997. Broad-based anisms. Overall, IDA has shifted the focus of its growth, human resource development, and pro- assistance from projects to sector-wide reforms tection of vulnerable groups have become com- and provided some form of social sector assis- mon CAS objectives. CASs are also increasingly tance in virtually all of its active borrowers. based on comprehensive poverty diagnosis and On the whole, IDA has had more success in consultations with stakeholders. By FY00, a helping countries to expand access to social growing number of IDA CASs included poverty services than in improving the quality of service reduction targets linked to intermediate objec- delivery to the poor. The difficult challenge has tives and benchmarks for tracking country and been to help countries deal with the politically IDA performance. and institutionally complex issues, particularly To underpin the sharpened focus of the CAS, deficits in public sector management and insti- IDA has made major contributions in collecting tutional development, that hobble the sector- and disseminating poverty data and analysis. wide reforms and programs needed to produce Poverty Assessments (PAs) have been completed sustainable results. IDA has responded to this for 90 percent of eligible IDA borrowers, and challenge with several program innovations, Public Expenditure Reviews (PERs) have been including new sector-wide and country-wide conducted for almost half. Still, linkages between programmatic and adaptable lending instru- country programs and poverty outcomes are ments, a stronger field presence, and greater pri- not always well articulated. More needs to be ority to institutional change, with a fuller done to integrate broad-based growth poverty recognition of the importance of partnership and reduction strategies into macroeconomic and ownership of policy reform. IDA has also sector strategies and interventions. Improve- increased its participation in country-led, donor- ments are needed in setting program priorities coordinated, sector-wide programs in education that will have the greatest impact in reducing and health; given more attention to multi- poverty. For this, the quality and policy relevance country (regional or global) programs; and, of economic and sector work (ESW) and the most recently, increased its support for linking monitoring of linkages between IDA-supported social sector reforms more closely with poverty policies and programs and poverty outcomes reduction goals through assistance to countries continues to need attention, with particular in their preparation of PRSPs. Each of these inno- emphasis on strengthening borrower capacity to vations shows significant promise, but also pre- collect and analyze poverty data, monitor sents operational challenges that call for further progress, and enhance program outcomes. results-based process and procedural changes on the part of IDA, in conjunction with other Expanding access to social services. IDA's donors. commitment to increase social sector lending has been highly satisfactory over the IDA10-12 The Challenge of Broad-Based Growth period. Social sector investment lending is up In promoting broad-based growth, the second from 20 percent of total IDA investment lend- major component of IDA's poverty reduction ing in the late 1980s to a sustained level of 40 framework, IDA has traveled a considerable percent since 1995. With the increase, IDA distance in implementing its commitment to became the largest financier in human devel- improve the poverty and social dimensions of opment and a major source of analysis and structural adjustment operations and to strengthen advice, particularly in Africa. Through its ana- its support for PSD. Nevertheless, acceleration of lytical work, lending, and technical assistance, broad-based, job-creating growth remains a major IDA has helped countries strengthen their human challenge. development policies, increase their level of social expenditures, expand access to basic ser- Gains from adjustment lending. Bank-wide vices, and, particularly in the transition countries, project ratings indicate that adjustment operations xxv ii IDA's Partnership for Poverty Reduction have improved their development effectiveness. factors to the weak broad-based growth out- Satisfactory outcome ratings have risen from 65 come. IDA's lending for agriculture and rural percent of completed projects in IDA9 to 80 per- development, largely overlooked in the cent in IDA11-12. In countries committed to IDA10-12 replenishment agreements, has reforms, IDA adjustment operations have con- declined from 23.4 percent of commitments dur- tributed to macroeconomic stability and the ing IDA10 to 9.6 percent during the first year of removal of key economic distortions, but evi- IDA12. It appears that IDA has withdrawn, dence on income and employment generation appropriately, from unsuccessful efforts, such as for the poor is less clear. Why has it been so dif- top-down systems of extension services and ficult for development partners, including IDA, complex rural development activities that had to support countries in moving beyond the inter- higher than average failure rates, but it has not mediate outputs of adjustment programs (new put improved approaches in place. Adjustment policies, legislation, privatization) to achieve lending and related ESW have contributed to rel- better poverty reduction results? evant policy reforms in a number of IDA coun- tries, improving agricultural price incentives and exports. Reform efforts, however, have not resolved other structural and institutional con- countries in moving beyond the intermediate straints that impede agricultural productivity and outputs of adjustment programs to achieve marketing and rural poverty reduction. better poverty reduction results? In the context of robust lending for social funds, rural infrastructure, and health and edu- cation, decreases in agricultural and rural lend- Many IDA countries have been inconsistent ing cannot be assumed, a priori, to be a bad in their implementation of reform programs, thing. However, given that most of the world's short-circuiting their ability to sustain high growth poor will continue to live in rural areas well into rates and to implement the complex structural the twenty-first century, and that agriculture reforms necessary for long-term poverty reduc- accounts for a sizable share of poor countries' tion. It has also proved difficult to come up GDP, the lack of consensus regarding rural with practical policy measures to achieve not just development strategies among development growth, but broad-based growth, and to address partners and the reduced priority of agriculture the factors that affect the ability of the poor to in aid programs are causes for concern. The sec- participate in the opportunities created by tor requires renewed attention on the part of the growth-oriented policies. Of concern is evalua- international development community, with tive evidence, including testimony of stake- IDA's role to be determined in coordination holders, that the links between policy change, with others. sector strategy, and the expected pattern of In contrast, as efforts to stabilize macroeco- growth are weakly articulated in IDA CASs, and nomic conditions took hold in the 1990s, IDA the mechanisms that are to transmit the bene- increased its PSD activities and, in certain sub- fits of policy changes to the poor are not spelled sectors, has had some success. But CASs still tend out. There is an urgent need for work on the to lack well-articulated PSD strategies, which in determinants of pro-poor growth in specific part reflects differences in perspective between country circumstances and for greater clarity IDA and its borrowers and continuing difficul- and specificity in how IDA assistance can best ties in linking IDA, International Finance Cor- support borrowers in setting and advancing poration (IFC), and Multilateral Investment country-specific priorities. Guarantee Agency (MIGA) activities into a coher- ent whole. In the past few years, IDA has forged Lags in rural and private sector develop- a closer working relationship with IFC. Consid- ment. Lags in both rural and private sector erably greater synergies, however, can be tapped development are also important contributing and selectivity exercised by further delineating xxviii Overview IDA's role in improving the country policy frame- ical work needed to identify the actions required work, IFC's connectivity to private corporations, for the poor to share in the overall gains. The and MIGA's catalytic function in foreign invest- PRSP initiative, launched after the negotiation of ment, in addition to shifting activities among insti- IDA12 and based on CDF principles, represents tutions and dropping activities better pursued by a major step in realizing these goals. It offers a other actors. Although the Bank's prior CAS ret- new way to link poverty analysis, country-led rospective did not analyze the treatment of PSD, policy design and program choice, partner the 2000 CAS report notes that by increasing the involvement, and monitoring. In this context, IDA early involvement of IFC and MIGA in CAS should increase its support for strengthening preparation, PSD programming has been borrower capacity to track programs, analyze improved. Thus, it proposes a deeper integra- results, improve program outcomes, and inform tion of CASs and work programs in selected broad public debate. In addition, IDA manage- countries. ment should continue to consider how to While many IDA projects have had success- improve the role of Sector and Thematic Strat- ful outcomes, a selection of IDA Country Assis- egy Papers (SSPs) in identifying knowledge and tance Evaluations (CAEs) gives relatively low strategic gaps, with a sharpened focus on poverty ratings to the effectiveness of IDA's PSD work reduction, as a guide to clarifying the kinds of and underscores the need to focus more sharply activities that make the most sense for the World on the investment climate. These evaluations also Bank Group. reflect past weaknesses in IDA's support for small and medium-size enterprises and rural finance-two areas with new strategies that aim IDA's comparative advantage in support of to improve future efforts. In addition, inade- broad-based growth andpoverty reduction quate focus on the institutional and policy frame- lies at the strategic level. work for privatization operations has meant that efficiency gains have often not been widely shared. In line with IDA12 commitments, such Integrating Gender, the Environment, operations are now giving increased attention to and Governance social protection and environmental issues. Although the IDA10-12 replenishment under- Efforts to increase the private provision of infra- takings that called for integrating gender, envi- structure are more recent and show promise. ronmental sustainability, and good governance The PSD strategy paper now being prepared into IDA's country assistance programs were should explicitly define the rationale for a clear highly relevant, progress has been constrained division of labor and greater selectivity within by a lack of consensus, within IDA and among the World Bank Group and vis-a-vis others. It its member countries, on the priority of these should also identify ways to improve IDA's sup- concerns, and on IDA's appropriate role in port for the policy and regulatory environment advancing them. While IDA has made important for private investment, the proper institutional contributions in each of these areas, its success foundations for privatization, the expansion of has been limited relative to its commitments. the private provision of infrastructure and social services, and the overall distributional impact of Slowprogress in gender and environmental PSD activities. mainstreaming. In implementing the commit- ment to reduce gender disparities in health and IDA's strategic role. IDA's comparative advan- education, IDA assistance has achieved satis- tage in support of broad-based growth and factory results, in part because of significant poverty reduction lies at the strategic level, not country ownership and effective partnerships only in lending for adjustment programs and key with other development actors, and in part investments in support of broad-based growth, because interventions have been underpinned but also in supporting the research and analyt- by rigorous analytical work. In countries with xxix IDA's Partnership for Poverty Reduction large gender disparities, IDA has integrated gen- although failures to implement environmental der into virtually all education projects, con- safeguard policies adequately in a few high- tributing to positive trends in girls' school visibility projects have drawn public and Bank enrollments. It has also contributed to improve- attention to the continuing need to further ments in maternal health. IDA assistance, how- strengthen the Bank's environmental assessment ever, has been weaker in promoting women's process. Safeguards and mitigation should be a participation in the economy and in improving minimum threshold, but not the main thrust of borrowers' institutional frameworks for gender. the environmental sustainability strategy. Projects These shortcomings have undermined the effi- in all sectors need to be designed to ensure envi- cacy of the assistance and led to disappointing ronmental quality and sustainability, but IDA has results at the country level. yet to provide guidance to define, promote, IDA's implementation of environmental monitor, or evaluate this broader objective of undertakings has also been partially satisfac- mainstreaming. tory. By the end of IDAl1, National Environ- Lack of country interest in borrowing from mental Action Plans (NEAPs) had been IDA for gender and the environment has been completed for nearly all IDA countries, but their a constraining factor, in part because of the quality has been mixed and their use in CASs has availability of grant funding from other sources. varied greatly. To improve the treatment of the But IDA has also lacked clear accountability for environment in country assistance programs gender and environmental mainstreaming. In where environment is a priority issue, the Bank's both areas, IDA needs to concentrate on strength- 2000 CAS review identifies several "next steps." ening borrower institutions and policies as a Drawn from recommendations in OED, extemal, matter of priority. In addition, based on com- and self-evaluations, these steps call for a bet- prehensive diagnoses, it should better integrate ter integration of environmental considerations gender and environment into CASs, and increase into ESW, a strengthening of the link between gender and environmental diagnoses in the eco- environmental considerations and poverty reduc- nomic and social analyses carried out in prepa- tion measures, and a better incorporation of ration of IDA-supported projects, especially in environmental indicators and trends in CAS diag- situations where gender disparities are high or noses of country development issues. These environmental threats serious. IDA also needs to steps are essential to mainstreaming environ- clarify the scope of the Bank's gender and the mental considerations into IDA activities, but they environmental mainstreaming policy, strengthen are only first steps. the management for gender and environmental issues, and establish M&E systems to regularly Safeguards and mitigation should be a track and periodically evaluate IDA-wide minimum threshold, but not the main thrust progress. New strategies to guide gender and environmental activities, currently under dis- of the environmental sustainability strategy cussion within the Bank, give IDA an opportu- nity to deal with these matters. While lending for environment projects remains at about the level reached in IDA9, IDA The criticalfactor of governance. Although has increased the number of environmental largely missing from the Bank's 1990 poverty components in projects in key sectors. This strategy, good governance was identified in the assistance has helped to increase public and IDA10-12 period as a critical factor that affects govenmmental awareness of environmental issues, all other areas of program emphasis. IDA was contributing to, for example, a reversal of land slow to comply with its IDA1O governance degradation, improved incomes from arid lands, undertakings, but over the past four years it has and strengthened environmental capacity. More- given priority to public sector reform in coun- over, IDA has made efforts to help countries try assistance programs and openly addressed improve their environmental assessments, issues of corruption. To strengthen its capacity xxx Overview for expanded operational work, IDA has the CAS in setting program priorities, improving increased staffing, analytical work, and policy the performance-based allocation (PBA) system guidance. As a result of these efforts, country dia- to tighten the link between country policy per- logue and reporting on governance issues have formance and lending allocation, increasing picked up, and lending for public sector reform stakeholder participation in projects and pro- has grown. In addition, institutional development grams, and strengthening aid coordination issues are increasingly addressed in lending among donors. While the PRSP initiative has operations and PERs, and more attention is given a significant impetus to these reforms, focused on wider issues of public expenditure IDA, together with its development partners, management, although capacity building for still has a considerable distance to go in con- effective and accountable processes remains a solidating and institutionalizing improved part- major task. nership practices. But there are shortfalls. The treatment of gov- ernance is not yet consistent across countries. There has been an increasingfocus on the Greater coordination among external agencies country as the unit of account in the design in regard to governance conditionality and assis- tance is needed to make progress on the broader governance agenda. More support is needed, for example, to bolster the rule of law, which is cen- Improving Program and Country Selectivity tral to an environment conducive to investment, as well as to alleviate personal insecurity, a Enbancing the role of the CAS. There has principal concern of the poor. IDA currently been an increasing focus on the country as the supports this work in only a handful of coun- unit of account in the design and assessment of tries, but it does not have the comparative advan- IDA assistance. The CAS-as both a document tage to deal with all aspects of judicial and legal and a process-has become the main program- reform (including law enforcement). IDA's planning vehicle for this shift. Its self-evaluation strengthening of public financial accountability content has improved considerably in recent in borrower countries-a previously neglected years. As a result of more comprehensive diag- area-has gained momentum, but it still requires nosis and greater participation in their design, a considerably increased effort, focused on CASs have contributed to program relevance, capacity building in borrower countries at all lev- greater country ownership, and better aid coor- els of government. In addition, governance has dination. As the Bank's 1998 CAS retrospective become a factor in determining CAS lending highlighted, however, at the start of IDA12, less levels, with a "governance discount" applied to than 40 percent of CASs discussed selectivity in allocations, but this mechanism needs rethink- key program areas, and fewer linked IDA's strat- ing to ensure more effective treatment of gov- egy with its comparative advantages, including ernance performance. prioritizing its activities across and within sec- tors and by instrument. FY00 CASs show some The Process Dimension improvement in program selectivity, which As it has refocused the development agenda, IDA reflects an increase in attention to this issue by has also been at the forefront of change in the member governments and management, but aid "business." IDA's Replenishment Reports progress remains uneven. With the introduc- put particular emphasis on greater selectivity in tion of PRSPs, the role of the CAS will change the use of aid and on improving partnerships by again. As management has indicated, as of July increasing participation and coordinating aid 2002, CASs will normally be based on PRSPs with countries' own development programs. while retaining their identity as business plans In line with replenishment commitments, this for the World Bank Group. Still, the challenge reform agenda has focused on strengthening of program selectivity will remain. Moreover, four key IDA processes: enhancing the role of consistency now needs to be achieved among xxxi IDA's Partnership for Poverty Reduction criteria for assessing the quality of PRSPs, CAS cessive replenishment recommendations, cul- lending triggers, and IDA's PBA assessments. minating in IDA12, with its emphasis on coun- try-led partnerships that combine the objectives Strengthening the system of performance- of country ownership and donor coordination. based allocations. IDA's PBA system-the But progress thus far has been limited, and principal mechanism for achieving country selec- uncoordinated aid programs continue to impose tivity-now better directs credits to countries with heavy burdens on recipient countries and limit good performance ratings than at the start of the impact of aid programs. IDA10. This improvement reflects increased Although progress was modest in IDA10-11, knowledge about the causes of growth and IDA has accelerated its efforts in aid coordina- poverty reduction, as well as specific replen- tion, particularly in the past three years. In- ishment recommendations, which include giv- country coordination has been reinforced by ing greater weight to govemance, environmental the increased placement of IDA country direc- sustainability, and nondevelopmental expendi- tors in the field. IDA has given greater empha- tures in assessing country performance. Since sis to harmonizing procurement procedures and there are relatively few top performers (and evaluation processes among multilateral devel- most are small economies), the bulk of IDA opment banks. There has been a trend toward lending goes to countries in the middle per- country-led coordination mechanisms. IDA has formance range. Some shortcomings that remain increased its participation in sector-wide in the design and implementation of the allo- approaches (SWAps), an aid mechanism that cation system are related to two key issues: combines government leadership in the design equitable treatment across countries and the of a strategy, an agreed medium-term expendi- strength of the links between performance ture framework, external assistance provided assessment criteria and countries' continuing within that strategic framework, and agreed poverty reduction. These issues could be processes and indicators for monitoring progress addressed by rethinking the current "gover- on the ground. These SWAps are one of the few nance discount" methodology, which has failed examples of formally structured program coor- to capture some borrowers with serious gover- dination mechanisms focused on both design nance problems; further adapting the assess- and implementation. As such they should serve ment criteria; and increasing transparency and as key building blocks to support recent CDF and dialogue with partners.2 PRSP initiatives. Overall, the shift in approach to country ownership and partnership is clear. Few of IDA's program and process objectives Consolidation and institutionalization of this can be satisfactorily achieved without shift, however, require the move from ad hoc to structured arrangements at the country level and a greater commitment to harmonization of policies and procedures at the corporate level Building More Effective Partnerships by IDA and the other multilateral and bilateral agencies. From ad hoc to structured aid coordination. Few of the program and process objectives of Moving beyondprojectparticipation. A sec- IDA's Replenishment Reports can be satisfacto- ond key feature of the move toward more effec- rily achieved without enhanced aid coordination. tive partnerships is increasing the participation During IDA10-12, the focus has moved beyond of borrower country governments, civil society, the mechanics of donor agency coordination to and the private sector in IDA program design, improved aid management, preferably led by implementation, and monitoring. The percent- recipient countries, with donors directing their age of IDA projects with at least some primary support to sound, country-designed policies and stakeholder participation nearly doubled from programs. These changes are reflected in suc- 1994 to 2000, reaching 83 percent of all IDA proj- xxxii Overview ects. PAs and PERs have recently become more comes for a third of the country programs were participatory, although clients remain dissatisfied fully satisfactory and the bulk of the remainder with the extent of local capacity building. The were moderately satisfactory. Both the portfolio participation of stakeholders in CAS preparations and CAE reviews highlight that development has also increased, but the impact on CAS design outcomes are influenced by exogenous factors, in all but a few cases is unclear. Moreover, the borrower and partner performance, as well as move beyond project participation to participa- IDA's own performance. They also show a tion in analytical work and strategy design has dynamic of improvement over the period. Finally, intensified issues of representation, approach, they point to issues at the corporate level that and costs. need further work. Getting to Results Accountability for policy compliance. IDA's policy framework remains highly relevant. But The Corporate Issues a clarification of the rationale, intent, and scope IDA has accelerated organizational changes since of IDA's policy is needed in certain priority areas, the start of IDA10. Its country focus and respon- particularly PSD, gender, and the environment. siveness are stronger, with some 24 IDA coun- Recently, IDA management has responded to try directors now in the field. It has introduced Inspection Panel investigations by allocating innovative lending instruments to increase flex- more resources to quality assurance and com- ibility and institutional development impact. pliance monitoring of safeguards policies. But Along with these transformations has come a more needs to be done to clarify the assignment strong focus on improving the quality of IDA per- of accountabilities, improve staff training, and formance at the project and country levels. This realign staff incentives. Regular monitoring and emphasis has begun to show significant results periodic evaluation also need strengthening at the in improvements in the performance of the corporate, country, and project levels. These lending portfolio. Outcomes of completed proj- issues underscore the importance of rebalancing ects have risen to 70 percent satisfactory, close the matrix toward the implementation of global to parity with the International Bank for Recon- priorities and strengthening the role of sector struction and Development (IBRD, or World strategies in setting program goals, articulating Bank). The institutional development impact IDA's role in meeting them, and helping to and sustainability of IDA projects have also strengthen implementation strategies. improved, although from very low levels. Project-level performance is an important indi- Investing in analytical work and capacity cator of IDA's contribution to country develop- building. Broadening the range of lending instru- ment efforts, but it tells only part of the story. In ments has increased IDA's flexibility and respon- recent years, IDA has significantly shifted its siveness. Both adaptable lending and new types focus from individual projects to the "higher of adjustment lending facilitate IDA's support of plane" of country programs. OED CAEs and institutional reforms and the tailoring of its assis- Bank research results suggest that the two most tance to country circumstances. But achieving fur- important determinants of country program out- ther improvements in program outcomes still comes are the level of borrower commitment to depends on ensuring adequate, high-quality ana- the objectives laid out in the CAS and the extent lytical work and enhancing the capacity-building to which the specific components of the strategy, dimensions of IDA's assistance. instrument mix, and the efficacy of country pro- gram implementation, including partnerships, Deploying resources. Cutting across all other are adapted to country circumstances. Reflecting issues is the matter of aligning resources to these multiple factors, the 24 most recent CAEs priorities. Three sets of issues are of particular (most of which cover assistance over the period relevance. First is the availability of budget of the 1990s) found that the development out- resources for country priority lending and non- xxxiii IDA's Partnership for Poverty Reduction lending services. As highlighted in the back- ing several that are highly consistent with the ground studies for this report and discussed in major findings and recommendations of this Bank strategic direction papers and related budget review. They are: (a) the establishment of a proposals, administrative resources declined for management committee whose principal role is both country lending and ESW over the period to align corporate strategies, ensure institutional of this review. Second, despite the Bank's poverty selectivity, and manage tensions between cor- reduction mission, country poverty level and porate priorities and country programs; (b) the performance factors have been relatively minor continued sharpening of the framework for cor- considerations in budget allocations. Regional and porate priority setting, and definition of criteria country budget allocations do not explicitly dis- for selecting those priorities; (c) the implemen- tinguish between IDA and IBRD countries. And, tation of more accurate tracking and manage- while corporate and intraregional decisions have ment of nonlending services; (d) the introduction begun to provide more budget resources to of budget process reforms, as noted above, poorer countries, consistent with performance, involving the full funding of CASs within a the impact to date has been small. There are com- rolling three-year planning and budgeting hori- plicating factors in linking budget to poverty zon for FY02 and beyond; and (e) the further levels-for example, the differences in operating promotion of decentralization and rebalancing costs among countries. However, poverty could of the management matrix, including additional be given greater weight in budget allocations clarification of accountabilities. through the use of a country norm methodology, an approach that to date has only marginally influ- Could IDA Have Done Better? enced decisions. Third, the programming and IDA's efforts to recast its mission; reach out to budget system has lacked adequate mechanisms engage more broadly with its development part- for reconciling commitments and budget allo- ners; and reposition its country staff, country pro- cations. This is a particular problem for CASs, grams, and lending instruments were all highly which generally serve as a planning instrument relevant adjustments that have contributed sig- for a two- to three-year period but are approved nificantly to increasing development effective- separately from annual country budgets. It is ness. Moreover, the recent CDF and PRSP potentially significant, therefore, that in this year's initiatives provide important potential for further budget process Regions are not only carrying out improving program implementation and results. detailed costing of CASs, but also, for the first As a consequence, the IDA program at the mid- time, are preparing a three-year rolling budget point of IDA12 is different in important ways to minimize unexpected movements in Regional from the program at the start of IDAIO in FY94. funding. Its portfolio performance has steadily improved, and its contribution to development outcomes Cutting across all other issues is the matter in the future has been enhanced. The impact of IDA's efforts would likely have been greater, however, if it had moved more quickly in the mid-1990s to increase attention to Recent management proposals. Over the governance and institutional impediments con- period covered by this review, there has been fronting country development, and directed a commendable buildup of management self- more of its analysis and dialogue to identifying evaluation, learning, and proposed new actions, ways to improve rural and private sector devel- as identified throughout this report. While it is opment and economic opportunities for too early to judge the efficacy and efficiency of women-all measures needed to stimulate many of the recent initiatives, their relevance to broad-based, pro-poor growth and poverty IDA's evolving role is clear. In addition, in reduction. IDA's impact would also have likely preparing for this year's budget exercise, man- been enhanced if it had used its resources more agement has proposed further initiatives, includ- selectively, not only among countries based on xxxiv Overview demonstrated commitment to poverty reduc- at the strategic level in supporting economy- tion, but also in its choice of program approaches wide, sector-wide, and government-wide and instruments, based on more adequate diag- reforms, and on capacity building. At the same noses of country circumstances and its own time, IDA should play a more proactive role at comparative advantage in specific country con- the global level to facilitate achieving the har- texts. Finally, IDA's effectiveness would likely monization and coordination of external assis- have been further enhanced if it had found tance needed to make greater progress toward ways to improve capacity building in borrower the overarching goal of poverty reduction. countries in partnership with others, developed the necessary indicators and monitoring IDA shouldplay a moreproactive role at processes for a sharper focus on results, and, the global level to facilitate achieving the together with partners, moved considerably fur- harmonization and coordination of external ther in coordinating efforts at the country level to support country-led programs. These chal- assistance needed. lenges have been described in numerous OED reports, and many of them have been addressed Next Steps in management's self-evaluation reports and IDA could take several steps to build on the proposed future actions. The key to improved improvements of the past seven years in the development outcomes in the future lies in development effectiveness of its country and aligning resources behind responses to these global roles: challenges in the context of the CDF/PSRP * Be more selective. IDA needs to do more to process at the country level. increase its country, program, and corporate selectivity. This calls for further improving Looking Forward IDA's PBA system and ensuring consistency The IDA10-12 review period has witnessed con- among the PRSP, CAS, and PBA processes. It siderable change-in borrower countries, in also entails strengthening sector strategies and IDA, and in the development system. The better integrating them into CASs, based on IDA10-12 policy framework has encouraged countries' poverty reduction strategies, to help IDA to move in directions that are relevant to determine where IDA should take a leading or the needs of its borrowers and that remain a supporting role in coordination with other broadly germane for the future. But IDA and its donors. IDA also needs to clarify its priorities partners are still in the process of implementing and objectives across sectors and themes to the core elements of the framework, reinforced identify more clearly what it can (and cannot) by new initiatives that were introduced during commit to do. Because this corporate-level IDA12. IDA now needs to deepen and broaden selectivity cannot be determined effectively the gains from the existing policy framework by: in isolation from other agencies' strategic deci- * Focusing on implementation sions, IDA needs to become part of a broad, * Adequately aligning resources to strategic agency-wide harmonization action plan. In priorities practice, quantitative lending targets for sec- * Consolidating the IDA mandates. tors, lending instruments, or groups of coun- tries can serve as disincentives to greater To achieve these goals, IDA will need to programmatic and country selectivity. adjust further its role at both the country and the * Focus on governance and capacity build- global levels, within the limitations set by ing. Every area of this review highlights the resources available for its lending and non- centrality of governance and public sector lending services. In its primary role of support- capacity building, with a view toward encour- ing country-based development efforts, IDA aging borrower governments to provide pub- should concentrate more on its areas of com- lic goods and services more efficiently and to parative advantage, which, for the most part, lie be more transparent and accountable to their xxxv IDA's Partnership for Poverty Reduction publics. To encourage more effective gov- * Clarify program objectives and policies. ernment and improved program implemen- IDA should articulate what it means by its tation, every aspect of IDA's assistance-from "focus on poverty reduction" and clarify its analytical work and design and supervision program objectives and policies in relation to of operations to monitoring for results- that goal. The record of the past seven years should have a capacity-building dimension. shows that it needs to accelerate broad-based This may require expanding IDA grant financ- growth and governance reforms as key inter- ing; it may also require instituting much more mediate objectives of its overarching goal of structured coordination with grant-giving poverty reduction. It also needs to link the agencies. While the governance agenda set objectives and operational policies of the out in the IDA10-12 Replenishment Reports crosscutting themes of gender, environment, remains relevant, recent experience suggests and PSD directly to poverty reduction and to that IDA, its borrowers, and other develop- clarify the policy of gender and environ- ment partners need to make a special com- mental mainstreaming. mitment to enhancing public expenditure * Better align resources with program pri- management and financial accountability. orities. Finally, in applying the lessons of the IDA should support, and link its future lend- past seven years, it is essential that IDA bet- ing to, the commitments of its borrowers to ter deploy its resources relative to its com- establish time-bound plans for sound public mitments through its budget process and full financial accountability systems. funding of CASs. Poverty has been a relatively Commit to effective development part- minor factor in budget allocations, although nerships. IDA should work at the country and this could alter with the further application of global levels to move to a new development a country norm-based methodology. Efforts architecture, including a shift from ad hoc to to cost CASs more realistically should be structured arrangements of aid coordination. accompanied by a process that ensures full One potentially important way forward is to funding of board-approved strategies. Also, use the PRSP as a concrete way to apply the ways are still needed to ensure funding of CDF principles. The implementation of the appropriate levels of due diligence and PSRP initiative is a priority for IDA12 and program-specific ESW and to ensure a greater beyond. Within this context, another priority focus on capacity building. should be to strengthen and broaden the application of sector-wide programs at the The Replenishment Process country level, following recent lessons on The findings of this review suggest that IDA's how to make these effective, results-oriented, replenishment process itself might usefully donor-coordinated approaches support be fine-tuned. It offers a valuable opportunity country-owned programs. At the global level, to discuss, at a global level, the experience IDA donors should ask the Bank's president and future direction of international devel- to facilitate a time-bound process involving opment assistance and to mobilize funding to the heads of bilateral and multilateral assis- support key objectives. As currently consti- tance agencies to achieve greater harmo- tuted, the process falls short of fully realizing nization in aid practices. The agenda should this potential. go beyond procedural issues to strategic con- Although consistent with an evolving con- cerns of program and country selectivity. sensus in the international development com- While IDA cannot and should not take the munity, replenishment undertakings have been lead in all aid coordination efforts, it can fur- both overdetermined and overloaded (for exam- ther adjust its own processes, and encourage ple, in specifying the shares of lending for sec- others to do the same, to achieve the much tors and countries and in the number and detail greater coordination needed to reduce today's of the recommendations). They have sometimes high aid transaction costs. been unrealistic about what IDA and its bor- xxxvi Overview rowers could reasonably accomplish in a three- should consider how to engage its partners in year period, having focused on inputs rather than monitoring and evaluating IDA13 perform- results, without addressing budget resources. ance and results. More important, IDA's replenishment process has * Define commitments in terms of moni- been disconnected from its development part- torable and achievable objectives, with ners, both borrowers and other assistance agen- realistic costing. IDA's replenishment under- cies, to the detriment of setting priorities and takings have tended to emphasize inputs and, applying its comparative advantage. Three too often, unrealistic output targets that do not changes could improve the process and, thus, take adequate account of the need for coun- the impact of future undertakings. try ownership if reform efforts are to be sus- * Develop a long-term vision focused on tained. It would be better for Replenishment results. As part of the IDA13 negotiations, Reports to focus on development goals and on management should be asked to develop, in the kinds of priority activities that IDA should consultation with borrowers, a long-term vision support in advancing those goals, while for IDA, clarifying what is meant by IDA's accounting for IDA's comparative advantage poverty focus, identifying ways to deploy IDA's and reflecting realistic costings of replenishment resources, and taking advantage of IDA's global commitments. In addition, Replenishment role as a complement to its country focus. Reports ought to agree on IDA performance * Engage developing countries in setting indicators and on a process of progress report- replenishment commnitments. The far more ing, recognizing that operating within CDF transparent and consultative process planned principles means moving even further away for the IDA13 negotiations goes well beyond from directly measuring the link between IDA the measures taken in IDA12 and should help activities and country development outcomes to set achievable IDA goals and improve imple- to new ways of tracking IDA's performance in mentation. Beyond the negotiations, IDA partnership with others. xxxvii Part I The IDA Review and Its Context The mission of IDA is to support efficient and effective programs to reduce poverty and improve the quality of life in its poorest member countries.... To achieve this, tbefocus must be on: sustainability-to achieve enduring development impact with an environmentally sustainable framework; and equity-to remove barriers and open up opportunities for the disadvantaged. -IDA12 Replenishment Report (p. iii) !4 - .A< ,V4,;::A. - " ' i', , ! i Introduction T he International Development Association (IDA) is a unique instru- ment of development cooperation. Its establishment in 1960 marked an unprecedented commitment by the international community to improve global welfare. IDA has made substantial and distinctive contributions to growth and poverty reduction in low-income countries through conces- sional finance, global knowledge, and aid coordination services. The largest source of concessional finance to low-income countries, IDA has provided an average of $6.45 billion annually (in constant 1995 dollars) to some 77 eligible borrower countries through the 1990s. The "development crusade" that gave rise to replenishment agreement between IDA and its IDA has reached a new consensus in recent donors.2 years focused on poverty reduction and stronger development partnerships. While IDA's basic IDA1O-12 Replenishment Undertakings features-as a separately funded but integral Before IDA10, agreements between IDA and its component of the World Bank Group-have donors focused largely on resource concerns remained much the same, its support for coun- (size of the replenishment, eligibility criteria for try development has broadened in line with this borrowers) and included general endorsement evolving consensus and the changing circum- of IDA's ongoing and planned activities. The stances confronting its borrowers.' extensive policy content of the IDA10-12 replen- Has IDA changed fast enough in recent years ishment undertakings (IDA10, FY94-96; IDAI 1, and in the right directions? Has it acted respon- FY97-99; and the first year of IDA12, FYOO) sibly to implement its commitments? As a result, makes this review of IDA's compliance and is it well equipped to assist its borrowers in an effectiveness especially important (see box 1.1).3 era of rapid technological change, borderless pri- The IDA10-12 agreements called for major vate investment, and an increasingly fragile nat- program transformation to strengthen the poverty ural environment? These questions underlie the impact of IDA's assistance. In broad terms, the mandate for this review as set out in the IDA12 IDA10-12 accords endorse poverty reduction 3 IDA's Partnership for Poverty Reduction Box 1.1 The IDAIO-12 Replenishment Undertakings The IDA12 agreement called for "a review of the IDA program during the WA1II)1 period and an interim review of IDA12, in,iud- ang perlormance in implementing the recommendations of the Deputies set out in each ofthese Replenishment Reports."' The specific undertakings related to these broad instructions center on: Sixnprogram priorites,, and Four processes:. -Povertyreduction * Aid coordination Envirionmental sustainability * Enhanced Country Assistance Strategy (CAS) design and-, .- Gender- . - z ' - .) 'implementation overnce'. * Participation * Private sector development ..* Performoance-base4 allocations. * Social sector development as IDA's overarching objective and instruct IDA tion accounted for some 14-18 percent. IDA's to: assistance, therefore, cannot determine the * Sharpen the poverty focus of its country assis- choices that governments make, although it can tance programs. support and influence those choices. Nor can * Direct assistance to expanding access to basic IDA alone be held accountable for country social services, fostering broad-based eco- development outcomes. The performance of nomic growth through private sector devel- borrowers and other development partners, as opment (PSD), integrating gender and well as changes in the global economic envi- environmental considerations into all activi- ronment, all influence those outcomes. IDA can ties, and promoting good governance. and should be held accountable, however, for * Increase operational effectiveness by more selec- how it deploys its resources in fulfilling its cor- tive use of resources, more participatory design porate commitments. (Did IDA do the right of country assistance programs, and better coor- things, taking account of others?) It should also dination with other development agencies. be held accountable for how effectively it shapes its assistance to meet borrowers' priorities and These issues form the agenda of this assess- circumstances. (Did it do things right?) It is in ment of IDA's compliance.4 Overall, they are these terms that this review examines IDA's highly relevant to the development challenges efforts over the past seven years. facing IDA borrowers. The comprehensive approach to poverty reduction and higher- Trends in development and aidL The period quality aid processes that they embody reflect covered by this review is very much a transitional accumulated lessons of development experi- one-in both country development and inter- ence (see Dollar and Prichett 2000; Kanbur and national aid. At the start of IDAIO, many devel- Sandler 1999; OED 1997a, 1998a, 1999a, 2000a; oping countries were plagued by slow or Tarp 2000). Individually, each of these areas of negative growth, major economic dislocations, emphasis makes sense. Together, however, they and rising official debt. Internal conflicts were have proved extraordinarily demanding for IDA on the upswing, and the political liberalization and its borrowers. that has come to mark the period was newly under way. Progress since then has not been IDAls Role in a Changing Development broad or deep enough to significantly reduce Environment poverty in most IDA countries. Although the Through the 1990s, total official development share of the population living on less than a dol- assistance to IDA-eligible countries amounted to lar a day declined during the 1990s, the num- about 8 percent of their combined gross domes- ber of poor people has remained roughly tic product (GDP). Of that amount, IDA's por- constant and inequality has worsened. But both 4 Introduction slow economic growth and conflict have been nornic reform-s, and imnplementing complex reform major contributing factors to these trends (see programs are formidable tasks-even where gov- box 1.2 and Annex B for details on poverty, emrnent conmnitments to reform are clear. growth, and social trends). Governance problems and incomplete social and economic reforms A growing number of borrower countries have also been serious impediments. Behind have improved their economic management, these aggregate figures, however, stand a grow- ing number of borrower countries that have improved their economnic management, increased strengthened their social development with their rates of economic growth, and strengthened IDA's help. their social development with IDA's help (see World Bank 2000d, 2001b for diversity within An overview of IDA's assistance. IDA has countries). Some have also begun to tackle gov- been at the forefront of much of the renewal and ernance and public sector reforms. change in this period. In parallel, the development community has * Its financial assistance totaled $42.3 billion in reached a new consensus on aid policies and the period. Assistance remained fairly constant practices, including a sharper focus on poverty, through IDA10 and I1 and, after a drop in the partnership, and policy performance. The pace first year of IDA12, is expected to increase. of improvement in aid practices remains slow, * The bulk of that assistance went to the two but there is evident movement in useful direc- Regions with the largest number of poor peo- tions, reflecting the accumulated lessons of ple: Sub-Saharan Africa, which received 38.3 development experience (see box 1.3). These percent of IDA cormmitments, and South Asia, promising, though incomplete, transformations which received 28.2 percent. (See box 1.4 for require the deepening and broadening of reforms three country examples of IDA's assistance.) by both donors and recipients. * IDA also provided assistance for the unprece- This evolving development agenda has posed dented challenges of countries in transition difficult challenges for countries with limited and devised new approaches for assisting resources and institutional capacities. It is now countries emerging from conflict. widely acknowledged that external assistance, to * Continuing a shift begun earlier in the decade, be effectively implemented and sustained, needs the largest share of IDA's lending supported to be directed to countries' own strategies and pro- the efforts of countries to expand access to grams for change. Building consensus, aligning basic social services. Another substantial share resources in support of major social and eco- went to infrastructure development and Box 1.2 Poverty. Growth, and Conflict Some 12 billion peopleone of everyfive-live on less than a dollar a day. The share of the population living on less than a dol- j lars dayfelislowly in develoing countries durigtbel990s. from 28 percent in i98i to 23 percent in 1998, while population growth heldthe numberofpoorpeople roughly constant. Social indicators improved more, particularlyfor health and education, but the aggregate gaits are heavily influenced by rapid advances in China, which at the start of IDAIB accounted for a quarter of the world's poor. (See Annex 1 for more detail on poverty and social indiators.) Slow growth explains a large part of the weak poverty outcomes:poverty generally declined in countries whose economies grew rapidly and increased in those whose economies stagnateL or contracted (Revallion 2z00; World Bank 2001b). The overall I decline inextreme povertyduring the 19905 wasdtiven byhighorates of gwwth in countries with large numbers o poor people-: although increasing inequality is now slowing the rate of poerty reduction in several ulrries - - Civil conflict, which afflicted 17 IOA countries in the 1990s, also explains part cl the story. In Sub-Saharan Africa, for exam- pie, countries with btter policy environments achieved avelageGQP gains of 5.2 percent during the 1990s, while countries expe- riencing ivil strife or malor poltical disruptions registered only 0.2 percent growh. - 5 IDA's Partnership for Poverty Reduction Box 1.3 Tre n d s i n Of f i cia I Deve l o p me nt A s s i sta nc ce Flows of offictal development assistance (ODA grants and loans with a grant component of 25 percent or more) to IDA countries exhibited signs of fatigue through IDA10, declining from $50.0 billion in 1994 to $37.4 billion in 1997. A slight increase since then has brought ODA flows to $41.6 billion in 2000, still short of the decade's earlier levels. In addition, key changes in aid programs J 'over the past seven years have included: K4 An increase in the share of aid going to poor countries with improved policy performance ratings (Collier and Dollar 1999) - A more concentrated focus on poverty reduction as the objective of assistance programsl * More explicit attention to matters of governance in both aid allocatioris and programs * Greater emphasis on country ownership of externallyfunded activities,and Innovations in the provision of aid in support of country- led efforts ; *Heightened attention to the still elusive objective of aid coordination } New interest among the international development community in the provision of global public goods to advance thefight against poverty. These changes-in combination with improving country policies-hold promise for improved development outcomes in the future. Still, greater strides are needed in both country economic and institutional reforms and aid coherence and coordination among assistance agencies. ,,a. AsimnIidetein the recentarfticulation of international development goals and the linking of the enhanceddebt reduction initiatwe with countries' commitments to K ovoktopovtty reducfion and social sectorexpenditures. improved economic management-areas of IDA's performance at the project, country, and essential to sustainable growth (see Annex C sector levels. This emphasis has begun to show for IDA commitments and disbursements by significant results in improving the performance Region and sector). of the lending portfolio (see figure 1.1). OED • In support of its broadening development evaluations of completed projects exiting the agenda, IDA introduced new lending instru- portfolio in the first half of FY00 suggest that ments and program approaches to increase more than 75 percent of IDA projects can be its responsiveness, flexibility, and attention to rated satisfactory, reflecting improvements in policy and institutional impediments in bor- IDA and borrower performance.5 Data from the rowing countries. It deepened its country Bank's Quality Assurance Group (QAG)6 confirm focus by strengthening the role of Country improvements in the quality of the ongoing Assistance Strategies (CASs), increasing the portfolio and a remarkable convergence in the program and budget authority of country quality of project preparation and supervision for directors, and decentralizing staff to country IDA and IBRD countries.7 offices. In addition, it has tightened the link These gains have been achieved even though between country policy and institutional per- projects are becoming increasingly complex and formance and levels of lending. demanding. Over 85 percent of IDA projects * Three major new initiatives involving a cen- evaluated since 1997 were substantially demand- tral role for IDA-the enhanced Heavily ing for the borrower, and three-quarters were Indebted Poor Country (HIPC) debt relief substantially complex. While this reflects, in initiative, the Comprehensive Development part, the broader scope of the reforms countries Framework (CDF), and the Poverty Reduction are undertaking, projects that are too complex Strategy Papers (PRSP)-reinforce the and demanding may overwhelm borrower refocusing of the development agenda (see capacity. More than one in three IDA projects box 1.5). show unsatisfactory borrower implementation, including nearly half of the projects in Africa. Fur- IDA's performance. Along with these trans- ther progress will require increased capacity formations in IDA's way of doing business has building and further adaptation of assistance to come a strong focus on improving the quality borrower circumstances (OEDa). 6 Introduction - * __ | | I 0 I Mozambique,which became a member of the World Bank in 1984, pin the current strategy and core objectives and include (a) emerged from conflict in 1992 and has since made significant improving macroeconomic management (b) promoting private and accelerating advances in implementing market-based eco- sector-led growth; (c) refonning public sector management id) nomic policies, boasting one of the strongest privatization pro- accelerating agricultural growth and rural development and le) grams in Africa. Following a period of post-conflict assistance, promotingfaster human development IDA plays a key coordinating IDA's current portfolio comprises 16 projects estimated at $737.3 role by chairing the annual CG meeting, with local CGs focused | million in commitments. Recent projects include a fast-track on specific sectors meeting periodicallythroughoutthe year. IDA Flood Emergency Recovery operation, Railway and Port Restruc- also supports a sector-wide approach (SWAp) in health that has turing, and efforts to support the government's HIVAIDS plan. increased access to healt services, and donors are now work- Poverty reduction is the overall goal for the government and IDA ing togetherwith the governmentto improvethe qualityof health in the country. The 2000 CAS, which supports the government's services in the country. IDA's lending levels in Bangladesh have Five-Year Strategy and the Interim Poverty Reduction Strategy been constrained in recent years due to absorptive capacity con- Paper (IPRSP), focuses on three core objectives: (1) increasing straints, slow progresson structural reforms, and problems of gov- economic opportunities, (2) improving governance and empow- ernance and weak institutions. erment and (3) improving human capabilities. Donor assistance Ghana joined the World Bank in 1957 and IDA has since plays a vital role in supporting the country's economy an; financed some 94operations in the country, accounting for more accounts for approximately $600 million per year-more than 15 than $35 billion in lending. The active lending portfolio of 23 percent of GOP. A Consultative Group (CG), for which IDA is projects is one of the largest in Africa. Recent operations have chair, is the main coordinating mechanism for donor activities. included a second Economic Refonm Support Operation and Adapt- IDA is a partner in sector-wide programs (which involve an able Program Loans(APLs)for ConmunityWater Supplies, Urban agreed sector program and coordinated funding among donors) Development, and Agricultural Services. IDA's current GAS is tor health, education, transportation, and agriculture. supportive of Ghana Vision 2020, the national strategy for reduc- I Bangladesk joined the World Bank in 1972 IDA has financed ing hard-core poverty and achieving broad-based economic devel- morethan 182 operations in the country, with loanstotaling more opment. The CAS has two parts: Part 1, which sets out the than $9.4 billion. IDAs active lending portfolio for Bangladesh govermnent's poverty reduction strategy, and Part II, which pre- includes26 projects,valued at roughly $2.billion. A long-standing sent IDA'sbusinessstrategy. External assistance included some population program has substantially contributed to increases in $1.7 billion in commitmentsfor2000O1.The govemment has been family planning. Strong support in promotion of girls' education strongly involved in aid coordination, and Ghana is credited with has helped to boost secondary school enrollment rates. Effective being one of the two Comprehensive Development Framework cooperation with the government, IDA, the African Development (COF) pilot countries that have made the most overall progress in Bank (AfDB), and the Japanese Overseas Economic Cooperation fostering country-led, long-term development partnerships. The Fund has funded the Jamuna Bridge, which connects the north and widely regarded, ongoing health SWAp currently involves 17 south of the country. Efforts to build effective institutions under- donors and is characterized by strong government ownership. There is also some improvement in the sus- information on portfolio ratings of completed and tainability (resiliency to risk) and institutional ongoing projects.) development impact (the contribution of the Project-level performance is an important project to capacity building) of completed proj- indicator of IDA's contribution to country devel- ects.8 The share of IDA projects that substantially opment efforts, but it tells only part of the story. met their institutional development objectives In recent years, IDA has significantly shifted its rose from less than 30 percent of projects dur- focus from individual projects to the "higher ing IDA9 and IDA10 to 35 percent since the plane" of country programs. Evaluation and beginning of IDAl 1. Projects judged likely to be research results suggest that the two most impor- sustained have increased to nearly half, up from tant determinants of country program outcomes a third during IDA9. But long-standing problems are the level of borrower commitment to the with sustainability and institutional develop- objectives laid out in the CAS and the extent to ment continue to limit impact, more for IDA than which the specific components of the strategy, for IBRD projects. (See Annex D for detailed instrument mix, and the efficacy of country 7 IDA's Partnership for Poverty Reduction Box 1.5 Three Key Initiatives of the Late 1990s The Heavily Indebted Poor Country Initiative: ing to comparative advantage. Since March 1999, the COF The HIPC debt relief initiative was proposed by the World Bank approach has been piloted bi she West Bank and Gaza and in the and IMF and endorsed by 1180governments in the fall of 1996. It folowiug 11 counries Boliia. Cbte divoire, the Dominican i was the first comprehensive international effort to reduce the Republic, Eritrea, Ethiopia, Ghana, the Kyrgyz Republic, Morocco, et-ernal debtincluding muWliateral debt-oftheworld's poor- Romania, Uganda, and Vietnam. The September 20W progress iestandmostindebted countriesArmajorreviewrin 1999produced report found that 9 of the COF pilot countries demonstrate good an enhanced HIPC initiatve that is deeper, broader, and faster" - progress in determining a long-term vision and strategy, though than the original framework. As of February 2001, 22 countries overall progress in fostering the development partnership envi- had reached their decision point under the enhanced HIPC and sioned by the CDF varies by country. The Bank's current Strate- i 'arenowreceivngdebtservicethatwillamoounttoabout$34bil- gic Framework puts the COF at the center of the institution's lion overtime, or a reduction of S20 billion in net presentvalute strategic orientation for the coming years. of their outstanding debt. In the long run, the policy implications. of the HIPC initiative, which includes placing debt relief within Poverty Reduction Strategy Papers (PRSPJ Program: the overall framework of poverty reduction and improving the In September 1999, the Development and Interim Committees of policy dialogue between the poorest countries andtheir multi- the World Bank and the IMF endorsed PRSPs as the new frame- lateral creditors, may be as important as the initiative's imme- -work for Bank and Fund efforts to achieve sustainablepoverty diate fiscal impacts. ; ' .' reduction {World Bank 201c)t PRSPs have become-the basis for concessional lending from the World Bank and the IMF and for Comprehensive Development Framework: debt relief under the enhanced HIPC; they are a keymechaimsol Introduced by World Bank President James Wolfensohn in Jan- for improving the policy performance of the poorest countries uary 1999, the COF is a holistic approach to development, which -,through an emphasis on clearly defined, monitorable objectives. aims to balance macroeconomic concerns with social and Built on the four COF principles, PRSPs are to be country-owned structural development requirements. The CDF is anchored in four and gio iparicpatoryprocessandshouldserveasthe interrelated principles that guide development assistanceonthe framework for other donor assistance. The PRSP benefits from country level: a long-term holistic vision and strategy; enhanced strong coordination between the Bank and the Fund (with the country ownership of development goals and action; more strate- Bank taking the lead on the social and structural framework gic partnership among stakeholders; and accountability for and the Fund leading on the macroeconoMic framework) that development results. The CDF approach relies on country lead- includes oversight from a Joint Implementation Committee and ership, with development partners working selectively accord- joint assessments of PRSPs by staff from both organizations. program implementation, including partnerships, tance Evaluations (CAEs) identify several key are adapted to country circumstances.9 determinants linking country-level program out- On a Bank-wide basis, country program out- come with IDA performance: comes are not strongly associated with country * Diagnosis. IDA's diagnosis of major devel- income. Moreover, it appears that with skillful opment issues and constraints-what needs strategy design and effective Bank and partner per- to be done-is generally good, but the qual- formance, a country strategy can be relevant and ity of diagnoses varies by issue and sector. a country program outcome can be satisfactory Analysis of macroeconomic issues and con- even in countries with weak policies or inadequate straints is usually strong, but links between institutions. What is important, in addition to a gov- stabilization and growth are not always artic- ernment's commitment to reform and capacity ulated; and the overall impact of Public development, is the extent to which IDA's assis- Expenditure Reviews (PERs) and Poverty tance strategy, projects, processes, and partnerships Assessments (PAs) is strongly correlated with are judiciously adapted to the country setting. their quality, which has been highly varied in More specifically, as reported in the OED the past, although improving in recent years. Annual Review of Development Effectiveness * Focus on poverty. As discussed earlier, IDA has 2000, reviews of completed OED Country Assis- sharpened the poverty orientation of its coun- 8 Introduction Improvements in Project Outcomes, Figure 1.1 Institutional Development, and Sustainability in IDA/Blend Countries 100 90 - E ID Impact * Sustairiability D Outcome 80 - (% substantial) (% likely) (% satisfactory) 70- 60 60 50- CL 40- 30 -~ 20- 10 IDA9 (1991-93) IDA10 (1994-96) 1DA11+ (1997-00) IDA Replenishment Periods try programs. Economic growth, a necessary sensus about reform as critical to IDA pro- but not sufficient condition for poverty reduc- gram outcomes. CAEs have pointed to numer- tion, is at the center of nearly all country ous past examples of lending to promote strategies, as is the provision of basic social reforms, either through adjustment or invest- services. However, OED analysis and Bank ment lending, before enough consensus has policy research suggest that equity affects emerged, thus incurring avoidable develop- the poverty impact of growth and that safety ment risks. nets and empowerment of the poor deserve * Assessing ownership. IDA and governments increased attention. More needs to be done may agree on broad objectives, but may dis- to integrate broad-based poverty reduction agree on the measures and timetables to strategies into macroeconomic and sector achieve them. Concrete actions and track strategies and interventions. Also, inadequate records are better indicators of ownership attention by IDA and other donors to poverty than statements of intent. Instruments for monitoring and evaluation (M&E) has meant assessing ownership are coming into wider use that significant knowledge gaps persist regard- (and lending instruments evolving to better cal- ing linkages between policies and programs ibrate with their findings), but such assess- commonly supported by IDA and poverty ments are still not systematically mainstreamed outcomes. into project and program preparation. * Balancing corporate and country priorities. * Diagnosing institutional development. IDA's IDA has improved its client focus. But client contribution to institutional development at ownership does not eliminate divergences the country level has been modest, reflecting between IDA and country priorities, nor con- the inherent difficulties of institutional change flicting views on "right" policies. OED eval- and capacity building. IDA's diagnosis of uations have identified inadequate borrower institutional, political, and governance con- commitment as the most important reason for straints has traditionally been weaker than its poor policy or program implementation and economic and technical diagnoses. Improve- have emphasized the level of country con- ments have recently begun to show at the 9 IDA's Partnership for Poverty Reduction country level, but further progress is needed policy dialogue, and lending. It has helped coun- to articulate comprehensive institutional and tries lay foundations for renewed growth and governance strategies. accelerated poverty reduction through improved * Estimating capabilities. Several CAEs found economic management and increased invest- patterns of over-optimism in IDA's estimates ments in basic social services. In recent years it of the receptivity of borrower governments has also brought governance to the fore as a crit- to IDA's advice, their willingness to undertake ical development issue. Compliance remains difficult reforms, and their capacity to imple- uneven, however, across and within areas of ment reform measures. In particular, pro- program and process emphasis, with limited grams have often underestimated the political progress in integrating PSD, gender, and envi- difficulties and obstacles to rapid change of ronmental sustainability into country assistance long-term socioeconomic systems, especially programs. in transition countries. Assessed against its ambitious goals, the devel- * Being selective. At the country level, selectiv- opment outcomes of IDA's programs have been ity requires identifying interventions that are partially satisfactory.'° Although IDA has done well consistent with IDA's comparative advantage in helping countries to lay foundations for eco- relative to its partners. CAE reviews and the nomic growth and poverty reduction, the record Bank's two recent CAS retrospectives suggest of IDA countries in sustaining growth at high that IDA is getting better at establishing pri- enough levels, over long enough periods, and by orities for country programs, but still has room measures adequate to benefit the poor is mixed. for improvement. Justifying IDA's presence in This reflects a host of non-IDA influences on many sectors by its convening role and capac- development outcomes, including regional con- ity for policy analysis may underestimate the flicts, weak domestic capacities, mixed policy capacity of other actors to take the lead in pro- performance, variable aid policies, and exogenous gram interventions, or fail to take into account shocks. This said, IDA's own performance, while the need to use IDA administrative resources having significantly improved over the review selectively to achieve results. period, could be enhanced still further and con- tribute even more positively to development out- The remainder of this report focuses on IDA's comes. It needs to clarify corporate objectives and performance in the aggregate on its sector and accountabilities for implementing them, espe- thematic replenishment undertakings, as well as cially in some key, crosscutting areas. It needs still on related process reforms. It draws on a wide greater selectivity in resource use among coun- range of OED country and sector evaluations and tries and better prioritization of actions linked to other sources to do this. poverty reduction within countries. Some famil- iar implementation challenges persist as well, IDA has made major strides in recasting its especially in the area of institutional development, mission-to make poverty reduction itS and the alignment of resources to program pri- orities remains incomplete. Overarching objective. Reviewing IDAs Performance Overall, IDA has made major strides in recast- This is the first independent report on the IDA ing its mission-to make poverty reduction its program. Previous reports have been prepared overarching objective-and in redirecting its by IDA management and have provided impor- operations in line with its relevant but highly tant background information for this review." ambitious replenishment commitments. Imple- The methods used by the OED review are mentation of those commitments has been, on described in Annex G. the whole, satisfactory, with momentum having increased in IDAl1. IDA has done much to Questions. In evaluating IDA's performance, this sharpen the poverty focus of its analytical work, review asks four main questions: 1 0 I ntroduction * How has IDA responded to the recommen- at the sectoral (or thematic) and country levels, dations set out in the IDA10-12 Replenish- the fit of lending and nonlending services to ment Reports? country circumstances, the strategic selectivity of * Have these responses advanced core objec- resource allocations and choice of instruments, tives at the country level, especially the over- and, as far as possible, the impact on country poli- arching objective of poverty reduction? cies, institutions, and actions. The limited infor- * Which factors have contributed to IDA's per- mation on outcomes and results of IDA's actions formance and which have constrained it? (even for a longer period than that covered by * What lessons can be drawn from the ex- this review) underscores the need for M&E at the perience of recent years in the major areas of project, country, and corporate levels and a more emphasis? results-oriented set of IDA commitments. Third, many factors bear on outcomes in a ChaUlenges. These questions present several country context, making attribution difficult. It challenges. First, since neither the Replenishment also considered the influence of both internal fac- Reports nor follow-on instructions from man- tors (such as institutional practices, accountability agement provided specific compliance bench- structures, and alignment of resources with pro- marks,12 the review addresses whether IDA's gram priorities) and external events. Where actions were consistent with the letter and the progress has been less than expected, the review spirit of the recommendations. It looks at how looked at whether strategy, implementation, or well IDA acted and institutionalized changes in a combination of the two contributed to the its processes and programs. For example, on the shortfall. commitment to making poverty the overarching objective, the review examines what IDA has Approach. This review is based on major back- done to sharpen the poverty focus of its analytical ground studies of each of the 10 program areas work and lending and to link other program and process reforms emphasized in the objectives, such as PSD and environmental sus- IDA10-12 Replenishment Reports. It also draws tainability, to that goal. The review assesses on the findings from in-country consultations whether IDA has made its processes (such as (with representatives of government, civil soci- resource allocations) more poverty focused. ety, the private sector, and other assistance agen- Because of the proliferation of instructions and cies) in nine "focus" countries; two international the absence of benchmarks, however, it has workshops that included experts from borrower been difficult for IDA to be consistent and per- and donor countries; and wide-ranging inter- suasive about its pursuit of objectives. Future views with Bank management and staff.14 replenishment undertakings would benefit from The background studies and this report are greater clarity and selectivity, as well as from based on desk reviews of Bank documents, more specificity in management's implementa- databases, studies, and evaluations;15 staff sur- tion instructions. veys; and country and international consultations. Second, compliance is not the same as effec- When evidence was available, the review used tiveness. IDA's performance on the replenish- a results-based analysis to trace IDA inputs (poli- ment recommendations (stated largely as inputs cies, alignment of resources), outputs (volume and outputs rather than outcomes) is not nec- and composition of lending and nonlending essarily a good measure of its development services), and reach (stakeholder participation, effectiveness. Because of the review's time frame coordination with other donors) to outcomes and (FY94-00), the bulk of actions being assessed are results. It analyzed the quality of IDA's lending still under way, and their effects will continue and nonlending services in terms of their rele- over the medium to long term.'3 The review, vance and fit, as well as evidence of outcome therefore, examines IDA's development effec- performance of ongoing and closed projects. tiveness largely in terms of the quality of its Also, using the focus country consultations and underlying analysis, the coherence of its program OED CAEs, the review examined IDA's IDA's Partnership for Poverty Reduction performance, taking account of its partners' institutional capacities-its operational policies and performance. procedures, instruments, and budget resources In the following four sections, this evaluation (Part IV) and the consistency and realism of the examines how well IDA has performed in imple- replenishment mandates themselves (Part IV). menting its IDA10-12 replenishment commit- The report concludes with suggestions for ments within the context of changing global ways to improve the alignment of future mandates, development and aid trends, and how well IDA institutional capacities, and program design and has integrated its program priorities with its cor- implementation to advance IDA's contribution to porate policies and country assistance programs the overarching goal of poverty reduction. The (Part II). It looks at how well IDA has institu- report was presented to the Board of Executive tionalized the recommended process reforms to Directors on May 29, 2001. A summary of the dis- improve its overall effectiveness (Part III). The cussion at that meeting is attached as Annex H. record reflects not only changing country cir- The Bank's management response to the findings cumstances, but also IDA's management of its of the review is attached as Annex I. 12 Part II The Program Dimension In line with IDA replenishment recommendations, IDA has done much to implement the revised poverty reduction strategy adopted in 1990. IDA has contributed to improved economic management, poverty data and analysis, and access to basic social services. Its adjustmentprograms have also become more attentive to poverty and social issues. These actions have contributed to sounderfoundations for economic growth and human development. IDA has had less success in aligning its instruments of assistance to reinforce other measures for sustaining pro-poor, broad-based growth, especially measures supporting agricultural and rural development and development of the private sector. IDA has also responded to replenishment commitments to broaden its poverty strategy by taking steps to integrate gender, environmental sustainability, and governance in its country assistance programs. This has represented a demanding change in IDA 's authorizing environment. While IDA has made important contributions in each of these areas, the mainstreaming of gender and environmental issues has been limited relative to commitments, and while the treatment ofgovernance issues has expanded markedly, the achievement of sustainable governance improvements remains a daunting challenge. 1 3 Sharpening the Focus on Poverty Reduction T he IDA10-12 replenishment undertakings commit IDA to sharpen its focus on poverty reduction in accordance with the Bank's 1990 poverty strategy.' They also urge IDA to integrate gender, environ- ment, and governance into that strategy as a "broad-based framework for poverty reduction" (World Bank 1998a) and to increase attention to poverty in its performance-based allocation (PBA) system (see Part III). The replenishment commitments calling for a since 1997, encouraged by strengthened guide- sharper focus on poverty (box 2.1) instruct IDA lines and follow-up by management (OED to: 2000d; IDA Review 2001b). * Strengthen the poverty focus of its Country * Broad-based growth, human resource devel- Assistance Strategies (CASs). opment, and protection of vulnerable groups, * Build poverty analysis and monitoring into its key elements of the Bank's 1990 poverty analytical work and policy dialogue. strategy, are commonly stated objectives * Increase poverty-targeted and social sector where country circumstances warrant. investment lending. * CASs increasingly use data and analysis from * Promote broad-based economic growth Poverty Assessments (PAs) and Public Expen- through poverty-focused adjustment lending diture Reviews (PERs), which have gradu- and support for private sector development ally improved their poverty focus.3 (PSD). * Greater consultation with borrower govern- ments and other stakeholders in the prepa- Progress on these commitments has gained ration of CASs has contributed to the considerable momentum since the start of strategies' greater relevance. IDA10.2 CASs have made less improvement, how- Strengthening the Poverty Focus ever, in setting priorities and identifying meas- of Country Assistance Strategies ures in support of country-specific, pro-poor Poverty has received greater coverage in IDA's growth strategies. Participants in country con- CASs during the past seven years, especially sultations commended IDA's heightened atten- 1 5 IDA's Partnership for Poverty Reduction Box 2.1 IDA1O-12 Commitments on Poverty IDA 10 IDA 12 * Complete Poverty Assessments. * Develop a brad-based policy framework for poverty reduc- * Increase share of lending to social sectors and to poverty- tion Omphasizing investment in people, broad-based growth, targeted investments. good governance, and environmental protection. * lncludespecificpovertyreductionnmeasuresinadJustmentpo- * Broaden participation in policy fornulation and program grams wherever feasible. implementation. IDA1f - * Direct about 40 petcent of investment lending to the social * incorporate participatory components in Poverty Assess- . seit9rs. ments and focus on the gender dimensions of povery '. Mitioate inequalities. K*Stengthen povertymonitoringi includirg theimpact6f projets * Link'assistance to poverty reduction targets, including the with andwithouttargeting mechanissforreachingtke p-o' "inteipatioal dedvelopment targets. * Use Public Expenditure Reviewstoeassess-spendinp in`teir - of the development needs of the poor. A Increase attention to stumctural ondhi$cafmeasirestpexppnd opportunities for the poor. tion to the poverty impact of its assistance, while Building in More Poverty Analysis expressing concerns about inadequate priority and Monitoring setting and tailoring to country circumstances and IDA has made major contributions to collecting weak governance and institutions (box 2.2). and disseminating poverty data and analysis, OED Country Assistance Evaluations (CAEs) con- an essential underpinning for a sharper CAS firm the relevance of the greater poverty focus focus on poverty and an important achieve- in IDA CASs. But they also emphasize that more ment that might not have happened without needs to be done to integrate poverty objectives IDA (box 2.3). Still, there is important unfinished into macroeconomic and sectoral operations and business-from improving the quality and pol- to identify the concrete measures needed not only icy relevance of much of the analysis to strength- for accelerating growth but also for overcoming ening countries' capacities to collect and analyze social and structural constraints to poor peo- poverty data, monitor progress, and enhance ple's participation in new economic opportuni- program outcomes. ties. This includes adequate attention to the Reviews of PAs,7 PERs,8 and other economic institutional mechanisms through which policy and sector work (ESW) highlight the impor- changes are expected to benefit the poor.4 tance of working collaboratively with borrower governments and institutions. They also note IDA has made major contributions to weaknesses that limit the strategic relevance of collecting and disseminating poverty data the work. PAs and PERs have had little impact on country policy where ownership by and analysis, an essential underpinning for government and other stakeholders has been a sharper CAS focus on poverty. lacking.9 Recently, participatory PAs have begun to incorporate the views of poor and disadvan- CAS monitoring has improved recently, aided taged groups, but it is difficult to trace their by the country program matrix introduced in influence on government policies or IDA assis- IDA11.5 By FY00, more IDA CASs contained tance programs.10 poverty reduction targets linked to intermediate The first year of Poverty Reduction Strategy objectives that could be monitored annually,6 Papers (PRSPs) exposed continuing weaknesses in although it is still too soon to know the effect countries' poverty data collection and analysis and on program outcomes. in public expenditure tracking, despite recent 1 6 Sharpening the Focus on Poverty Reduction Box 2.2 Stakeholders' Views Incountiyconsultations,stakehoWderspraised theWorld Bank's broad strategic perspective on development issues, but expressed con-` cemthatthe Bank sometimes promoted a 'one-size-fits-all- approach. They cited several strengths and weaknesses of the Bank' Strenlths Weaknesses * Outstandinganalyticalworkanddisseminationofinformation * Too little local ownership of ideas and interventions * Abilityto fold issues of poverty into broaderdiscourses on eco- * Astrategythatistoo macro and connects poorly with micro- nomic and social development economic issues and poverty * Strong human resource capacity and attradtive lending terms * Little involvement in areas that matter most to the poor tagri- * Aid coordination and sector coordinatiEon. culture, rural credit, small and medium-size enterprise devel- opment) and insufficient attention to governance issues * Processes and procedures that are too rigid to permit true part- nership and full participation * Insufficient focus on national capacity building for poverty. Siurce: OEO2000a, Bank data. analysis, monitoring, and evaluation. ISoutceOED 2Wlla,8Bnk dat.*i efforts to increase country participation in PERs and approaches to poverty reduction in different to focus more on government financial manage- contexts. The PRSP and new forms of program- ment. Intensified efforts are needed to strengthen matic lending add new dimensions to the need analysis and monitoring capacities, ranging from to strengthen M&E. A key priority, as reported short-term measures to credibly track public expen- in the early PRSP progress reports, is to support ditures to long-term efforts to strengthen capaci- the buildup of borrowers' capacities to track ties in poverty analysis, performance monitoring, progress, analyze results, improve program out- and evaluation of program impacts. comes, and inform broad debate on priorities. Projects increasingly include impact evaluation (See Part IV for further discussion of M&E.) frameworks to assess poverty-related results over Management is aware of these problems in time, a sorely needed improvement.1" But mon- poverty analysis and other ESW and has given itoring and evaluation (M&E) by IDA and by bor- them increasing attention in the last two years. rowers remains fragmented and underfunded. Resolving the problems is critical to IDA's ana- That means that IDA and its partners are not lytical, advisory, and aid coordination services building a reliable database for assessing alter- and involves issues of accountability and resource native policy mixes and implementation allocation (see Part IV). B 2 3 IDA's Contribution to Poverty Data Box 2.3 Collection, Analysis, and Dissemination PAs have been completed for most (9 percent) of lDAs eli- - AlmosthalfofactivelDAborrowershaveareoentPERfandnew gible borrowers. Although progress lagged inthe overly ambi- approaches insomecountriesare increasingthecapaityforsuc.h tious IDA1O replenishment undertaking because of severe reviews and strengthening ownership. For example, Ghana and I deficiencies in poverty data and the need to build governmnet Vietnam, assisted by IDA, have undertaken their own reviews. support and interest, many countries now collect and use * OtherESW, such as Social and Structural Reviews (SSRs)and income and consumption data in developing policies. (As an sectoral analyses, has also strengthened the focus on pove A. indication of this increase in informatin, the WorldDevel- * Following IDA12 recommendations, IDA recently increased | qpmentlaort(WOf)2X)f1fs global assessmnatof poverty analytical work on otheraspects of poverty reduction.A notabe' was able to use data froIm 110 developing countries, compared initiative, responsive to IDA Deputies' concerns, focuses on with only 60 countries at the time of the previous poverty child labor through the Global Child Labor Program, a catalyst::.'i WDR in 1990.) for research and analysis, pilotstudies, and otheractivitiess l 1 7 IDA's Partnership for Poverty Reduction Increasing Poverty-Targeted own poverty reduction strategies through bet- Interventions and Social Sector Lending ter knowledge about effectiveness, tinkering IDA has met its commitments to increase lending with the PTI will be less important than sup- to poverty-targeted and social sector interven- porting more and better outcome and impact tions, focusing on efforts that benefit the poor evaluations, not just in projects but also at the directly and expand their access to education and country level. basic health services. A greater challenge has been to help countries with politically and insti- Investing in social sectors. Investment in the tutionally complex sector-wide reforms and pro- social sectors has been a large part of IDA's grams. For this, new program approaches-not just poverty strategy throughout the period under higher levels of lending-have been critical. review. This assistance has expanded access to basic services, but the greater challenge has The increase in social sector lending has been to help countries improve the quality and made IDA the largest financier in human efficiency of service delivery to the poor through sector-wide reform. development and a major source of Lending in social sectors (health, nutrition, and analysis and advice, especially in Africa. population; education; social protection; and water supply and sanitation) rose from 20 per- Maintaining the share of poverty-targeted cent of IDA investment credits in the late 1980s interventions. In line with replenishment com- to 40 percent by 1995, where it has remained. mitments since IDA10, the share of investment That level satisfies the IDA10 and 11 commit- lending classified under the Program of Tar- ments to emphasize the social sectors and the geted Interventions (PTIs)'2 rose after IDA9 and 40 percent investment lending target of IDA12. then leveled off (see Annex E). Monitoring of the This assistance has varied across sectors and poverty impact of these investment credits has Regions, influenced by the presence of other lagged, although it has been somewhat better donors and by country commitments and capac- than in other projects. The program remains ities to implement reforms (see box 2.4 and mainly a way of looking at inputs, however. It Annexes C.1 and C.2). says nothing about outputs, outcomes, or The increase in social sector lending has impacts, and its focus on direct targeting of the made IDA the largest financier in human devel- poor may not always be the most effective way opment and a major source of analysis and of reducing poverty.13 To strengthen countries' advice, especially in Africa. Through its analyt- Where Did Increased Investments in the Box 2.4 Social Sectors Go? Mostf thte increase in IDA invesments since the mid-I191s has goneto'health, nutrition, and population, whose share rose from slightly more than $2.0. billion in IDAO. to some $23 billion in IDAI1. Education comnitmenits remained largely stable, increasing- slightly1from $1.85billion in IDA10 to $1.91. billion in lDA11 Iwiththe number of proiects exceeding those in health). Social pro- tection lending wa's also largelystable, with a strong acceleration in len,ding in the Europe and Central Asia (ECA) Region, while investments in water supply and sanitation increased in IDAI1 after contracting significantly in IDA9 and IDA10. . South Asia and'Africa dominate IDAs social sector lending. In South Asia, where India and Bangladesh are sizable borrow- ers, social sectors account for about .45 percent of lending. In Africa, thtB social sectors sacount for just over 30 percent of lend- ing,with the amount declining slightly.from IA10-1l, although the number of projects has increased. An FY00 HIVIAIDS initiative will allocate :up to $S50 million to countries:in Africa during the next three years. The Regional distribution is affected by-the concentration of lending in blend countries--as directed in IDA11-12--in social and environmental matters.This influencessectoral patternsin countries such as China, India,.and Pakistan. Also in the ECARegion, where countries are "nominal" blends, most of the social sector lending to date has entailed social protection provisions inkthe context of economic adjustment credits. 18 Sharpening the Focus on Poverty Reduction ical work, lending, and technical assistance, IDA CAEs also stress the relevance of the increasingly has helped countries strengthen their human systemic focus of IDA assistance, especially on development policies, increase social expendi- the composition of social sector spending, its tures, expand access to basic services, and adjust regional distribution, and inefficiencies in pub- pension and other social protection mecha- lic spending (see box 2.5). nisms, particularly in countries in transition. Project portfolio review ratings also showed Overall, IDA has provided some form of social improvements, particularly during IDAl1, with sector assistance to virtually all its active outcome ratings of completed projects rising borrowers. from 61 percent in IDA10 to 78 percent in IDAl 1 The focus of social sector assistance has and the first year of IDA12 (see Annex D). The shifted from projects to sectors, with increased ratings showed some improvement in sustain- attention on the quality and financing of service ability and the institutional development impact delivery for the poor. Through its analytical of investments, although both these results work and conditions attached to adjustment remain at inadequately low levels,'4 reflecting lending and debt relief, IDA has encouraged what past evaluation findings have shown to be countries to protect-and even increase-social major challenges in implementing social sector expenditures. Available evidence suggests a gen- reform efforts. eral upward trend in national expenditures, When governments have demonstrated com- although often from very low levels, and some mitment and leadership and IDA has effectively improvement in the efficiency of that public tailored its support to realities on the ground, spending. This emphasis on countries' own project outcomes have been significant. The expenditure levels has reinforced IDA investment recently evaluated Second Technician Educa- credits in support of inputs needed for the geo- tion Project in India is a good example. State- graphic expansion of basic services (construc- level government commitment, ownership, and tion of schools and clinics, provision of essential attention to execution made it possible to over- drugs); training for service providers; and come the implementation challenges of a very improved sector policies and service delivery, complex project plan.'5 However, reviews also among others. point to a number of frequently experienced implementation difficulties. For example, an Program evaluation. Country consultations OED evaluation of Bank assistance to health, found that governments and civil society wel- nutrition, and population during the 1990s and comed IDA's heightened emphasis on the social more limited education reviews (OED 1999b, d) sectors, its broadened strategic perspective, the point to: strong contribution of its analytical work, and its * Weaknesses in institutional analysis and insti- increasing coordination with other donors. OED tutional development impact, especially in In Uganda, IDA adjustment and investment lending in the 1990s encouraged the Ministry of Finance to raise public expenditures in health and education. By documenting service performance problems and expenditure leakages, IDA helped strengten the min- istry's efforts to protect public spending. In Burkina Faso, adoption of minimum budget allocations to health and education as a condition of adjustment lending and debt relief reinforced IDA investments in support of the decentralized health system and a reorientation of the primary education sys- tem, resulting In higher school enrollments. In Mozambique, IDAs presence in the health sector strengthened the dialogue with the government on expanding public spend- ing on health and influenced the balance between investment and recurrent spending. $ourcm OED 1999e. 2001b; Landau 1997. 1 9 IDA's Partnership for Poverty Reduction efforts that aim beyond expanding access to grams; more attention to multi-country (regional social services to improving service quality to or global) programs; and the PRSP process and the poor, a politically and institutionally com- its emphasis on linking social sector reforms plex task more closely to poverty reduction goals. Each * Uneven quality of sector work needed to tai- shows important promise, but also operational lor program priorities and implementation challenges that require further attention. strategies to country circumstances Two new adaptable lending instruments- * Unrealistic expectations about borrowers' Learning and Innovation Loans (LILs) and Adapt- institutional capacities and readiness for able Program Loans (APLs)-were introduced in reform (OED 2000a; Johnson and Wasty 1993). 1997 to provide increased flexibility, especially * Insufficient assessment of project impact and for investments involving complex institutional cost effectiveness in reaching the poor.16 change."8 Experience shows the usefulness of these new instruments for testing operational The health, nutrition, and population study ideas and facilitating adjustments and change as covering operations through 1998 concluded projects unfold. But it also shows a need for more that, although the quality of institutional analy- supervision (and therefore more budget alloca- sis has improved, the Bank has been more suc- tions than anticipated) and better M&E in sup- cessful in expanding service delivery than in port of these flexible implementation approaches improving service quality and efficiency and than have yet been put in place.19 In addition, promoting institutional change. Project designs two new forms of lending-the programmatic have also tended to be more complex in coun- adjustment credit focused on medium-term social tries with weak institutional capacity."7 and structural reforms and the more recent Moreover, investment projects have often had Poverty Reduction Support Credit focused on to deal with systemic governance problems, providing support for countries' medium-term such as weak budget management, weak finan- poverty reduction strategies-offer new ways of cial accountability, and the need for broad civil reinforcing public sector reforms and institu- service reform. The OED CAE for Cameroon, for tional development. example, found that intended beneficiaries IDA has also increasingly engaged in sector- received no more than about half of public wide approaches (SWAps), especially in health expenditures allocated to health and education. and education. SWAps, which can be supported These problems cannot effectively be solved by a wide variety of lending instruments, typi- project by project. They require progress on cally involve multi-donor participation in sup- public sector reform and institutional develop- port of an agreed, country-led reform program ment on a broader programmatic basis and at and lending framework as part of a medium-term the national and provincial levels. While a new expenditure plan. The rationale for this approach emphasis on private provision of social services is dramatically illustrated by the situation in may alleviate some inefficiency in service pro- Mozambique. Before an integrated education vision (IDA Review 2001g), broad governance sector program was set up, external assistance and public sector management challenges still to the Ministry of Education was being pro- have to be confronted directly and systematically. vided under more than 150 different projects and subprojects, funded by some 16 donor countries, Program innovations. To deal with these 6 U.N. agencies, and 3 multilateral financing implementation challenges, IDA has introduced institutions, including IDA.20 several program innovations. These include: Consultations in Bangladesh, Ghana, and new lending instruments (designed to deal with Mozambique expressed strong support for these the institutional complexities of improving ser- approaches, noting that, although they took vice delivery and with getting better results from time to organize, they markedly improved the sector reforms); increased participation in delivery of development assistance over the tra- country-led, donor-coordinated, sector-wide pro- ditional fragmented project approach. In a few 20 Sharpening the Focus on Poverty Reduction cases, such as the Ghana Health Sector Pro- accountability mechanisms in ways that benefit gram (box 2.6), there has been sufficient agree- the poor.21 ment on objectives and approaches for donors to pool their funding. Reviews and tracking of New regional andglobal initiatives. Although sector-wide programs confirm that they have IDA usually provides repayable credits to mem- significantly improved project relevance and ber country governments, new regional and consistency of sector expenditures with macro- global initiatives on specific problems and sup- economic conditions and institutional assistance; ported by grant funds have occasionally com- strengthened country ownership of the reform plemented country-based lending. An early program; and improved country and donor dia- example was the Riverblindness Control Program logue on priorities and approaches. Progress in West Africa. More recent initiatives include the has been slower on country budget management Global Forum for Health Research, which pro- (at central and decentralized levels), support motes research to improve the health of the for improved implementation capacity, donor poor; the Stop TB Initiative; and the Global coordination of procedures and processes Alliance for Vaccines and Immunization, which through government mechanisms, and the estab- works to boost childhood immunization rates lishment of self-monitoring systems. and vaccine research for major infectious disease These SWAps have important potential as killers in poor countries, including HIV/AIDS. building blocks in a country's poverty reduction The Bank has also joined a global effort to strategy. Early experience with PRSPs has shown improve the use of global data and strengthen the value of revisiting sector strategies in light country monitoring capacity. While such pro- of explicit poverty reduction goals, to sharpen grams look promising for advancing the fight the focus on equity and efficiency objectives and against poverty, expanding IDA's participation establish indicators to assess performance in poses challenges in setting priorities with part- serving the needs of the poor. SWAps are a ners, building partnership mechanisms for pro- means of aligning external assistance with these gram implementation, and mobilizing funding, strategies to improve access, financing, and including grant funds, as needed. _~~~~~~~E NIH p. IlUS Us _l~E UllP U e IDA and 16 other assistance agencies have provided integrated supporforthe Ghana Ministryof Health'sfive-yearsector refonn pro- gram. This support has included pooled funding arrangements and a comion framework for M&E. Most donor funds, including the IDA credit, are provided as untied contributions to a common health account and managed under existing government procedures. The other resources are earmarked funds but are included iit the govemment's annual planning and budgeting cycle; they are chan- neled through the Financial Controller rather than given directly to program managers, apart from other funding. The health account funds, kept in a bank account under the control of the Ministry of Healh and the Controller and Accountant General, are distributed to all eligible health units that meet minimum 'Sreadiness criteria,' including submission of annual budgets accompanied by quanti- fied targets and objectives and procedures for authorizing payments, maintaining accoints, and providing monthly reports. Soures: Johannson and Adams 19911 21 Promoting Broad-Based Growth n promoting broad-based growth, the second major component of IDA's poverty reduction framework, IDA has supported economic policy and structural reforms and productive investments to accelerate job-creating growth. The IDA10-12 replenishment commitments on the importance of growth for poverty reduction emphasize IDA's role in improving the poverty and social impact of adjustment lending (box 3.1) and promoting private sector development (PSD) (see box 3.6). IDA has made considerable changes in its adjustment operations over the period. It has also made progress on some of its PSD replenishment undertakings. Nevertheless, the acceleration of sustained, broad-based, job-creating growth remains a major challenge in a large majority of its eligible borrower countries. IDA's Evolving Adjustment Operations social and structural reforms (in the social sec- Adjustment lending has been IDA's major tool for tors, financial and private sector develop- helping countries improve their economic man- ment), adjustment lending evolved to support agement (box 3.2). As a share of total IDA lend- institutional reforms and increasingly empha- ing, adjustment credits fell from 25 percent on sized poverty reduction and social sector average during FY92-97 to 19 percent in FY98-99 reforms. As the share of policy conditions sup- and 16 percent in FYOO, as adjustment lending porting macroeconomic reform declined and to Africa and South Asia slowed. The share of sec- the share supporting public sector reforms, toral adjustment operations decreased signifi- financial and private sector development, cantly over this same period (see Annex F). and social sector reforms increased, the focus In the period under review, adjustment oper- has become more long-term, institutional, ations have evolved in ways consistent with the and microeconomic. replenishment undertakings: * In FY99, 15 percent of conditions on IDA * As countries moved from first-generation adjustment credits related to social sector macroeconomic reforms (trade, exchange reforms, an increase over previous years. rate, monetary policy) to second-generation "Poverty-focused" adjustment credits increased 23 IDA's Partnership for Poverty Reduction l D A 1 0 - 1 2 improvements in the design of operations and B o x 3.* 1 C o m m i t m e n t s better Bank and borrower performance. o n I m p r o v i n g On the broader issue of impact on poverty o f reduction, two findings emerge clearly from a en d i n g range of studies. One is that many countries Re.l.ns. - r d to t receiving adjustment credits have been able to Replenishment recotmrnendations related to these- -. - I; - - . I .- protect (and even increase) social sector spend- operations have encouraged IDA to include special pe poverty measues ifn the design of adjusbnt po ing (IDA Review 2001b). The increase, however, grams, to protect social expenditres and .to see has not always improved results for poor or vul- that refom packages are compatible,with prodoc. nerable groups (Castro-Leal and others 1999; tive investment- OED 1999c). Corruption, imbalances in alloca- i- ~. _ .... ._. ..._tions between capital and current budgets, and disparities in the distribution of expenditures to from 33 percent of IDAIO operations to 46 per- services benefiting different income groups cent of IDAII operations (67 percent by undermine the impact of such spending on value).' poverty. The Bank's recent retrospective on adjustment lending points out that the poverty Countries that have sustained reforms and social focus of adjustment lending has have had at least modest increases in increased over time, but it is still inadequate in many cases and remains a major priority.2 per capita income growth and decreases The second finding is that adjustment oper- in the incidence of poverty. ations have done well, on average, in helping countries lay a foundation for accelerating A rising share of adjustment operations has growth and poverty reduction. Countries have been rated satisfactory during the 1990s, accord- improved macroeconomic stability, lowered ing to Quality Assurance Group (QAG) quality inflation, and removed economic distortions at entry ratings and OED quality at exit ratings. (Branson, Javarajah, and Sen 1996), and in QAG found a decline in adjustment operations many countries trade, price, and regulatory at risk from 38 percent in FY95 to 16 percent reforms have contributed to higher agricultural in FY00. OED found an increase in outcome rat- output and productivity growth (Meerman 1997). ings of satisfactory or above from 65 percent in Countries that have sustained reforms have had IDA9 to 80 percent in IDAl 1 and the beginning at least modest increases in per capita income of IDA12. A quarter of the improvement is growth and decreases in the incidence of explained by the lower share of evaluated poverty.3 Countries with good records of suc- adjustment operations in the Africa Region, cessful adjustment operations include India, which has consistently ranked last among Uganda, and Vietnam in the early 1990s and Regions in adjustment lending performance Bangladesh in the mid-1990s. But the record on (OED 2000a, p. 11). In addition, there have been sustaining growth rates high enough that many Box 3.2 Poverty Impacts of Adjustment Lending B * 3. in Uganda Two Structural Adjustment Credits ISAC I and SAC 1I) in 1991 and 1994 and the Agricultural Sectoral Adjustment Credit in 1990 were among IDA's most potent poverty reduction instruments. SAC I and 11 continued a focus on stabilization and market-oriented reforms begun in the latter half of the 1980s, but were largely concerned with public sector management and private sector development. The adjustment and agricultural credits supported important reforms in coflee, for example, that have increased poor armers' incomes. - The liberalization of coffee marketing allowed farmers to retain 65-80 percent of export earnings, compared with 30 percent before b§f the reforms-increasing revenues by about S19 per capita per year. 2 4 Promoting Broad-Based Growth of the poor benefit is not broadly positive (see tural reforms. Typically, financing has tended to box 3.3). be reduced in that later phase just as policy Why has it been difficult for countries to move reforms are taking hold and resources are needed beyond new policies, legislation, and even action for supporting policy and structural adjustments (privatization, for example) to better poverty out- (Devarajan, Dollar, and Holmgren 1999). Reflect- comes? One reason is that many IDA countries ing these lessons, many adjustment credits since have not consistently implemented their policy the mid-1990s have had fewer and simpler pol- reforms, making it difficult to institutionalize the icy conditions.4 "Floating" tranches have given complex structural reforms needed to sustain governments more flexibility in timing reforms, growth rates high enough for long-term poverty within the discipline of a medium-term expen- reduction (Devarajan, Dollar, and Holmgren 1999; diture framework (OED 1999c). Introduced in Killick, Gunatilaka, and Marr 1998). The recent 1998, programmatic adjustment lending prom- collaborative study Can Africa Claim the 21st ises support for countries facing the institution- Century? notes that: "Many African countries have ally and politically complex demands of moved in and out of compliance with economic second-generation reforms (see box 3.4). Coun- and structural reform programs, so formally being tries need strong budgetary and expenditure on a program has meant little for the policies actu- capabilities to make these new adjustment cred- ally pursued over longer periods. And short-term its work. Better monitoring of country and IDA reforms have failed to address some difficult performance is needed as well. underlying institutional problems-and in some cases may have made them worse" (World Bank Programmatic adjustment lending 2000b, p. 35). Sound policies, the study notes, pay promises support for countries facing the off in the medium run but require good economic management over a sustained period, which has institutionally and politically complex been difficult to achieve. demands of second-generation reforms. Research on adjustment lending and reform in Africa also points to the intervening role of Another contributing factor is the difficulty in the domestic political economy and to the lim- identifying practical policy measures for achiev- itations of a conditionality-driven model of adjust- ing not just growth, but broad-based growth. The ment. Conditionality that is useful to governments poor typically benefit from growth, but how in the early stages of reform may be too intru- much they benefit varies greatly (Ravallion 2000). sive during second-generation social and struc- The fight against poverty has to address the Despite dramatic achievements in macroeconomic stabilization and trade liberalization in 1986-91, growth and poverty reduction in Bolivia have fallen short of expectations. The OED Coury Assistance Evaluation (CAE) cites five reasons: incomplete reforms, including in the finaneial sector, strong opposition by interest groups to privatization and legal, judicial, and regulatory reforms; i regional imbalances in growth; inadequate social safety nets; and insufficient investment in human capital. Boosting agricultural productivity has been on Tanzania's reform agenda since the government agreed to a structural adjust- ment program in 1986.Yet despite a steady return to macroeconomic stability in the mtid-1990s and a well-regarded reform pro- gram covering key areas of budget management, privatization, and incentives, agriculture has stagnated. Among the many reasons for the weak supply response are poor infrasructure. lack of credit, price variability, and weak public sector support for agri- culture, characterized by an uneven commitment to reform in the early 1990s. Noting the absence of a clear rural development strategy, OED's findings suggest that this may have contributed to the apparent neglect of policies for improving agricultural growth and reducing rural poverty. Source: OED 2=e3, OED dota. 25 IDA's Partnership for Poverty Reduction Box3.4 Programmatic Adjustment Lending to IDA B o x 3 . 4 C o u n t r i e s ., , _ ........~~~.... . ... .... _._._..........__.. _.__. Introduce'd in igge, programmatic structural adjustm'ent loans and credits focus on medium-tern structural and social reforms, i providing supportfor a couitry-owned reform program through sequencpd one- or two-tranche adjustment operations over three to five years.'Unlike traditionai adjustment loans, in which conditionality is based on promised actions, these loans and credits provide funding for completed reforms. 110ftntrim Guidelines on Poverty Reduction Support Credits were-proposed in April 2001 as an adaptation of programmatic,: adjustpeht lending. This instrument is conceived as a series of programmatic- adjustment.credits with a strong focus on poverty. Twotoltlgeeannual credihtin aserieswill besynchronized withthe borrfweresannual budget'andpolicy cycleto the extentprac- -.I ticable. Each credit would support the borrower's medium-term program of social and structural reforms and institution buildming set out in the country's PRSP. The credits are also intended to facilitate coordination with the IMF. Thefirst one is being prepared to suppon Uganda's poverty reduction strategy and focuses heavily on public sector reform. factors limiting the ability of the poor to partic- of a recent assessment of the "undercapitaliza- ipate in the opportunities created by growth- tion" of African agriculture (World Bank 2000b). oriented policies (Kanbur 2000; Ravallion 2000; Most of the world's poor will continue to live in Thomas and others 1999). The Bank's 1999 rural areas well into the first half of this century, Annual Progress Report on Poverty (World Bank and agriculture still accounts for a sizable share 1999) notes weak attention in Country Assistance of poor countries' GDP. Strategies (CASs) to the transmission mecha- To some extent, the decline in lending is the nisms through which policy changes are result of a reclassification of assistance under dif- expected to benefit poor groups. The August ferent sectoral headings (for example, lending 2000 progress report on Poverty Reduction Strat- for rural roads, which has increased, is now in egy Papers (PRSPs) calls for more work on the the infrastructure portfolio). But much of it also determinants of pro-poor growth and for greater comes from IDA having withdrawn, appropri- specificity about how to support borrowers in ately, from unsuccessful efforts (such as top- setting and advancing country-specific priorities. down systems of extension services and complex Weak progress in agriculture and rural devel- rural development activities that had higher than opment is one continuing factor. average failure rates), but without improved approaches having been put in place for help- Lags in Agriculture and Rural ing countries make the comprehensive Poverty Reduction improvements needed to accelerate agricultural World Development Report 1990 and 2000/2001 productivity growth, market development, and (World Bank 1990, 2000a) point out that reduc- rural poverty reduction.6 Adjustment lending ing poverty requires major investments in areas and economic and sector work (ESW) have con- where the poor live and in activities they pur- tributed in many countries to relevant policy sue. IDA's experience confirms that investing in reforms that have improved agricultural price rural social and economic infrastructure can incentives and exports. However, the Africa col- raise the incomes and living standards of the laborative study notes that "recent reforms have poor (box 3.5). improved agricultural price incentives, but they Thus, the decline in IDA's lending in agri- have not done as well at addressing other struc- culture and rural development-from 24.3 per- tural and institutional constraints, including rural cent of commitments under IDA10 to 19.1 infrastructure (irrigation, roads, power, telecom- percent under IDAl1 and to 9.6 percent during munications), agricultural research and extension, the first year of IDA12-raises some questions and farmer health and education-factors that (see Annex C), especially in the absence of impede agricultural productivity and output."7 compensating increases by other assistance agen- Relative decreases in rural or agricultural lend- cies.5 The decline is especially sobering in light ing over other sectors cannot be assumed to be 26 Promoting Broad-Based Growth j~~~~~~~~~ . I U - , I' : - . . ! In Bangladesh, two of IDANs most successful pro-poor investments have been in rural road rehabilitation and rural eleotrSficatio,, I The rural electrification project, approved in FY90, sought to expand distribution networks to underserved areas and to rehabili- tate distribution systems taken over from state ownership. The proiect improved household lighting, increasing opportunities to# study and earn income and raising the quality of life, and it led to more efficient energy use in industry and agriculture. At credit , closure, consumer connections far exceeded original estmates. A socioeconomic study thowed that average household income in the program villages is about 50 percent higher than that in non-electrified villages and attributed 22 percent of the difference I to electrification. The poverty rate in electrified villages is lower as well. The investment completion report notes that "although electrification has not shrunk the gap between the richest and poorest'" the incomes of the poorest 10 percent of households in electrified villages are much higher than those of their counterparts in non-electrified villages, Although the forestry project in the Indian state of Madbys Pradesh did not explicitlyfocus on poverty, it led to significant improve- imonts in livelihoods and liwing standards, especially for tribal peoples. While IDA financed activities in 2,500 communities with more than I million people, the project expanded to more than 12,000 communities and 6 million people. It increased production fincome) for the poor and created conditions for empowering poor communities on the forest fringe. Community protection funds helped to increase public choice and to reduce debt, and thus reliance on moneylenders. The project also made substantial progress toward environmental goals Detracting omthe prejecfs majorsocial gains, however, were the conHficts overforest access between villges during participatory planning and the limited participafion by women in decisionmaking. a bad thing a priori, especially since lending for percent of closed projects had satisfactory out- social funds, rural infrastructure, and health and comes, 55 percent were judged likely to be sus- education have been robust. Lack of consensus tainable, and 37 percent had at least substantial among development partners regarding rural institutional development impact, about the same development strategies and the reduced priority ratings as for IDA projects overall. While the given to agriculture in aid programs is, however, outcome ratings show satisfactory progress, the a cause for concern. The sector requires revital- low institutional development impact is of con- ized attention on the part of the international cern, given the importance of well-functioning development community, with IDA's role to be institutions for achieving the boost to broad- determined in coordination with others. based growth that can come from PSD. The IDA-supported projects have entailed: Strengthening Private Sector Development * High compliance in microfinance (box 3.7) in Lags in private sector investment are another developing and disseminating best practice important part of the weak growth story in IDA globally, including through IDA's support for countries. For example, the ratio of private the Consultative Group to Assist the Poorest investment to GDP is not much higher than 5 (CGAP). percent for Madagascar or Mali, although it is as * Rapidly expanded support for private provi- high as 30 percent in Malaysia. As efforts to sta- sion of infrastructure since the start of IDA11, bilize macroeconomic conditions took hold in with 60 percent of such activities in Africa. the 1990s, IDA increased its PSD activities, with * Assistance for new private sector legal and success in some areas. The IDAIO-12 Replen- regulatory frameworks (more support is ishment Reports all urged greater support for PSD planned) and for some 131 privatizations (the to accelerate job-creating, broad-based growth addition of the transition economies to IDA's (box 3.6). However, PSD activities have not, on private sector work in the mid-1990s vastly the whole, been well integrated into IDA coun- increased the scope of this undertaking), but try assistance programs.8 scale and effectiveness are not yet adequate. Some 250 IDA projects with PSD components * Modest progress in support of small and have been approved since the start of IDAl0. At medium-size enterprises and rural finance. the project level, OED assessments show that 87 IDA has moved away from using public 27 IDA's Partnership for Poverty Reduction IDA1O-12 Undertakings on Private Sector Box 36 Development ',%Ji IDA10 Replenishment Report emphasized improving the enabling-environment for business-through legal and regulatory reforms, > expart promotion, and privatizationwith private sector assessments as an analytical underpinning for countries' efforts. The lDA11 .tep-ort-while reiterating the importance of the business environment, also emphasized private provision of infrastructure and a slifttto a more poverty-focused agenda, including greater attention to small and medium-size enterprises. The IDA12 report inten- sified the focus on poverty reduction. It called on IDA to ensure that privatization activities were consistent with social equity and env,i,oninental sustainability-and took a broader systemic perspectivez endorsing the piloting of partial risk guarantees to cat- s,alyeprivate investment and directing IDA to develop a comprehensive private sector development strategy by the end of 1999. institutions to provide directed credit and * Financial sector development. Since FY94, services to small enterprises and from using IDA has approved 70 operations with signif- government-owned rural finance institutions icant financial sector development compo- to provide targeted credit. But sound alter- nents, most of them in the Africa and Europe natives have yet to be found.9 Thirty-five IDA and Central Asia Regions. Evaluations point to countries have no programs for increasing a need to strengthen the institutional foun- access to rural finance. dations for a fair and robust market-based economy.'2 Improvements in the policy and At the country level, many OED CAEs point regulatory environment for financial markets to a need for better choices of interventions, are needed to increase the access of rural approaches, and instruments and for more atten- and urban micro, small, and medium-size tion to the distributional impact of PSD activi- enterprises to commercially viable financial ties. The evaluations give low ratings to the services. effectiveness of PSD work. Many express con- * Privatization. Project ratings show that most cern about weak institutions and the lack of a IDA-supported privatization efforts have comprehensive, country-specific PSD strategy.'0 improved results at the firm level, but macro- The gains from increased efficiency are not economic and distributional results have been always widely shared, in large measure because mixed. Problems with the methods and of inadequate attention to the institutional and sequencing of privatization and weak insti- policy framework for PSD activities.1" tutions are partly to blame. Where legal and A review of IDA's PSD agenda shows a need regulatory institutions are weak, privatiza- for improvements in several areas: tion has not improved (and has sometimes * Business environment. IDA has focused on the worsened) equity and has done little for important first steps for improving the busi- short-run productivity. But trying to reform ness environment through policies on foreign state enterprises rather than divest them has trade, investment, and the financial sector. It not been any more successful. Achieving has focused less on competition, consumer better results will require a more intensive, protection, property rights, insolvency and country-specific diagnosis; a long-term view; bankruptcy reform, and corporate gover- proper institutional foundations; and a con- nance, especially where institutions are weak. centration on key firms and sectors. And while trade policy reform has altered pro- * Private provision of infrastructure and social ducer incentives and promoted exports, few services. Improving the efficiency of the deliv- projects have explicitly supported export ery of infrastructure and social services is development, and not enough use has been critical to growth and poverty alleviation. In made of IDA's analytical and advisory services private provision of infrastructure, the recent for addressing cross-border trade and invest- focus has been on helping governments set ment problems. up policy and regulatory frameworks that 28 Promoting Broad-Based Growth Box 3.7 Bangladesh: Poverty Alleviation through M i c r o f i n a n c e | The Poverty Alleviation Microfinance Project supports an ambitious expansion of microcredit activities in Bangladesh that has increased the outreach of the 171 participating nongovernmental organizations from 440,000 clients in 1996 to 1.8 million by mid-1999. Women account for 90 percent of the clients, and loan recovery stood at 98.4 percent in June 2000. The program is executed by a nonprqffti' organization and is governed by a general assembly representing the main stakeholders concerned with poverty alleviation and soclal ' mobiluzation issues in the country Today, microcredit reaches 8 million households-40 percent of Bangladesh's poor. An ongoing impact study finds that micro-% i credit has increased borrower incomes and asset accumulation: improved access to health, education, and sanitation facilities;, and enhanced mobility and efficienttime use. Through the Poverty Alleviation Microfinance Project. IDA helped to scale up the >.21 industry's operations and increase outreach during a time of declining grant financing. The Second Poverty Alleviation Microfi-i J nance Projectwill help the industry achieve sustainability by accessing financial markets through improved creditworthiness. It V 4 will improve industry disclosure standards, formalize the regulatory and supervisory system, and strengthen capital adequacy,. portfolio quality, and governance systems. Sonrce:IDA Review 2019. will motivate the private sector to respond to tivity criteria reflecting the distinctive roles of consumer needs and enable poor households IDA/IBRD, IFC, and MIGA. Considerable syn- and communities to share the benefits of bet- ergies can be tapped within the World Bank ter services. The emphasis has been on devel- Group by combining IDA's role in improving the oping market structures and regulatory country policy framework, IFC's unique con- regimes appropriate to institutional and capac- nectivity to private corporations, and MIGA's ity constraints while improving governance catalytic function vis-a-vis foreign direct invest- and expanding capacity. Private provision of ment. Development rewards would surely be infrastructure shows promise as a growth enhanced if the three agencies were to work area for IDA assistance. more closely together and with their external partners to generate environmentally and socially A strategy paper prepared in 1999 laid out a sustainable development. This would require reorganization of World Bank Group PSD work. This step was accompanied by the preparation There is no overall strategy for Bank support of subsector strategies for small and medium-size of PSD linked to its mission of poverty enterprises and the financial sector. But to date there is no overall strategy for Bank support of reduction and based on World Bank Group PSD linked to its mission of poverty reduction areas of comparative advantage. and based on World Bank Group areas of com- parative advantage. The strategy paper now improving the delineation of respective roles, being prepared (for completion in 2001) will shifting activities among institutions, and drop- meet this IDA12 replenishment commitment. ping activities that are found to be better pur- Clearly, PSD is a complex, multifaceted sued by other actors. The sector strategy provides endeavor, and there is a need for IDA to exer- a good opportunity to make explicit the defini- cise selectivity based on country commitment tion and rationale for a clear division of labor and performance, demonstrated IDA compara- and a greater selectivity within the World Bank tive advantage, and partnership with other key Group and vis-a-vis others. It should also help actors. With countries' increasing economic identify ways to improve IDA's support for the openness, there is demand for a greater focus policy and regulatory environment for private on governance, environmental, and social issues investment, the proper institutional foundations related to private investment. In this context, the for privatization, the expansion of the private forthcoming PSD strategy should propose selec- provisioning of infrastructure and social services, 29 IDA's Partnership for Poverty Reduction and a positive distributional impact from nificantly reduce poverty in the near future. increased private sector-led growth. And there is still much to learn about the determinants of sustainable, pro-poor growth Looking Ahead in individual countries. Two recent process initiatives-the CDF and * IDA's comparative advantage is strategic, not the PRSP-could significantly improve the effec- only in lending for adjustment programs and tiveness of IDA's support for poverty reduction key investments in support of broad-based in borrower countries. growth, but also in supporting the research . Application of the CDF principles, which and analytical work needed to ensure that the emphasize country ownership and coordi- poor share in the gains. Because of the impor- nation of development assistance in support tance of private sector and rural develop- of poverty reduction, should help IDA align ment to economic growth and poverty its country program priorities with borrowers' reduction, these areas need redoubled poverty reduction efforts through coordina- efforts-with IDA's role determined in coor- tion with other development partners. dination with its development partners. . The PRSP initiative, by providing a structure * IDA's contributions in the social sectors remain for operationalizing the CDF principles, is relevant and in need of continued effort, par- intended to achieve what the IDA replen- ticularly the attention to sector-wide reforms. ishment recommendations have sought for However, IDA and its partners need to many years: effective country strategies that sharpen their focus on results and on the link macroeconomic policy, sector strate- institutional issues that impede their achieve- gies, and high-impact interventions to ment. Experience has demonstrated the ben- enhance opportunities and reduce vulnera- efits of working through sector-wide bilities of the poor. programs. These coordinated, country-led sector reform efforts ought to be more widely Several lessons from the period under review used as the building blocks of IDA's and should inform these efforts: other agencies' support of countries' poverty * Countries' poverty reduction strategies and reduction strategies. IDA's support of them must focus on accel- * Across all areas of activity, IDA has made erating broad-based growth. Notwithstanding major and widely regarded contributions to the uneven country record, many IDA bor- countries' efforts through its analytical work. rowers are in a better position than at the This work needs to be sustained and adapted beginning of the IDA10 period to focus on to emphasize strengthening countries' capac- broad-based growth and poverty reduction ities to diagnose conditions, analyze and goals thanks to their policy reforms and the improve policy and program outcomes, and contributions of IDA and other development inform broad debate. The availability of ade- partners. But rates of growth are projected to quate resources for this aspect of IDA's role remain too low and inequality rates too high requires priority attention, as recent man- across a large number of IDA countries to sig- agement reports have indicated. 30 Integrating Gender, Environment, and Governance T he IDA10-12 replenishment agreements emphasized gender, environmental sustainability, and good governance as core elements of IDA's broadened poverty reduction framework. While these undertakings were highly relevant, progress has been constrained by lack of consensus, in IDA and its member countries, on explicit priorities and on IDA's role in advancing them. IDA has made important contributions in each governance. IDA should build on those insights of these areas, but progress has fallen short of to help strengthen domestic consensus, poli- commitments. In the areas of gender and envi- cies, and institutional capacity for incorporating ronment, implementation of replenishment these issues into countries' own development undertakings has been partial, with greater strategies. progress on some matters than on others and, overall, slow progress on the integration, or Addressing Gender mainstreaming, of gender and environmental The Bank's 1994 Operational Policy on "Gender considerations in all IDA activities. Recently, Dimensions of Development" (OP4.20) aims to good governance has received much height- reduce gender disparities and advance women's ened attention as a critical factor in poverty economic opportunities. It also requires the Bank reduction. Still, the effective treatment of gov- to assist countries in strengthening institutions for ernance issues, although expanding rapidly, increased participation of women in develop- remains a challenge, and unresolved issues ment. The IDA10-12 commitments built on these about IDA's role persist. objectives, giving added emphasis to integrating Although these three issues were largely over- gender considerations into all IDA lending activ- looked in the Bank's 1990 poverty strategy, the ities (see box 4.1). In implementing those com- World Development Report 2000/2001 (World mitments, IDA assistance has achieved satisfactory Bank 2000a)-with its emphasis on opportunity, results in education and health, in part because empowerment, and security-broadens the per- of significant country ownership and effective spective on poverty reduction in ways that sug- partnership with other development actors, and gest linkages to gender, environment, and also because operations were underpinned by 31 IDA's Partnership for Poverty Reduction B o x 4.1 IDAI 0-12 Commitments on Gender t': JDA10 and 11 replenishment commitments echoed the objectives of the Bank's 1994 gender policy on reducing gender 'dfisparities and advancing women's economic opportunities, urging IDA to undertake regular gender analysis, expand supporl for ; family planning and social services for women (especially girls' education), and integrate gender in all lending activities. IDA12 x:called for intensifying and monitoring the mainstreaming of gender in IDA operations, expanding dialogue on gender, undertaking '-nder equality assessments, and helping countries implement national gender equality plans. It also instructed IDA to prepare a gender strategy in 1999. rigorous analytical work. IDA assistance has Both Bank policy and IDA replenishment been weaker, however, in promoting the eco- undertakings emphasize monitoring policy nomic participation of women and improving implementation and impact on the ground, a borrowers' institutional frameworks for gender. commitment that needs stronger follow-up. In The shortfalls have undermined the efficacy of 1987, the Bank became one of the first agencies the assistance provided and led to disappointing to establish a "women in development" rating results at the country level. Moreover, the broader system to evaluate the integration of gender intent of integrating gender in all IDA activities issues in projects. The system tracks projects after has yet to be implemented.' they have been approved, for the extent to which inputs attend to gender commitments. Increasing attention to gender in analytical Taking the next step of monitoring impact at the work and monitoring. Overall, the integra- project level has been more difficult. Only 20 per- tion of gender considerations into the full range cent of IDA projects use gender-disaggregated of IDA economic and sector work (ESW) has monitoring indicators, and 70 percent of these been weak. Analyses in the areas of health and are in health. And there is still no Bank-wide sys- education have increasingly considered gender tem to provide feedback on progress in main- dimensions, focusing on low enrollment of girls streaming gender. and maternal and child health. Poverty Assess- ments (PAs) and Public Expenditure Reviews Integrating gender in country assistance (PERs) have also increasingly included gender programs. Overall, the diagnostic treatment of analyses (Whitehead and Lockwood 1999; OED gender in IDA Country Assistance Strategies 2000c), but again looking largely at education (CASs) has improved significantly over the review and health and not at women's participation in period. Some 66 percent of a sample of IDA economic activities. Outside the social sectors, CASs since 1997 include satisfactory gender analy- there has been some analysis of gender in agri- sis, compared with 7 percent in the two years pre- culture-where women account for a large part ceding IDA10. But even in CASs with good gender of the labor force in poor countries-and recently analysis, the link between diagnosis and the pro- in transport, but still very little in these areas and posed lending program remains mainly in the even less elsewhere.2 The lack of a consistent areas of education and health. Moreover, projects analytical framework has impeded the integra- and programs show no improvement in inte- tion of gender considerations in general ESW. grating gender considerations during the past 10 And gender-disaggregated data and analysis years. While 46 percent of IDA projects under- remain limited overall, even in the social sectors. taken (compared with 40 percent of IBRD proj- The importance of these findings is underscored ects) contain at least some gender analysis, only by recent evidence on the links between analy- 25 percent indude gender-specific actions. Again, sis and lending, drawn from review of 12 coun- most of these projects are in education and some try cases, that confirms the oft-made argument areas of health. that good analytical work leads to improved Support for girls' education, especially in gender integration in lending. countries where gender disparities are great, 32 Integrating Gender, Environment, and Governance stands out as an area of strong Bank commitment tance has been directed primarily to microlevel, (see box 4.2). Evaluations of projects closing in ad hoc activities and that governments have not FY95-00 indicate that where there are large gen- been able to scale up or replicate most of them, der disparities in enrollments, IDA has integrated although a few notable successes demonstrate gender concerns into virtually all education proj- the benefits that can be achieved (see box 3.7, ects and has contributed to positive trends in which describes the successful microfinance female enrollment. Where disparities have been project in Bangladesh). In The Gambia, a long- smaller, gender-related issues in education have standing national commitment to improve received little or no attention, a missed oppor- women's economic status and to build the insti- tunity to improve the situation for girls. tutional capacity for program implementation In the health sector, attention to gender has resulted in a country-led agenda through which focused mainly on maternal health, through IDA provided program and institutional support.4 components to reduce illness and death among IDA assistance has given women a greater women of childbearing age and among children voice in project implementation and helped by expanding maternal health and family plan- strengthen institutions to deliver gender-aware ning services (see box 4.3). Some of these com- programs in selected sectors and in a few coun- ponents have increased women's access to tries. Overall, however, it has not worked with good-quality reproductive health services,3 but governments to strengthen institutional capacities others have been highly localized, and their for designing and implementing gender policies.5 sustainability is uncertain. Most other project components (such as construction of health clin- Clarifying the gender policy. Budget con- ics) are gender-blind. Gender analysis has yet to straints and lack of strong country interest have be undertaken for many health issues with a limited progress in integrating gender into IDA's major impact on women, including those related country assistance programs. But internal short- to environmental degradation. Many projects comings are to blame as well. Despite the lack a sharp focus on results. increased visibility of gender issues in the Bank In the productive sectors, integration of gen- following the 1994 gender policy (formation of der concerns has been very limited, and is the Extemal Gender Consultative Group in 1996, mainly seen in agriculture and transport. Oper- the Gender and Development Board in 1997, and ations in other productive sectors have virtually new gender thematic groups in 1998), a recent ignored gender issues. A review of projects in OED evaluation found no consensus in the Bank eight IDA countries designed to increase or in member countries on the scope of women's economic participation finds that assis- the Bank's gender policy and implementation Box 4.2 Increasing Assistance for Girls' Education IDAGs assistance in girl' education has been a strong feature of its poverty reduction efforts in the past decade. The share of IDA education lending going to girls' education rose from 39 percent in 1996 to 48 percent in 1999. While only 23 education projects targeted girls at the start of IDA9, about half of the 98 projects in IDP:s education portfolio at the end of IDA11 did so. The Bank's 1994 gender policy focused explicty on girls' education, requiring that the Bank aim to reduce gender disparities in: education andtake gender into account in its operations in order to remove barriers to girls' school attendance. In 1997. a girs' edu.,%- cation program identified 31 active borrowers as having significant gender disparities in education and targeted 15 of them tall in =' the Africa and the Middle East and North Africa Regions) for exceptionally large enrollment gaps between boys and girls. The 1999 . education sector strategy maintained a focus on gender. Analysis of a small sample of countries showsthat IDA has supported both demand- and supply-based interventions, includ-. i ing construction of schools in remnote areas, training of female teachers, and processes for reducing the opportunity cost of girls' schooling. In the cases reviewed, these efforts have had a significantly positive effect, except where exogenous factors impeded - I project implementation. 33 IDA's Partnership for Poverty Reduction ......~.. .. .. . B o x 4 . 3 Maternal Health in Bangladesh , . . s . . .......................................... . ...... .. , t... . . . S .... . ... ..... .. . ..... ..... .. . . ... The Fourth Population and Health project in Bangladesh adopted a "gendered' approachto matenal and child health. The OE Gender Review found that project outcomes clearly infiienced such positive trends for women's health in Bangadesh as shaiply deciining '. ~-'-tility rates, rising woRien's life eXpectancy, and lower rates of under-five mortality. The project resulted in the expansion of family - a Slannntaternal and hildhealth service deliverythrough satellite clinics in riral ares; a wide range of successful infniation X . educaisn, and communication pograomsthatdeal withthe responsibilities of bothmen and women infamilyhealt; construction and staffing of an Institution for Mother and Child Health, with women making up half the staff; establishment of a Gender Issues Office headed by a joint secretaryfor expanding women's involvement in the Ministry of Health; increased efficiencyofthreeintetsectorata| population programs; and the recruitment and training of 4,500 female health assistants. strategy. Many staff are unaware of even those Lessons. Characteristics of good practice in policy elements on which there is consensus; and integrating gender considerations into country the Bank has yet to establish adequate support assistance are described in box 4.4. These lessons and accountability processes for ensuring pol- and the findings from the recent OED gender icy implementation.6 evaluation lead to the following recommenda- tions for strengthening the integration of gender A recent OED evaluation found no consensus considerations into IDA activities: in the Bank or in member countries on the * Clarify the scope of the gender policy. As a guide to IDA's operations, the rationale, scope oj the Bank's gender policy and intent, and scope of the Bank's gender pol- implementation strategy. icy need to be clarified. The statement of objective should make clear that the policy There are two distinct but related problems is a core part of the institution's overarching with the current policy. The first is the lack of objective of poverty reduction. consistency among international norms, Bank * Strengthen borrower institutions and gender policy, and 1DA12 replenishment com- policies. Most borrowers have formulated mitments. Consistent with the platform of the national policies and action plans, which aim Beijing Conference on Women,7 the Bank to improve the well-being of women and are focuses on reducing gender disparities and fur- usually consistent with the principles stated thering women's economic opportunities. But in the Beijing Platform for Action. IDA should while the Beijing platform places women's strengthen institutions to support the imple- advancement within a gender analytical frame- mentation of these policies and plans. In work, the Bank has not fully made this shift. countries where such policies and plans are Even in the health sector, efforts remain focused weak, support for their strengthening (through on the narrower goal of improving women's country dialogue and nonlending services) reproductive health. The IDA12 agreement goes should he an IDA priority. beyond even the Beijing platform by instruct- I lntegrate gender considerations into CASs. ing IDA to undertake gender equality assess- Based on a comprehensive diagnosis, the CAS ments and to assist countries in implementing should explain how IDA assistance will take national gender equality action plans. The sec- into account the linkages between poverty and ond problem is IDA's focus on reducing gen- gender. This assistance and its underlying der disparities in education and health without strategy should be explicitly related to the simultaneously addressing women's economic borrower's policy framework for gender. participation, which limits the impact of health * Integrate gender analysis into the design and education improvements on women's well- of IDA-supported projects. Gender diag- being, national development, and sustainable nosis should be integrated into the economic improvements in gender relations. and social analysis carried out in the prepa- 34 Integrating Gender, Environment, and Governance Box 4.4 Characteristics of Good Practices in Integrating Gender County Owfership,ineluding visible and activeiy implemented country gender policy or strategy andstrog commitmenstreflected' in domestic institutions, and the design of assistance consistent with countries' own action plans. Analytical workthat underpinned and laid a strong technical foundation for IDAOs operations. A holistic approachto gender issues within a county assistance program, including attention to institutional issues. Strong parterships with other donors and civil society organizations and systemati monitoring ofrosuft ration and design of IDA-supported projects Enhancing Environmental Sustainability so that both men and women are able to The creation of the Environment Department in access the benefits equitably. This is especially the 1987 reorganization marked environmental critical for countries with high gender sustainability as a major objective of the World disparities. Bank's work.8 Participation in the 1992 Rio Earth * Strengthen management of the gender Summit and publication of World Development program and establish a monitoring and Report 1992: Environment and Development evaluation (M&E) system. The Gender and (World Bank 1992a) reinforced that commit- Development Board should be provided with ment. Specific IDA1O-12 replenishment under- the necessary authority to ensure gender takings emphasized four priorities for IDA's mainstreaming across sectors and themes as environmental work (see box 4.5): appropriate, and actions should be taken to * Integrating environmental concems into coun- ensure that institution-wide progress is reg- try strategies ularly tracked and periodically evaluated. * Lending for environmental objectives * Enhancing the application of environmental The Bank's forthcoming Gender Strategy, safeguard policies soon to be released, provides an opportunity to * Increasing attention to global environmental clearly link gender activities with the overarch- issues. ing goal of poverty reduction and provide a clear implementation strategy. Monitorable IDA has broadened awareness of environ- benchmarks will be needed for measuring mental issues in borrower countries, particu- progress and effectiveness in implementing the larly at the project and program level. It has policy for mainstreaming gender into IBRD and supported innovative projects, extended the use IDA activities. of environmental assessments, and. conducted Influenced by assessments leading up to Rio and by negative public reaction to controversial IDA projects such as the Narmada dam in India, the DA9 Replenishment Report elevated enviromnental sustainability to the same level of importance as poverty reduc- tion and broad-based growth. The IDAIO Replenishment Report reiterated that emphasis, while the IDAI1-12 reports revised the emphasis slightly, putting poverty reduction atthe center and environmental sustainability and broad-based growth in essential supporting roles. More specifically, the Replenishment Reports recommended: *Completion of national environmental action plans (NEAPs) * Improved implementation of safeguard policies, including by in all IDA countries and their incorporation in CASs and coun- assisting borrowers to improvethe quality and scope of envi- try policy dialogue ronmental assessments i * Continued lending for environment projects and integration * Supportfor projects addressing global envirnmental issues and mainstreaming of environmental considerations in all (climate change, biodiversity, desertification) and integrating IDA activities global concerns in country dialogue. 35 IDA's Partnership for Poverty Reduction significant research and analysis. Direct lending countries are more than five years old. Staff for environmental projects increased in IDA9 and working on environmental issues say that they then leveled off, while environmental compo- lack the time, resources, and incentives to apply nents of other projects increased significantly the analysis. As a result, IDA's environmental (table 4.1). In many countries, project work actions have been less strategic than they might developed out of NEAPs, usually prepared with have been.10 IDA assistance. Still lacking, however, is the full integration of NEAPs and environmental sus- Lendingfor environmental objectives. Direct tainability concerns into CASs and country dia- environmental lending shows no discernible logue, and the establishment of criteria for trend since increasing in IDA9, although the mainstreaming environmental concerns in other number of projects has increased slightly (table sectors and linking them to poverty reduction. 4.1). However, environmental components in Weak borrower interest and tight budgets play agriculture, urban, water supply, and energy a part, but so do inadequate guidelines, account- projects increased, both in the number of proj- abilities, and incentives for implementing IDA ects and the estimated level of financing, in commitments. IDA10 and then leveled off."1 Guidelines for adjustment lending (Opera- Integrating environmental concerns into tional Directive 8.60) suggest that environmen- country strategies. Following replenishment tal factors be considered, but they do not recommendations, NEAPs have been completed encourage environmental reforms through adjust- in nearly all IDA countries, although more slowly ment operations. A recent management review than intended and with mixed quality and follow- found little increase in environmental coverage up. The combination of high-quality NEAPs, in adjustment operations over the period and has strong government interest, and IDA support now provided the basis for follow-up action resulted in strong environmental programs in (Reed 1996; World Bank 1997a). A working some countries (see box 4.6), but overall the pic- group (including the Environmentally and ture is mixed. Socially Sustainable Development Network, In 1999, as throughout the decade, only about ESSD, and other units) is currently preparing the half of the CASs reviewed treated environmen- conversion of the Operational Directive (OD8.60) tal sustainability adequately.9 CASs were not that will provide guidance on treating the envi- required to include environmental performance ronment in adjustment operations. indicators, nor was environmental sustainability Beyond direct lending, replenishment agree- a priority in management reviews or a major fac- ments have increasingly stressed the need to tor in the policy dialogue for many countries. address environmental concerns in all projects. IDA's underlying ESW and other analysis of This emphasis on mainstreaming goes beyond environmental issues have been good to excel- the mitigation ("do no harm") actions of the lent, but environmental analyses for most IDA Bank's safeguard policies to encompass positive Box 4.6 Using the NEAP to Develop Strong Project Works 0,&henFtheNEAP in Dangladesh was found to be a long shopping list of concerns witbout adequate priorities, the country depart- I Seitomdunted a further mission with the government to establish priorities and translate them into projects. Initially a single ,vioimental project was planned, but the parties decided that it would be more effective to incorporate most of the priority actions fin the NEAP into other projects. IDA did this in several of its own projects, and the United National Development 'grammealso conducted a follow-on project to the NEAP to improve environmental,management As a result the NEAP,was slOte,into an effective program that was mainstreamed into the IDA portfolio. t Soorce: IlA Review 2001h. 36 Integrating Gender, Environment, and Governance TabIe 4.1 DDirect IDA Lending for the Environment and Environmental Components, FY91-00 Estimated IDA Direct Direct Environmental financing of e'nvironment environment components,.othe. environmental ; nd,ng- : lending sector prolectso components' Fiscal year (-numbehr,of,projecWt' (S millions) (project o.>. . (S millions) 199C 2 191 13 155 1991 . . 179 .-9 - 290 1992 I 5 .29 34 554 1993 4 2. 02 23 235 1994 4 17 26 581 199' 3 69 33 552 199E 5 3.19 34 . 1.063 1997 12 25 7 25 , 435 199E , . A.,.4 149 28.:... 556 199, 5.. . 13' 21 - 437 200C .7 60 27 608 a. Based on sectoral reviews of the agriculture, urban, water supply and sanitation, and energy portfolios. This includes environmental components in sector projects that closed over 1990-00. b. The value of IDA financing for environmental components has been calculated at the same proportion as the overall IDA commitment in total project costs, as this review did not under- take a component-by-component breakdown. This approach is conservative and likely underestimates IDA's support for environmental components. ("do good") aspects of project design in all sec- natural resource management (the emphasis in tors. To date, there are no clear guidelines for IBRD lending is on pollution abatement). Proj- promoting, monitoring, or evaluating main- ects have helped reverse land degradation (Sodic streaming, suggesting that it is not yet a func- Lands Project in India, Loess Plateau Project in tional priority, despite the replenishment China), strengthened environmental manage- recommendations. The recent IDA report on ment (through a series of environmental man- mainstreaming finds that sector strategies agement projects in Madagascar with coordinated (notably energy and urban development) have donor assistance, and in China), and increased incorporated significant environmental input income generation on arid lands (Arid Lands Proj- and committed to better mainstreaming of future ect in Kenya). Environmental project perform- sectoral operations. The report finds only mod- ance and supervision have been on a par with erately satisfactory mainstreaming in CASs, how- Bank lending in general."2 ever, and no integration as yet in Poverty Reduction Strategy Papers (PRSPs): "While in Enhancing safeguards. OED and manage- some cases environment may be missing from ment reviews in 1996 and 1997 concluded that client priorities for a good reason, there is much safeguard policies and procedures were essen- more to be done to ensure that appropriate tially sound and had often helped to mitigate attention is paid in the country dialogue to the potentially adverse effects of IDA-funded proj- long-term sustainability of natural resource use ects and boost environmental awareness. The and to the impacts of environmental degrada- reviews also noted major shortfalls: environ- tion on development" (World Bank 2001e, p. 4). mental assessments have come too late in the Where environmental concerns have been a project cycle to influence design, alternatives borrower priority and figured prominently in IDA were not adequately considered, and supervision country strategies, results have been impres- of actions recommended in environmental sive. IDA lending has appropriately addressed assessments has often been weak. 37 IDA's Partnership for Poverty Reduction Assessments by management and staff have processes in most countries. Many countries attributed shortfalls in part to inadequate have established their own environmental assess- resources for implementing safeguards. Also, ment regulations, but implementation remains decentralization of responsibility for environ- weak.14 Moreover, there has been almost no mental assessments to Bank Regions has created move toward a more strategic, sectoral approach an awkward conflict of interest for Regional to environmental assessments. The ongoing and network staff, making them both promoters review of safeguard policies should identify of environmental issues and policemen of envi- ways to build greater country capacity (box 4.7 ronmental safeguards. describes a good case example). The April 2000 Inspection Panel report on the Westem China Poverty Reduction Project brought Increasing attention to global environmen- high-visibility attention to these implementation tal issues. IDA countries stand to suffer most problems. It also revealed widely divergent from the adverse impacts of global concerns, views among managers and staff on how to such as climate change. IDA has provided infor- apply safeguard policies. Reviews of safeguard mation on the local costs and benefits of address- policies and environmental assessment processes ing global environmental issues, and Global are under way. They seek to improve imple- Environment Facility (GEF) funds have been mentation and find ways to extend safeguards used to finance such projects.'5 Analysis has to adjustment and programmatic lending. More identified where local and global benefits can be resources have been allocated to the safeguard mutually reinforcing and tradeoffs minimized process in the FY01 budget, and a new central (Hughes and Lvovsky 1999). The emphasis on unit dedicated to safeguard policy quality assur- local impacts of global issues has helped in ance should impose a more integrated man- developing relevant projects and programs. The agement approach.13 Clean Fuels Initiative, for example, seeks to reduce locally harmful particulate emissions as IDA also has great potentialfor addressing well as carbon dioxide emissions.'6 In addition, regional and transboundary issues, but IDA has begun to help countries mitigate neg- ative environmental impacts and should expand those efforts where circumstances and interest internal organization makes it difficult make this a priority.'7 to address such issues. IDA also has great potential for addressing regional and transboundary issues, but the strong But the larger issue of efficacy remains. country orientation of its internal organization Despite a positive impact at the project level, the makes it difficult to address such issues. Budgets, effects at the country level have been modest programs, and incentives are not designed to because of the limited coverage of IDA-funded support this work. Some GEF projects, such as environment projects, the lack of follow-up pro- the Lake Victoria project and the Central Amer- cedures after project closure, and the slow adop- ican Mesoamerican Biodiversity Corridor, have tion of effective environmental assessment effectively addressed regional transboundary Eritrean Environmental Guidelines: Box 4.7 Doing the Right Thing Right In 1995 Eritrea issued a National Environmental Management Plan. IDA provided supportfor its implementation, with an IDF grant j to prepare environmental assessment guidelines, legislation, and training. Although the 1998- border conflict delayed fromal Aenactmientof legislation, the govemment's guidelines have been applied. In 20W IDA undertook a pilot initiative in which the Eritrean environmental guidelines would be applied to IDA projects in lieu of Bank guidelines. Three projects have been processed sutc-' K cess%ully in this manner. 38 Integrating Gender, Environment, and Governance problems with global implications. There has also ceptually and operationally more like a sector been IDA lending follow-up to the Lake Victo- than a crosscutting theme, and the links to IDA's ria project. While the GEF and other grant poverty reduction work are still undefined. Fre- resources offer opportunities for solving trans- quent reorganizations have confused account- boundary problems, these resources are lim- abilities for environmental goals. The Bank's ited; consequently, IDA should do more to network role in setting, supporting, and moni- support cross-border programs when there are toring objectives needs clarification and strength- substantial benefits to neighboring countries. In ening. While high-profile crises attract attention these cases, IDA should modify, as needed, its and galvanize action (as in the follow-up to the heavily country-focused programming and budg- Western China project), over the long-term crises eting in order to bring the countries together to appear to make borrowers and managers risk- solve shared problems (in watersheds or other averse in program design. ecosystems that span national boundaries). These issues are important to development, and few Recommendations. The review of IDA's assis- other agencies can address them effectively. tance in ensuring environmental sustainability points to a number of lessons, some broadly sim- Challenges and constraints. Environmental ilar to those that have emerged from the evalu- sustainability is among IDA's most challenging ation of IDA's work on gender. The lessons goals and a source of tension within the Bank and include the importance of strengthening coun- with borrower countries. Using environmental tries' own policies and institutions; better inte- and natural resources is essential to growth and grating environment in CASs and sector poverty reduction. Abusing them is a threat to strategies; making environmental sustainability health, economic sustainability, and long-term a central feature of policy dialogue, with par- ecosystem integrity. Many environmental impacts ticular attention to the links between poverty and are indirect and long-term, which makes draw- environment;20 integrating environmental analy- ing the line between use and abuse difficult. sis into project design to foster environmental Debates rage between parties interested in short- quality and sustainability (with safeguards and term gains and those with long-term horizons, and mitigation serving as a minimum threshold, not between those interested in local and national pri- a first line of defense); and further strengthen- orities and those interested in global priorities. ing accountability within the Bank for environ- Opportunities for enrichment from exploitation mental and safeguard policy compliance. of natural resources can lead to corruption and impede sound policymaking. IDA's primary external constraint in IDA's primary external constraint in pursuing pursuing its environmental commitments is its environmental commitments is the lack of interest and commitment among member gov- the lack of interest and commitment among ernments. Many countries do not want to bor- member governments. row from IDA to address environmental issues either because they do not view them as a pri- Specifically, the findings and lessons lead to ority18 or because they prefer to use grant funds. three main sets of recommendations (these are In several cases, the GEF has been the only outlined in more detail in the environment back- way to bring environment projects into country ground study for this review and are taken into programs.19 But these projects are no substitute account in the design of the new environment for IDA operations, because the GEF has a very sector strategy): different mandate-to provide incremental fund- * IDA should build on its comparative advan- ing for cross-border or global issues, not poverty tage and analytical capacity to demonstrate the reduction. critical role of the environment in sustainable Internal factors also affect IDA's perform- development and poverty reduction. It should ance. The environment has been treated con- incorporate environmental objectives into its 39 IDA's Partnership for Poverty Reduction country assistance and sector strategies and actions a commitment to environmental sus- enhance its efforts at country capacity build- tainability. Where countries are not committed ing, focusing on strengthening institutions, to addressing environmental problems, IDA policies, and regulatory enforcement. should work toward informing policymakers of the importance of environmental considerations IDA should concentrate its resources, to strategic development priorities through bet- ter treatment of the environment in the diagno- in partnership with other actors, on sis underlying CASs, collaborative analytical assisting the efforts and strengthening the work, and policy dialogue.2" Moreover, experi- institutions of countries that demonstrate a ence around the world has shown that govern- ment intervention-through regulations and commitment to environmental sustainablity market-based incentives-is essential to safe- guarding the environment. Governments have * IDA should strengthen its accountability for a great deal of control over the allocation of nat- incorporating environmental goals into its ural resources, so linkages with IDA's efforts to activities where the environment is a prior- support effective governance are also important ity issue and for complying with the Bank's to environmental objectives.22 environmental safeguard oversight system and process. In parallel, it should modernize Improving Governance and adapt its policy framework to the chang- With poverty reduction front and center of ing practices and instruments being used, our agenda, our work at the "rock-face"must and place greater emphasis on helping bor- be on governance, institutions, and capacity rowers build their own capacities to formu- building. late and implement environmental policies -James D.Wolfensohn and manage environmental resources and 1999 Annual Meetings Speech risks. * In helping to advance the global environ- IDA was slow to implement replenishment mental agenda, IDA should concentrate its undertakings in IDA10, not only on such sensi- assistance on the local and national benefits, tive matters as the rule of law, transparency, and and increase its attention to regional (trans- accountability, but also on capacity building, boundary) issues in its analytical work and institutional development, and public sector programs. management (see IDA Review 2001e). But momentum accelerated in the latter half of the Overall, IDA should concentrate its resources, 1990s (see box 4.8). World Bank President James in partnership with other actors, on assisting the Wolfensohn gave new prominence to gover- efforts and strengthening the institutions of coun- nance issues, emphasizing public sector reform tries that demonstrate by their policies and as an integral part of the Bank's poverty reduc- Box 4.8 IDA10-12 Replenishment Commitments on Governance | jfi~tat +i ver nance intersects all areas of IDA's support for countries' development efforts, replenishment undertakings | 3~ hiJ to assist borrower governments in strengthening the rule of law and public accountability systems and becoming i l e nant and participatory. Each CAS is to show how governance is being addressed, and PERs are to be used to t [?~ublec expenditure management and to assess whether nondevelopmental spending (such as on the military) is 3 id But1sociat expenditures. Replenishment undertakings also urged IDA to assist judicial reform and anticorruption ibasues, encourage broader participation in governance reform, and tighten the connection between lending levels and gover- 1 ncvperormiance. 40 Integrating Gender, Environment, and Governance tion mission and instructing country teams to The coverage of governance and public sec- address corruption openly. A major effort fol- tor reform in lending programs is still partial, held lowed to expand capacity for operational work back by resource constraints and limited coun- in governance through increased staffing, ana- try ownership. Nonetheless, the number of pub- lytical work, and policy guidance; to increase lic sector reform projects and multi-sector projects lending for public sector reform and other ele- with significant public sector reform compo- ments of governance; and to link overall lend- nents more than doubled from 45 in FY97 to 96 ing more closely to countries' governance in FY99.28 Structural adjustment operations performance (discussed in Part III). addressing public sector reform also more than doubled from FY98 to FY99, to 22. Building Bank competencies. Efforts have Satisfactory ratings for completed public sec- been under way during the past three years to tor management projects rose as well, from 54 build staff capacity in public sector reform. The percent in FY95 to 94 percent in FY98 (dropping Public Sector Group, established in 1997, quickly achieved a strong record in developing infor- mation and practical guidelines on best practices. Coverage of governance andpublic sector The Bank recently recruited experts in public reform is stillpartial, held back by resource accounting and auditing and is building up its constraints and limited country ownership. team of legal and judicial reform specialists. Analytical and policy work on govemance has also expanded in the past three years.23 The most slightly to 91 percent in FYOO). In FY98-00 more recent policy statement, Reforming Public Sec- than 75 percent of the rated projects were con- tor Institutions and Strengthening Governance, sidered likely to be sustained, and two-thirds to proposes a more proactive approach to gover- have a substantial institutional development nance and institution building. Three Bank impact (all ratings exceed the average for Bank Regions-Africa, Europe and Central Asia, and projects overall). And because successful reform Latin America and the Caribbean-have recently requires strong ownership, broad participation, produced special regional studies on gover- modest investment, long implementation, and nance.24 The Bank's Development Economics timely technical assistance, the Bank has exper- Vice Presidency has done valuable analytical imented with adapting lending instruments for work,25 and the World Bank Institute (WBI) has public sector reforms.29 made helpful contributions.26 The Bank has Still, in most countries the dialogue on gov- increased its analytical work on public financial ernance reform is just beginning. IDA has yet to accountability and related policy guidelines, put governance squarely on the table in a con- although it has been slow to take a systematic sistent way for all borrower countries. It does not approach to assessing and strengthening always give core elements of public sector borrowers' public financial accountability sys- reform-from improved budgeting, auditing, tems, which have repeatedly been shown to be and accountability to the rule of law and trans- important for achieving desired outcomes in parency in public sector activities-the attention governance.27 they deserve in country assistance programs. And it still faces a challenge in strengthening Fuler treatment ofgovernance in CASs and country ownership and political commitment lending. Governance now figures prominently for reform (box 4.9). Governance is not an easy in CASs, which are widely discussed with stake- agenda-for IDA or for borrowers. Building holders in each country. Governance consider- domestic consensus for reform is critical. Because ations have also been given greater weight in transparency is a key ingredient, IDA needs to country performance-based lending allocations, do more to "walk the transparency talk." And though not as effectively as they need to be (see progress will require close coordination with the Part III). IMF and other development agencies. 41 IDA's Partnership for Poverty Reduction Box 4.9 Kenya: A Case Study of Withholding Lending to Foster Governance Reforms h .iMay1998lED Country Assistane Note on Kenya concluded --Although some progress has been made in the design of ""thatIDA assistance had not been effective in promoting reforms. governance refonns,there hasnotbeen much progressin,terns-I Given weak compliance with IDA conditionality, and the poor of effective implementation. mprovements in governance were, V governance situation,the note recommended limiting lendingto not sufficient tomerit a move to large-scale lending, because jmnall, poverty-targeted interventions and shifting the focus to it was predicated on stg progress in implementation. There - tnonlending activifies, were also several additional factors. One is the continuing risk The Septembet 1998 CAS envisaged Kenya to be in a low- of policy reversals, as in the past. This risk has now material- case lending scenario for the three years of FYl9901. Base-case ized with a delay in the sale of Kenya Telecom (acentral trig- 'Jlendi,ng levels including budgetsupportwere directlylinkedto ger for IDA assistance in the 1998 CAS); with the declaration of t improvements in governance. Thefocus or governancetotrig- Kenya's Anticorruption Authority as unconstitutional, stripping gerthe base-case scenario was a first in IDA history. ffthe base it of investigation and enforcement powers; and with the pas- case were triggered, the volume of lending in the first year sage of a bill in the Parliament to cap commercial bank inter- would be around $100 million, but strong progress in imple-e at rates, undoing liberalizationin INthe financiatsectorSecond, mentation would justify increasing annual lending toward the the impact of the governance reforms at the central level had not higher end of the range. IDA would also invest in nonlending been felt at the local level of communities. And third, important services. laws, bills, and circulars expected to be passed have not yet been IDAs stance of suspending new lending to Kenya (coordi- approved by Parliament.'- nated with other donors) led the government to appoint the IDA's approval of fast-track emergency projects also raises Change Team in July 1999 and to initiate economic govemance the issue of IDA's role in a crisis situation in a country with a poor and policy reforms. In August 2000, IDA approved a $150 mil- governance environment. There are good reasons to engage in j lion budget assistance loan (the EPSRC) although the condi- crises, but rapid-disbursing program lending should not antic- ; tions for such support, as specified in the September 1998 CAS, ipate reforms, but rather should depend on solid and evident ! were not fully met. Following the EPSRC, two AIDS projects and progressinthe implementation ofthe governance reforms, espe- an Emergency Energy Project were also approved. Total IDA cially'where institutional changes are required. For this reason,- .I commitments between FY9 and Becember 2000 have been IDA has held backthedisbursement of boththe secondiianhoe.; $362 million, of which $322 million was approved in the last six of the EPSRC.and further disbursements under the Emergency months of 2000.' Energy Project. Emerging issues. Assessment of the country insecurity, a principal concern of poor peo- work relating to governance raises four main ple (Dollar and Kraay 2000, 2001; World Bank issues: 2001d). Until recently, IDA viewed assistance * Consistency oftreatment. IDA's reporting and in establishing the rule of law largely as part country dialogue on governance have of promoting a conducive environment for expanded and become increasingly candid, private investment.30 In a few countries it but country treatment is not consistent. Such has begun to support broader reform of legal inconsistencies are hard to explain to bor- and judicial systems, and has started to pre- rower countries and risk undermining the pare more such efforts. Especially given that dialogue in cases where a firmer stance has some key areas of this work (such as law been adopted. In addition, better harmo- enforcement) are not part of IDA's compar- nization of donor assistance strategies, on ative advantage, IDA should, consistent with governance is needed to avoid undermining CDF principles, closely coordinate its legal and efforts to build national ownership and con- judicial reform activities with its develop- sensus in support of effective government. ment partners. • Rule of law andjudicial reform. Many stud- * Institutional capacity. IDA has increasingly ies show that the rule of law is important not incorporated institutional concems in its activ- only in creating an environment conductive ities, from public expenditure work to civil ser- to investment but also in alleviating personal vice reform and tax administration reform.31 42 Integrating Gender, Environment, and Governance Still, mainstrearning governance concerns in all cutting areas, but real progress has usually sectoral work and strengthening public expen- hinged on the existence of a consensus for diture management remain major challenges. change in the borrowing country. Positive out- Tackling crosscutting and systemic institutional comes have occurred where assistance has problems calls for long-term, integrated, multi- responded to or encouraged country policies and sectoral CASs for institution building that are action plans. This implies an approach of coun- prepared with development partners. try selectivity, which concentrates resources * Public financial accountability and trans- where the greatest opportunity for gains exists, parency. Accountability is a key part of good and support directed to strengthening coun- governance. Weak public financial accounta- tries' own institutions as the entry points for IDA bility systems in many IDA countries under- support. In countries where national policies are cut program implementation. Both fiduciary weak, IDA should support their strengthening concerns and development effectiveness call as a priority through collaborative analytical for more attention to this matter. As an under- work, policy dialogue, and institutional capac- pinning for future IDA lending, borrowers ity building. Strategic selectivity also means leav- should commit themselves to setting up sound ing the field to other agencies better able to move financial accountability systems and agree to the agenda forward in specific areas. put in place-with external assistance if Second, IDA needs to clarify the intent and needed-monitorable plans for achieving scope of its policies for "mainstreaming" both them. Since establishing such systems will gender and environmental sustainability, linking take time, the cotmnitment should be to steady them clearly to the goal of poverty reduction. It steps toward a robust and transparent system also needs to further strengthen the management of public financial accountability. Transparency of its gender and environment programs. For this, is also important, but IDA (and other assistance Networks need to articulate strategies that set agencies) does not demand that project reports achievable objectives for which IDA is prepared from borrowers be made public. As part of a to commit the necessary resources and develop broader effort to harmonize donor reporting indicators and processes for tracking perform- requirements, IDA and its development part- ance. Regions need to ensure that these issues ners should require the public agencies they are incorporated into CASs where diagnosis assist to prepare and make public regular shows the issue to be a development priority. reports on their activities, to inform the pub- QAG and OED need to give more attention to lic about their performance, and to set mon- the mainstreaming of these issues in their eval- itorable performance targets. uative frameworks. Lessons Realprogress has usually hinged on the The three issues addressed here-gender, envi- ronment, governance-have been highlighted as existence of a consensus for change in the key components of the IDA10-12 "broad-based borrowing country. framework for poverty reduction." In drawing together the lessons of development experience over the past decade, the World Development Third, good governance affects all of a coun- Report 2000/2001: Attacking Poverty (World try's development efforts and all areas of IDA's Bank 2000a) confirms their relevance in its assistance. Moving governance and institutional emphasis on opportunity, security, and empow- development issues to the center of the IDA erment as essential elements of a comprehen- program has been a major accomplishment of sive attack on poverty. Experience in the past the past several years. But achieving significant seven years offers three sets of lessons for IDA. reform remains difficult. IDA and its borrowers First, IDA has provided important support to and other development partners must accept joint countries' development efforts in these cross- responsibility for this agenda and distinct 43 IDA's Partnership for Poverty Reduction accountabilities for improved outcomes. IDA review. But IDA is still learning how to set pol- needs to sustain the recent momentum in atten- icy priorities that promote equitable and sus- tion to governance, while broadening the cov- tainable growth that include the poor, both erage and increasing the consistency of treatment women and men, and learning how to help across countries. With other assistance agen- governments become more effective and cies, IDA needs to improve and deliver on its accountable in delivering public services required support for institutional development and accept for a well-functioning economy. The main task that it is a long-term process. In particular, IDA over the next few years is to consolidate such and its borrowers and other partners need to lessons. Much of what needs to be done involves commit together to a major drive to improve pub- setting sharper priorities clearly linked to the lic expenditure management and public finan- overarching objective of poverty reduction and cial accountability, reinforced by increased strengthening implementation strategies to bet- transparency. ter take account of institutional and policy weak- IDA's support of a broad-based approach to nesses, country circumstances, and the actions poverty reduction in borrower countries has of development partners. These are largely mat- become increasingly relevant in the period under ters of process, which Part III addresses. 44 Part III The Process Dimension Along with refocusing its development agenda, IDA has been at the forefront of fundamental change in the "business" of aid. IDA replenishment commitments, aimed at improving development effectiveness, have emphasized three aspects of aid quality: greater selectivity, increasedparticipation, and donor coordination in support of countries' own development efforts. IDA's progress was moderate during IDA 10-11, but the Comprehensive Development Framework and Poverty Reduction Strategy Paper initiatives introduced after IDA 12 negotiations bave given significant impetus to this aid reform agenda. Consolidating and institutionalizing these new processes will require more-structured aid coordination at the country level, in support of recipients'poverty reduction strategies, and greater harmonization ofprocesses and procedures at the corporate level. Equally, IDA needs to further adjust its own instruments and procedures and should be encouraged by its donors to facilitate a time-boundprocess among agencies to achieve the long-overdue harmonization of aidpractices so as to reduce the transaction costs borne by IDA borrowers. 45 Improving Program and Country Selectivity o improve IDA's development effectiveness, the IDA10-12 T Replenishment Reports urged IDA to enhance the role of Country Assistance Strategies (CASs) and strengthen selectivity in resource allocation (see box 5.1).1 Enhancing the Role of the Country strategic selectivity called for in IDAll and 12, Assistance Strategy which is based on greater specialization and IDA has increasingly focused on the country- coordination with other assistance agencies at the not just the project-as the unit of account in the country level.3 design and assessment of assistance. CASs have been the main program-planning vehicle for C4S content and lendingprograms. Since the this shift. To better align IDA assistance programs start of IDA10, internal CAS guidelines have with replenishment commitments, donor gov- evolved broadly in line with replenishment rec- ernments proposed during IDA9 replenishment ommendations. Current guidelines call for a com- negotiations that IDA prepare a multi-year CAS prehensive diagnosis of countries' poverty for each borrower, which would be discussed challenges and identification of measures to speed with the Board of Executive Directors.2 Since improvement. They stress selectivity and part- then, replenishment recommendations have nerships and encourage stakeholder participation given increasing attention to the CAS as a plan- in CAS preparation. As of July 1, 1999, they have ning document and as a process for sharpening mandated the public release of IDA CAss. IDA's poverty focus and increasing its pro- Since 1998, management has issued three grammatic selectivity. retrospectives on how well the CAS process IDA has largely complied with the recom- meets those guidelines.4 These and other reviews mendations to make CASs more poverty focused, find notable improvements in the coverage and more comprehensive in their diagnosis of devel- content of CAS documents. Analytical work is opment challenges, and more participatory as a often reflected in the CAS,5 though analytical programming process. The CAS has increas- weaknesses still constrain the policy relevance ingly become a vehicle for strengthening coun- of the diagnosis: The poverty focus and diagnosis try ownership and enhancing aid coordination. of CAS documents have been strengthened (as But CASs have not yet achieved the degree of noted in Part II). 47 IDA's Partnership for Poverty Reduction IDA10-12 Replenishment Commitments on Box 5 . 1 I m p rovi n g Deve lop me nt Ef f ectiveness through Selectivity IDA10-12 replenishment recommendations urged IDA to be more ' 'other donor-sparticipate in preparingthe CASto betteralignthe i selective within countries by concentrating on areas of its com- IDA program and the country's development priorities and that parative advantage, and more selective among countries by direct- the CAS be made public. ing more assistance to borrowers with sound policy environments. To achieve greater cointry selectivity, recommendations To achieve greater program selectivity, the recommenda- encouraged IDA'to adjust its performance-based allocation tions encouraged IDAto enhancethe role of its CASs insetting (PBA) system to link lending allocationsmorecloselytocouno- program priorities, taking account of country needs and the tries'policy performance. Theyalsocalledforassigninggreater activities of other assistance agencies. They urged that CASs weight to governance, environmental factors, and nondevelop- focus more selectively on actions to speed poverty reduction; mental expenditures; applying performance criteria more trans- provide a comprehensive diagnosis of the country's development parently and more consistently across countries; and opening challenges-drawing on the results from major building blocks the system to more public scrutiny. of IDA's analytical work, such as Public Expenditure Reviews Toforgemoreeffectivepartnerships, the recommendations (PERs), Poverty Assessments (PAs), and environmental action caftedohlDAtoengagegreaterstakeholderparticipation in proj- plans-and be finalized only after discussion with the Board. ipogran and improve coordination with other agen- They also urged that the borrower government, civil society, and cies and strengthen country-led management of aid. . * Governance has received significantly more review consultations) showed a reasonably close attention in recent CASs. correspondence between the program discussed * Attention to the role of other donors has also in the CAS and actual lending, although many improved. projects were not tightly linked to the underly- * Problems remain with the timeliness of PERs ing CAS analysis (see Part II).7 The CAS process and the uneven treatment of gender, envi- was also found to be flexible enough to drop ronment, and private sector development or delay lending when circumstances change or (PSD) (see box 5.2 on the increasing use of governments prove reluctant to carry out agreed joint IDA-IFC CASs, which should improve reforms, or to introduce new operations when attention to PSD). priorities change, especially in emergencies or when unexpected opportunities emerge, such as A majority of CASs discuss coordination with a change in goverment. Nonlending services are less well discussed and prioritized, both the other donors and comparative advantage in "due diligence" economic and sector work (ESW) broad terms, butfewer than 40 percent cover and the program-specific analytical work that selectivity in program design for key areas. underpins lending. Strategic selectivity. Improvements in cover- Most CASs are now prepared through a par- age and consultation have not yet been accom- ticipatory process involving the borrower gov- panied by much increased strategic selectivity in ernment, and usually civil society representatives the design of country programs. Many CASs and donors. Consultations carried out for this present criteria for choosing among options, review found that participants in some countries but proposed lending operations do not con- viewed the process as an effective effort that had sistently reflect those criteria.8 influenced the CAS design. In other countries, The CAS retrospective analyses of 1998 and participants expressed frustration with the appar- 1999 found that a majority of CASs discuss coor- ent lack of impact beyond greater information dination with other donors and comparative on the IDA program.6 advantage in broad terms, but fewer than 40 per- A review of lending programs in a sample of cent cover selectivity in program design for key countries (including the countries visited in IDA areas. Recent CASs have been more attentive to 48 Improving Program and Country Selectivity ~~W . 3 If-6En. OE DE ,* *EN ~ W s elUf. Joint IDA-IS CASs, introduced in FY97 to foster closer coordination and cooperation with If Cmay ead to more strategic atten- tionto private sector development Morethan halfof IDA CASs in FY00were prepared jointlywith IFC. TheseCASsfeatures ashared diagnosis and agenda for action for private sector development. he 1999 CAS retrospective study notes that joint CASs have promoted dialogue on IFC's role and strategy io the country beyond individual operations. The Azerbaijan CAS (FYOO) specifies how IFC activ- ities will complement IDA assistance to the financial sector and identifies a number of priority areas for IFC involvement in pri- vate sector development A review of FYW0 IDA CASs foundmthat joint CASs generally contain a more coherent, comprehensive tatment of PSD and financial sector issues and often include a discussion of past experience and lessons learned in these areas. the activities of other donors, but few link IDA's Programmatic selectivity improved in FY00 strategy with its comparative advantage or pri- CASs, although progress is uneven. The Mozam- oritize activities by sector and instrument (an bique CAS notes, for example, "to the extent that IDA12 recommendation). As the 1999 retro- other partners have a strong presence and com- spective noted, while many CASs use the vocab- parative advantage [in the social sectors] and are ulary of strategic selectivity-mentioning willing to finance activities on a grant basis, the comparative advantage, track record, choice of Bank will scale back IDA's financing contribu- instruments, and so on-few actually use selec- tion." The proposed lending and nonlending tivity itself as an analytical tool for focusing on programs seem to apply this principle well. The certain sectors or themes and exiting from oth- latest CASs also show a marked increase in per- ers. Furthermore, very few spell out why par- formance benchmarks, which should enhance ticular lending or nonlending instruments were attention to development results. In three self- selected.9 evaluation pilots (Bolivia, Mali, and Yemen), Several factors have contributed to this lim- progress benchmarks that clearly differentiate ited progress in programmatic selectivity: between country and IDA performance indica- * A reluctance to withdraw from activities and tors will be used in ongoing evaluations of pro- to rely on partners to assume responsibil- gram impacts by the country teams. Improved ity.10 Once significant staff and budgetary monitoring at the country, sector, and project lev- resources have been invested in identifying els will also be needed if benchmarks are to be and preparing a new area of operation, that used more often to encourage strategic selectivity activity tends to remain in the program even favoring the areas in which IDA is demonstra- if it is no longer fully consistent with strate- bly contributing to results on the ground. gic selectivity. Borrowers also often prefer that IDA stay and that it take the lead across a wide The latest CASs also show a marked increase range of issues. * Contradictory directions set by replenishment in performance benchmarks. commitments. Endorsements of overall selec- tivity and selectivity within country programs Building in the CDF and PRSP processes. The are accompanied by exhortations for IDA to Comprehensive Development Framework (CDF) engage in the full range of development issues. and Poverty Reduction Strategy Paper (PRSP) ini- Recommendations of new areas of emphasis, tiatives have major implications for the CAS. such as governance or the financial sector, are The PRSP process is expected to become the not offset by specific recommendations for vehicle for applying the CDF principles to coun- reduced attention elsewhere. The Replenish- try assistance efforts and for focusing IDA and ment Reports have adopted the rhetoric of other donor support on countries' own devel- partnership but have not yet consolidated opment priorities. In addition, PRSPs and joint mandates or explicitly recognized where IDA Bank-Fund assessments of them will provide could "comply through others." comprehensive diagnosis for the bulk of IDA 49 IDA's Partnership for Poverty Reduction country lending and nonlending programs. The Strengthening the System of participation built into the PRSP process will Performance-Based Allocations lessen the need for participation in CAS prepa- IDA's PBA system for rationing lending resources ration. Management has indicated that as of July is its principal mechanism for achieving country 1, 2002, CASs will normally be based on PRSPs selectivity. The system has evolved over the and will become business plans for the World IDA10-12 period to reflect new knowledge and Bank Group. IDA replenishment recommendations. These While CAS content will change, the chal- changes have strengthened the link between lenge of achieving greater selectivity in pro- countries' policy and institutional performances gram priorities and instruments and of setting and lending levels. Further adjustments are needed performance benchmarks will not. Countries' to fully ensure equitable treatment of countries, presentations of their own strategic priorities to strengthen the links between actions that mat- and monitorable targets in their PRSPs should ter for poverty reduction and CAS lending scenarios make this easier. But CASs will still need to and lending allocations, to apply performance make strategic choices based on IDA's corporate criteria transparently and consistently, and to open goals and comparative advantages and the activ- the PBA system to more public scrutiny."1 ities of other assistance agencies. Since 1977, the Bank has had a system that generates an indicative allocation of all IDA IDA's comparative advantage is mainly at the funds available for the next three years based on country performance. Under the system's current strategic level-helping countries to improve terms, the evaluation of borrowers' perform- their overall economic management and ance is based on the implementation of sound policyframework, set sector strategies, and policies and institutional arrangements con- ducive to sustainable economic growth and poverty reduction within a framework of good govemance, as assessed through the Country Pol- Experience shows that IDA's comparative icy and Institutional Assessment (CPIA), and the advantage is mainly at the strategic level-help- effective implementation of their IDA portfolio ing countries to improve their overall economic (see box 5.3).12 management and policy framework, set sector Today, the PBA formula directs more strategies, and implement sector-wide reforms. resources to good performance than it did at the This view of IDA's role was widely endorsed in beginning of the period.13 For every $1 per country consultations. New programmatic lend- capita lent to the median IDA borrower in ing in support of countries' PRSPs conforms to FY93-95, about $1.20 went to those ranked in this strategic role, although to be effective it the top quintile by performance and $0.85 to requires a major investment in improving the those in the lowest quintile. By FY98-2000, the public expenditure management systems and spread had widened, with $2.10 per capita going financial accountability of member countries. to the best performers and $0.60 to the poorest. As discussed below, IDA should also make more But there is relatively little difference in lending use of sector-wide programs as building blocks per capita among the middle three quintiles, and- of the PRSP process, basing its involvement on because many in the top quintile are relatively its corporate objectives and implementation small, the bulk of IDA lending, in absolute strategies as set out in Bank Sector Strategy terms, goes to the middle-rated performers. Papers. Converting the CAS to an IDA business plan Complying with design and implementation that supports a country's poverty reduction strat- recommendations for the PEA system. Con- egy also has implications for PBA. The PRSP, CAS, sistent with replenishment recommendations, and IDA-PBA process all need to be reconciled the design and implementation of the PBA sys- with each other, as discussed below. tem have been improved: 50 Improving Program and Country Selectivity Box 5.3 The Performance-Based Allocation System The PBA system annually altocates all IDA funds available over country. The formula ensures thatthe resaurce allocation rises the following three years in a three-step process. faster than the performance rating, allowing a considerable Step one: assessing country performance. Staff prepare two reward for countries atthe upper end of the performance scale. annual ratings of each borrowers performance, the CPIA rating Population size and GNP per capita are also factored in. IDA man- and the IDA portfolio performance rating, currently combined in agement determines the approved allocations in light of the an 80 to 20 ratio. CPIA ratings derive from an unweighted aver- normnallocations and otherrelevantfactors. Maximum and min- age of 20 indicatorsthat relate to four sets of concems: economic imum lending conventions apply, and allocations for some spe- - management, structural policies, policies for social inclusion, cial case borrowers, including effective IDA-blend and eligible and public sector management and institutional arrangements, post-conflict countries, are not driven by the formula. Policies, not actual outcomes, are key considerations. The com- Step three: relating the allocations to CASs. The approved bined performance rating is reduced by a third for borrowers allocation generaltyfonnsthe base case leindingscenario for each i found to have severe governance problems-the "governance CAS (or CAS update) presented to the Board for review. But CASs discount.' do not provide information on the country performance ratings or Step two: determining the indicative allocations. Perfor- the norm and approved allocations underlying the base case imance ratings afe factored into a formula to arrive at a three- lending scenario. There is no link between the PBA system and year indicative, or "norm,' allocation of IDA resources for each the alternative CAS lending scenarios (the high and low cases). * Policy performance criteria have been Europe and Central Asia and for a few better- amended to reflect increased knowledge performing Sub-Saharan African countries. For about the causes of growth and poverty post-conflict countries, a modified process with reduction and instructions in IDA replenish- explicit criteria for eligibility has been estab- ment agreements. lished. In other cases, the CAS will need to * Staff have worked to improve the consis- explain the rationale for the deviation. tency of assessment and review processes across countries. Improving the PBA system. Notwithstanding * Allocations take into account borrowers' per- the many improvements, shortcomings remain formance on existing IDA credits. in the design and implementation of the PBA sys- tem. These shortcomings relate to two issues that Country allocations may be raised above nor- are fundamental to the system's relevance and mal PBA levels under certain circumstances, credibility: the extent to which the system such as for post-conflict borrowers (see box ensures reasonably equitable treatment across 5.4). In FYOO, allocations above the norm also countries, and the strength of the links between continued for many transition economies in CPIA performance criteria and countries' further Bo x 5.4 A N ew A p p r o a ch to Post-Conf I ict Bo rro we rs The PBA system has been modified to betteralign IDA allocations with the exceptional financial needs of post-conflict IDA countries while still maintaining a focus on policy performance. The modified allocation process includes: * Eligibility criteria for countries waranting exceptional treatment * Reengagement criteria to determine the size of the initial allocation * Post-conflict progress indicators to assess performance in post-conflict countries eligible for exceptional treatment I * Limits on the duration and volume of exceptional allocations. The post-conflict progress indicators consolidate CPIA indicators, refined and regrouped to reflect the realities of countries affected by conflict with a new cluster of indicators relating to public security, reconciliation, and demobilization and disarmament. 51 IDA's Partnership for Poverty Reduction poverty reduction. To improve the handling of comes and a more substantial cut in lending these two issues, further adaptations of the sys- to countries that fail to improve governance, tem are suggested."4 even if their other performance ratings are * Establish a written record. Staff ratings should average. In particular, more work is needed contain written rationales for each CPIA cri- on establishing better governance indicators, terion. Without them, it is difficult to ascertain such as that under way within the Bank, whether criteria have been interpreted uni- which involves discussions with researchers formly across countries and regions and outside the Bank and IDA's partners. applied consistently (despite the significant . Relate the PBA system to the CAS and PRSP efforts of IDA management to improve processes. Although the approved IDA allo- consistency).15 cations that emerge from the PBA process are * Improve the design of the rating systems. The reflected in most CAS base case lending sce- CPIA rating criteria, which account for 80 narios, two improvements are needed. First, percent of the overall performance rating, as recommended in the IDA12 Replenish- have evolved to reflect increased knowledge ment Report, each CAS should discuss the of the determinants of growth and poverty rationale for the base case lending scenario. reduction and IDA replenishment recom- This is especially needed when the approved mendations. There is room for further devel- allocation differs from the norm allocation or opment of the CPIA and IDA portfolio when it is made without applying the allo- performance rating systems (as suggested in cation formula (as in the case of blend coun- box 5.5).16 tries). Second, the triggerst7 recommended in * Rethink the governance discount. The gov- the CAS for moving to higher levels of lend- ernance discount, introduced in 1998, is not ing need to be clearly linked to CPIA criteria working as intended, except to show that for measuring performance. And as the CAS IDA takes governance seriously. By the sec- becomes focused on support of countries' ond year of operation, only borrowers with PRSPs, consistency will be needed between the very lowest overall CPIA ratings were the CPIA criteria and those suggested in the affected. Yet the discount did not capture guidelines for Bank-Fund joint staff assess- some bonrowers whose governance has raised ments of PRSPs. serious concerns, sometimes to the point of * Increase disclosure. More than anything, the curtailing IDA lending. Further study is needed process needs greater transparency and to identify ways to achieve both equitable out- dialogue with partners. Recently, the Bank dis- Bo x 5.5 Suggested Changes for the Performance Rating Systems SCL ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~ ~. .. .. .. . . . . .. . .. . . ..... ..... . For the CPIA system: * Ensure that each criterion can be objectively assessed and * Remove criteria not shown by research to be important for thakt IDA -has the capability to assess it. growth and fund research to identify policies that lead to . Redefiire ile governance indicators. in light of ongoing con- poverty reduction (beyond that achievable by growth,alone).. sultatiors and research. * Assign appropriate weights to the criteria. . For the IDA portfolio performance rating system: * Ensure that ea-c CPIA criterion consists of just one element * Separate the responsibilities of the borrower and of IDA for that can be appropriately'rated and reviewed, portfolio performance (a task now being worked on by IDA * Develop, onstistentdefinitions for each rating level for each managementl. :'criterion, with similar interval values between equivalent * Remo.vethe counteriatuitive (but substantial) positive effect ratings for each criterion. on ratings resulting from thie cincellation of poorly perform- ,* nsurethateach criterionrates policy performance ratherthan ing proects.- . feveoof development, rewarding equally all borrowers doing * Adjust the rating scale to make it compatible with the CPIA , .mverything feasible in their situation. rating scale, with which it is combined. l 52 Improving Program and Country Selectivity closed the PBA methodology on its Website appropriate. They also urged IDA to respond and has discussed it with some development promptly to changes in performance and to partners. But disclosure has not yet led to the develop a comprehensive approach for activi- two-way dialogue recommended in the IDA12 ties in post-conflict countries. IDA has broadly Replenishment Report. Individual perform- complied with these guidelines, although proj- ance ratings are not disclosed, although coun- ect outcomes have been persistently lower in tries are publicly listed by performance countries with poor performance. A recent QAG quintile. A recent Board decision authorized review of ESW has also found, based on a rel- disclosure of ratings to individual borrowers atively small sample of activities over a limited and asked for further analysis of disclosure. time, that the quality of ESW has also been Fuller disclosure is needed to ensure equitable lower in countries with poor performance rat- treatment of countries, to share the knowledge ings, while CAEs and interviews with country of outside parties in the continuing appraisal staff emphasize the inadequate stock of analyt- and evolution of the system, and to use the ical work in these countries. system as a diagnostic tool for enhanced part- nership rather than simply a means of The quality of ESW has also been lower in rationing IDA resources."8 This change fits in well with efforts to build more effective devel- countries with poor performance ratings. opment partnerships through increased coun- try ownership, improved donor coordination, OED evaluations emphasize five main lessons and distinct donor and recipient account- for assisting poorly performing countries: abilities for effective use of aid. * Give primary attention to governance issues and weak institutional capacity, which can Assisting poor performer countries. As undermine project implementation. intended, greater selectivity has resulted in . Avoid complex project designs and overesti- lower lending allocations for countries with mating implementation capacity-simple, poor policy performance. Nonetheless, IDA's social fund-type projects may be best. core objective of poverty reduction requires a * Use innovative lending instruments (such as continuing engagement with these countries. APLs and LILs) that sequence assistance over Poor policy performance can be due to weak time and use delivery mechanisms that can country capacity as much as to weak commit- more directly reach intended beneficiaries. ment by leaders. While adjustments in some * Ensure close supervision and good aid coor- CPIA criteria could make this distinction clearer, dination, suggest the value of having a pres- the main issues are to identify assistance instru- ence in the field. ments that can be used effectively in weak pol- * Apply a differentiated approach to ESW in icy environments and to ensure the adequacy weaker policy environments, including strong of budget resources for nonlending services supervision and enhanced quality assurance where lending is limited. (OED 2000a). The replenishment recommendations encour- aged IDA to remain engaged in countries with One implication of these lessons is the need poor policy performance through well-tailored to have a high level of budget resources rela- country strategies and quality nonlending ser- tive to lending in weak policy and institutional vices, complemented by targeted lending where environments. 53 Building More Effective Partnerships B uilding more effective partnerships with borrowers and other development agencies is the second major process reform emphasized in the IDA10-12 replenishment recommendations. Increasing the participation of borrower countries' governments, civil society, and the private sector and improving coordination in development partnerships are key features of that reform. Moving Beyond Project Participation Yet the Bank has no overall policy on partic- As urged by replenishment recommendations ipation and has produced no major policy state- (see box 6.1), participation in IDA projects has ment since its 1994 report The World Bank and increased considerably since the start of IDAIO, Participation. Although some 15 Operational although staff are still learning how to most Directives and Operational Policies address par- effectively engage stakeholders. Participation in ticipation, the lack of clear policy guidelines is analytical and policy work is increasing, but particularly evident in economic and sector work questions of representation, approach, and costs (ESW) and in support to governments to broaden remain.' participation in policy and sector program design. Thus, progress has been more limited in new Record on participation. Stakeholder partic- areas of emphasis in the replenishment mandates: ipation in IDA-financed projects increased sub- * Participation has been greatest in Poverty stantially over the IDAIO-12 period: Assessments (PAs), although the share has * In a random sample of 88 IDA projects, the remained at 60-70 percent since IDAIO, share with participation by primary stake- despite repeated directives to do even more. holders increased from just under 45 percent There has been less participation in Public to 83 percent and the share with a high level Expenditure Reviews (PERs) and other ESW, of participation (beyond consultations) although borrower governments, civil society, increased from 29 percent to 50 percent. and other donors have been more involved . The share of IDA CASs prepared with par- in recent initiatives. ticipation by members of civil society groups * Efforts have increased to encourage govern- rose from 20 percent to nearly 70 percent. ments to include broad participation in their IDA's Partnership for Poverty Reduction IDA1 O-1 2 Replenishment Commitments on Box 6.1 Improving Development Effectiveness th ro u g h Pa rtne rsh i ps iDAD recoinnendations emphasized increasing the participationof primary stakeholdeomin IDA-assistedprojects. environmental assess-- 6,.ments, and CounrtryAssistance Strategies (CASs); giving more attention to governance, andbuiliingstaff capacityto promote partic- ipation. IDAt1 and 12added increasing participation in-ESW, partularlyth analyticalworkitoxundepin a sharpened povertyfocus .I i(Athe PovertyAssessments, social sectorreviews, and Public Expenditure Reviews)and edoouraging borrowerngovermuents tobroaden . public participation in their own projects and programs. IDA10 also emphaszed better coordination among donors, while IDAll and IDA12 recommended greater programmatic selectivity based on IDA'srcomparative advantage. IDA12 emphasized country-led partnerships that combine country ownership and donor coordination. own activities and to create an enabling envi- Constraints on effective participation. Per- ronment for participation. However, there is haps the key obstacle to effective participation little guidance on this matter and little evidence is the lack of understanding by IDA and gov- on what has been done.2 The Povety Reduc- ernment agencies of what needs to be done to tion Strategy Paper (PRSP) process represents help communities organize to contribute mean- a significant departure by including broad- ingfully to project design and to build institutions based participation in its formulation, imple- to implement projects that represent diverse mentation, and outcome-based monitoring as interests. Weak governance also plays a role. one of the five core PRSP principles. Experi- Government resistance remains a major con- ence with this enhanced participation at the straint to participation in countries, while staff strategic level should be tracked and evalu- incentives and resources are the biggest con- ated with IDA's partners. straint in the Bank. Costs are another significant factor. Wide con- Perhaps the key obstacle to effective sultation is expensive, for borrowers and IDA. For stakeholders (including government and participation is the lack of understanding communities), the costs of participation averaged by IDA and government agencies of what between 2 and 12 percent of total costs in eight needs to be done to help communities case study projects.3 Only limited information is available on Bank costs, which occur mainly dur- organize to contribute. ing the preparation of operations, but they appear to be substantial, although less than Quality and effectiveness have not always those to governments. Three case study projects kept pace with participation in projects, CASs, and had preparation costs of $22,000-$75,000, much underlying diagnostic work. Best-practice par- of it covered by trust funds. Costs of participa- ticipation efforts in projects have often remained tion in CAS preparation ranged from 4 to 30 per- islands of success. Government participation in cent of the total (as high as $50,000-$60,000 preparing CASs has become routine, but the when participation was extensive). quality and impact of civil society engagement These factors suggest a need to build and dis- remain highly variable. In the best cases, both IDA seminate best practices in participation and to staff and stakeholders have noted an improved guard against requirements or expectations that focus in the CAS. But examples of best practice are too high. Particularly for institution building are still infrequent, and participants receive lit- reforms, the strategy articulated by government tle feedback. Much the same can be said about has to be internalized at the administrative and participation in ESW. When efforts have been subnational levels. Consultation with the pri- made to work collaboratively, quality and capac- vate sector and civil society needs to reinforce, ity building have benefited, but the costs are high not conflict with, democratic political processes, and examples of best practice are few. including those of parliaments. 56 Building More Effective Partnerships Implicationsfor IDA policy. While efforts to its lack of transparency and timeliness in build participation into IDA-financed projects sharing information and providing feedback. continue, more emphasis is needed on building * IDA management has conveyed to staff the countries' capacity to make their own policy and need to address programmatic selectivity at program processes more participatory. It is not the country level in consultation with bor- clear that this is an area of IDA's comparative rowers and other assistance agencies. Man- advantage and thus its support in this regard may agement has also provided increased guidance need to be worked out in closer partnership with through directives on the CASs and the sec- others. tor strategies. A recent report on the eight country CDF pilots notes progress, though still Improving Aid Coordination limited, in achieving greater selectivity on Few of the program and process objectives the ground. emphasized in the IDA Replenishment Reports * IDA-led Consultative Groups (CGs) and local can be achieved without better aid coordination. coordination forums are moving toward During IDA10-12, the focus expanded beyond country-led partnerships. Some CG meetings the mechanics of donor agency coordination to are now held regularly in borrower countries improved aid management, led by recipient (Bolivia, Ghana, Tanzania, and Uganda). countries, with donors directing support to sound * The Strategic Partnership with Africa (SPA), country-designed policies and programs. Replen- launched in 1987 and chaired by the Bank, ishment recommendations reflect this evolving has continued to evolve and deepen coordi- perspective. Still, progress has been limited, and nation processes. While its initial focus was uncoordinated aid programs continue to impose on quick-disbursing resources to support eco- heavy burdens on recipient countries and to nomic reforms, sector programs are now limit the impact of aid agencies' programs.4 receiving significant emphasis.6 Compliance in building partnerships. Until Uncoordinated aid programs continue to the past few years, IDA had made only modest impose heavy burdens on recipient progress in complying with commitments that entailed actions within its own control. But the countries and to limit the impact of aid momentum has accelerated recently with the agencies'programs. Partnership Initiative of 1998 (World Bank 1998c) and the Comprehensive Development Frame- * Work with other agencies is moving forward work (CDF) and PRSP processes. IDA's initial on a comprehensive approach to guide assis- translation of these initiatives into operational tance to post-conflict countries, and a new policies, procedures, and organizational changes operational policy statement has been issued and its work with other multilateral development based on extensive consultations with other banks on harmonizing processes and proce- donors, civil society, and NGOs (IDA Review dures are encouraging developments. 2001c, para. 43-46). * Most of the progress in strengthening coor- * As discussed in Part II, IDA has increased its dination with bilateral aid agencies has participation in sector-wide approaches occurred in the field. Weak commitment has (SWAps), which combine several reinforcing slowed procedural and policy reforms at the elements: government leadership in the design agency level.5 Posting IDA country directors of a strategy set within a medium-term expen- in the field has improved in-country coordi- diture framework; external assistance in sup- nation, and greater use of in-country coordi- port of the strategy objectives; and agreed nation groups of donors and government has indicators for monitoring performance and shown some positive results. Still, complaints progress.7 Donor support takes various persist about IDA's inadequate consultation forms-from pooled financing in a few cases with other donors on country programs and to- separate investment projects within the 57 IDA's Partnership for Poverty Reduction sector-wide framework-and the open dis- development outcomes. Borrower countries cussion of differences in approach gives gov- must take responsibility for implementing sound ernments an opportunity to choose among policies and building effective institutions, under- alternatives. SWAps also provide an important pinned by transparent, accountable systems of means of advancing sector reforms and financial management and evaluation. Devel- addressing implementation capacity prob- opment agencies need to take responsibility for lems in countries' poverty reduction strategies. the predictable delivery of quality aid through Both governments and donors support this coherent support for agreed objectives, better approach, but harmonization of donor pro- coordination and division of labor along lines of curement and other procedures remains a comparative advantage (including a willingness problem (World Bank 2000e; Jones 1999, to gear up to provide diagnostic work in areas 2001). The PRSP process has increased coor- of leadership), and efficient aid delivery that is dination between the Bank and the IMF in aligned with capacity building and country-led low-income countries. A Joint IMF-World efforts. Bank Implementation Committee was estab- More concretely, IDA should concentrate on lished in May 2000 to oversee the Heavily three interrelated measures: Indebted Poor Countries (HIPC) debt relief ini- * Carrying through with the IMF on institu- tiative and the PRSP program. This commit- tionalizing joint support of the PRSPs, includ- tee's primary concern has been to establish ing strengthening collaboration with other a common approach to the HIPC initiative and agencies supporting countries' poverty reduc- PRSP program and to ensure that countries tion strategies. receive consistent messages from both organ- * Promoting expanded use of sector-wide pro- izations. PRSP missions are conducted jointly, grams as building blocks of the PRSP process, and a joint staff assessment accompanies the drawing on experience to refine and documents to the Bank and IMF Boards. The strengthen core processes, encouraging a PRSP process, which is strongly supported by lead donor model to reduce transaction costs borrowers and other assistance agencies, for recipients and donors, and adjusting its could become the major vehicle for increas- own processes and procedures to facilitate ing donor coordination at the country level. effective participation. Pursuing strategic selectivity at the corporate Overall, the principles of country ownership level, based on sound sector strategies, and and partnership now inform IDA's strategies the integration of those strategies into CASs and priorities on many fronts. Still, IDA has not that are consistent with countries' own poverty yet fully aligned its own practices and procedures reduction strategies. with these new approaches. Nor have IDA and other assistance agencies adequately harmo- In addition, this review recommends that nized their policies and procedures to fit this IDA donors ask the institution to assume a framework. stronger role in accelerating donor coordination to reduce transaction costs for recipients of aid IDA should be encouraged to initiate and from multiple sources and to strengthen coun- manage a conference of bilateral and try capacity for managing and coordinating aid resources. The forces working against donor multilateral agency heads to agree to a time- coordination and harmonization are strong. As bound, monitorable plan of action. the preeminent multilateral development finance institution focused on poverty reduction, IDA has Implications for IDA's future role. To move the potential for facilitating change. The agency- forward, IDA, its borrowers, and other devel- level agenda goes beyond important procedural opment partners need to accept mutual respon- issues, such as procurement and reporting, to the sibility and distinct accountabilities for achieving policy and strategic issues of division of labor, 58 Building More Effective Partnerships aid delivery mechanisms to enhance ownership participation and better aid coordination-are and capacity, and PBAs. While the time for real essential for greater development effectiveness. progress is long overdue, there is still no stand- These reforms need to be pursued simultane- ing mechanism to ensure high-level agency ously to maximize their impact. Most of the commitment. IDA should be encouraged to ini- improvements are needed at the country level, tiate and manage a conference of bilateral and in the design and implementation of assistance multilateral agency heads to agree to a time- projects and programs. But changes are also bound, monitorable plan of action. needed at the agency level to adjust policies and procedures to support improved country assis- Directions for the Future tance programs. Part IV turns to the internal These process reforms-in program and coun- adjustments that IDA needs to make to support try selectivity and partnerships based on greater these development effectiveness measures. 59 Part IV Getting to Results IDA replenishment commitments have been broadly consistent with an evolving consensus in the international development community [see Development Committee Communique 2001] and have encouraged IDA to move in directions relevant to the needs of borrower countries. As a result, IDA in FY00 is very differentfrom IDA in FY94. Still, translating key objectives into monitorable programs and verifiable results remains unfinished business. Issues of accountabilityforpolicy compliance, instrument choice andprogram monitoring, and alignment of resources with pri- orities need closer attention. Further organizational change, as recent management reviews and proposals indicate, is required if the broad policy framework laid out in the IDA Replenishment Reports is to bring desired results. While the period covered by this review has been one of considerable change- in borrower countries, in IDA, and in the international development system-IDA and its partners are still putting core elements of the IDA 10-12framework into practice, reinforced by the new initiatives that have come into play in IDA12. For the immediate future, the principal needs are to consolidate mandates, focus on implementation strategies, and direct resources to agreed new program priorities and processes. 61 I Corporate Issues O ver the seven-year period covered by this review, IDA management has repositioned IDA and recast its mission statement in line with its replenishment commitments. It has: . Refocused and broadened the development services, including Adaptable Program Loans agenda. As discussed in Part II, IDA has sharp- (APLs), Learning and Innovation Loans (LILs), ened its poverty focus, although helping coun- new programmatic adjustment credits, more tries accelerate equitable and sustainable sector-wide programs with development part- growth remains a challenge. IDA has also ners, and due diligence analytical work. It has expanded its agenda, giving more attention to also stepped up efforts to build more effective governance and institutional impediments, partnerships in support of country develop- devising new approaches for aiding post- ment through the Comprehensive Develop- conflict countries, and assisting in the unprece- ment Framework (CDF) and Poverty Reduction dented challenges facing transition economies. Strategy Paper (PRSP) initiatives, although both . Increased responsiveness to borrowers. The are too new to assess. In addition, several World Bank Group has moved program staff new global and regional initiatives are impor- to the field, including 24 of 51 country direc- tant to IDA countries, including the new $500 tors. This has enhanced the coordination of million African HIV/AIDS program. aid at the country level and improved dialogue * Improved quality of the IDA portfolio. Better with government and civil society about poli- outcomes have raised the overall performance cies and priorities.' In implementing the of IDA's portfolio close to that of the IBRD. enhanced Highly Indebted Poor Country This is a major achievement. Of course, qual- (HIPC) debt relief initiative, Bank leadership ity at entry remains below 100 percent, and has also responded to a key development the long-standing issues of uncertain and impediment for many IDA countries. In addi- unlikely sustainability and limited institutional tion, project preparation, appraisal, and development continue to impede long-term approval have been accelerated, thus dealing impact. Performance in Africa has improved with a long-standing complaint of borrowers. but has not yet reached the level found in * Diversified instruments. IDA has introduced other Regions; and some sectors remain prob- new lending and nonlending products and lematic, including rural development. 63 IDA's Partnership for Poverty Reduction While these changes have positioned IDA to are still being prepared for three areas that sig- advance core commitments, implementation nificantly lag in IDA compliance: gender, envi- remains a challenge. Three main implementation ronment, and private sector development. shortfalls-in strategic selectivity, support for Typically, SSPs assess the development ration- country ownership and capacity building, and ale for Bank participation in the sector and iden- focus on and accountability for results-need to tify best-practice approaches. They are weaker be addressed through adjustments in the fol- in giving direction to Bank activities based on lowing corporate management areas. the Bank's record and comparative advantage. OED has emphasized that SSPs should specify Accountability for Policy Compliance the policy framework, taking account of global A recent management report to the Development experience and best practice; assess the per- Committee stated "while the country must 'own' formance of Bank programs to improve devel- its vision and program, the Bank must 'own' and opment effectiveness; describe the future be accountable to shareholders for its diagno- program of assistance in the aggregate, includ- sis and the program it supports" (Development ing monitorable global goals, countries of con- Committee 2000). For the Bank, the relevance centration, deployment of instruments, and skill and implementation of corporate policies is a key and budget requirements; and assess ongoing starting point. Yet policy objectives are not enun- and planned activities of partners, the need for ciated clearly enough to guide country pro- new alliances, and the comparative advantage grams, and mechanisms of accountability for of the Bank (OED 2000a). Management's review policy compliance are weak. These shortcom- of SSPs is focusing on these issues and will ings leave a gap between corporate policies on identify cost-effective ways to address them. IDA commitments and country programs. Consistent with CDF principles, the review will recommend wide-ranging consultation with part- Lack of clear policy objectives has ners to assess past performance, define com- parative advantage, and set out the vision and particularly constrained effective integration strategic directions for sectors and thematic of cross-sectoral themes such as gender areas. With these reforms, SSPs can and should environmental sustainability, and private play more of a role in helping to guide replen- sector deelopment ishment undertakings as well. sector development. Weaknesses in accountability procedures have also impeded compliance with IDA commit- Lack of clear policy objectives has particularly ments. A gender study, for example, found no constrained effective integration of cross-sectoral requirements to assess how gender issues are themes such as gender, environmental sustain- treated at any stage in the project cycle, includ- ability, and private sector development into ing supervision. Nor have accountabilities for the Country Assistance Strategies (CASs). Sector and mainstreaming of environmental issues been Thematic Strategy Papers (SSPs) are intended to clear-a constraint likely to be addressed in the articulate policy objectives and guide their imple- new environment sector strategy. mentation at the country programming level. Accountability for quality, which has received However, OED evaluations show weak integra- extensive management attention, also requires tion of sector and thematic strategies into coun- improvement, although the Quality Assurance try assistance programs (OED 2000b). Through Group (QAG), since its creation in 1997, has a thorough review of the role and effectiveness done pioneering work in tracking the quality of of past SSPs, management is now seeking to ongoing Bank operations. sharpen these documents' strategic role and More rigorous scrutiny of quality safeguard strengthen their linkages to the CAS process. supervision (for both social and environmental Strategies are now in place for nine sectors aspects) was introduced in last year's QAG and thematic areas, but as of this writing they assessments, and safeguard aspects are now 64 Corporate Issues widely addressed in Bank operations. Yet, while quate adaptation of projects to weak institutional serious neglect appears to be rare, the quality contexts. Sector adjustment loans, which support of Bank oversight during appraisal and super- economy-wide policy changes, perform well in vision could be improved in about 20 percent both high- and medium-rated countries, but con- of cases. To support this objective, the Bank is siderably worse in low-rated countries. This may now in the process of revising its management be due to weaker sectoral ministries and capac- systems for safeguards policies, with a view to ities, the complexity of sectoral reforms in poorly maintaining decentralized responsibility while performing countries, and a multiplicity of donors strengthening central coordination. This process providing different and overlapping advice and should lead to an improvement in the account- assistance. Studies of adjustment lending suggest, ability mechanisms for safeguards compliance, however, that some policy reforms, particularly although some issues remain to be addressed.2 first-generation macroeconomic reforms involv- In addition, both background studies for this ing primarily the central ministries, can be review and a Bank task force on the cost of doing successfully implemented in countries with a business have called for a shift to a long-term, weak track record when there is a turnaround country-based capacity-building approach to and adequate govemment commitment. But the accountability for safeguards and public finance. conditions for successful, complex second- This would entail a systematic rather than a generation structural and sectoral change are far project-by-project emphasis on capacity build- more demanding. ing. It would also require a broad discussion of Instrument choice raises several important the harmonization of environmental safeguard issues: and financial accountability policies among * Analytical work. IDA's contribution to coun- clients and donors, beginning with assistance to try policy analysis is widely regarded as a countries to meet their own national standards major area of comparative advantage.3 Yet (IDA Review 2001e, 2001h). each thematic background paper prepared for this review raised concerns about the quality Instrument Choice and adequacy of analytical work, including IDA uniquely combines the provision of global the core due diligence and country-specific knowledge with financing and advisory services. sectoral and thematic work that underpins As reported in the Annual Review of Development operations (table 7.1).4 Effectiveness 2000 (OED .2000a, hereafter referred The declining resources and quality prob- to as ARDE 2000), the choice and mix of instru- lems of economic and sector work (ESW) are ments-matched to the development objectives, cause for concem. QAG's recent findings-that consensus on reform in the borrower country, the value added by country management and the country's policy, institutional, and polit- exceeds that by sector management, and that ical context-are key determinants of effective the quality of ESW is especially weak in the- Bank assistance. matic areas-shows a need to further rebalance ARDE 2000 finds that lending instruments the management matrix (OED 2000a). The perform better in countries with improved pol- Networks are supposed to lead ESW, as well icy and institutional environments (as measured as support it. Structural obstacles that prevent by the Bank's CPIA ratings), but the sensitivity this need to be addressed. Ways also need to varies by instrument. Technical assistance loans, be found to fund good due diligence ESW which support targeted capacity building, perform without crowding out country-specific project well in countries with above-average performance and program analysis. Two core products, ratings, but only half are satisfactory in countries Poverty Assessments (PAs) and Public Expen- with lower ratings. Investment loans fare slightly diture Reviews (PERs), continue to receive worse, likely reflecting what project evaluations lower than average QAG ratings, and key fidu- show about the influence of weak policy envi- ciary due diligence assessments are lagging in ronments on investments, as well as the inade- some areas (table 7.2). Yet staff are concemed 65 IDA's Partnership for Poverty Reduction _ . ... .. . _ _ . , M _ , M __~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..... .. ........I.. ... . Breakdown of Operational Country Service Ta b I e 7 . 1 Costs by Activity (Direct Costs Only, in US$ millions) Use FY96 ' ;;i - Lending 1 4'-i.ti Economic and sector work . .- .1.. Supervision U 1 19 - lZ Othera 50r 6b a. Includes TA and aid coordination, country program support and client training. Source: World Bank data. that due diligence work has squeezed resources benefits of increased regional and global pro- for project and program analytic work as the gramming. Using IDA resources for multi- total resources for ESW have declined.5 country programs would require setting up * Adjustment, programmatic, and investment decision processes for determining priorities lending. Each of these lending instruments and could entail setting aside an agreed serves specific functions and has its own amount of IDA funds for multi-country use implementation challenges (see box 7.1). that would not be allocated through the PBA Selectivity in lending instrument choice is a system. strategic matter and ought to be treated that * 7he special needsfor enhanced capacity build- way. This becomes particularly important ing. As this review has frequently noted, greater with the sharper division of labor among development progress could be made by donors that the CDF promises. At a mini- enhanced support for national capacity build- mum, the rationale for instrument choice ing in IDA operations. A key question is should be made explicit in CASs and effec- whether IDA possesses the right instruments tiveness carefully monitored and evaluated. for this. Its instruments may need to be broad- * Multi-country programs. The World Devel- ened to include grants or be linked more opment Report 2000/2001 (World Bank 2000a) effectively with grant resources available else- makes a strong case for the poverty reduction where. Grants will be more attractive to coun- TabIe 7 .2 Due Diligence Economic and Sector Work in IDA Countries by Region (FY98-OO) CPFA CPAR Planned net Planned Region .9-99 2000 : $-m ZO 9-99 2000 Africa - _ , 7 . East Asia and Pacific 1 g' - 1 Europe and Central A , ;13 - LatinAmericaandthe1 jrtitear - - '1 Middle East and Nonr, A r 1.: South Asia Ii21 a 1 Total 43 1 17 Number of IDA borrovier countrte: . with item completed j 22r 33 4 8 Note: In addition to the number of completed ESW items in this table, there are a number of reports under preparation and listed as "planned" for FY01. Source: World Bank data. 66 Corporate Issues Box 7.1 Features of Alternative Lending I n s t r u m e n t s Adjusowentprogramlending.Adustmentlendingcansupport pol- straints and is more appropriate for certain kinds of targeted icy changes and reforms economy-wide or at the sectoral level, capacity building, But investment projects are more likely to be butonly when a critical mass of stakeholders becomes convinced hampered by shortfalls in counterpartfunds and a weak public of the need and direction for reform. Conditionality can be effec- sector. The procurement and other due diligence requirements tiveas an instrumentof mutual commitment shared objectivesand associated with ivestment lending can strengthen borrower reciprocal obligations, but not as a coercive tool. Cash-strapped accountability and capacity, but are not always well adapted to poor countries may be coaxed into acceptng externally imposed borrower procedures. A multiplicity of uncoordinated invstment conditions, but policies are likely to be poorly implemented and loans in a single sector is a particular problem of IDA countries, subsequently reversed. Adjustment lending has traditionally sup- Instrwnent mix. Combining adjustment lending with other ported 'stroke of the pents' reforms involving limited public con- instruments-such as analytic and advisory services, technical sultation, but it is increasingly used to support more complex assistance, and investment loans-may improve the policy envi- j second-generation reforms, involving many stakeholders, as ronment and, hence, the outcomes. Complementarwy investments reported in the Bankfs recent adjustment lending retrospective. to build capacity, improve service delivery, or develop support- Bank efforts to use adjustment lending to promote civil service ive infrastructure are often necessary to achieve the benefits of reform have been mostly unsuccessful, but the Bank has begun to policy change, Adaptable program lending may be appropriate experiment with more flexible and consultative programmatic for long-term public sector reform, depending on commitmeot approaches. Thesenewprogrammaticeffortssupporta borrowers to reform and the quality of the trigger points and evaluation medium-erm program of reforms, oftenthromugh aseries of single- benchmarks selected. tranche operations based on agreed actions taken. Investment lending. Investment lending can allow experi- SoweBranson andHanna 2oN Devarajan Donairand Ho*nm20ig ank1;iisbnkar mentation and joint problem solving of specific dvelopment con- issa Kifick, Gutmtilaks, _d Maf 199 OED 2WtO.X tries reluctant to borrow for this purpose and There are three key elements for develop- will enable a needed long-term perspective.6 ment effectiveness and M&E systems. They are: (a) the need to build incentives or demand for Monitoring for Results M&E data for decisionmaking at all Bank and bor- IDA's broadened agenda has increased the rower levels, with a focus on development out- demandingness of its objectives and interventions comes and results rather than inputs and and put heavy pressure on human and budget deliverables; (b) ownership by governments and resources, implying both higher risks and poten- other stakeholders, reinforced by evaluation tially higher rewards. Thus, IDA needs improved capacity development; and (c) harmonization performance indicators and monitoring and eval- among external assistance agencies of their M&E uation (M&E)-at project, country, and corpo- requirements as well as coordination in securing rate levels-with a clear focus on results. adequate funding. The quality of M&E has improved since the late 1990s, but ratings still fall short of expecta- Multiple measurement systems in the Bank tions: a 1999 assessment found that less than one project in two had adequate M&E in place. Good have created a problem of lack of consistency M&E systems are crucial for systematically assess- and coherence in performance measures. ing progress in meeting core targets and pro- moting development effectiveness through Multiple measurement systems in the Bank results-oriented management. Evaluation reports have created a related problem of lack of con- and a 1999 Bank working group on M&E see the sistency and coherence in performance meas- main weaknesses at the project level as weak ures that limits IDA's (and its partners') ability incentives, diffuse accountabilities, and weak to track and assess results and adjust policies capacity-in both Bank and borrower countries. and programs.7 The Bank is working to har- 67 IDA's Partnership for Poverty Reduction monize and strengthen performance measures Poverly-effcient budget allocations. Despite internally and with partners. PRSPs and sup- the Bank's poverty reduction mission, a coun- porting programmatic adjustment credits will try's level of poverty gets relatively minor explicit require an overall approach for selective M&E consideration in budget allocations. Regional at the project level, greater M&E at the sector and country budget allocations do not distinguish and country levels, and enhanced country capac- between IDA and IBRD. While corporate and ity for both. Future Replenishment Reports Regional decisions have begun to channel more could reinforce these efforts to advance M&E program funding to poorer countries, consistent reforms by requesting that management focus with performance, the impact has been small. more on outcomes and results in reporting on In FYOO, the budget allocation to IDA countries the IDA program. was, on average, $0.54 per capita, and to IBRD countries, $0.45. Alignment Between Resources and There are complicating factors in making Strategic Program Priorities such a link (for example, the differences in Cutting across all other issues is how budget operating costs among countries). However, resources are deployed. Network and Regional poverty could be given greater weight in budget staff are concerned that current budget alloca- allocations by applying the country norm tions fall seriously short of the funding needed methodology9-an approach that, to date, has to meet IDA commitments. Budget processes only marginally influenced budget decisions have changed significantly over the past five because of unresolved methodological and pol- years in response to the matrix structure intro- icy issues. duced in the mid-1990s, other alterations in the Bank's way of doing business, and the Strategic The link between program and budget. The Compact (FY98-01).8 The Compact and internal Bank's programming and budget system lacks Cost-Effectiveness Review anticipated that adequate mechanisms for reconciling budget improvements in the quality of Bank services and allocations and commitments to shareholders, greater resource availability would lead to an bondholders, donors, partners, and countries. increase in lending. However, many of the CASs, which generally serve as two- to three-year expected efficiency gains have yet to be planning instruments, are approved separately achieved. Moreover, resources were allocated for from annual country budgets. CASs are sup- implementation of the CDF, PRSPs, and other posed to estimate costs associated with pro- new initiatives, including the enhanced HIPC posed lending scenarios and to present program debt relief initiative, within a budget set by the recommendations that correspond to realistic Strategic Compact commitment level. So while budget levels. But unanticipated resource the Bank's development agenda expanded, demands, including new mandates or crises, expenditures for lending and ESW continued to can arise over the two- to three-year CAS period, decline, in part because of the increased budget and Regional vice presidents are not committed requirements of the "knowledge bank" (see to the CAS funding levels. A projected CAS pro- table 7.1). gram for a particular year may not be adequately funded, and there are current examples of sig- While the Bank's development agenda nificant budget shortfalls. A more automated CAS costing tool that has recently been endorsed should facilitate ESW continued to decline. more realistic estimating of indicative costs. But it will not guarantee that a CAS-even after To better align resources with strategic pri- Board review-will be fully funded across all orities, two sets of key issues are relevant: years. A system that combines CAS costing poverty-efficient budget allocations and the link with a bottom-up, zero-based corporate between programs and budgets. resources allocation process on a multi-year 68 Corporate Issues basis would get closer to full funding. It is a A related issue is the Bank's heavy depend- positive step, therefore, that in this year's ence on trust funds.10 Those funds that provide budget process a three-year rolling budget is advisory services and technical assistance for spe- being prepared, for the first time, to minimize cific development-related activities amount to unexpected movements in Regional funding. about a third of the Bank's administrative budget, This step should be accompanied by reporting and the percentage is even higher for some to the Board when there are changes in pre- countries and sectors.1" The multiplicity of funds viously discussed CAS programs due to alter- can cause distortions and high transaction costs. ations in budget allocations. A large amount of staff time is spent acquiring IDA commitments should also be costed. and administering these resources, but their Although none of the many IDA10, 11, and 12 impact on country program budgets is not clear. replenishment commitments were explicitly Given these difficulties, there needs to be a sig- costed, many of them intersect ongoing or nificant rationalization of trust fund arrange- planned processes, including CASs, sector strate- ments, an issue that has been highlighted in the gies, and other major initiatives. The cost of Bank's Strategic Directions planning. recommendations should be presented to IDA Overall, a sizable implementation agenda lies Deputies before the conclusion of a replenish- ahead to ensure effective implementation of the ment negotiation, and to the Board with the IDA IDA program. Improved accountability systems, Replenishment Report. Where a replenishment instrument choice, and M&E are central. But lit- requirement implies actions beyond ongoing or tle of this will be possible without a better align- already planned efforts, it should have a sepa- ment of budget resources and program priorities, rate implementation path, with the necessary pol- the major goal of the budget reform currently icy and budgeting changes. under way. 69 Implications for the Future hile implementation of replenishment undertakings has moved W z A / the IDA program in the right direction, IDA and its partners have not yet fully institutionalized the changes or entirely absorbed the lessons of experience. What is needed now is to deepen and broaden the gains from the existing policy framework by: • Focusing on implementation in areas of Be More Selective emphasis Although there is consensus on this point, more * Aligning resources to strategic priorities needs to be done to increase IDA's country, * Consolidating the IDA mandates. program, and corporate selectivity. * Country selectivity. IDA's performance-based For this, IDA will need to further adjust its role allocation (PBA) system has brought increased at the country and global levels, within the lim- selectivity to the allocation of resources at the itations set by resources available for adminis- country level, based on assessments of the trative costs, lending, and nonlending services. soundness of countries' policies and institu- In its primary role of supporting country-based tional arrangements. Further advances could development efforts, IDA should concentrate on be made by continuing to improve the Coun- its areas of comparative advantage-most of try Policy and Institutional Assessment (CPIA), these are at the strategic level of supporting rethinking the governance discount, and ensur- economy-wide, sector-wide, and government- ing consistency with the Poverty Reduction wide reforms through analytical work and lend- Strategy Paper (PRSP) and Country Assistance ing-and on capacity building. IDA should also Strategy (CAS) processes. Also, broader dis- play a more active role at the global level to facil- closure of the rating system would improve itate the harmonization and coordination of exter- consistency of treatment and allow the system nal assistance needed to speed progress toward to benefit from open scrutiny and to serve as the overarching goal of poverty reduction. a diagnostic tool for strengthening development More specifically, IDA could build on partnerships. improvements of the past seven years in the fol- * Program selectivity. Countries' poverty reduc- lowing ways. tion strategies provide a new way of setting 71 IDA's Partnership for Poverty Reduction priorities for IDA and other donor country countries suggest the need for institutional assistance programs. More effective program development strategies that identify cross- selectivity, and instrument choice, depends in sectoral concerns, prioritize areas of assis- part on better integration of strengthened tance, and create synergies in the handling of sector strategies into CASs. This should help problems in different sectoral programs. IDA define the focus of its lending and non- * While the governance agenda set out in the lending services, including where to take a IDA10-12 Replenishment Reports remains leading or a supporting role with other valid, recent experience suggests that IDA, its donors, and its choice of instruments. borrowers, and other development partners Corporate selectivity. IDA needs to clarify pri- need to make a special commitment to orities and objectives by sectors and themes improving countries' public expenditure man- and identify more precisely what it can (and agement and financial accountability. This cannot) commit to do, selecting the highest review recommends that IDA link its future payoff interventions for advancing poverty lending to time-bound plans for establishing reduction, based on its comparative advan- sound public financial accountability systems. tage. This corporate-level selectivity needs To foster that accountability, IDA should also to be established in concert with the strate- encourage greater transparency by requiring gic decisions of other agencies as part of a that agencies and programs supported by broadened harmonization action plan. IDA issue regular public reports that set per- formance targets and record progress on IDA quantitative lending targets for sectors, achieving them. instruments, or groups of countries serve as dis- incentives for effective program and country Commit to Development Partnerships selectivity. IDA should work actively at the country and global levels to move aid coordination processes Focus on Governance and from ad hoc to structured arrangements. Capacity Building - The PRSP process provides a concrete way Every area of this review highlights the central- of applying the Comprehensive Develop- ity of good governance. IDA should continue to ment Framework (CDF) principles in sup- intensify its support of effective governance and port of countries' development strategies. public sector capacity building, increasing its Institutionalizing this support, in coordination coordination with other external assistance agen- with the IMF and other assistance agencies, cies to encourage borrower governments to should define the core of IDA's future pro- become more efficient in their provision of pub- gram. The phasing-in of the new Poverty lic goods and services and more transparent Reduction Strategy Credits in step with coun- and accountable to their publics. tries' capacities for effective use and moni- * Every aspect of IDA's assistance-from ana- toring should be handled with care given its lytical work, to design and supervision of strategic relevance. operations and monitoring for results- * Expanded use of sector-wide approaches should have a capacity-building dimension. (SWAps) should be a building block of IDA The implications for time, costs, and adjust- support for countries' development efforts, ments in ways of doing business mean that taking into account lessons of recent experi- IDA may need to consider options for ence on how to use these results-oriented expanded grant financing for nonlending approaches to support country-owned pro- services and for much greater coordination grams. Even where other agencies are better with grant-giving agencies in support of positioned than IDA to take the lead, IDA ana- capacity building. lytical work or lending, or both, may still be • The sectoral impacts of systemic governance needed. As necessary, internal project and and institutional weaknesses in borrower procurement procedures should be adjusted 72 Implications for the Future to enable flexible participation in structured Better Align Resources with Priorities aid coordination arrangements. A better deployment of resources relative to * IDA Deputies should use IDA to achieve IDA commitments is essential to applying the greater coherence and harmonization in aid other lessons of the past seven years. The rela- practices, which are so long overdue. This ini- tion between the budget process and the full tiative should involve the heads of bilateral funding of CASs is of particular importance. and multilateral assistance agencies and * To make poverty a more prominent factor should set a clear schedule for achieving in the Bank's budget allocation process, a results. The global agenda should go beyond country norm methodology has recently procedural issues-as important as they are- been applied as a supplementary measure. to policy and strategic issues of program and Resolving methodological and policy issues country selectivity and the processes for bol- that are holding up the move to full coun- stering country-led aid management. try norm-based budgeting would support the Bank's overall emphasis on poverty and Clarify Objectives and Strengthen performance. Accountabilities . Recent efforts toward more realistic costing * The process introduced in IDA12 for track- of CASs should be accompanied by a process ing implementation of IDA commitments for ensuring full funding of Board-discussed should be maintained and strengthened. CASs across their two- to three-year period. Clear guidelines on compliance should be This year's preparation of a three-year rolling provided to staff at the start of the replen- budget is a step in this direction. ishment period, and Regional management . Ways need to be found to ensure appropri- should be responsible for tracking country ate levels of due diligence and program- coverage of relevant commitments, taking specific ESW and greater attention to capacity account of countries' priorities and activities building. Options for grant financing for by others. capacity-building activities need to be * Clearer objectives and guidelines are needed explored. in the pursuit of the IDA policy framework, especially for private sector development The IDA replenishment process itself might (PSD) and the mainstreaming of gender and usefullv be re-examined tofacilitate refo environmental sustainability in IDA activities. Networks need to devise clear and achiev- in the overall development architecture. able aims and indicators, strengthen their involvement in key sectors, and track main- This review also suggests that the IDA replen- streaming in country programs. Regional man- ishment process itself might usefully be re- agement needs to ensure adequate treatment examined to facilitate reforms in the overall in CASs, reflecting appropriate selectivity. development architecture. The process provides QAG and OED reviews ought to give more a unique opportunity to discuss, at a global attention to mainstreaming. level, past experience and future directions for • Recent internal recommendations for M&E international development assistance and to processes should be followed up to under- mobilize funding in support of key objectives and pin a focus on results, especially at the coun- to evaluate the development effectiveness of try and sector levels, with attention to the overall aid system. As currently constituted, improving capacities in borrowing countries. the process falls short of fully realizing this Of particular immediate importance is the potential. development of processes for evaluating per- Although broadly consistent with an evolving formance and tracking progress on PRSPs consensus in the international development and the supporting PRSCs and wider CAS community, the replenishment undertakings programs. have been both overloaded and overdetermined 73 IDA's Partnership for Poverty Reduction (for example, in the specification of lending experiences will help to set IDA priorities and shares going to individual sectors and coun- improve implementation. The consultation tries, and in the number and detail of the steps taken in the IDA12 negotiations were a recommendations). Undertakings have often start. The transparent and consultative process been unrealistic about what IDA and its bor- planned for the IDA13 negotiation-including rowers could reasonably accomplish in three- consultations with borrower governments and year periods, have focused more on inputs than civil society and the posting of papers on an results, have neglected to consider IDA budget IDA Website-is a solid second step. Follow- resources, and have failed to consider the impli- ing the negotiations, IDA should consider ways cations for the overall development assistance to ensure continuous feedback and to engage business. its partners in M&E of IDA13 performance and results. The replenishment process has been too disconectdfromDS'sevelomentDefine Comtmentsin Termsof disconnected from IDA's development Monitorable and Achievable partners, and IDA's comparative advantage Objectives and Take Account of Their has not been sufficiently emphasized. Realistic Costing IDA replenishment undertakings have tended to Specifically, the replenishment process has emphasize inputs and output targets that do not been too disconnected from IDA's development take account of the need for country ownership partners, both borrowers and other assistance if reform efforts are to be sustained. It would be agencies, so that priorities have not always been better for Replenishment Reports to focus on as relevant as they might have been, and IDA's development goals and on identifying the kinds comparative advantage has not been sufficiently of activities that IDA should support in advanc- emphasized in the agreed undertakings. Three ing those goals, as a matter of priority, taking changes could improve the process, and thus, account of IDA's comparative advantage and the impact of future undertakings. realistic costings of replenishment commitments. In addition, Replenishment Reports ought to Develop a Long-Term Vision, agree on IDA performance indicators and on Focused on Results objective reporting on progress toward desired As part of the IDA13 negotiations, the IDA outcomes. This process needs to recognize that Deputies ought to ask management to develop, operating within CDF principles means moving in consultation with borrowers, a long-term even further away from a direct measure of the vision for IDA beyond the replenishment period. link between IDA activities and country devel- This vision ought to clarify what is meant by IDA's opment outcomes to new ways of tracking IDA's poverty focus, identify how IDA's resources can performance in partnership with others. One way best be deployed, set up an intemal management to facilitate this is to strengthen the role of sec- system, and consider IDA's global role as a com- tor strategies in defining IDA's comparative plement to its support for country programs. advantage and the objectives to which IDA would commit itself-in terms of program strat- Engage Developing Countries in Setting egy, targets, and deployment of resources-as and Reviewing Replenishment Commitments the basis for commitments agreed to in IDA Opening communication channels that allow negotiations, subject to overall resource for interaction and feedback from country availabilities. 74 ANNEXES ANNEX Al: IDA'S FEATURES Established as an integralpart of the World on average, about $5-6 billion a year for different Bank: IDA was established in 1960 to lend to types of projects. Though the major proportion low-income member governments of the World of its lending has always been investment lend- Bank that could not afford to borrow on the ing, IDA also provides forms of quick-disburs- Bank's near-market terms. Though a separate ing adjustment and program loans conditioned legal entity, IDA operates as an integral part of on agreed macroeconomic, sectoral, or public the Bank-sharing the same staff and head- management reforms. In recent years it has also quarters; reporting to the same president; and provided, on a pilot basis, partial risk guaran- applying the same standards for loan appraisal tees in support of private investments. Though and approval. its Articles of Agreement permit IDA to provide funding on a grant basis, it has done so only in Lends only to low-income countries: IDA lends a limited number of special circumstances, in only to countries that have a per capita income support of particular global programs, certain (in 1999) of less than $885 and lack the financial post-conflict situations, and debt relief efforts. ability to borrow from the Bank. At present, 78 IDA funds are allocated to borrowing coun- countries are eligible to borrow from IDA. tries in relation to their population size, level of Together, these countries are home to 2.3 billion income, and record of success in managing their people, comprising 53 percent of the total pop- economies and their ongoing IDA projects. Over ulation of the developing countries. Today, 1.5 bil- time, IDA has made modifications in its alloca- lion of these people survive on incomes of $2 or tion policies: for example, putting a ceiling on less a day. Since 1980, IDA lending has amounted lending to its two largest borrowers, India and to 12-18 percent of total official development China, and giving increased weight to coun- assistance to eligible borrower countries. tries' policy and institutional performance. In Some countries, such as India and Indonesia, FY00, 47 percent of new commitments went to are eligible to borrow from IDA due to their low Sub-Saharan Africa, 27 percent went to South GNP per capita, but they are also creditworthy Asia, 11 percent to East Asia and the Pacific, 7 for some IBRD borrowing. These countries are percent to Eastern Europe and Central Asia, and known as "blend" borrowers. Countries that the remainder to poor countries in the Middle once borrowed from IDA but are now too pros- East and Latin America. perous to qualify include Chile, China, Costa Rica, and Egypt. Funded largely by government contribu- tions: Whereas the Bank raises most of its funds Provides loans on concessional terms: IDA on the world's financial markets, IDA is funded loans (called credits) have maturities of 35-40 primarily by contributions from member coun- years with a 10-year grace period on repayment tries. Their cumulative contribution since the of principal. There is no interest charge, but start of IDA totals, US$96 billion equivalent. credits cany a small service charge, currently 0.75 Additional funds come from transfers of Bank percent on disbursed balances. Since 1960, IDA income and from IDA borrowers' repayments of has lent $120 billion to 106 countries. It lends, earlier IDA credits. 75 IDA's Partnership for Poverty Reduction Donors agree on a three-year cycle on the to lend about $20 billion, of which donor con- replenishment of IDA funds. The 12th replen- tributions will provide a little over half. Today ishment will finance projects over the three there are 37 IDA donors, two of which were once years starting July 1, 1999, and will allow IDA IDA borrowers. 76 Annexes r ANNEX A2: EVOLUTION OF IDA'S PROGRAM Throughout its 40-year history, the purpose of million in 1961-68 to $3.8 billion in 1980. IDA's assistance has remained the same: to sup- Although a part of this growth reflects inflation, port low-income-country economic develop- in constant dollars annual commitments more ment and poverty reduction. However, its than doubled from 1970 to 1980, as did the policies and programs have evolved continuously number of projects. in response to changes in the challenges its borrowers have faced and in thinking about Tbe 1980s advent ofpolicy-based lending: By development. the end of the 1970s, it had become clear that development progress and IDA project per- The 1960s focus on infrastructure: In its formance were being seriously constrained by earliest days, IDA followed the lead of the IBRD problems in the policy and institutional envi- and concentrated on financing roads, ports, and ronments in many borrower countries. But IDA's other infrastructure projects. The approach main instrument of project lending was unable reflected economic thinking in the 1950s and to provide adequate support for the economic 1960s, which emphasized the accumulation of policy and structural adjustment reforms deemed capital as the engine of growth, and growth as necessary. The onset of the debt crisis in the early the key to poverty reduction. As food deficits and 1980s lent urgency to this situation, creating the payment imbalances increased in developing circumstances for the introduction and rapid countries, it became clear that both sets of expansion of adjustment lending conditioned on assumptions were too simplistic. In response, in borrowers' commitments to undertake specified the mid-1960s, IDA increased its agriculture policy reforms. Focused initially on distortions lending and began lending for education. in the macroeconomy, adjustment lending became a major feature of IDA lending in sup- The 1970s decade of expansion. IDA under- port of both structural and sectoral reforms and went a decade-long period of transformation and continues to account for roughly one-quarter growth in the 1970s. Despite improved rates of ($1.5 billion) of IDA lending today. Structural economic growth, millions of people in devel- reform underscored the importance of two main oping countries were still living in poverty, and points: (a) along with renewed growth, explicit growing inequities were increasingly evident. As pro-poor policies and programs were needed in a result, confidence in the prevailing broad the many countries where poverty remained "trickle-down" approach to development had pervasive and deep; and (b) sustainable reform waned, and attention then turned to more direct could be supported but not induced by exter- efforts at poverty alleviation, including rural nal assistance. Both lessons became central to activities aimed at increasing the productivity of further changes in IDA's program in the 1990s. the rural poor as well as increased lending for human development. In support of this evolv- The 1990s broadened agenda of develop- ing agenda, development research and ESW ment concerns: From the 1990s onward, IDA's were expanded and IDA lending increased from efforts have been marked by an expanding pol- an annual average level of commitments of $229 icy agenda along with a drive for increased 77 IDA's Partnership for Poverty Reduction development effectiveness. Environmental sus- enced serious internal conflicts that called for tainability, gender equity, and the improvement new forms of post-conflict assistance. IDA under- of governance became core policy priorities in took several key reforms during the decade to support of the overarching objective of poverty "change the way it does business," shifting its reduction. At the same time, IDA was confronted focus from individual projects to the country as with increasingly diverse and complex borrower the main unit of account; strengthening and circumstances as China and the newly inde- diversifying its analytical work; and placing pendent countries of Central Asia joined its greater emphasis on stakeholder participation, ranks and numbers of IDA countries experi- transparency, and aid coordination. 78 Annexes ANNEX B: POVERTY AND SOCIAL INDICATORS inflrnin:S (Si/~~~1d ay P P P) Caiegory 1987- 1990 -993 1996 199 (estl) Percentage below SI/day PPP 1993 prices (0/a) IDA*,:rIlv courdre; 33 85 39 2e 39 92 38 22 33 60 IDA.-:nlv I::urrrie- le: B3nq. Bf e;h, 3834 41 34 41 37 41 44 37 70 Blend oi)unrilrie: 37.06 37 74 -36.17 30 82 30 03 All IDA tiled r junri 36r59 - 37 97 36.75 3I 96 30 59 All IDA ilenro counriErr le- I Crr,a . 43096 4260 41 87 4163 39.43 Absolute number below SI/day PPP 1993 prices (million) IDA-,r,ly 278 ICIA el qtile 1,063 C[rra 290 Note: PPP = Purchasing power parity. Source Institutional Business Warehouse Indicator 199 - 1990 1997 19890 (0/a) 1990-97 4%), Life expectancy (years) All IDA : 61 63 6 3 IDA vvithout China 53i 57 -60 8 5 Africra 47 48 50 J 3 Infant mortality rate 4%) All I[DA 86 65 59 24 11 IDA wjh'"jCh[na 112 85 74 '4 12 Africa 117 101 - 92 14 -9 Primary school enrollment MO) All IOA 66 86 -98 3D 14 IDA vhoul luinr - 665 60 69 -9 15 Africa 55 47 48 -15 2 Female illiteracy 4%) All IDIA 62 50 44 .18 -13 IDA v,w,h,hul [hrn3 71 62 56 12 -10 Africa 76 64 54 17 -15 All indicators are population weighted. Source: World Bank data. 79 IDA's Partnership for Poverty Reduction ANNEX Cl: IDA COMMITMENTS AND DISBURSEMENTS BY REGION IDA Commitments and Disbursements - Table C 1.1 by Region-IDAIO TO FYOO (percentage and total, US$ million) l l l l l l g ~~~IDA11lla Region Commitment Oisbulrsement s i m n Africa F.. ll 34 4 371 .. -4,. 4? Europe ariiCE-ri[ralA ,3kia 11 5 6 4 .....-,9 Latin Arrierci:a and Caribk.ear, I5.7 6 3 Middle Ea: ardi ..... Nort[ 41rca l' a 4.2 33 SouthA:a 1 A 30.3 275 : TotalI (O,:. 100 100 Total (US$ TIIonl 18,946 14,072 80 Annexes Figure C1.1 Commitments by Region 50 5 IDAI0 * IDAll F FY2000 40- c 30 - co 20 20 1 0 0 Africa East Asia Europe and Latin America Middle East South Asia and Pacific Central Asia and Caribbean and North Africa Figure C1.2 Disbursements by Region 50 2 IDA * IDA l l F] FY 2000 40 - = 30 co a CD Of 20 - 10 0' Africa East Asia Europe and Latin America Middle East South Asia and Pacific Central Asia and Caribbean and North Africa 81 IDA's Partnership for Poverty Reduction ANNEX C2: IDA COMMITMENTS AND DISBURSEMENTS BY SECTOR IDA Commitments and Disbursements Table C2.1 by Sector-IDAIO to FYOO (percentage and total, US$ million) IDA11 Sector Co ii bbisenent Commitment Disbursement Agriculture(%) .2. 4.3- -- 191 215 i Economy-wide(%) 14 2 102 : .4: w/o Environment (%) 4 t 4 - 0 4 0 Private sector development(°:. -. 07.: ! -, 1 Infrastructure (%) 198;- 'U'* ' l g R 196 ' , w/o Transportation(O) ' ; 5 1 ,3 13 3 Industry/finance (%) '9 85' 1 ..* Social sector (%)36 g 5t,9¢ r - i 3 365 w/o Education(%) : - : 7 17 5 148 Health, nutrition, population (' I 8 153 0 6 Total investment (US$ million) 1 S9 .;'. 1$jti32 1; 2,64 .s-- Total adjustment (US$ million) 474 .7' ? 3694 1809 6.j1 '"'A Total (US$ million) i . -',- 18 946 14.07, 82 Annexes Figure C2.1 Commitments by Sector 50 D2 IDAlO * IDAll F FY2000 40 - 'OD 30- C co 20- 10 f 0 Agriculture Economy-wide Private sector Infrastructure Industry/finance Social sector development Figu re C2 .2 Disbursements by Sector 50 D IDA lO DAl l FY 2000 40- n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 30 - CD 20 20 10 0 Agriculture Economy-wide Private sector Infrastructure Industry/finance Social sector development 83 IDA's Partnership for Poverty Reduction ANNEX D: IDA PORTFOLIO PERFORMANCE Outcome, Sustainability, Institutional Table D. 1 Development (ID) Impact, and Aggregate Ratings by Sector, Network, Region, and Lending Type/Source by Exit Years 1991-93, 1994-96, 1997-00 (by Project) Note:ercetaesexcldeprjectsnotated. SectrRProuiecgs Sh oe end of FiYe00 ar s Humdn~~~~~~~~~~ ~~~~~~ %tj( %Sale boe 7Z 2r5 9 1Ene scongoming expe 74 2t 66 38 20001 84jil Irr mnt [ g 1 2 2 59 2 21 Induwv 20 M 6 45a 30 25 INfra:sPruc[enae excud 25jet not 39ed Setr2ersn7D eleihetRpr ruigsa fteedo Y0 a.TedtNoe Y0eittersnwoatarsmlk10oto 6)an elc h rcsin falIR eevd hog uut20.Te rcsigo h eaidro h Y0sml Psoverryg Rexpectedion be Ecompltdbping201 M8 -c4 nei7 1 6 8 2 Annexes Outcome, Sustainability, Institutional Table D .2 Development (ID) Im pact, and Sector, Network, Region, and Type/Source by Exit Years flr 1 997-00 (by Real 1111,1I lrl:l . h ---------------~~~~- --- - ---------------- , , < r ; IDA 10 1994-961 IDA 11t4 IDsw-1r Dipies-? ,,>?i pezt h bDiohurse Sust % impact Drporse Suet imnpac *.5, SitS,. 4*jtr" 'j;JAoI S Shore Out likelyoi %sub. S Share Out likely or % suh. intPiepe % -e "* <9 1 ? nnt millions % % Set bhne or bener enHoao % ' Sao bhoner or bnor Sector Group :; .n Agriculture 4882 .35 4 440 26 79 42 42 5,389 26 73 59 48 Economic-wi i2 'TB . 't _ i, 4153 24 81 42 21 4 5322 22 83 55 24 Human-resoLre related 12829 AS tg, 3 2.880 17 63 41 20 *4908 23 77 52 36 Industry 2.078 :X 5vPH t591n 1,336 8 55 36 37 ;1.48,9 7 75 58 57 Infrastructure 3.155 2Z 7 '4W t '. 4,163 25 73 45 18 4.696 22 76 57 42 Network Environmentally 6. So:all; Sustainable [,Iel,oprnmni 4.82. 35 4 40 26 79 42 42 6Q75 29 72 57 46 Finance, Private 'Sec cr S. Infrastructtre 5,570' 3ir ii .i 9fjjf 6,056 36 68 44 24 :7,249 34 70 52 43 Human Deve opmenri 1491 '4.32'2 14 65 38 16 , 384 4; 18 87 59 33 Poverty Redu,: trn *& E: ,:nmn: Management ,2,18916' 65Ai. x . 4,153 24 81 42 21 3,847: 18 86 58 23 Lending Type Adjustment '3,357- 24 B6¾, '6 S* n 6 403 38 78 46 25 41I 23 88 65 35 Investment '10385 .76, 5.. . . - ' 1S--ag'mil0559 5.............6 62 71 40 28 18144' . 77 74 55 41 Region Africa '5,323:38 %'k ' 7,867 46 72 33 29 i ,892. 38 69 .44 32 EastAsiaand Pacile: 2,40' 17 ..',- 8.i7'ic 1 2.215 13 90 85 156 4503 21 92 80 71 Europe and Cernral A:ia ' / g2Zai7d 427 43 1085 5 95 66 34 Latin America arid E yritte.3r ' 385. 3 6 549 4 73 34 51 ;I869 4 85 39 36 Middle Eastard lJtirth Alria 615 4 84, ' ' 187 1 88 19 36 ::-358 ' 91 35 43 South Asia 5,413 '38 7. ' Q.k{i,kYIA 56l7 33 66 36 25 6 308. 30 70 56 27 Lending Source - *. IDA 1 1,692 2 6 :. 4 ,4&T4Lff13.317 24 76 40 28 17.228 .25 78 56 40 IBRD '37,90!;' ; "339.57A2 39 531 70 76 60 34 4837-71 '70 82 70 51 Blend 2,451 5 71,j ,, 2k,1 3.655 6 64 51 24 3,787 5 70 55 38 Grand Total (IDA & Blend) 114.143 100 U 2 .169,ig 5z,il'30' ......... ...... 156972 100 73 42 27 Zt,015 100 77 56 39 Note: Percentages exclude projects not rated. Sectors represent IDA Replenishment Report groupings as of the end of FY00. a. The data for FY00 exits represent a partial sample (120 out of 2691 and reflect the processing of all ICRs received through August 2000. The processing of the remainder of the sample FY00 is expected to be completed by spring 2001. Active portfolio data reflects projects active as of July 1, 2000, and it is taken from DAG materials. 85 IDA's Partnership for Poverty Reduction ANNEX E: LENDING FOR POVERTY-TARGETED INTERVENTIONS (PTIs) Table E. 1 DAIBlend Poverty-Targeted Lending (percentage PTI) -1 Volume of Category .- Yearscomtets) IDA 1 992 983 5 Bend X ~~~~~~~~~994-96 53 1997-99 1997O 9 684, 8 6 Annexes ANNEX F: LENDING BY INSTRUMENT IDA employs a range of lending instruments, nance loans have declined in importance. but specific investment loans dominate IDA Structural adjustment loans show a marginal commitments. Moreover, their relative share increase in terms of the distribution of amount has increased over time, while sector adjust- of commitment. APLs and LILs started in ment loans and sector investment/mainte- IDA11. by Intervention IDA10 IDAll FY2000 Amount of Percent total Amount ol Percent total Amount of Percent total lending, IDA lending, IDA lending, IDA Instrument USS million canomitinents USS million commitments USS million commitments Adaptabi,e Piogr.3mn Loan 0 0 515 3 568 13 Debt RE,Ji:,- in, Ioan 0 0 85 o0 0 Emergevrv Aec:over, Lo:a3n 359 2 843 4 81 2 Financial Inlermed,.ary Loan 248 1 137 1 5 0 Learninq 9 3d Inr,,,d:r, Loan 0 0 113 1 76 2 Program n,Lru' lur3l Adju;irn,e7r Lo:rn 0 0 1.1 0 0 0 Rehabib,i.arn,,n Lo:ir, 283 1 61J O 0 a Sector AOInmeni Loanr 2281 12 981J 5 73 2 Sector Irne- imnri Mairr reninr,e Lo:,n 1,312 7 699 4 110 3 Specific Irn,eL,&Twrr Loan 11,784 62 1 541] 66 2,588 59 Structul.,l Adluirnenr Loan 2183 1 1 2571 14 608 14 Technical a I.- Lo...n 688 4 40I * 257 6 Total 19,138 100 18,952 100 4,366 100 87 IDA's Partnership for Poverty Reduction Table F.2 Distribution of IDA Commitments by Number of Loans by Intervention Emergency Recovery Loan ~ ~ ~ Num2e Pecn Instrument ceIts1 numbe Debt F,eduction Loan 2 105| Financial Intermediary Loan 4 Learning and Innovation 2 Loan 26 7 Program Structural Adjustment Loan 0 0 Rehabilitation Loan 2 1 Sector Adjustment Loan 11 3 Sector Investment/ Maintenance Loan 13 3 Specific Investment Loan I:220 58 Structural Adjustment ,-' i3 Technical Assistance Loan 2 : :'- 8 7 Total 380 100 The distribution of commitments by number While the relative share of Specific Investment of loans by type of intervention presented Loans by amount was increasing, there was a above indicates a larger percentage share of decline in terms of the relative share by num- APLs and LILs compared to their share in the ber of loans, which indicates a declining aver- amount of lending. This highlights the rela- age size of commitment for Specific Investment tively small average size of these interventions. Loans. 88 Annexes ANNEX G: METHODOLOGICAL NOTE: RATING IDA'S DEVELOPMENT PERFORMANCE OED evaluates development interventions by CAS design and implementation, aid coordina- assessing how their results stack up against their tion, and participation. own stated objectives.' From an accountability Outcomes. OED assessed the extent to which perspective, this goal-based approach is attrac- IDA-supported projects, programs, and other tive because it relates results to objectives agreed activities were relevant to these concerns, the to by the Board of Executive Directors.2 degree to which they have been or are expected Specifically, OED evaluates outcomes by con- to be achieved (efficacy), and at what cost sidering three factors: (efficiency). * Relevance of the intervention's objectives in Design. OED's review used a multifaceted relation to country needs and institutional evaluation design, including: priorities. * Desk reviews of Bank documents and work- * Efficacy, the extent to which the develop- ing papers, project operations databases, mental objectives have been (or are expected extant studies, and OED CAEs to be) achieved. * Staff surveys, with more than 200 respondents * Efficiency, the extent to which the objectives * In-country and international consultations have been (or are expected to be) achieved with representatives of government, civil soci- without using more resources than necessary. ety, the private sector, and other assistance agencies in nine focus countries involving The assessment of relevance is especially more than 680 participants critical. When done well, it nets out excessively * Two international workshops bringing or inadequately ambitious objectives. Combin- together nearly 60 experts from both bor- ing these three factors, overall outcome is rated rower and donor countries on a six-point scale, ranging from highly satis- * Wide-ranging interviews with relevant Bank factory to highly unsatisfactory. (See box G.1 for managers and staff details.) Outcome is not a simple average of the * Where the evidence allowed, results-based factors, because the factors interact: they are analyses tracing IDA inputs (policies, align- cumulative and interdependent (for example, ment of resources), outputs (volume and satisfactory relevance is useless if efficacy is composition of lending and nonlending ser- poor). vices), and reach (stakeholder participation, coordination with other donors) to outcomes How Did OED Evaluate IDA11-12? and results. Compliance. The review concentrated on IDA's compliance with replenishment undertakings This work was done with the support of an and development contributions in six thematic advisory group of six prominent international developmentpriorities: poverty reduction, social development experts, three each from devel- sector development, private sector develop- oping and developed countries, including a ment, governance, environmentally sustainable number with experience in high-level govern- development, and gender. It also addressedfour ment, private sector, civil society, and multilat- priorityprocess reform objectives: PBAs, enhanced eral development bank positions. 89 IDA's Partnership for Poverty Reduction Box G.1 OED's Outcome Rating Scale Highly satisfactory: All relevant developmental objectives are Partially unsatisfactory: Many ofthe'major relevant objec- (or are expected to be) achieved and/or exceeded efficiently, with tives are not (or are not expected to be) met; major shortcom- j no shortcomings. ings are observed. Satisfactory: Most of the relevant development objectives Unsatisfactory: Most major, relevant objectives are not (or are (or are expected to be) achieved efficiently with only minor are not expected lb be) mnet and/or most objectives are not shortcomings. relevant. Partially satisfactory: Significant shortcomings are observed, Highly unsatisfactory: None of the relevant objectives is (or even though most of the major relevant objectives, on balance, is expected to be) met or is not relevant. are (or are expected to be) met. Because few activities initiated under IDA10, IDA made significant advances in sharpening 11, and 12 are complete, the evaluation had to the poverty focus of investment and adjustment consider a number of proxies for assessing IDA's lending and analytical work, established a strong performance: the quality of the analysis under- presence in the social sectors, brought gover- lying the program, its coherence at the country nance issues to the fore, and enhanced processes and sector (or thematic) levels, the responsive- related to Country Assistance Strategies, PBAs, ness of lending and nonlending services to the participation, and aid coordination. Compliance country context, the selectivity of resource allo- was uneven across and within areas of program cations and choice of instruments, and, where and process emphasis. With regard to under- possible, IDA's impact on country policies, insti- takings on social sector development and CAS tutions, and actions. Box G.2 highlights the enhancement, IDA did very well. Though recendy methodological challenges. accelerating, IDA's implementation of undertak- ings related to gender, environment, and PSD was How Well Did IDA Meet Agreed modest in depth and pace in relation to the Undertakings? replenishment agreements. Overall, IDA's compliance with the replenishment The compliance rating is based on the find- undertakings has been satisfactory, with impor- ings of IDA review background studies, which tant qualifications. During the IDA10-12 period, identified the extent and pace of implementa- What Were the Main Challenges of the Bo x G . 2 IDA Evaluati-on? Conducting evaluations is almost always complicated, but this actions posed a particular difficulty. To deal with this, OED took evaluation was especially demanding and complex. account of external factorsthat might have affected IDA's devel- First, neither the Replenishment Reports nor management opment performance, such as fluctuations in the world economy, instructions provided specific benchmarks against which com- borrowers' and partners' performance, war and civil distur- pliance or outcomes could be measured. OED, therefore, looked bances, and natural disasters. at the extent to which IDA took actions to change its processes In addressing this last issue, OED conducted in-country con- i and programs and to institutionalize those changes. sultations in nine focus countries, chosen according to the fol- Second, the temporal scope of the evaluation was limited. At lowing criteria: size of IDA program, inclusion of blend and the request of the IDA Deputies, the evaluation focused on per- IDA-only countries, regional diversity, country performance rat- formance under IDA replenishments 10 and 11 and the first year of ings (that is, countries across the CPIA spectrum, excluding the U IDA1Z Many of the programs supported during this period are still very lowest, where the IDA program was small because of very under way, and their development outcomes are not fully known. 'low performance), availability of an OED CAE, and special cir- Finally, since many factors affect country program outcomes cumstances (for example, post-conflict). . in a country context, attributing success or failure to IDA's 90 Annexes tion to date of more than 150 separate IDA10-12 those completed in IDA9 or 10 to be rated by OED undertakings. The rating reflects the overall as having satisfactory outcomes, likely sustain- extent ofsubstantive compliance, rather than the ability, and substantial institutional development effectiveness or outcomes of IDA's actions. impact. (Too few cases are available from the The number and scope of undertakings made IDA12 exiting year for analysis.) This is a welcome this an ambitious challenge. The individual development, and the hypothesis of increasingly replenishment undertakings varied widely, rang- satisfactory outcomes is well supported by other ing from broad redirections in operations to evidence displayed throughout the IDA review. calls for specific reports. Findings on the degree In particular, QAG active portfolio data show of IDA's compliance made use of a system of substantial improvement in project quality. ratings on individual undertakings, which was Project-level performance is an important reviewed with management. This system also indicator, but does not tell the full story of IDA's served as input into the substantive discussion contribution to development outcomes. In recent of implementation summarized in the back- years, IDA has shifted its focus to the "higher ground paper entitled IDA10-12 Replenish- plane" of country programs. The results from ment Undertakings Implementation Matrix (IDA OED's CAEs for 23 IDA and IDA blend countries Review 2001f). (adjusted to match the rating scale in box G.1) found that 13 of these country programs were What Were the Development Outcomes? rated partially satisfactory, compared to 8 that OED finds the development outcomes of IDA pro- were rated fully satisfactory.3 (Two others were grams-influenced by exogenous factors and rated unsatisfactory.) While CAEs cover a longer boffower and partner performance, as well as IDA period than the IDA review (about 40 percent performance-to be partially satisfactory, with cover periods through 1999 or later and another notable improvements over the period. Much 30 percent through 1998), most make use of up- progress can be seen in project-level outcomes to-date QAG data, assess efficiency using coun- as well as in quality indicators compiled by QAG. try budget coefficients, and draw lessons for For example, as the figure shows, projects com- improving program performance. These results pleted in the IDA1 period (mostly initiated in ear- support the finding that the development lier periods) are significantly more likely than outcomes of IDA programs, which also reflect Trends in Performance of IDA Figure G.1 Projects Closing in the Years Covered by Replenishments 9, 10, and 11 100 - 90 80 - - - - - - - - 70 - Outcomes (percent satisfactory) A ~60 -- C 50 ______ _ ._ X 40 - ----Sustainability (percent likely)-l- ---- ---- - 30 - - ------- 20 - Institutional development impact (percent substantial 1 0 -___ -__- _ . _, _ _ _ _ _ _ _ _ _ _ _ _ _ . . . . . . . . .... _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ -......................._ _ ...... ... _ _,_ 0- IDA 9 IDA 10 IDA 11 91 IDA's Partnership for Poverty Reduction factors outside of IDA's control, have been par- the country level point to a generally positive tially satisfactory. record in assisting countries to lay the founda- An important indicator of performance across tions for economic growth and poverty reduc- countries is the allocation of aid. Recent work tion. Yet the record of IDA countries in sustaining by DEC (box G.3) suggests that the allocation growth high enough and long enough to bene- of IDA resources across countries is highly fit the majority of the poor has been disap- aligned with ratings on poverty reduction and pointing in most IDA countries due in large part policy performance. to many factors beyond IDA's control. The review Given the terms of reference of the review, found that IDA's efforts to foster private sector of particular importance to this assessment is per- development, enhance opportunities for women, formance against the objectives embedded in the promote environmentally sustainable develop- replenishment undertakings. The results of that ment, use its resources more selectively at the analysis are shown in table G. 1 in terms of their country level, and promote aid coordination fell relevance, efficacy, and efficiency. short of admittedly demanding objectives. To assess relevance, OED evaluated the cor- As noted earlier, since many IDA-supported porate strategies in each of the priority areas and projects and programs from the period under their translation in country assistance programs. review are still ongoing and their results not fully Overall, the relevance of IDA's efforts in most known, OED considered a number of proxies areas targeted by IDA undertakings has been sat- for performance that informed its assessment. isfactory or highly satisfactory. This analysis found many areas of progress, but The bottom line on development, however, is some significant shortcomings as well: what happens on the ground and this calls for an * Quality of analysis underlying the program. assessment of the efficacy of IDA's activities. To IDA's analytical work is one its strengths, this end, OED asked the extent to which, given highly regarded by borrowers and other the corporate strategy, implementation is likely to development partners. The increase in the achieve program objectives. As table G.1 shows, quantity of data and analysis, especially on in 6 of the 10 priority areas likely progress against poverty, is a major achievement. But the objectives is only partially satisfactory, while quality of the data and in-country capacity aggregate efficiency has fallen short of the targets building on data collection and analysis (for set forth in the Strategic Compact, although not example, on poverty and gender) remain specifically measured against IDA programs. important challenges (as borne out in the On the most important dimension-poverty PRSP progress reports), often because coun- reduction-evaluations of IDA's performance at try ownership is lacking. Box G.3 Evaluating Aid Effectiveness Across Countries U A major methodological difficulty is distinguishing the contri- IDA-fer its allocation across countries, but cannot distinguish iV bution of IDA from all other activities. OED's approach is to differentoffectsof rivalaidprogramswithinacountry.ThisisI assess CASs down to the project level and see whether the complementary to OEDWs approach, which is much better in- results of lending and nonlending operations were satisfactory. country-than cross-country. Specificaily, DEC finds that IDA's This approach has limitations because of fungibility. allocationissuperiortoanyofthebilateralptograinsand, indeedd,I ! An additional approach, which has different limitations, is thatitsallocationruleisgoodinabsolutetenmslDAdeviatesfrom< the aid effectiveness analysis that has been done in the Bank's the poverty-policy rule (directaid to low-income countries withi t-rosBearoudep,arTtment ("Aid Allocation and Poverty Reduction," reasonable policies) on an ad hoc basis, but not systematically. to. 1.onrii,~ij European EconomicfReviewl. t estimates the con- Its deviations usually reflect additional knowledge. tributoii ofaid to poverty reduction econometrically across coun- tries.This approach evaluates major aid progran*s-bilaterals and Sourcte:Development Research Group- 92 Annexes Table G.1 C o m p I aa n c e a n d to IDA Undertakings Outcomes Development objective Compliance.: - Relevance Efficacy/efficiency Poverty reduction Satisfactory - Highly ;aistactjury Pariially saiisfactory Social sector developrnrr,-ii Highlv satistactory Higmrly satistaciorv Satisfactory Private sector develcprreirt Partially satisfactory Panial1' miosa tn,I:ry Partially satisfacto ry Governance Satisfactory Satslfaclory Satisfactory Environmentally susi >irotIe development Partially satlslactory Partill31y calista: lory Partially satisfactory Gender Pariially satisfactory Satisla,: tory Pariially satisfactory Process reform objective CAS enhancement Highly satisfactory Highly sariitacLory Satisfacto.ry Performance-based allocations Satisfactory Highlv sarvt.aurry Partially satisfactorv Aid coordination Satisfactor-y Satisfac tory Partially saTisfactory Participation Satisfactory Satisfa;tory Satisfactory * Coherence at country and sector (or thematic) Annual Review of DevelopmentEffectiveness for levels. Although IDA has strengthened its 1999 and 2000 (OED 1999a, 2000a) and many poverty orientation, more needs to be done OED evaluations stress weaknesses in institu- to integrate that orientation into macro- tional analysis and capacity development. economic and sectoral priorities and policies. While CASs have shown substantial improve- Conclusions ment in their coverage of poverty during the Overall, then, OED finds that IDA has complied past seven years, with most occurring since satisfactorily with the replenishment undertakings, 1997, they have made less improvement in set- which were ambitious. Development outcomes ting priorities and identifying country-spe- were partially satisfactory, in part because of cific, poverty-focused assistance strategies. factors outside IDA's control. These ratings reflect • Responsiveness of lending and nonlending accelerating improvements in IDA and country services to country context. While the innova- performance, but still limited progress in achiev- tions in lending instruments are an important ing the overarching goal of poverty reduction. feature of the period, there also has been a Recent shortcomings remain, but implemen- decline in support for ESW, and continuing tation trends augur positively for the future. To weakness in M&E, which denies IDA and its realize this potential, however, the next IDA partners adequate knowledge on cost-effective replenishment discussion should develop a long- interventions in support of core objectives. term vision focused on results, engage devel- * Strategic selectivity. OED found-and man- oping countries in setting replenishment agement agrees-that strategic selectivity conditions, and define those commitments in remains a challenge for IDA and its partners. terms of monitorable and achievable objectives * Impact on country policies, institutions, and with realistic costing. More immediately, to action. Portfolio performance shows improve- deepen and broaden the gains from the exist- ments on outcomes, and QAG ratings-which ing policy framework IDA needs to: are useful leading indicators-are improving. * Focus on implementation in areas of emphasis But institutional development impact, though * Align resources to strategic priorities improving, still remains too low. In addition, the * Consolidate the IDA mandates. 93 IDA's Partnership for Poverty Reduction ANNEX H: CHAIRMAN'S SUMMING-UP-MEETING OF THE EXECUTIVE DIRECTORS (MAY 29, 2001) The Board of Executive Directors welcomed IDA's specific contribution to outcomes, noting OED's review of IDA. They found it both timely the divergence of views between Management and important, as well as a signal of the signif- and OED on the outcome rating. Directors agreed icance that both the Executive Board and Man- that the focus on outcomes reinforced the impor- agement attach to independent evaluation. tance of the development community's redou- Directors generally agreed with the findings and bling its efforts under IDA13 to promote poverty recommendations. They viewed it as a useful reduction, to develop better indicators of devel- input into the IDA13 replenishment. Directors opment effectiveness, to enhance its evaluation congratulated OED on a comprehensive and methods, and to build evaluation capacity in well-written review and noted, in the context of IDA countries. the first such evaluation, the challenges OED Directors welcomed IDA's work on faced in undertaking this exercise. They con- performance-based lending allocations. They gratulated IDA Management on its performance, noted that, as with any system of this kind, addi- as documented by OED. They also appreciated tional improvements were possible, and they the guidance provided by the Board's Commit- welcomed OED's recommendations for further tee on Development Effectiveness (CODE) as strengthening. They suggested that IDA con- embodied in the statement of its chairman. tinue to work to refine the system and the under- Directors welcomed the finding that IDA per- lying methodology, especially with respect to the formance was satisfactory, with qualifications, treatment of governance, transparency, and links with regard to compliance with IDA undertak- to the CAS and PRSP processes. They discussed ings. They observed that this performance was the issue of weak performers and the need to especially noteworthy because of the breadth assist these countries in building capacity. and complexity of these undertakings. They Looking ahead, Directors welcomed the broad also agreed with OED that IDA performance has agreement between Management and OED on improved over the period, recognizing that IDA priorities, especially the focus on implementa- today is very different from IDA in 1994. tion, consolidation, alignment of resources to With respect to overall development out- strategic priorities, and the related costing of IDA comes, most Directors accepted OED's rating of mandates. They stressed the importance of build- partially satisfactory, while stressing that the glass ing on the CDF/PRSP process in IDA countries, was more than half full with respect to IDA's con- notably with regard to ownership, participation, tribution. Directors stressed that IDA's bottom line partnership, and harmonization of operational is poverty reduction, and that poverty is still policies and procedures. Many Directors called rampant in IDA countries. They discussed the for a strengthening of the ESW program to many factors that affect development outcomes underpin the CAS and as a basis for lending, in IDA countries, including, of course, the actions including programmatic lending, and as a tool of the countries themselves; the role of devel- for capacity building, notably in the areas of pub- opment partners, including IDA; and exogenous lic financial accountability and fiduciary man- factors such as trade and price movements. In this agement. Directors agreed with OED and context, they discussed the difficulty of isolating Management that more needed to be done to 94 Annexes incorporate gender, environment, and PSD into Directors agreed that the OED review and IDA programs and welcomed the steps that background documents should be made avail- Management was taking to do so. With regard able publicly, together with the Management to private sector development, they specifically Response and OED's supplementary note on rat- noted the need for the IFC to work in a more ing methods. Directors also agreed that this integrated fashion with IDA, and asked that spe- summing up of today's discussion be included cific modalities and instruments be explored. in the OED review. 95 IDA's Partnership for Poverty Reduction ANNEX I: MANAGEMENT RESPONSE 1. Introduction independent evaluation and self-evaluation, Created in 1960 to provide financing to address designed to understand and improve IDA's the development needs of the poorest countries, development effectiveness. The Bank has used IDA has long been a vehicle for articulating the a variety of self-evaluation vehicles, most notably development agenda, gaining global consensus project and ESW reviews by the Bank's QAG, as around it, and supporting its implementation. well as retrospectives of Country Assistance IDA9 (1990-93) set out much of today's devel- Strategies (CASs), ESW, and lending volumes opment agenda-with its focus on poverty reduc- and instruments. Systematic self-evaluation has tion, gender, participation, private sector increasingly underpinned and complemented development, and environmental protection. Sub- the evaluations carried out by OED. Management sequent IDA agreements have extended and has used self-evaluation and internalized the deepened the framework. The IDA10 period, results of independent evaluation to learn, to 1993-96, emphasized country performance, sup- change, and to improve its assistance to low- port for the social sectors, and assistance to Sub- income countries. Saharan Africa. The IDAI 1 period, 1996-99, focused on promoting the sustainability of reforms Management Perspective. In this spirit of by strengthening institutions, improving gover- learning and evaluation, Management very much nance and addressing corruption, and building welcomes the OED IDA review. Management ownership at national and local levels. IDA12, appreciates the comprehensive nature of the which began in 2000, built on these emphases, review-and the work of OED management giving increased attention to addressing the effects and staff-and agrees with the broad thrust of of conflict; helping countries build and implement most of the recommendations. Management is comprehensive, long-term, and monitorable particularly pleased that the OED review con- poverty reduction strategies; empowering the firms and validates many of the conclusions poor; and strengthening IDA's PBA system. IDA itself has drawn and the actions it has taken-actions that have already made a differ- IDA Performance. Throughout the period of ence, notably in terms of poverty focus, greater the review by the OED, Management has focused selectivity both within and across countries, and on operationalizing the IDA framework through substantial improvements in the quality of lend- continuous learning, which in turn has translated ing and ESW. At the same time, Management into steady improvement in the quality of IDA acknowledges that there have been shortcom- activities, especially its country focus and poverty ings in certain aspects of the Bank's performance reduction strategy. But, of course, there is still over the period of the OED review, particularly much room for improvement in a number of in the early part of the IDA10-12 period, and that areas, as indicated in the OED review and in self- important challenges remain. However, Man- evaluations, including the recent Strategic Com- agement is concerned with the "partially satis- pact Assessment, which is now being reflected factory" rating OED gives IDA for development in Management follow-up actions. Indeed, the outcomes, as it does not adequately capture IDA evolution reflects a strong commitment to IDA's dynamic progression over the period. IDA 96 Annexes in 2001 is clearly very different from IDA in ment. QAG did not exist. Nor did the Heavily 1993. We believe that more explicit attention to Indebted Poor Countries (HIPC) initiative. Con- this critical time dimension would provide a cern about compliance with operational policies more resonant assessment of IDA's achieve- had just led to the creation of the Inspection ments to date, and remaining challenges. Panel. The Bank often over-promised-includ- ing on IDA commitments-and thus, even with Organization of This Note. This note dis- the best of efforts, frequently under-delivered rel- cusses IDA from three perspectives: poverty ative to its ambitious undertakings. Even so, and country focus; key thematic and sectoral pri- Bank research shows that the poverty reduction orities; and selectivity and replenishment issues. impact of IDA was far higher than the impact of official development assistance on average and II. IDAs Poverty and Country Focus that IDA's impact improved in the 1990s. IDA's performance in both doing the right things and doing them right has improved over the B. IDA Today review period, as indeed is acknowledged by the Today IDA has become significantly more OED review. Strategically, the emergence of the poverty-focused and effective. This is not to say low-income-country business model grounded in we are-or should be-satisfied. Much work the PRSP and the CAS is a seminal achievement remains to be done, especially in getting actual of recent years, providing a strong basis for coun- results measured in tenrms of reduced poverty and try ownership, partnership, and selectivity in the progress toward the other international devel- pursuit of poverty reduction. This approach has opment goals. Drawing on lessons from evalu- built on the lessons from research on poverty and ation (including early work by OED on this development assistance, from the 1990 World review) and research, Management has devel- Development Report on poverty to the 1998 pol- oped a strategy for making IDA more effective icy research report Assessing Aid, and the World in the future. In September 2000 in Prague, the Development Report (WDR) 2000/2001: Attacking Development Committee reviewed the paper Poverty.' IDA's performance also has changed "Supporting Country Development: World Bank dramatically, improving across a broad front over Role in Low- and Middle-Income Countries."2 the period-in CASs, whose quality and poverty With the overarching goal of poverty reduction focus have improved sharply; in lending; in pol- as the starting point, the paper set out IDA's icy implementation; and in ESW. Country selec- country programming cycle, elaborating on the tivity has improved too, reflecting significant relationship between the PRSP and the CAS, enhancements to IDA's PBA system. While, as reinforcing the emphasis on country ownership, noted by OED, further progress in strengthening and highlighting and clarifying the role and the links between CASs and poverty outcomes is selectivity of IDA. The report recognized the still needed, the work of recent years has importance of support for country capacity enhanced IDA's development effectiveness. development, strong diagnostic and analytic work, and M&E. Subsequently, these same issues A. IDA FY94 figured prominently in the Bank's Strategic It is worth recalling the IDA of 1994 ("50 years Framework Paper, discussed by the Bank's Exec- is enough"). The CAS, a relatively new instrument, utive Board in January. This way of doing busi- was evolving from the purely internal document ness in IDA countries, endorsed again at the that it had been initially. IDA CASs were not dis- Spring Meeting of the Development Committee, closed and were not participatory-we were consists of four components: vision, diagnosis, only beginning to share them with clients. The programming, and results. first in-depth review of CASs was four years away. Client surveys were not yet in IDA's toolkit. 1. Country Vision OED evaluations showed that project quality The most important lesson the development was low, and there were few signs of improve- community has learned during the 40 years 97 IDA's Partnership for Poverty Reduction since IDA was created is that development can- nosis. In addition, ESW underpins CAS prepa- not be done to a country; if it is to be success- ration, the overall dialogue with client countries, ful, it must be done by the country. The and the lending program. foundation of IDA's work thus has to be a country-led and country-owned policy frame- Rebuilding ESW: The OED review stresses the work covering the range of structural, social, critical importance of IDA's ESW and the need environmental, institutional, and macroeconomic to ensure adequate resources for it. Management policies that make for successful development; agrees. While the quality of ESW has been ris- country commitment is essential. In IDA-eligible ing, budget pressures have contributed to a countries, the associated program to implement depletion of the stock of this important basis for the policy framework is articulated in a PRSP. the policy dialogue. In the period FY96-01, only about 60 percent of active IDA borrowers Poverty Reduction Strategy Papers. Build- (excluding the smallest countries) were cov- ing on the lesson of the central importance of ered by PERs and 20 percent by ESW on pro- country ownership, early in IDA12 the Bank curement and financial management systems. and IMF introduced the PRSP3 approach to the Recent Bank-Fund analysis reinforces the need provision of concessional assistance and debt for such ESW, especially in HIPC countries, relief under the Enhanced HIPC Initiative. The where major gaps have been identified in sys- PRSP approach is an important step in opera- tems for tracking budgetary expenditure and tionalizing the principles of the CDF,4 building for measuring outcomes. But stronger fiduciary on the emerging findings of the WDR, and ESW also is needed more broadly, including to sharpening IDA's poverty focus. The PRSP underpin both the IMF-Bank Joint Staff Assess- approach has been extended to other (non- ments (JSAs) of PRSPs and lending. Going for- HIPC) IDA countries, gaining wide acceptance ward, Management is preparing an ESW by these countries and by other donors as a basis implementation note, focusing on filling the for improving country strategy formulation and gaps in ESW coverage in core areas (including aid coordination. Although it is too soon to poverty analysis) and continuing the improve- expect development impacts, implementation of ment in quality, especially in poorly performing the PRSP approach has accelerated rapidly. By countries, where lending has tended to be less the end of March 2001, 32 countries had pre- effective; rebuilding the pipeline of CAS-based sented Interim PRSPs (most in connection with ESW to underpin future lending and the policy a HIPC Decision Point), and four countries had dialogue; and improving participation in and dis- presented their first full PRSPs. semination of ESW in client countries. 2. Diagnosis 3. Country Programming IDA's assessment of a country's policies, insti- The Bank's diagnostic work, in turn, provides tutions, and private sector strength provides the the basis for its country business strategy, in basis for determining both how best, and by how which-as a committed long-term partner-it much, IDA should support the country's efforts. aims to help the country carry out its vision for Indeed, while the country must "own" its vision growth and poverty reduction. Within this strat- and program, IDA must "own" and be account- egy, set out in the CAS, IDA's program of lend- able to shareholders for its diagnosis and the pro- ing and nonlending assistance reflects country grams it supports. In most cases, the country's priorities, needs, performance, and institutional vision, priorities, and analysis and the Bank's capacity. The specifics of the program take diagnosis are mutually interactive, supporting and into account IDA's track record, its compara- complementing each other. ESW, prepared and tive advantage, the actual and potential con- shared with clients and partners, provides key tributions of other partners, and, where relevant, inputs and an analytic basis that the country can Bank efforts in the provision of global public use in developing its vision and its own diag- goods. 98 Annexes Country Assistance Strategy. In 1990, when the remain a substantial share of IDA financial sup- CAS was first adopted, it was exclusively a doc- port in most country programs. But over time, ument for Board discussion of IDA country pro- for countries with strong programs, the poverty grams, with country authorities having access to reduction support credit (PRSC) is also expected the CAS only when their Executive Director shared to become an important vehicle of IDA finan- it with them. Since then, the CAS and the CAS cial support and the policy dialogue. In most process have evolved. All CASs are now pre- cases, the resources and conditionalities asso- pared in consultation with the govermment, which ciated with the PRSC will complement those of has resulted in a more comprehensive country the Fund's Poverty Reduction and Growth Facil- diagnosis, closer alignment between the IDA pro- ity (PRGF), with IDA supporting the policy dia- gram and government priorities, and a better logue on the social and structural agenda and assessment of implementation capabilities. There the Fund supporting the policy dialogue on also has been improved treatment of participation, macroeconomic issues. governance, poverty reduction, human develop- ment, selectivity, and partnership. In line with Fiduciary Policies. IDA is required to ensure IDA agreements, all IDA CASs are now disclosed. that its funds are used for the purposes intended, Going forward, the CAS country vision will come and its financial management and procurement increasingly from the PRSP, with the CAS itself policies are designed to this end.6 But with the becoming more of a business plan setting out IDA's increasing recognition of the fungibility of aid (see comparative advantage vis-a-vis its partners. Dollar and Pritchett 1992) and of the importance of good governance, IDA also has sharpened its HIPC Initiative. For many IDA countries, HIPC attention to countries' public expenditure, pro- has become an important element of the coun- curement, and financial management systems as try program; however, the OED review mentions a development issue, focusing on the overall use it only briefly. Launched by the World Bank of public resources and supporting policy and and the IMF in the fall of 1996, the HIPC initia- institutional development as needed. Mindful of tive was the first comprehensive approach to the fact that it will take considerable time and reducing the external debt of the world's poor- effort to show results in this critical area, IDA est countries.5 A major review of the program encourages borrowers to develop efficient and in 1999 resulted in a significant enhancement of transparent systems for the allocation, execution, the original framework to provide broader and reporting, and auditing of budgetary resources, faster debt relief. As of February 2001, 22 IDA working with them and other development part- countries had begun benefiting from HIPC assis- ners through institutional development grants, tance that will provide some US$34 billion in credits, and fiduciary ESW. debt relief over time. To date, the Bank has delivered some US$1.5 billion in debt relief, Safeguard Policies. OED recommends accel- including US$225 million in IDA grants, under- erated work on the effort to recast Bank and IDA pinning the policy dialogue in a major way in social and environmental safeguard policies, a number of countries. with specific attention to building country capac- ity. Management agrees that this is a priority, and Lending Instruments and Mix. As part of the preparatory work is under way. But at the same discussion of the Bank's country programming time, Management also accords priority to imple- cycle, Supporting Country Development [Devel- mentation issues, to which we have progressively opment Committee 2000] suggested adapting devoted increased resources and attention. Over IDA lending instruments to better support the past year, for example, Management has country-led poverty reduction strategies, with the adopted several measures to enhance the imple- particular instrument mix reflecting country con- mentation of safeguard policies, including by ditions. Under this approach, investment lend- strengthening systems for management of safe- ing (including through SWAps) is expected to guard policies at the central and Regional levels. 99 IDA's Partnership for Poverty Reduction Actions entailed clearly assigning accountabilities pilots, the foundations for sustainable, results- for safeguard implementation, ensuring that based M&E are being tested for possible repli- safeguard clearance has independent funding, cation in other countries. This includes providing clear and timely guidance to task demonstrating how M&E can be used to support teams, and strengthening training activities. The the CDF/PRSP process and CASs. The second centrally based safeguard quality assurance unit year of the program will see the addition of three is now providing special advisory support and more pilot countries. Meanwhile, capacity- training for headquarters and field staff to building activities within the Bank have included improve their knowledge of safeguard policies. workshops, development and dissemination of Similar activities are being taken with govern- tools, good practice examples, and advisory ment counterparts, with expansion proposed services to task teams. for the next fiscal year-with the understanding, however, that building safeguard expertise along Portfolio Quality. IDA also has paid consid- with broader regulatory infrastructure in client erable attention to improving the quality of its countries will take time. portfolio, looking to improve results measured in terms of development outcomes. OED and 4. Results QAG indicators show how these efforts have At the end of the day, it is results on the ground made a difference. The OED results show that matter. This means that governments must strongly improving trends (see figure 1.1 in the set clear targets, monitor and evaluate per- OED Review); however, they cover projects that formance against those targets, and use the are exiting the portfolio, with a majority results to shape current and future programs. This approved by the Board prior to FY95. QAG's CDF principle is embedded in the PRSP, which assessments, which cover the active portfolio (by includes country performance benchmarks and definition, projects of a younger vintage), show outcomes as central elements. But judging Bank an even stronger uptick (see figure I. 1). As QAG performance is also essential; thus, work to ratings have been found to be a good predictor strengthen the M&E of the Bank's contribution of development outcomes as later measured by to poverty reduction and other country devel- OED, this suggests that OED ratings may rise as opment objectives is very much a part of efforts the portfolio matures and these projects also exit. to improve the CAS process. In the meantime, Management attention to the implementation of IDA's fiduciary and safeguard Monitoring Progress. OED draws attention to policies also has produced significant results. the need to continue improving the quality of QAG indicators of the quality of the supervision IDA M&E and strengthening borrower capacity of fiduciary/safeguard aspects of IDA lending in this area. This is clearly a very important have increased substantially, from 82 percent sat- issue. A three-year program to promote effec- isfactory or better in FY97 to 92 percent in FY00. tive use of results-based M&E practices was endorsed by the Board's Committee on Devel- Ilil. Thematic and Sectoral Issues opment Effectiveness (CODE) in September OED raised several thematic and sectoral issues 2000 and was subsequently launched. The pro- in its review. Management is using strategy gram has two strategic thrusts. Capacity is being development, implementation, and monitoring built both in country and in the Bank to as one of the tools to address these issues. Since strengthen the understanding and use of the launch of the Networks to link staff across performance-based M&E through an integrated Regional units working in the same sector or in program that puts country- and sector-level M&E the same thematic area, the Bank has used Sec- as a central focus, supported by relevant project- tor and Thematic Strategy Papers (SSPs) as a tool level M&E. The first year of implementation has to clarify the Bank's role in these areas. In prin- focused on five country pilots (three of them IDA ciple, the SSP is to a sector or theme what the countries) and internal capacity building. In the CAS is for a country-it reviews the lessons of 1 00 Annexes Figure 1.1 QAG Data on IDA Project Quality _ . .........~~~~~~~~~~~~~~.. ... ,........... ...__ ... Quality at Entry Quality of Supervision (Share judged satisfactory or better) (Share judged satisfactory or better) 100 8 100 90 83 ~~~~~~~~~~~~~~~82 73~~~~~~~~~~~~~~~~~7 80 - 0 X . I 180 L~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~Lts 58 60 -6 C~~~~~~~~~~~~~~~~~~~~~~~~C 40 - 0~~~~~~~ 40- 20 -20 CY 97 CY98 CY99 FY97 FY98 FY99 FY00 Projects at Risk 50 *46 7 // 43 / 4 40 40 - 33 / 28 30 30 - 2 tl 20 - 1 5 14 10~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ o 10 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 Latest experience (notably drawing on self-evaluation stocktaking is expected to be discussed at CODE and OED evaluation), identifies issues, defines in early FY02. The early results of this SSP self- strategic directions, and recommends actions. In evaluation are already helping to shape the practice, the first SSP was issued in 1997, and a design of new ones. SSPs have been prepared total of nine have been prepared to date.7 Man- or are under preparation for all of the major sec- agement has now initiated an evaluation of the toral and thematic areas raised by OED. They strategic relevance, analytic quality, business help to respond to the issues that OED posed, implications, and process efficiency of SSPs; this starting with institutions and governance. 1 01 IDA's Partnership for Poverty Reduction A. Governance and Capacity Building countries, and IDA has implemented in-country Management believes that weak governance workshops or surveys on anticorruption and ineffective institutions undermine develop- approaches in some 23 client countries. Although ment effectiveness across the board, hence the Management agrees that more needs to be done, importance it attaches to public sector reform and it cautions that the complexity of institutional capacity building. This also was highlighted in change requires an adaptable, sustained, and Supporting Country Development [Development medium-term approach. In that context, the Committee 2000], which called on the Bank and introduction of PRSCs gives the Bank another the countries' other partners to work to useful tool to support broad reforms for better strengthen local capacity and institutions. OED governance and stronger institutions. Other lend- calls for a broader country-wide or sector-wide ing and nonlending efforts, based on country approach, rather than a project-by-project needs, will build domestic capacity to support approach, to address such problems. Manage- the detailed implementation of the country's ment supports this OED finding, which is also medium-term program of policy and institu- in line with the conclusions of the Bank's recent tional reforms, in areas ranging from civil SSP, Reforming Public Institutions and Strength- employment practices to judicial reform to local ening Governance. The latter emphasizes the government strengthening. Fiduciary assess- importance of institutional reform and provides ments, and the underlying work on public a plan of action for working with client coun- expenditure management, financial accounta- tries to strengthen public institutions.8 Indeed, bility, and procurement, will help to identify the Poverty Reduction and Economic Manage- where support for capacity building is most ment Network (PREM) and sector families in crucial. other Networks are increasingly working together to mainstream institutional concerns in Bank B. Gender Mainstreaming work and integrate them in country settings as OED confirms IDA's substantial support for gen- appropriate. Overall, IDA's work on governance der actions in health and education, especially translates OED's general recommendation into in matemal health and girls' education. However, specific actions tailored to country needs. OED concludes that during the review period, IDA did not make sufficient progress in incor- Capacity-Building Work IDA has been increas- porating gender into its other activities, partic- ingly active in capacity building in support of ularly those supportive of women's economic good governance. During the last three years, advancement. Management agrees and has made 31 IDA countries have received or have begun gender mainstreaming one of its corporate pri- to prepare loans with significant public expen- orities. The Bank and IDA have moved to diture or financial management components. develop the analytic basis for gender main- As noted earlier, the coverage of PERs, Country streaming and put together a practical strategy, Financial Accountability Assessments (CFAAs), recently endorsed by CODE. and Country Procurement Assessment Reports (CPARs) in IDA countries, while less than desir- Gender Strategy. In early 2001 the World Bank able, is significant. The Bank's Legal Department completed a policy research report that explored and PREM have taken the lead in supporting the links among gender issues, public policy, and legal and judicial reform operations under prepa- development (see World Bank 2001a). This ration or execution in more than a dozen IDA report has served as an important building block countries. The Legal Department is building up in the preparation of the updated strategy for the its legal and judicial reform unit and, in wide col- Bank and IDA. The draft gender strategy, Inte- laboration with other units, is developing a law grating Gender into the World Bank's Work: A and justice network. Both PREM and the Legal Strategy for Action, is designed to clarify the Department have worked closely with the World accountabilities and responsibilities for gender Bank Institute on anticorruption assistance to IDA mainstreaming and to direct resources to main- 1 0 2 Annexes streaming efforts in the Regions. The draft SSP cators and targets based on country priorities. It also calls for establishing an effective system for notes the importance of building country capac- tracking and assessing gender mainstreaming, ity for environmental management. The envi- including developing new indicators to monitor ronment strategy, like the gender strategy, costs implementation. It proposes a proactive effort out its recommendations, estimating the over the next three to five years to ensure that resources needed to implement the strategy analysis of the impact of gender in poverty over the next three years and beyond. However, reduction is available for countries with an active it is important to note that during the review Bank program; and that policy consultations period IDA had already increasingly main- (for instance, on PRSPs and CASs) benefit from streamed environmental activities across sec- the input of women's groups in client countries tors, particularly in areas such as natural resource and systematically incorporate the gender vari- management and urban development. This able. Demonstrating the purposeful nature of the progress is documented in IDA's Environmen- strategy, it is fully costed. tal Mainstreaming Report (World Bank 2001e). Altogether, the portfolio of core environmental C. Environmental Mainstreaming projects and projects in other sectors with envi- OED calls for a corporate program to better ronmental components has grown considerably. mainstream environment into IDA country pro- There are about 250 projects under implemen- grams, clarify accountability, and track progress. tation, representing about $6 billion in IDA IDA has made real progress in environmental financing. mainstreaming, but more is needed. The Bank's draft SSP, Making Sustainable Commitments: An D. Private Sector Development Environment Strategy for the World Bank, dis- OED notes that PSD activities have increased in cussed at CODE on May 2, takes up all of the the 1990s, and cites its project reviews showing issues raised by OED and sets out tangible steps that, in general, these projects have had suc- to address them operationally. cessful outcomes. OED's criticism in the IDA review is really at the country level, where it has Environment Strategy. The draft SSP focuses identified problems with the integration of pri- on encouraging a stronger country dialogue on vate sector activities and noted insufficient key environmental issues, linking environment attention to institutional development. Manage- with poverty issues more explicitly-for exam- ment believes that IDA, like other development ple, the long-term sustainability of natural assistance agencies and governments, has had resource use and the impacts of pollution and difficulty in finding solutions to the weakness of environmental degradation on poor people and the private sector and market institutions in on the prospects for economic growth and poor countries. However, the Bank and IDA development. In fact, Making Sustainable Com- have had an active agenda of work to draw les- mitments proposes measures to improve the sons of experience as a basis for building an quality of life (addressing today the environ- effective strategy. mental issues that affect the health and pro- ductive assets of poor people), the quality of Strengthening IDA Supportfor Private Sec- growth (ensuring sustainable use of natural tor Development. The Bank's strategic frame- resources to assure that future generations will work for the fight against poverty is based on be able to enjoy these assets), and the quality two pillars: building the climate for investment, of the global commons (by proposing incentives jobs, and sustainable growth; and investing in for country programs to incorporate global con- people and empowering them to participate in cerns appropriately)-requiring, as in the case development. The private sector is one of the of gender, strengthened analytic work and clearer central features in the life of poor people across incentives and accountabilities in the Bank. The the world, and must figure prominently in eco- SSP recommends introducing into the CAS indi- nomic growth and development. Empowerment 103 IDA's Partnership for Poverty Reduction means expanding private sector activity and enhancing reforms. Both of these balances have thus creating opportunities for poor or less pow- to be struck at the country level and will be erful people-in particular by fostering a market- addressed in an updated rural strategy. friendly investment climate that encourages growth of enterprises, whether small or large- Updated Strategy. An update to the Bank's in part by making credit more widely available. 1996-97 rural SSP, now under preparation, is ben- Management has moved to strengthen the inte- efiting from the compilation of "bottom-up" gration of the PSD agenda into IDA programs, Regional analyses and from donor and client con- while doing the preparatory work in support of sultation.9 The exercise analyzes the downturn a renewed strategy. A key step has been better in rural/agriculture lending but also looks at coordination of IDA and IFC/MIGA activities in other sector operations and adjustment lending IDA CASs, including ten joint IDA/IFC/MIGA that have had important impacts on rural areas. CASs since the beginning of FY2000. The out- It is worth noting, for instance, that if the areas line of the Bank Group's new PSD strategy was of education, health, nutrition, and community discussed by the CODE subcommittee on March infrastructure are included, about 33 percent of 26, and there was a technical briefing for Exec- total FY99-00 lending for Africa directly sup- utive Directors on May 23 on the basis of a ported activities in rural areas.10 The strategy also note on issues and options for the strategy and reviews another difficult issue-the poor per- two comprehensive background papers. Exten- formance in many past rural operations, also doc- sive internal and external consultations on these umented by OED reports. The past few years documents will soon begin. The final SSP will have brought substantial improvements in the be discussed by Executive Directors in Decem- performance of the rural portfolio across Regions, ber. The strategy will focus on actions that as QAG reviews have confirmed. This is the enhance the attractiveness of the investment cli- result of a systematic closure of failing projects mate-to promote faster "catch-up" growth-and (beginning in 1996) and greater attention to apply private sector incentives and marketplace new project design and implementation."1 In solutions to better delivery of basic services particular, the introduction of community devel- (infrastructure, education, health) to poor peo- opment projects has provided a new model-a ple. Also, over the next few years, the work pro- more participatory approach to address rural gram of the Bank's research group, Development needs. Now nearly all rural projects in Africa, for Economics, will include efforts to answer ques- example, are designed with much more partic- tions about what works in improving the invest- ipation of beneficiaries and emphasis on decen- ment climate, notably in low-income countries. tralization than in the past. All of this points to the inadequacy of focusing on a narrow defini- E. Rural Development tion of the rural sector and new lending num- OED calls for renewed attention to agriculture bers as the sole metric. The challenge is to and the rural sector, citing the downturn in IDA rebuild the rural portfolio in a way that learns lending in these areas. Because so many of the from past experience, using recently successful world's poor people live in rural areas, Man- models, especially community-based participa- agement believes that broad-based growth must tory approaches, while recognizing that these include support for rural development. However, efforts will still be very difficult and resource- addressing rural poverty raises real dilemmas. intensive. At the working level, this means ensur- The right balance must be struck between lend- ing a multi-disciplinary focus and cross-sector ing to agriculture and investment in the broader teamwork in expanding economic opportunities rural sector, for example, in rural education or in rural areas, rural input into PAs, and contin- infrastructure, including roads and electricity. ued support for participatory activities. In addi- Similarly problematic is the balance between tion, PRSCs may be used to support rural action project lending and indirect support through in countries that have developed strong rural more economy-wide market- and trade- strategies and articulated them in PRSPs. The 1 04 Annexes upcoming rural SSP will set out the options for Linkages between SSPs and CASs. To enhance an expansion of lending for rural development, the linkages between SSPs and CASs, SSPs will broadly defined (including development of non- aim to provide clearer guidance on country and farm activities), but with better targeting of the intrasector emphases, and look more closely at poor. It will suggest targets and indicators for instruments-which ones are most effective and continued work in improving the quality and per- under what circumstances. There has already formance of rural operations. The new SSP will been progress in linking the sector and country also speak to the importance of greater attention foci. SSPs are increasingly building on work to women's needs in agriculture, expanded sup- done by Regional units and country teams them- port for rural education and infrastructure, trade selves. A good example is the draft rural SSP, liberalization (with countries in the Organisation cited above, which factors in the demands and for Economic Co-operation and Development constraints faced at the country level, based on [OECD] and also regional trade and market inte- bottom-up Regional rural development strategies. gration in Africa), and adaptive research-in In the other direction, sector teams already pro- addition to direct support for agriculture. vide inputs into CASs, drawing on SSPs, and Man- agement is looking at how best to move this IV. Selectivity and Replenishment Issues sector participation more upstream in the CAS OED calls for greater selectivity. Management process. The enhanced two-way exchange will agrees that this is a priority; it has provided sig- increase the usefulness and implementability of nificant attention to this issue in recent months. SSPs and the rigor of the choices made in the The Strategic Framework Paper notes that greater CAS process. selectivity in what we do will result in better leverage of the Bank's and IDA's scarce B. Selectivity among Countries- resources. IDA is tackling selectivity across three Performance-Based Allocations dimensions: within countries through the CAS, The OED review gave extraordinary attention to across countries, and at the regional or global the PBA system. Management agrees with the level. A framework of corporate priorities is report's conclusion that "IDA's PBA system has now in place as a guide to selectivity. brought increased selectivity in the allocation of resources at the country level" (para. 8.3). Man- A. Balancing Country and Sector Priorities agement has actions under way with regard to In the context of country vision and partnership a number of OED's recommendations: (a) fur- with the client country and other donors, IDA ther strengthening the CPIA; (b) tightening the intends to focus on key social and structural link between the PBA system and the CAS reforms, with an emphasis on capacity building. process; and (c) establishing a more complete OED recommends strengthening the role of record of the rating process to the extent pos- sector strategies and integrating them better sible, given task managers' budget and time into the CAS process. Management agrees. As constraints. noted earlier, Management is now taking stock of experience with SSPs since 1997, aiming to Quality of the IDA AUocation Process. Man- strengthen their design and implementation. agement has launched a review of the CPIA The goal is to increase their impact on country process, drawing on intemal evaluations and staff programs. However, this should not happen at feedback as well as OED's review. Overall, how- the expense of country ownership and country ever, Management finds that much of the review's focus. We recognize the natural tension between discussion of the CPIA and, by extension, the bottom-up country-driven priorities and sector basis for IDA's country allocations, is more crit- goals, and we are working to enhance the effec- ical than warranted. IDA's allocation system has tiveness of sector strategies to meet corporate been a pioneering activity-one that is a demon- priorities and to sharpen selectivity, while retain- strated success and is widely seen in the devel- ing country focus. opment community and in research studies as 105 IDA's Partnership for Poverty Reduction a model for linking aid to performance. It seems Ghana and Vietnam, for example, have recently shortsighted to fault this approach simply put this into practice in PRSP exercises. But because there are still ways to improve it, as is equally, Management believes that the donor continually happening in any event. community as a whole must address the issues of harmonization and coordination on a broad Governance Discount. Management notes that front, including through the Development Assis- the workings of the governance discount, intro- tance Committee of the OECD (OECD/DAC) duced in 1998, need to be kept under review and and the regional development banks. fine-tuned with experience. However, Manage- ment finds OED's suggestion of "rethinking" it, Partnership at the Country LeveL The PRSP which seems to go further, counterproductive. is becoming the basis for better-structured aid Management believes that the governance dis- partnerships at the country level. It provides count serves two important purposes. It sharply enhanced arrangements for the Bank and the reduces lending to countries with very serious Fund to take responsibility for distinct aspects governance concerns, where resources might of the policy dialogue with borrowers, and set well be wasted. And the fact that it exists brings a common framework in which the two insti- attention to the governance indicators in the tutions jointly and separately assess and moni- CPIA and highlights governance weaknesses in tor progress. An important context is the IMF's countries that do not receive a discount. The PBA desire to focus more on its core macroeconomic system, including specifically the governance and related structural areas of responsibility, dimension, was discussed with the IDA Deputies looking to the Bank to take the lead in the dia- at their Paris meeting in February; our sense from logue on social, structural, and sectoral issues. that meeting is that the donors broadly agree with The complementary but distinct roles of the the concept, but would value further discus- PRSC and the Fund's PRGF are expected to be sion of the mechanism. a significant element in enhancing this partner- ship. The PRSP also provides a vehicle for struc- Link with Budget. OED recommends a stronger turing partnerships with other multilateral link between IDA's poverty reduction mandates development banks (MDBs) and bilateral donors, and country unit budget allocations, pointing to thus aiding selectivity. There is increasing an expansion of mandates without explicit resourc- cooperation with MDBs on analytic and diag- ing. Management notes that the Strategic Direc- nostic work, for example, with the Asian Devel- tions Paper, which provides the framework for the opment Bank on fiduciary work. budget, discusses the expanded activities in IDA countries over the past three years-including Coordination and Harmonization. Several PRSP activities, the Enhanced HIPC Initiative, and initiatives to improve coordination among mul- post-conflict assistance-and calls for increased tilateral institutions and with bilateral donors budgetary resources for these activities, as well as are under way. The Bank has been very active work to close ESW gaps as noted above. The Strat- in all major initiatives on harmonization of poli- egy Directions Paper also introduces a three-year cies and procedures, selectivity, and aid man- rolling budget framework to help ensure the con- agement, and is also engaged with MDBs and sistency of country programs and available budget others in discussions of broader institutional resources over the CAS period. coordination and reform. The Bank also partic- ipates in the work of the recently established C. Partnership OECD/DAC Task Force on Donor Practices, Aid partnerships are fundamental to the PRSP which focuses on harmonization among bilateral approach. IDA is already working to strengthen agencies, with the Bank acting as the represen- country-based, government-led aid coordina- tative of MDBs in this work. In addition, the Bank tion with explicit division of roles, based on com- has proposed a prioritized agenda for harmo- parative advantage, among external partners. nization work at the agency, country, and global 1 0 6 Annexes levels, covering procurement, financial man- tives to participate at the third IDA13 meeting agement, and environmental assessments, which (in early October). was endorsed by the Development Committee at its meeting on April 30, 2001.12 Grant Funding. OED proposes that IDA expand its use of grant funding and forge better part- Regional and Global Partnersbips. Selectiv- nerships with other donors to support capacity- ity has also motivated a recent Bank review of building activities. The issues of IDA's partnerships to focus on those in which IBRD's comparative advantage vis-a-vis other partners or IDA's participation reflects the institution's and expanded grant funding are part of a broader comparative advantage, and those in which consideration of IDA terms in which the IDA other institutions should be looked to for lead- Deputies are already engaged in the IDA13 ership. A new governance structure for part- replenishment discussions. nerships, discussed with Executive Directors in January, is now in place. Replenishment Focus on Results. OED observes that there is a mismatch between IDA's 0. Replenishment Issues long-term development goals (and the impor- OED highlights the value of borrower views in tance of tracking outcomes) and the periodic the replenishment process. At the request of replenishments that are politically and finan- the IDA Deputies, IDA has moved in recent cially necessary for donor governments. During years to incorporate more borrower views. In replenishments, donors are focused on estab- IDA13, the June 2001 IDA Deputies' meeting will lishing the framework for the upcoming replen- be held in Ethiopia to allow for borrower con- ishment period under which their governments sultations organized and led by the Economic can take decisions to commit resources. They are Commission for Africa. Beyond this, the Deputies typically less focused at this time on imple- have invited borrowing countries to nominate six mentation and long-term results. To address representatives to join the IDA13 replenishment this, in the IDA13 replenishment the IDA meetings-a significant broadening of the IDA Deputies are looking at two key long-term process. Replenishment documents are also issues-debt sustainability and growth prospects being made publicly available for the first time. in IDA countries. The Bank's Resource Mobilization Department has compiled a survey that seeks feedback from Midterm Reviews. The IDA Deputies may also borrowers on IDA's policy framework and oper- want to consider using future midterm reviews- ations. The survey has been retumed by over 200 meetings held between replenishment years- respondents in ten countries, and its results will to focus explicitly on IDA's results and progress be shared with IDA Deputies in June. External toward outcomes, looking at country programs Affairs and the Africa Regional Office also con- and follow-up to PRSPs, recently closed projects, duct periodic IDA-country client surveys, which and projects under implementation. Manage- are inputs to the IDA13 process. ment will raise this suggestion with the IDA Deputies, building on the experience of the Outreach and Nongovernmental Organiza- successful review in Lisbon last year. tions. Individual donors consult quite closely with their own nongovernmental organizations Consolidation of Mandates. OED recom- (NGOs). But Management has been trying to mends that replenishment mandates be consol- reach out to NGOs in the South. During IDA12 idated because they have become overloaded negotiations, for example, the Deputies held and overdetermined. It does not provide detailed consultations with a number of southern NGOs, guidance on how to consolidate, other than and in the current replenishment that process will cautioning against specification of sector and be continued. Work is under way in External country/Regional shares. This is an issue the IDA Affairs to identify southern NGO representa- Deputies may want to take up. 107 IDA's Partnership for Poverty Reduction Costing. OED proposes costing of IDA man- ments, it has been increasingly successful. Con- dates. Management believes that the costing of ceived during the debates about the Wapen- mandates would provide the Deputies with an hans Task Force Report in 1992 and born before understanding of what the costs of implemen- the 1994 Annual Meetings in Madrid, the tation would entail and inform their views on the IDA10-12 era has witnessed a major turn- cost-benefit tradeoffs. This would also provide around-in strategy and partnership, in portfo- a basis for assessing whether IDA was ade- lio performance and development effectiveness, quately resourced and for examining tradeoffs and in institutional credibility and leadership. and the implications for the budget process. Meanwhile, the face of development assistance This is a complex and staff-intensive exercise, has changed, in no small measure because of but exploratory work along these lines is already IDA. But the turnaround is very much a work under way. in progress, and fragile; and the unfinished agenda is large. We must nurture the critical V. Conclusion drivers that have sustained the turnaround to The OED review has provided an important date, including accountability, selectivity, and opportunity for the development community to transparency. These have spurred IDA's institu- step back and assess IDA's effectiveness in the tional renewal and must underpin the replen- large, and to draw conclusions and lessons for ishment process going forward. More important, future action. On this basis, Management con- these same drivers must also be applied to our cludes that the impact of the IDA replenish- country and sectoral programs. Clearly the chal- ment agreements on IDA's policies, strategies, lenge ahead is to focus our renewed institutional and development outcomes has been highly energies on achieving results measured in terms significant. The overall IDA program during the of progress toward reduced poverty and the period under review has been big, complex, and other international development goals. These are challenging. Although not without implemen- the benchmarks by which we must measure tation problems, false starts, and disappoint- IDA's performance in the future. 1 0 8 ENDNOTES Overview light governance weaknesses in countries that do 1. Management does not agree with OED's assess- not actually receive a governance discount. While all ment of the development outcomes of IDA's work as parts of the performance-based allocation system are "partially satisfactory." This difference in judgment reviewed systematically for possible improvements, appears to come from two factors. First, the OED rat- including the governance discount, management does ing is an average for the whole FY94-00 period and, not believe it needs to be substantially altered. Man- as such, does not give sufficient attention to the agement will continue to work to refine the system, strong improvement in IDA performance on all fronts in consultation with IDA Deputies and others, includ- in recent years (although these improvements are ing donors that have adopted similar systems. highlighted in the OED review). For example, using independent and self-evaluation as a basis for action, Chapter 1 IDA has significantly improved the quality of CASs, 1. See Annex A for a description of IDA's basic fea- lending, implementation of policies, and economic and tures and the evolution in its program. sector work (ESW). OED puts heavy weight on a sam- 2. IDA depends for most of its financial resources ple of 24 IDA-country CAEs. By far the majority of on contributions from its wealthier member countries, years covered by these CAEs fall before or in the first usually provided on a three-year cycle referred to as half of the review period. The second factor is the lack a replenishment period. At each funding interval, of clarity on what OED is measuring in terms of IDA's management and donor countries (represented IDA's impact on development outcomes. While OED by their IDA Deputies) agree on a set of terms and cites a long list of factors outside the scope and con- conditions, which are set out in a Replenishment trol of IDA programs-including the fact that IDA Report. Once endorsed by the World Bank's Board accounts for substantially less than 20 percent of total of Executive Directors and adopted by its Board of development assistance going to IDA countries and Governors, the recommendations become formal far less as a share of overall investment in IDA coun- commitments of the institution. The current IDA12 tries-OED appears not to have given these factors agreement was endorsed by the Board in January sufficient weight in determining its rating. Indepen- 1999. dent research by the Bank's Development Econom- 3. A matrix summarizing IDA's undertakings related ics Department shows that the poverty reduction to the key recommendations in the three Replenish- impact of IDA was far higher on average than that of ment Reports is available on request. official development assistance and that IDA's impact 4. Other replenishment recommendations per- improved in the 1990s. That said, there is clearly taining to administrative, financial, and membership room for IDA to do better. Indeed, many of the issues are not covered. "weaknesses" identified by OED (for example, fund- 5. OED defines borrower performance as the ing for ESW, monitoring and evaluation, further work extent to which the borrower assumed ownership and on governance, and institutional development and responsibility to ensure quality of preparation and capacity building) are precisely the issues that man- implementation, and complied with covenants and agement itself has identified through self-evaluation agreements, toward the achievement of development and launched actions to further enhance IDA's devel- objectives and sustainability; and Bank performance opment effectiveness. as the extent to which services provided by the Bank 2. Management questions the analytic underpin- ensured quality at entry and supported implementa- nings to the OED conclusions and notes that the tion through appropriate supervision (including ensur- facts in the review and in the background paper sup- ing adequate transition arrangements for regular port a conclusion that IDA's allocation system has con- operation of the project). Portfolio cleanup efforts may sistently functioned effectively, achieving an allocation have initially contributed to declining IDA portfolio that is significantly more performance-based than performance in FY98-99, as problem projects exited concessional assistance as a whole. While it notes there the portfolio. is no room for complacency, management points out 6. Established in 1997, QAG conducts yearly that the system has improved over time and fulfills reviews of the quality of project preparation (quality the donor mandate specified in IDA12. In particular, at entry) and supervision, based on a random sam- management believes that the governance discount ple of projects and using standards it developed. has served a very useful function. Lending has been 7. The percentage of IDA projects at risk of not reduced sharply in countries with very weak gover- meeting their development objectives-an indicator nance. In addition, the process has served to high- of subsequent OED ratings-has declined from 1990 1 0 9 IDA's Partnership for Poverty Reduction to 1999. Two major findings emerge from annual in recent years (although these improvements are QAG assessments of quality at entry and quality of highlighted in the OED review). For example, using project supervision. First, both quality at entry and independent and self-evaluation as a basis for action, quality of supervision have improved markedly for IDA has significantly improved the quality of CASs, IDA projects from 1997 to 1999. Quality at entry for lending, policy implementation, and ESW. OED puts IDA projects improved from 73 percent satisfactory heavy weight on a sample of 24 IDA-country CAEs. to 88 percent, and quality of supervision increased By far the majority of years covered by these CAEs from 61 percent satisfactory to 84 percent. Moreover, fall before or in the first half of the review period. The while IDA projects initially rated lower for both these second factor is the lack of clarity on what OED is indicators, the quality gap between IDA and IBRD measuring in terms of IDA's impact on development projects appears to have been eliminated, based on outcomes. While OED cites a long list of factors out- the 1999 cohort. side its scope and control-including the fact that IDA 8. Institutional development impact (IDI) is defined accounts for substantially less than 20 percent of total as the extent to which a project improves the abil- development assistance going to IDA countries and ity of a country or region to make more efficient, equi- far less as a share of overall investment in IDA coun- table, and sustainable use of its human, financial, and tries-OED appears not to have given these factors natural resources through: (a) better definition, sta- sufficient weight in coming to its rating. Independent bility, transparency, enforceability, and predictabil- research by the Bank's Development Economics ity of institutional arrangements or (b) better Department shows that the poverty reduction impact alignment of the mission and capacity of an organ- of IDA was far higher than that of official develop- ization with its mandate, which derives from these ment assistance on average and that IDA's impact institutional arrangements, or both (a) and (b). IDI improved in the 1990s. That said, there is clearly includes both intended and unintended effects of a room for IDA to do better. Indeed, many of the project. "weaknesses" identified by OED (for example, fund- Sustainability assesses the durability of net proj- ing for ESW, monitoring and evaluation, further work ect benefits-that is, the likelihood that they will be on governance, and institutional development and maintained or exceeded over the long haul. While the capacity building) are precisely the issues that man- outcome rating is the best estimate of whether an oper- agement itelf has identified through self-evaluation and ation justifies the use of scarce resources, the sus- launched actions to further enhance IDA's develop- tainability criterion reflects the evaluator's judgment ment effectiveness. of its ability to continue producing net benefits in the 11. See World Bank 1997c. In addition, the Bank face of risk and uncertainty. published an IDA retrospective in the early 1980s: see Outcome, the primary measure of project per- World Bank 1982. formance, summarizes the likelihood that the project 12. Following the IDA10 negotiations, IDA man- will achieve its major relevant objectives (do the right agement brought the report to the attention of things) efficiently (do things right). The relevance Regional managers, but it issued no explicit staff check ensures that achievements rated satisfactory guidelines on how to implement the requirements. address the country's current development needs After the IDAll negotiations, management circulated and the Bank's operational priorities. Outcome cap- a note to staff summarizing the commitments in a tures both accomplishments and the expected level selective rather than in a comprehensive way; the note of future net benefits. included the statement that "Regions are responsible 9. Of the 24 OED IDA Country Assistance Evalu- for ensuring that our Country Assistance Strategies take ations, most of which cover assistance over the decade explicit account of these commitments." In mid-FYOO, of the 1990s, about 33 percent were rated fully satis- IDA management prepared a matrix to track imple- factory, 60 percent moderately satisfactory, and 8 mentation of the IDA12 agreement-a useful inno- percent unsatisfactory. vation for raising staff awareness, particularly 10. Management does not agree with OED's assess- considering that staff surveys undertaken for this ment of the development outcomes of IDA's work as review revealed that few staff were familiar with most "partially satisfactory." This difference in judgment IDA commitments. appears to come from two factors. First, the OED rat- 13. By July 2000, the portfolio cutoff date for this ing is an average for the whole FY94-00 period and, review, less than a third of expected IDA12 commit- as such, does not give sufficient attention to the ments were made and less than 5 percent were dis- strong improvement in IDA performance on all fronts bursed; of IDAl1 commitments, 34 percent were 1 10 Endnotes disbursed; and of IDA10 commitments, 70 percent 5. This new feature of CASs lists objectives, the were disbursed. The number of projects that have related diagnoses and actions to be taken, and bench- closed and have completed reports are even fewer. marks for tracking country and IDA performance. 14. The major thematic studies and reports of 6. Two notable examples of best practice in this country and international consultations are listed in the regard are the FY00 CASs for Honduras and Mozam- references and are available on request. The analysis bique, both of which identify clear monitorable of gender and participation was undertaken as part of poverty reduction targets. a concurrent OED evaluation, with IDA-specific infor- 7. See OED 2000c, which found many PAs want- mation disaggregated from the broader Bank-wide ing as an aid to country strategies. Nearly half did not assessment. The nine focus countries are Bangladesh, adequately address the individual elements of broad- Bolivia, Cambodia, Ghana, India, the Kyrgyz Repub- based growth, social service provision, and safety nets. lic, Mozambique, Uganda, and Vietnam. The selection Nor did they explain what worked and why and of a subset of countries was designed to: (a) deepen provide adequate justification for the priority rankings the analysis of the program and process reviews, (b) contained in strategy recommendations. Treatment of test the findings of those assessments against per- governance issues was patchy, including the respon- ceptions in the countries, and (c) gain a sense of siveness of institutions to the poor. The lesson drawn IDA's overall role and performance by taking into was that PAs are much more influential when demand account the performance of the borrowing country and for data is linked directly to domestic policy its other development partners. The global consulta- formulation. tions took place in two workshops, in Bonn in Decem- 8. On PERs, the most recent evaluation from 1998 ber 1999 and in Washington in November 2000. concluded that quality had improved since the mid- 15. These included both self-evaluations under- 1990s. However, analyses of spending policies were taken by management and independent evaluations often still too dated to have more than a modest by OED, as well as references to literature published impact on IDA lending, country policy, or aid coor- outside the Bank. dination. It recommended a stronger demand orien- tation, use of more selective and sequenced analyses, Chapter 2 and sharper focus on service delivery. Recent PERs 1. Based on the 1990 World Development Report on show many of these features. It is important to note, Poverty, the Bank's strategy advocated a two-pronged however, that the total average cost of four key due approach: (a) economic policy reform and productive diligence products-PAs, PERs, Country Economic investment aimed at increasing the incomes of the Memoranda, and Social and Structural Reviews-is poor through labor-intensive growth; and (b) expan- approximately $650,000 per country. Also see IDA sion of their access to basic social services and social Review 2001b. safety nets. 9. According to a recent OED review of PAs, in Tan- 2. This section on sharpening IDA's focus on zania, for example, despite a fairly extensive partic- poverty reduction draws on the background study, ipatory PA exercise in 1996 the dissemination of the Review of Poverty Reduction in IDA 10-12 (IDA Review PA within the government was limited and its impli- 2001b), which is available on request, and Poverty cations for policy are only now-some four years Reduction in the 1990s: An Evaluation of Strategy later-being discussed in the context of the PRSP, See and Performance (OED 2000d). OED 2000c. 3. As noted further on, shortfalls in the strategy con- 10. Important examples of where participatory tent of such analytical work have limited its impact PAs have worked well are noted in Robb 1999. on country policies and programs. 11. The PRMPO (Poverty Division) thematic group 4. OED 2000d. To encourage increased attention has recently produced a handbook on impact eval- to these concerns, management has devised more uation, with guidance on poverty monitoring and stringent criteria for evaluating the poverty focus of evaluation and a monitoring and evaluation techni- CASs. These criteria include whether poverty is at the cal note for the PRSP sourcebook. See Prennushi, center of the policy dialogue, whether the CAS Rubio, and Subbaro Poverty Net (available at www. assesses the impact on poverty of Bank-supported pro- worldbank.org/poverty/strategies/srcbook/m&e0925 grams, and whether the CAS includes benchmarks and .pdf). monitoring indicators. Further efforts to improve this 12. Investment projects are classified under the Pro- performance is under way in the context of the gram of Targeted Interventions if they include spe- Poverty Reduction Strategy Paper (PRSP) process. cific targeting mechanisms for reaching the poor, IDA's Partnership for Poverty Reduction such as a food security component or public works pendent, parallel activities such as audits and super- scheme. visions drew heavily on limited government capac- 13. As reported in the OED study of the Bank's ity. This was compounded by the donors' use of implementation of its poverty strategy, poverty-targeted different procedures and financial management sys- interventions have been neither a particularly reliable tems in parallel operations. For a discussion of the indicator of the poverty orientation of Bank lending experience with sector-wide programs as imple- nor a particularly accurate measure of who benefits mented in Africa, see Johannson and Adams 1998; from project investments. See OED 2000d. Schacter 2001. 14. See OED 1999a and 2000a. It should be noted, 21. World Bank 2000a. In particular, see Chapter however, that the 2000 review points out that increased 11, "Reforming Development Cooperation to Attack attention to these matters by the Human Development Poverty." The importance of SWAps as mechanisms Network may not yet be captured in the most recent of country-led enhanced aid coordination is further figures. discussed in Part III. 15. India Second Technician Education Project, Credit Number IDA 22230. Chapter 3 16. OED's HNP (health, nutrition, and popula- 1. See OED 2000d. The classification of operations tion) study (OED 1999d), for example, found that few as "poverty focused" has been used since 1992 and project documents presented a coherent analysis of relates to adjustment operations that support gov- how project interventions would be translated into ernment efforts to reallocate public expenditures in improved health outcomes for the poor, despite often favor of the poor, eliminate distortions and regulations being classified as poverty targeted interventions. An that disadvantage the poor, and support safety nets even smaller percentage of projects were able, on clos- to protect the most vulnerable. ing, to demonstrate clear results for the poor. While 2. According to the QAG's 1999 quality at entry this does not mean that such interventions did not review, 64 percent of a sample of Bank and IDA reach their target groups, it does mean that adequate adjustment operations gave adequate treatment to processes are not in place to assess the extent of proj- poverty issues. In addition, only 22 percent of the sur- ect impact and cost-effectiveness in reaching the veyed FY98-00 operations included poverty and poor. Similarly, the OED review of education assis- social indicators, though many of those operations cov- tance in Bangladesh noted that 11 of 12 projects ered poverty issues. lacked benchmarks or monitoring indicators. 3. See Meerman 1997. In addition, an OED review 17. Project portfolio ratings that show greater of adjustment lending showed that two-thirds of a sam- increase in the demandingness and complexity of IDA ple of countries that implemented reforms achieved projects compared with IBRD projects underscore per capita income growth and reductions in the inci- this point (see Annex D). dence of poverty of some 1 percent in most cases. Also 18. In FY98-99, these two new types of loans see Jayarajah, Branson, and Sen 1996. accounted for 23 percent, 22 percent, and 21 percent, 4. The retrospective points out, however, that respectively, of all Bank lending in HNP, education, there are still too many and too complex conditions. and social protection. 5. According to IFAD, between 1988 and 1998, total 19. LILs and APLs, which together are called "adapt- ODA to agriculture fell by almost two-thirds in real able lending instruments," were introduced in 1997. terms (IFAD 2001, p. 229). LILs support small-scale, innovative projects that have 6. The reasons underlying this decline are currently the potential to lead to larger projects and are used being assessed as part of a review and updating of the to test new approaches, often in start-up situations and Bank's rural sector strategy, which should feed into a with new borrowers. APLs provide phased support heightened emphasis on broad-based growth in IDA13. for long-term development programs and are used OED CAEs tell a mixed story, with a number noting when sustained changes in institutions, organiza- significant IDA contributions to improved agricultural tions, or behavior are key to successfully imple- growth through adjustment lending and others noting menting a program. the lack of a country-specific strategy for promoting agri- 20. The government was simply unable to moni- cultural productivity. OED CAEs for Albania, tor this large number of projects. In addition, there Bangladesh, Togo, and Uganda found that IDA helped were serious inequities under the projects in resource to increase agricultural productivity and rural incomes allocations to schools, provinces, and districts. The by supporting improvements in the countries' macro- numerous project implementation units and inde- economic conditions during the 1990s. Several other 1 1 2 Endnotes CAEs noted, however, that IDA had been less active ernment to fill 4,500 out of 5,000 health assistant jobs and effective in supporting specific investments and sec- with women because experience had shown that tor strategies in agriculture. For example, CAEs for when assistants were women, family planning and Ethiopia, Cameroon, Tanzania, and the CFA countries other services were delivered more effectively. concluded that IDA's development effectiveness had 4. Evaluation findings also show that the poten- been hindered by the lack of an adequate country rural tial adverse impact of gender-blind projects was development strategy. averted in countries with strong policies or with com- 7. See World Bank 2000b, p. 187. Based on its find- paratively greater gender equality. However, in coun- ings, this report proposes a "business plan" that tries with large gender disparities, women were focuses on the huge investments required by both the usually unable to access project benefits equitably and private and public sectors to capitalize African agri- the project impact on men and women was different. culture, increase its competitiveness, and harness the 5. In particular, IDA has worked primarily through potential of agricultural growth and rural development. sector ministries in supporting education and health; 8. This section draws on the background study it has not sought to engage the gender agencies or Review of Private Sector Development in IDA1O-12 ministries that now exist in most countries. (IDA Review 2001g), which is available on request. 6. A review points to the absence of Regional gen- 9. This new strategy, along with the new depart- der units other than Latin America and the Caribbean ment (Bank/IFC) for small and medium-size enter- as a particular impediment to fuller integration of prises, both recently launched, promises a more gender in country programs, especially where col- dynamic response, and an ongoing rural finance laborative diagnostic work and dialogue are needed study could provide needed guidance. to build national consensus. 10. Several CAEs have noted, in particular, that 7. The Beijing Platformfor Action, the main doc- while stabilization and liberalization support had ument adopted by the Fourth World Conference on important effects, more attention should have been Women, seeks to promote the advancement of women. paid to linkages among financial sector reform, pri- The document is available at http://www.un.org/ vatization, and judicial reforms as well as underlying womenwatch/daw/beijing/platform. constraints due to poor corporate governance. 8. This section draws on the background study 11. A joint CAS program between IDA and IFC was Review of Environmental Sustainability Issues in IDA introduced in FY97 to foster closer coordination and 10-12, 2001 (IDA Review 2001h), which is available cooperation between the organizations. See box 5.2 on request, and the OED Review of the Bank's Per- in this volume. formance on the Environment (OED 2001d). These 12. An OED review of Bank Group work on the two reports were prepared in conjunction with one financial sector found that individual project ratings another and share a set of recommendations. did not capture what was actually happening in the 9. See Hamilton and Shyamsundar (2000) for a sector as a whole. While the relevance of Bank sup- review of 51 CASs from 1993 to 2000. Using a priority- port was high, with lending operations strongly tar- based standard, the 1998-99 CAS retrospective rated geted on sector reforms, efficacy was mixed and closer to 67 percent satisfactory or above. Manage- overall the assistance was said not to be strong. The ment's 2000 CAS review also finds that the number study (World Bank 1998b) covered 23 countries, 10 of Bank-wide CASs with unsatisfactory treatment has of them IDA borrowers. declined to 16 percent, although the IDA management report on environmental mainstreaming, discussed Chapter 4 below, finds treatment of environment in IDA CASs 1. This section draws on a two-part OED evalua- "moderately satisfactory." tion of the integration of gender in Bank assistance, 10. Based on its recent study of Bank-wide ESW, including 12 in-depth country analyses, 9 of which management has indicated that the Bank needs to be were IDA countries, and the disaggregation of data diligent in ensuring that environment issues are ana- related to IDA provided specifically for this review. lyzed for all countries and that ESW-based knowledge 2. Two recent research reports have, however, should be current where environment is an important given particular attention to the links between growth, development issue. For this purpose, management poverty, and gender. See Blagden and Bhanu 1999; proposes broadening the due diligence category to World Bank 2001a. incorporate environmental reviews as the first step. 3. For example, the Bangladesh Fourth Population 11. From 1996 to 1999, China accounted for about and Health project (Credit No. 2259) required the gov- 41 percent of environment component lending. With 113 IDA's Partnership for Poverty Reduction China no longer a concessional borrower in IDA12, for achieving the 2015 International Development the aggregate IDA lending level can be expected to Targets. decline. 21. Consistent with this and other independent 12. This finding is based on reviews in the 15 evaluations, along with some self-evaluations, the selected countries of IDA's environmental projects Bank's 2000 CAS retrospective has recently proposed completed during the period under review, and of a set of "next steps" that include better integration of supervision reports of projects under implementation. environmental considerations into economic and sec- The focus countries for the IDA review included: Azer- tor work, a strengthened link between environmen- baijan, Bangladesh, Bolivia, Cambodia, China, C6te tal considerations and poverty reduction measures, and d'Ivoire, Ghana, India, the Kyrgyz Republic, Mozam- better incorporation of environmental indicators and bique, Nepal, Tanzania, Uganda, Vietnam, and Yemen. trends in CAS diagnoses. 13. See Part IV of this report for a broader dis- 22. Compare, for example, the experiences in cussion of design and implementation of safeguard China, which is making an effort, and in Bangladesh, policies. where rent-seeking activities in the ministry respon- 14. One of the more valuable follow-ups to NEAPs sible for the environment are an obstacle to any has been the establishment by individual countries of progress. their own environmental assessment procedures; 23. Two early papers include the 1983 World however, this is happening slowly. For example, less Development Report (WDR): Managing Development than half of the IDA borrowers in Africa have adopted (World Bank 1983) and From Crisis to Sustainable any such procedures and in many, the procedures Growth-Sub-Sabaran Africa: A Long-term Perspec- have yet to become effective. tive Study (World Bank 1989), which was the first Bank 15. GEF projects, which are grant-financed and report to raise issues of governance explicitly. The carry their own preparation funding, have often Bank's first policy on governance work was set out proven to be critical instruments used by environ- in a 1992 report entitled Governance and Development mental staff to convince country directors and coun- (World Bank 1992b), which was updated in 1994 as tries to include environment projects. Unfortunately, Development in Practice: Governance-the World these projects address only a limited number of issues Bank's Experience (World Bank 1994). Since the start and often substitute for, rather than complement, of IDA10, further guidance was provided in a policy IDA's environment lending in support of country paper entitled Helping Countries Combat Corruption: development. The Role of the World Bank (World Bank 1997b), 16. Among IDA members, only China and India which was updated in April 2000. The 1997 WDR on are significant contributors to greenhouse gas emis- the role of the state (World Bank 1997d) was a major sions, but nearly all IDA countries will be affected by effort to bring institutional economics into the Bank's some combination of rising temperatures, rising sea country analysis. levels, and more-violent weather patterns. 24. See World Bank 2000b, in which a central 17. The Bank and IDA supported several projects theme is "improving governance, managing conflict to help countries minimize damage from the last El and rebuilding states." Nifio, and IDA is working with countries to take 25. Notably, WDR 2000 (World Bank 2000e) and anticipatory actions to changes in rainfall, sea level, WDR 2001 (World Bank 2001d) are both heavily ori- and other expected effects of climate change. ented to the task of institution building. This year's 18. Most countries have by now established envi- focus is on institutions to tackle poverty; next year's ronmental agencies or ministries, often after com- is on nurturing market institutions. pleting a NEAP and usually with IDA or other donor 26. Key WBI inputs have included skills develop- support. However, many of these agencies remain ment for staff in the Bank and in borrower governments weak, environmental regulations are often not well (on governance generally and in the preparation of anti- enforced, and the ministries lack input in their coun- corruption action plans specifically), pioneering the use tries' overall development strategy and planning. of corruption perception surveys and public service 19. GEF projects are funded by grants and carry delivery surveys, and improving the measurement of their own funds for preparation and supervision, so the impact of corruption on development. they do not use IDA credits or budget resources. 27. For example, OED's CAEs for Bangladesh, 20. DflD's recent (2000) paper, Achieving Sus- India, and Indonesia and Country Assistance Note for tainability, Poverty Elimination and the Environ- Kenya underscore the issue of public financial ment, makes a strong case for this linkage as essential accountability. 1 14 Endnotes 28. This includes public sector reform compo- 5. The improvement noted here refers to the CAS nents only in public sector management and multi- document in particular; many of these practices pre- sector projects. viously occurred in the Country Strategy Papers that 29. The Uganda Poverty Reduction Strategy Credit did not go to the Board or the countries. (PRSC) is expected to be the first in a series of pro- 6. An internal review found that even as recently gram loans to support public sector reform. In India, as the first half of FY99, only 40 percent of CASs had a program credit has supported the first phase of a "extensive" civil society consultation. comprehensive public sector reform program in Uttar 7. For that purpose, the IDA Review Team exam- Pradesh. In Tanzania, a Programmatic Structural ined the CAS documents and the actual lending pro- Adjustment Credit (PSAC) supports the government's grams for nine focus countries in order to identify medium-term strategy for policy and institutional differences between the programs as proposed in the reform aimed at bolstering private sector development CASs and the actual approvals of lending operations in the country. And in Indonesia, the Bank has helped in subsequent years. to establish a governance partnership involving civil 8. There is an important distinction to be made here society, the government, the private sector, and the between areas of IDA involvement in underlying strate- development partners. gic work, on which not only its own but other lending 30. For example, it has provided technical assis- often depends, and its involvement at a major level in tance, investment credits, and included elements in lending. IDA tends to be needed in all critical areas adjustment loans to a variety of countries for such because other agencies are not equipped or willing to things as regulatory reform and privatization, devel- do the sharp analytical work needed to map out a sec- opment of legal and regulatory frameworks related tor strategy, but it need not follow that IDA play a to energy and water reform projects, banking, and major financing role in all of the sectors. This, however, telecommunications. raises budget resources issues, discussed in Part IV. 31. For example, the African Region collaborated 9. A later review further confirms that this remains with the African Executive Directors to launch a an issue that needs greater attention. capacity-building initiative (Partnership for Capacity 10. The recent OPS CAS retrospective found that Building in Africa, or PACT, 1996). Its evolution was only 38 percent of CASs cited donor involvement as protracted, but the outcome, which includes inte- the reason for no Bank activity in a given area. This gration with the Africa Capacity Building Foundation, has in some cases reflected the express preference of seems promising. clients that IDA stay involved, in other cases it reflected competing sectoral perspectives, and in still others it Chapter 5 resulted from the failure of a partner agency to deliver 1. Replenishment Report comments about the in an area of assumed leadership. CAS, and later about the PRSP, are really about the 11. Management questions the analytic underpin- underlying strategy IDA is following in each country. nings of the OED's conclusions and notes that the facts 2. Prior to that decision, the Bank had routinely in the review and in the background paper support prepared Country Strategy Papers (CSPs), but these a conclusion that IDA's allocation system has con- were confidential documents that were shared neither sistently functioned effectively, achieving an alloca- with the Board nor, in most cases, with the borrower tion that is significantly more performance-based governments. From 1991 to 1994, CASs were prepared than concessional assistance as a whole. While there for Board discussion on a parallel track with CSP is no room for complacency, the system has improved preparation for management. Thereafter, the CAS over time and fulfills the donor mandate specified in became the single strategy document for both man- IDA12. Management believes, in particular, that the agement and Board review. governance discount has served a very useful func- 3. This assessment is based primarily on the first tion. Lending has been reduced sharply in countries two CAS retrospectives undertaken by the Bank. In with very weak governance. In addition, the process addition, IDA Review team members conducted has highlighted governance weaknesses in countries reviews of CAS coverage in specific program areas of that do not actually receive a governance discount. emphasis as part of thematic background reports. A While all parts of the performance-based allocation third retrospective has recently been completed. system are reviewed systematically for possible 4. See Bank Procedure (BP) 2.11 Annex A, Con- improvements, including the governance discount, tent of Country Assistance Strategy Document, Janu- management does not believe the system needs to be ary 1995. substantially altered. Management will continue to IDA's Partnership for Poverty Reduction work to refine the system, in consultation with IDA addressed in the review of the system planned by Deputies and others, including donors that have management in the coming year. adopted similar systems. 12. This section draws on the background study Chapter 6 Review of the Performance-Based Allocation System, 1. An OED review of IDA-specific participation IDA10-12 (IDA Review 2001a), which is available on issues is reported here. request. 2. The PRSP process represents a new and signif- 13. Some recent Bank research has indicated the icant departure, including as one of five "core prin- totality of official development assistance (ODA) has ciples" a broad-based participatory process in moved considerably toward better performance. formulation, implementation, and outcome-based According to this work, IDA's efforts in 1990 to link monitoring. aid to performance were essentially undermined by 3. Governments bear most of the costs, often other aid flows that did not appear to make that link- financing them with resources from the project loan. age. By 1997-98, however, the situation had changed Communities also bear significant costs for project par- markedly for the better: an increase of $1 million of ticipation, contributing labor, materials, cash, and aid allocated on total ODA terms would have lifted time. an estimated 284 more people out of poverty, while 4. This section draws on the background study the corresponding number for IDA was 434. While Review of Aid Coordination in an Era of Poverty indicating that the numbers need to be used with cau- Reduction Strategies, IDA10-12 (IDA Review 2001c) tion, the work suggests that the differentials are quite and The Drive to Partnership: Aid Coordination and robust. See Collier and Dollar 1999. the World Bank (OED 2001a). 14. Included here are suggestions of broadest 5. With other multilaterals, improvements, though implication; the background report also recommends limited, have come at the headquarters level, while more detailed adjustments and a discussion of some results in the field have been mixed. additional issues that might usefully be considered that 6. This informal forum was originally known as the would provide for: (1) alternative allocation mecha- "Special Program of Assistance for Africa" and largely nisms and (2) ideas on how the PBA might need to involved discussions among donors, but both purposes be adapted in light of the PRSP process now being and processes have changed over time. See OED introduced for all IDA borrowers. 1998b. 15. Moreover, it is impossible to claim that the sys- 7. OED 1998b, para. 59-64. New SWAp initiatives tem is transparent (a goal urged by the Replenishment being pursued by IDA in Cambodia and Vietnam are Reports); in disclosing the PBA process, as discussed explicitly justified by expectations that they will simul- below, IDA would be exposed to a credibility risk in taneously result in enhanced country capacity and the absence of such records. Though this suggestion ownership, more coherent donor support to country was not formally costed, a rough estimate indicates sector strategies, and, once established, greatly reduce that implementation of the system costs about $700,000 aid delivery transaction costs. per year-a reasonable figure for a system that allo- cates some $20 billion annually-and establishing a Chapter 7 written record might add 50-100 percent to that 1. In-country consultations conducted for this amount. review strongly commended the increased represen- 16. IDA management intends to undertake a major tation in the field, especially noting improvements in review of CPIA design in the coming year. This report the content and timeliness of policy analysis and dia- recommends that close involvement of IDA's partners logue as well as enhanced coordination with other might usefully be built into that review. agencies. 17. Triggers define the specific conditions for mov- 2. Under the revised system, the Regions will ing to higher or lower lending scenarios. Most com- retain responsibility and accountability for safeguard monly stated triggers are macrofiscal performance, certification and compliance for most ("normal risk") structural reform, and portfolio triggers. projects; the responsibility will be shared between the 18. There are legitimate obstacles to fuller disclo- ESSD Networks and the Regions, with outstanding sure, including the need for a written record and the issues to be resolved by the relevant managing direc- IBRD borrowers' concern that disclosure of their rat- tor for "special risk" projects; and a quality assurance ings could negatively affect their financial market rat- role is exercised by the central Quality Assurance and ings, but these considerations could and should be Compliance Unit in ESSD. These arrangements offer 11 6 Endnotes some improvement, but still face three problems: the added to ensure funding for portfolio supervision. lack of defined criteria to identify "special risk" proj- Management can choose to place greater weight on ects; the absence of a provision for above-Regional poverty, or on performance, by adjusting the for- resolution of unresolved issues for "normal risk" mula's coefficients for these variables. The average projects; and only partial resolution of the potential budget dollars per capita (with GNP per capita in conflict of interest in funding and dual reporting parentheses) are as follows: Africa $1.96 ($491), arrangements; the Regional safeguards compliance East Asia $0.57 ($737), ECA $0.90 ($819), LAC $0.70 teams will still depend on cross-support from proj- ($1,772), MNA $0.23 ($731), and South Asia $0.23 ect task managers for a substantial portion of their ($467). work. 10. The relevant Bank Operational Policy (OP14.40) 3. The value of IDA's ESW was emphasized in defines a trust fund as "a fund administered by the country consultations both by borrowers and by other Bank in accordance with the terms of agreement assistance agencies. with a donor." Not all "supplementary funds" are, 4. "Due diligence" ESW has been identified by man- strictly speaking, trust funds in this sense. The Bank agement as a core set of underlying analyses that need acts as a fiscal agent for some funds, channeling to be kept up-to-date for work in borrowing coun- them to other entities to administer. There is also "com- tries, including: Poverty Assessments, Public Expen- plementary funding" that supports cofinancing of diture Reviews, Country Economic Memoranda, loans and credits, and debt-service funds. Discussed Country Profile of Financial Assessments, Country here are those arrangements under which the Bank Financial Accountability Assessments, Country Pro- administers donor-entrusted funds that provide advi- curement Assessment Reviews, Social and Structural sory services and technical assistance for a specific, Reviews. development-related activity or activities. 5. A specific concern, as noted in Part III, is the 11. For work in certain sectors or themes, the low allocation of resources and low quality of eco- dependence on trust funds to deliver core lending and nomic and sector work in poorly performing coun- ESW is now particularly strong. Notably, if averaged tries. If lending to weak-performing countries is to over the entire health, nutrition, and population port- be limited and good-quality ESW does not fill in, it folio for FY97-00, trust funds financed about 45 is hard to see what role IDA can claim in these percent of the total cost of loan preparation and countries. appraisal. 6. The Bank's support for the African-led Partner- ship for Capacity Building (PACT) aims, over the next Annex G five years, to mobilize $1.0 billion for a capacity- 1. The results may represent substantial progress building trust fund. The further step proposed here relative to the status quo ante (or what would have is to make a portion of IDA resources available on a happened in the absence of Bank/IDA intervention) grant basis for use in mainstreaming capacity build- but still lead to less than fully satisfactory outcomes ing in IDA operations where needed and/or to pool if they had not met their stated objectives or had done bilateral trust funds for capacity building. so inefficiently. This is especially likely when the 7. Among regions and sectors, between QAG and objectives are particularly demanding, as was the OED, and among country-level assessments for the case with the IDA replenishments. CDF, PRSPs, performance-based resource allocation, 2. The alternative-goal-free evaluation-is used and Country Assistance Evaluations. by OED whenever it is feasible to weigh the net ben- 8. The Compact's objectives were to be financed efits of the intervention in relation to the opportunity through savings and redeployments as well as through cost of the resources used. Thus, economic and finan- additional budgetary resources of $250 million over cial rates of returns are routinely used to assess the FY98-00, with the administrative budget returning (in justification of projects where appropriate data can be real terms) in FY01 to its FY97 level-as it has now obtained. Unfortunately, cash flow analysis is not done. practical for the complex programs funded by IDA. 9. In the country norm methodology, three main Even for projects, the implementation of policy and variables-population, poverty, and performance capacity-building objectives (which are often the (CPIA index)-are used in a regression analysis most crucial) cannot be quantified precisely enough against the historical trend of budget allocations by to allow cash flow analysis. country, to derive a formula that yields a "country 3. The methodology used in the CAEs has not been norm budget" to which additional resources are agreed with management. 1 17 IDA's Partnership for Poverty Reduction Annex I Sector (R99-131), July 20, 1999; Health, Nutrition, and 1. See World Bank 1990, 2000a; Dollar and Pritchett, Population (R97-168), July 22, 1997; Population and 1998. the World Bank: Adapting to Change (SecM2000-154), 2. "Supporting Country Development: World Bank March 24, 2000; Education Sector Strategy (R99-68), May Role and Instruments in Low- and Middle-Income 18, 1999; Social Protection Sector Strategy: From Safety Countries" (DC/2000-19). Net to Springboard (R2000-160), September 7, 2000; 3. See Poverty Reduction Strategy Papers. Opera- Strategyfor the Financial Sector (R2000-169), October tional Issues, Joint IMF/World Bank Paper (R99-241), 19, 2000; Cities in Transition: A Strategic View of Urban December 10, 1999, available at http://www.world and Local Government (R99-191), November 2, 1999; bank.org/poverty/. World Bank Group Private Sector Development Strat- 4. For information on the Comprehensive Devel- egy (R99-175), December 14, 1999; Corporate Gover- opment Framework, access http://cdf.worldbank.org/. nance: A Frameworkforlmplementation (SecM99-590), 5. See The Initiative for Heavily Indebted Poor September 13, 1999; and Small and Medium Enterprises: Countries-Review and Outlook (DC/98-15), Sep- Sub-Sector Strategy (R2000-67), May 25, 2000. See tember 2, 1998. It is important to note, too, that start- http://www.worldbank .org/, search term: Sector Strat- ing in the late 1980s, the World Bank established a egy Papers. number of mechanisms for reducing IDA countries' 8. See Reforming Public Institutions, note 7. debt levels, including the Debt Reduction Facility for 9. See "Reaching the Rural Poor: The Rural Devel- IDA-Only Countries, which has now extinguished $6 opment Strategy of the World Bank," forthcoming. billion in commercial debt, and the Fifth Dimension 10. South Asia provides another Regional exam- Program, which has allocated resources totaling $1 bil- ple. While the portfolio of the rural unit has declined, lion to offset IBRD interest payments owed by IDA- estimates of rural commitments by other sector units only countries. (including health, education, etc.) suggest an almost 6. Article V, Section 1(g) of IDA's Articles of Agree- 40 percent increase in lending for the rural areas ment states: "The Association shall make arrange- over the decade. ments to ensure that the proceeds of any financing 11. In 1990, for example, 64 percent of rural devel- are used only for the purposes for which the financ- opment projects under implementation in Africa were ing was provided, with due attention to considerations at risk; by 1999-2000, that measure was reduced to of economy, efficiency and competitive international about 21 percent. Actual problem projects dropped from trade and without regard to political or other non- 33 percent to 17 percent. The quality of projects at entry economic influences or considerations." and during supervision has also improved, the latter 7. The SSPs are as follows: Reforming Public Insti- rising from 50 percent in 1997 to 80 percent in 1999. tutions and Strengthening Governance: A WorldBank 12. See Development Committee Communique, Strategy (R2000-91), July11, 2000; Rural Development: April 30, 2001, at http://wbln0018.worldbank.org From Vision to Action (R97-25), March 11, 1997; Fuel /DCS/devcom.nsf/(communiquesm)/6FF3986EFC7595 for Thought: Environmental Strategy for the Energy BD85256A3E006A6411?OpenDocument. 11 8 REFERENCES IDA Review Background Papers Collier, Paul, and David Dollar. 1999. Aid Allo- All Background Papers are available upon cation and Poverty Reduction. World Bank Pol- request. icy Research Working Paper. Washington, D.C. Devarajan, S., David Dollar, and Torgny Holm- IDA Review. 2001a. Review of the Performance- gren, eds. 1999. Aid and Reform in Africa. 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