2012 Development Policy Lending Retrospective Emerging Findings and Issues Operational Policy and Quality Department The World Bank July 2012
Outline Content and Issues Key trends Contribution to country results Opportunities and Assessment and management of risks Reforms of the instrument and their effectiveness Progress made and areas for strengthening 2
The new spectrum of World Bank lending instruments Country’s National and Sectoral Development Programs World Bank’s Country Assistance Strategy Program for Results Development Policy Lending Investment Lending Lending (Expenditure Program (General Budget Support Support (Project Support – – Disburses against – Disburses against Disburses against Policy/Institutional Measurable Program Specific Investments) Actions) Results) Policy and Project Based Guarantees Note: The Bank also provides policy-based and project-based guarantees as well as analytical and advisory services 3
DPLs contribute to countries’ results through substantive engagement on policy and institutions • The country designs and implements its development Development program/strategy (World Bank provides support) Program Adequate macroeconomic policy Adequate fiduciary systems • The World Bank supports key policy/institutional actions, drawn from the country program, which form the basis of the operation Prior Actions • The country and the World Bank agree on key results, flowing from the prior actions, which will be used to monitor and evaluate impact. When possible results are drawn from Results government programs. 4
The DPL Retrospective aims at answering three critical questions Are DPOs helping How are risks countries deliver assessed and results ? managed in DPOs? How effective were the reforms in the operational policy framework for DPOs? 5
To provide answers it covers all DPOs since the last DPL Retrospective • Stocktaking from 77 IBRD and Blend (IBRD &IDA) April 2009 to IDA and Blend (IDA &TF) March 2012 TF 50 38 • Analysis of 221 30 operations and 6 17 supplementals 9 • 110 IBRD Africa East Asia Europe and Latin Middle East South Asia and Pacific Central Asia America and and North • 103 IDA Caribbean Africa 14,263 US $million • 6 solely financed 13,091 IBRD by TFs, 2 TF/ IDA IDA • Europe and TF 6,898 Central Asia, and 4,830 Latin America and 3,180 2,651 Caribbean accounted for 62 percent of Africa East Asia Europe and Latin Middle East South Asia commitments and Pacific Central Asia America and and North Caribbean Africa 6
Outline Content and Issues Key trends Contribution to country results Opportunities and assessment and management of risks Reforms of the instrument and their effectiveness Progress made and areas for strengthening 7
Total lending and in particular development policy lending increased during crises 60,000 60 DPO as % of total Inv. Lending US$M 50,000 50 DPO US$M 40,000 40 30,000 30 20,000 20 10,000 10 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Introduction of Development Policy Lending 8
Development policy lending as a share of total IDA has declined (from an average of 25 percent in FY05-09 to 12 percent by end FY11) 65 60 Policy Based Lending as % Total IBRD Lending 55 Policy Based Lending as % Total IDA Lending 50 45 40 35 30 25 20 15 10 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12a a Through third quarter 9
Reforms on public sector governance continue to dominate, and social protection and human development are on the rise 48 Prior actions (%) Previous Retrospective 40 Current Retrospective 23 18 18 16 12 12 7 6 Public Sector Financial and Private Environment, Trade and Economic Social Protection and Goverance and Sector Development Rural and Urban Management Human Development Rule of Law Development 10
DPOs are increasingly selective in their use of prior actions 40 Average number of prior actions IBRD 35 Average number of prior actions IDA 30 25 20 15 10 5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 11
Progress on Aid Coordination A large proportion of IDA operations are …But in some cases at significant costs prepared in the context of Joint Budget Support (JBS) partnerships… Rigidities 74 70 IDA Example: Africa Region • Economic Governance Grant, in Ghana, to support the country’s challenges during the 51 global economic crisis in 2009 46 High transaction costs • 638 coordination structures in 52 IDA countries. Only 60 % of them were found to be performing well Weakened policy dialogue and ownership Example: % operations % commitments • In Uganda, dialogue on financial sector reforms was undertaken in the context of a DPL prepared outside the JBS JBS partnerships has led to greater alignment in the policy dialogue, policy focus and results framework 12
Outline Content and Issues Key trends Contribution to country results Opportunities and assessment and management of risks Reforms of the instrument and their effectiveness Progress made and areas for strengthening 13
Strong emphasis on results, evaluation, validation and transparency Results Focus. Each DPO must have an explicit results framework (indicators, baselines and dated targets) Evaluation. Each DPO is evaluated at end of implementation. Bank prepares an Implementation Completion and Results Report (ICRR) Independent Validation. Management evaluation is validated by the Independent Evaluation Group (reports directly to Board) Transparency. New Access to Information policy – public has access to Bank information => public can evaluate DPOs 14
World Bank policy lending performs as well as investment lending and quality is holding up IEG evaluation of Bank’s Implementation Completion Results Reports Percent Moderately Satisfactory or Better 95 90 85 80 75 70 65 Policy Based Lending 60 Investment Lending 5 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Note: Later years are based on limited data. For example, in FY10 only half of the ICRRs have been evaluated/validated by IEG. This graph will be updated as more data becomes available. 15
Bank and IEG evaluations follow a similar trend although with a rating gap -- with Bank ratings slightly higher Bank vs IEG Evaluations Percent Moderately Satisfactory or Better 100 95 90 85 80 IEG 75 ICRR 70 65 60 FY05 FY06 FY07 FY08 FY09 FY10 Note: Later years are based on limited data. This graph will be updated as ICRRs and IEG evaluations become available. 16
Over 60% of the targeted results of the DPOs in the retrospective were fully or partially achieved – Based on available ICRRs Not observable 9% Not achieved or marginally achieved (<50 of target) 18% 60% Fully achieved or exceeded 13% Partially achieved (>50% of traget) Based on a limited sample 78 ICRRs. This corresponds to 87 DPOs. Results Frameworks have improved: 85 percent of the results indicators had baselines and targets, while in the last Retrospective only 42 percent of the results indicators had baselines. 17
Outline Content and Issues Key trends Contribution to country results Opportunities and assessment and management of risks Reforms of the instrument and their effectiveness Progress made and areas for strengthening 18
Countries with a stronger fiduciary and governance environment receive a larger share of total Development Policy Lending A larger share of the commitments A larger share of the commitments to better fiduciary performers (2005-2011) to better governance performers (2005-2011) CPIA ratings 4.5-<6 12.9% 15.9% 3.5-<4 3-<3.5 3.5% 1.3% 0.8% 2.5-<3 7.8% 2.0-<2.5 48.7% 21.3% 61.5% 26.2% CPIA ranges from 1-6. 1 is the lowest and 6 the highest. Governance measured using CPIA Cluster D (Public Sector Management and Institutions); Public Finance Management (PFM) measured using CPIA 13 (Quality of Budgetary and Financial Management) 19
Countries with stronger fiduciary and governance environments receive a larger share of Bank financing in Development Policy Lending 70 70 60 60 Investment lending Investment lending Investment lending 50 50 40 40 30 30 20 20 Development policy lending Development policy lending 10 10 0 0 1.5 2-<2.5 2.5-<3 3-<3.5 3.5-<4 4-6 2 - <2.5 2.5 - <3 3 - <3.5 3.5 - <4 4 - 6 CPIA for Cluster D CPIA 13 20
Policy content of DPOs focuses more on public finance management and governance when they are weaker 3.5 8.2 3.1 # of prior actions on governance # of prior actions on PFM 2.3 1.8 4.2 4.1 3.1 1.3 2.7 CPIA 13 CPIA D 2.0 2.5-3.0 3.5 4.0 4.5-6.0 2.0-<2.5 2.5<3.0 3.0<3.5 3.5<4.0 4-6 Public Financial Management Quality Governance Quality 21
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