2012 Development Policy Lending Retrospective Emerging Findings and - - PowerPoint PPT Presentation

2012 Development Policy Lending Retrospective

Emerging Findings and Issues Operational Policy and Quality Department The World Bank July 2012

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

Outline

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The new spectrum of World Bank lending instruments

Country’s National and Sectoral Development Programs World Bank’s Country Assistance Strategy

Development Policy Lending (General Budget Support – Disburses against Policy/Institutional Actions) Program for Results Lending (Expenditure Program Support – Disburses against Measurable Program Results) Investment Lending (Project Support – Disburses against Specific Investments)

Note: The Bank also provides policy-based and project-based guarantees as well as analytical and advisory services

Policy and Project Based Guarantees

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DPLs contribute to countries’ results through substantive engagement on policy and institutions

Development Program

• The country designs and implements its development

program/strategy (World Bank provides support) Prior Actions

• The World Bank supports key policy/institutional actions, drawn

from the country program, which form the basis of the operation Results

• 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 government programs.

Adequate macroeconomic policy Adequate fiduciary systems

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The DPL Retrospective aims at answering three critical questions

Are DPOs helping countries deliver results? How are risks assessed and managed in DPOs? How effective were the reforms in the

• perational policy

framework for DPOs?

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To provide answers it covers all DPOs since the last DPL Retrospective

• Stocktaking from

April 2009 to March 2012

• Analysis of 221
• perations and 6

supplementals

• 110 IBRD
• 103 IDA
• 6 solely financed

by TFs, 2 TF/ IDA

• Europe and

Central Asia, and Latin America and Caribbean accounted for 62 percent of commitments

Europe and Central Asia 38 East Asia and Pacific Middle East and North Africa 17 30 Africa 77 South Asia 9 Latin America and Caribbean 50 IDA and Blend (IDA &TF) IBRD and Blend (IBRD &IDA) TF 2,651 South Asia Middle East and North Africa 3,180 Latin America and Caribbean 14,263 Europe and Central Asia 13,091 East Asia and Pacific 6,898 Africa 4,830 TF IDA IBRD US $million

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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

Outline

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Total lending and in particular development policy lending increased during crises

60 50 40 30 20 10 60,000 50,000 40,000 30,000 20,000 10,000 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

• Inv. Lending US$M

DPO as % of total DPO US$M Introduction of Development Policy Lending

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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)

15 20 25 30 35 40 45 50 55 60 FY00 FY99 FY98 FY97 FY96 FY95 10 FY12a FY11 FY10 FY09 65 FY05 FY04 FY03 FY02 FY01 FY06 FY07 FY08 Policy Based Lending as % Total IDA Lending Policy Based Lending as % Total IBRD Lending

a Through third quarter

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Reforms on public sector governance continue to dominate, and social protection and human development are on the rise

16 6 12 18 48 23 7 12 18 40 Social Protection and Human Development Trade and Economic Management Environment, Rural and Urban Development Financial and Private Sector Development Public Sector Goverance and Rule of Law Current Retrospective Previous Retrospective Prior actions (%)

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DPOs are increasingly selective in their use of prior actions

40 35 30 25 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 20 15 10 5 2011 2010 2009 2008 2007 2006 Average number of prior actions IDA Average number of prior actions IBRD

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Progress on Aid Coordination

46 51 70 74 % operations % commitments IDA Africa Region JBS partnerships has led to greater alignment in the policy dialogue, policy focus and results framework Rigidities Example:

• Economic Governance Grant, in Ghana, to

support the country’s challenges during the global economic crisis in 2009

• 638 coordination structures in 52 IDA
• countries. Only 60 % of them were found to

be performing well Example:

• In Uganda, dialogue on financial sector

reforms was undertaken in the context of a DPL prepared outside the JBS High transaction costs Weakened policy dialogue and ownership

A large proportion of IDA operations are prepared in the context of Joint Budget Support (JBS) partnerships… …But in some cases at significant costs

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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

Outline

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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

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World Bank policy lending performs as well as investment lending and quality is holding up

Percent Moderately Satisfactory or Better 90 85 80 75 70 65 60 5 FY10 FY09 FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 FY00 95 Investment Lending Policy Based Lending

IEG evaluation of Bank’s Implementation Completion Results Reports

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

60 FY10 70 80 75 65 FY09 FY06 FY05 FY07 FY08 Percent Moderately Satisfactory or Better 90 95 85 100 ICRR IEG

Bank vs IEG Evaluations

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

Fully achieved or exceeded 9% 60% 13% Not observable Partially achieved (>50% of traget) Not achieved or marginally achieved (<50 of target) 18%

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. Based on a limited sample 78 ICRRs. This corresponds to 87 DPOs.

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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

Outline

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Countries with a stronger fiduciary and governance environment receive a larger share of total Development Policy Lending

A larger share of the commitments to better fiduciary performers (2005-2011)

1.3% 7.8% 26.2% 15.9% 48.7% 2.0-<2.5 2.5-<3 3-<3.5 3.5-<4 4.5-<6 0.8% 12.9% 21.3% 61.5% 3.5%

A larger share of the commitments to better governance performers (2005-2011)

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)

CPIA ratings

CPIA ranges from 1-6. 1 is the lowest and 6 the highest.

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Countries with stronger fiduciary and governance environments receive a larger share of Bank financing in Development Policy Lending

10 20 30 40 50 60 70 2 - <2.5 2.5 - <3 3 - <3.5 3.5 - <4 4 - 6 CPIA for Cluster D

Development policy lending Investment lending

10 20 30 40 50 60 70 1.5 2-<2.5 2.5-<3 3-<3.5 3.5-<4 4-6

Investment lending Investment lending Development policy lending

CPIA 13 20

Policy content of DPOs focuses more on public finance management and governance when they are weaker

2.7 3.1 4.1 4.2 8.2 # of prior actions on governance 3.5<4.0 CPIAD 3.0<3.5 2.5<3.0 2.0-<2.5 4-6 1.3 1.8 2.3 3.1 3.5 CPIA13 # of prior actions on PFM 4.5-6.0 4.0 3.5 2.5-3.0 2.0

Public Financial Management Quality Governance Quality

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• The Bank assesses possible distributional and social impact of

policies supported by operation

• In case of significant poverty and/or social effects, Bank summarizes

in the program document poverty and social impact analysis (PSIA) and overview of country systems to reduce negative and enhance positive effects

• In case of gaps in analysis or country systems, Bank describes in the

program document how gaps and shortcoming would be addressed during or before program implementation

Operational policy requirements regarding poverty and social impacts:

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Although virtually all prior actions will have positive poverty and social effects in the medium term; in the short term some prior actions may have adverse poverty/social effects

17% Positive 77% Neutral 6% Potentially negative (PSIA required) 17% Positive 75% Neutral 8% Potentially negative (PSIA required)

Last DPL Retrospective Current DPL Retrospective

Of these 6% of prior actions, a PSIA was not undertaken in 36% of cases Of these 8% of prior actions, a PSIA was not undertaken in 29% of cases

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Positive trend over time with dip in FY09 due to a larger number of prior actions that required PSIA

10 20 30 40 50 60 70 80 90 100 200 300 400 500 600 700 800 900 1000 FY07 FY08 FY09 FY10 FY11 FY12 (up to Q3) Prior actions with likely negative effects Prior Actions PSIA completed when needed

Prior actions Percentage

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• The Bank determines whether the specific policies supported by a

DPO are likely to have a significant impact on the environment, forests, or natural resources

• In case of significant impact, the program document assesses the

country’s system for reducing adverse effects and enhancing positive effects drawing on environmental analysis

Operational policy requirements regarding environment, forests and natural resource aspects

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Very few prior actions indeed have potential adverse environmental effects… … but in those few cases analysis needs significant strengthening

1.0% 6.0% 90.0% 3.0% 90.0% 9.7%

Last DPL Retrospective Current DPL Retrospective

Positive/Possibly positive Neutral Possibly negative Unclear 89.0% 0.3% 10.7% Of the 0.3% that had possible negative effects only 67 percent of the Program Documents discussed these effects

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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

Outline

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Revisions to the Development Policy Framework since the introduction

• f the OP 8.60 to enhance the effectiveness of the instrument
• Streamlined

verification protocol for Deferred Drawdown Option (DDOs)

• Introduction of

Catastrophe- DDO feature (Cat-DDO)

• Revisions to

Special Development Policy Lending

• Development

Policy Lending to Political Subdivisions

• Clarification on

Budget Transparency Policy in DPOs 2008 2009 2011 2010

• Access to

Information Policy 2012

• Mainstreaming

Policy Based Guarantees

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In 2011 the Bank clarified its focus on budget transparency in DPOs

• Comoros, 2010: Fragile country. Part of a

broader reengagement effort on the part of the international community

• Djibouti, 2008: Food crisis response

Development Policy Grant

• Iraq, 2010: Post-conflict country.
• Togo, 2008, 2009: Fragile country. Arrears

clearance operation. According to a recent rapid survey there have been four examples of DPOs to countries that do not publish the budget, since the introduction of Development Policy Lending

63 75 73 85 74 Percentage Audit report End of year budget execution report In-year budget execution reports Enacted budget Executive’ s budget proposal

Note: Percentage of the 97 countries participating in the survey Source: International Budget Transparency, 2010

However, some have argued that publishing the budget is just one part of a core of essential elements needed for transparency and accountability Barring certain exigent circumstances, appraisal of a DPO should not be authorized for a country (or political subdivision) that does not publish either its executive proposal

• r the enacted budget

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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

Outline

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Progress made and areas for strengthening (1/3 slides)

• 2. DPOs have been often successful in contributing to the intended results

1.We have consolidated our earlier progress on greater selectivity in use of prior actions

• 3. The number of results indicators per DPO have consistently declined over time, reflecting

greater focus

• 4. Despite improvement, more attention should be paid to poverty/ social and social impact

analysis

Need to maintain the selectivity, focusing of critical prior actions Need to maintain a focused approach and enhance the assessments of strengths and weaknesses of countries’ monitoring and evaluation systems Need to continue improving results frameworks, including enhancing the linkages between policies and results Need to assess more consistently the poverty and social impacts of prior actions supported by DPOs Need to improve the links between poverty and social impact analysis and the design of DPOs, by conducting upstream analysis

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Progress made and areas for strengthening (2/3 slides)

• 7. Progress was achieved in providing a forward looking discussion of macroeconomic policies,

but there are still some weaknesses in the macroeconomic assessments

• 8. While all DPOs discuss the analytical underpinnings some do not articulate the criticality
• f the selected reforms in light the analytical underpinnings

Need to better articulate the link between the findings of the analytical underpinnings and the selection of the reforms supported Need to strengthen the macroeconomic discussion, especially monetary and external sustainability issues, which have received less attention Need to include a more detailed account of expenditure composition and revenue structure

• 5. We are taking full account of public financial management and governance risks. However,

this has gone together with limited support to Fragile Countries and Situations…

Need to more thoroughly and consistently assess risks in DPOs

• 6. While most DPOs discuss a number of risks there is some unevenness in the deepness of

the risks discussions across DPOs

Need to consider how to strike the right balance between risks and opportunities

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Progress made and areas for strengthening (3/3 slides)

• 10. We are pushing the envelope on transparency and participation… but further to go

Need to consider further strides on budget transparency. For example, publication of budgetary

• execution. However, rapid progress may be difficult in severely constrained capacity environments
• 9. Aid coordination has led to greater alignment in the policy dialogue, but in some cases it led

significant costs and inefficiencies

• 11. There were several revisions to the operational policy framework: DDOs, Cat-DDOs,

and DPOs to Political Subdivisions

Need to ask some fundamental questions about Joint Budget Support Partnerships to enhance the effectiveness of DPOs

• 12. Great progress with regard to access to information due to the new Access to

Information Policy

Need to consider whether there is room to include anthropogenic disasters with catastrophic consequences in the Cat-DDO Need to continue supporting innovation, including regional DPOs Need to continue supporting access to information, including through more simultaneous disclosure

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We would like to have your views on the following:

1 2 3 4

How can the Bank engage in productive partnerships that support country-led development results? What can be done to further enhance the risk management framework for DPOs? To what extent have DPOs contributed to country results and what can be done to further enhance their results focus?

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To what extent have recent Bank reforms to its operational policy framework for DPOs increase their effectiveness? How can DPOs contribute to further progress in transparency, accountability and participation?

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Any other suggestions to make use of DPOs more effectively?

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Thank you

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