The effectiveness and efficiency of a country's public sector is vital to the success of development activities, including those the World Bank supports. Sound financial management, an efficient civil service and administrative policy, efficient and fair collection of taxes, and transparent operations that are relatively free of corruption all contribute to good delivery of public services.

The Bank has devoted an increasing share of its lending and advisory support to the reform of central governments, so it is important to understand what is working, what needs improvement, and what is missing. IEG has examined lending and other kinds of Bank support in 1999-2006 for public sector reform in four areas: public financial management, administrative and civil service, revenue administration, and anticorruption and transparency.

The public sector is the largest spender and employer in virtually every developing country, and it sets the policy environment for the rest of the economy. About one-sixth of World Bank projects in recent years have supported public sector reform, because the quality of the public sector -€” accountability, effectiveness and efficiency in service delivery, transparency and so forth -€” is thought by many to contribute to development. Improving the efficiency of government counterparts is also essential for the effectiveness of the Bank's support for development.

Summary of Findings

Although a majority of countries that borrowed to support public sector reform experienced improved performance in some dimensions, there were shortcomings in important areas and in overall coordination.

• The frequency of improvement was higher among IBRD borrowers than among IDA borrowers.
   
• Performance usually improved for public financial management, tax administration, and transparency, but did not usually with respect to civil service.
   
• Direct measures to reduce corruption— such as anticorruption laws and commissions— rarely succeeded.