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Borrow wisely, spend wisely: supporting public financial and debt management in low-income countries

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Image of hand saving a coin into a word-shaped bank
Sound management of public finance is critical to fiscal discipline and the efficient and effective use of scarce public resources. Weaknesses in public financial management and debt management (PFDM) can have wide-ranging implications for development, including by driving a wedge between public policy and its implementation. A new report from IEG assesses the impact of efforts to promote sound Show MoreSound management of public finance is critical to fiscal discipline and the efficient and effective use of scarce public resources. Weaknesses in public financial management and debt management (PFDM) can have wide-ranging implications for development, including by driving a wedge between public policy and its implementation. A new report from IEG assesses the impact of efforts to promote sound PFDM, which is now more important than ever in the wake of the COVID-19 pandemic, and as an increasing number of low-income countries (LICs) find themselves again at high risk of, or in, debt distress. As governments rapidly shift policy and spending in response to the pandemic, robust, responsive, and flexible PFDM systems are crucial for: using scarce resources efficiently to ensure value for money and prevent the unauthorized use of funds, accelerating budget execution and the release of critical funds to deliver essential and emergency public services, and managing the costs and risks associated with the inevitable short-term increase in indebtedness. Debt Crisis, Deja vu Even before the onset of the pandemic, a resurgence in debt stress among low-income countries (LICs) was evident, including among past recipients of large-scale debt relief. Since 2013, the number of countries eligible for financing from IDA, the World Bank Group’s fund for the world’s poorest countries,  at high risk of, or in, debt distress more than doubled (from 13 to 34) and the average debt-to-GDP ratio increased from 40% to 60% . Between 2013 and 2018, median interest payments among LICs rose 128%. And this all occurred as the Bank and others were scaling up support to debt management. Public financial management  and debt management are often looked at separately, even though the importance of addressing them together was clearly recognized in the 19th IDA replenishment: “the first challenge is to assist IDA countries to ensure that the benefits [of borrowed resources] exceed the costs of servicing their debt. IDA and other partners can help by supporting initiatives that enhance capacity in areas such as public finance management, public investment management … and debt management” (p 19). Complementarity between the pillars of PFDM is at the heart of IEG’s new evaluation, World Bank Support for Public Financial and Debt Management in IDA-eligible Countries. It focuses on the decade following the 2008 global financial crisis, during which many LICs increased non-concessional and shorter-term borrowing, much of it sourced bilaterally and often on relatively opaque terms. Many LICs were also impacted by low commodity prices and the realization of large contingent liabilities, including those associated with state-owned enterprises. The period was also characterized by increasing attention to “growth enhancing” public spending and investment to close the infrastructure gap and meet the Millennium Development Goals and, subsequently, the Sustainable Development Goals.   World Bank PFDM Support, Impactful but Uncoordinated The evaluation found that the Bank’s support to IDA-eligible countries to strengthen PFDM led to positive, albeit limited, results. It contributed to the rollout of financial management information systems to help track and manage public expenditures but was less successful in encouraging the extension of systems to include high-value transactions. There was also an increase in the number of IDA-eligible countries that met minimum standards for several dimensions of debt management capacity, including being able to prepare Medium-Term Debt Strategies and debt sustainability analyses. But, for many of the most vulnerable countries, debt management support was not systematically accompanied by, or coordinated with, efforts to improve public financial management, despite widely recognized synergies between borrowing, fiscal transparency, and the quality of public spending and investment. This is problematic, as many LICs were borrowing extensively from private markets and bilateral donors to finance investment projects, and thus could have benefited from improvements in institutional structures and systems to improve the quality and efficiency of public spending. As a result, opportunities to increase the growth-enhancing impact of debt-financed public investment have likely been missed, with potentially negative consequences for debt sustainability. Public investment management (PIM) diagnostics have been undertaken by the Bank for less than half of IDA-eligible countries, with demand concentrated among higher-income LICs. Of the 32 IDA-eligible countries at high risk of, or in, debt distress in FY18, only 10 received PIM support over the previous decade.  With the growing importance of improving the impact of scarce public resources in the face of rising debt levels, a more deliberate and coordinated approach to PFDM capacity building is warranted if the Bank is to achieve the IDA 19 objective of helping client countries ensure that debt burdens do not overwhelm their ability to reduce poverty or provide essential government functions. The decentralized and uncoordinated way PFDM diagnostics have been undertaken and used in the Bank suggests that there is scope to realize further synergies among PFDM pillars. A Way Forward The evaluation recommends that Bank staff maintain a clear and up-to-date picture of PFDM strengths and weaknesses for each IDA-eligible country, drawing on existing assessments of the main dimensions of PFDM. This has already been addressed within pillars of PFDM, but synergies across pillars remain underexploited. It also recommends that the Bank more systematically support PFDM in IDA-eligible countries with better sequenced and complementary lending and nonlending support. Implementation of the new Sustainable Development Finance Policy and the associated identification of performance and policy actions provide an early opportunity to take a more holistic view of PFDM at the country level. In the wake of the economic shock associated with the pandemic, efforts to maintain a broader focus on both borrowing and spending will only increase in importance.   Read the Evaluation: World Bank Support for Public Financial and Debt Management in IDA-eligible Countries Image credit: Shutterstock/AntartStock

World Bank Group Gender Strategy Mid-Term Review

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Colorful image of many silhouettes of women of all races and ages. Image adapted from shutterstock/ Angelina Bambina
The gender strategy Mid-Term Review assesses how well the implementation of the gender strategy positions the World Bank Group to contribute to closing key gender gaps at the midpoint of the strategy’s eight-year cycle (FY16–23). The gender strategy Mid-Term Review assesses how well the implementation of the gender strategy positions the World Bank Group to contribute to closing key gender gaps at the midpoint of the strategy’s eight-year cycle (FY16–23).

How to Implement a Strategy to Close Gender Gaps?

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Photo: © Stephan Gladieu / World Bank. Prof. Amivi Kafui Tete-Benissan (left) teaches cell biology and biochemistry at the University of Lomé. She’s also a vocal activist who encourages girls to pursue science as a career path. “Female students represent only 10 percent of our student body in science and engineering,” she says sadly.
Many large development organizations face challenges in implementing a gender strategy. A mid-term review of the World Bank Group’s Gender Strategy uses a theory of action to illustrate the institutional factors that enable implementation. Recent evaluations in the African Development Bank, Inter-American Development Bank and the World Food Program point to difficulties in helping staff to think Show MoreMany large development organizations face challenges in implementing a gender strategy. A mid-term review of the World Bank Group’s Gender Strategy uses a theory of action to illustrate the institutional factors that enable implementation. Recent evaluations in the African Development Bank, Inter-American Development Bank and the World Food Program point to difficulties in helping staff to think and act with a gender lens in their work. Key issues often revolve around who supports staff, how to resource support and what knowledge is required to assist implementation. The current gender strategy of the World Bank Group has defined the institution’s approach since 2016. At the heart of the Gender Strategy is a move towards the prioritization of gender gaps drawing upon focused analysis, action and measurement. The gender gap approach seeks to address deficits identified in the gender mainstreaming approach (used previously), such as: weaknesses in embedding a gender equality orientation across organizations, fragmented results and low replication of success (UNU-WIDER, 2014: 13). A recently completed IEG mid-term review of the World Bank Group’s Gender Strategy identifies opportunities to maximize implementation efforts. The review found that commitment to the Gender Strategy by Bank Group management and staff has translated into progress against plans and good practices in implementing the strategy. This commitment is reflected in changes in how organizational goals are framed and in the increased number of projects targeting gender gaps. When support was well defined, resourced, and coordinated, it helped projects address specific gender gaps for agreed priorities. While commitment at the level of strategy is a prerequisite, actions at the level of the country portfolio and in coordinating support, are also needed. The review found that challenges in implementation arose when there was a lack of support to help identify a gender gap, limited ability to translate technical knowledge into practice, or limited monitoring of gender in projects implementation. To visualize and discuss needed enhancements we put together what evaluators call a theory of action – a diagram that describes the important elements for implementation, their design and connections. The theory of action identified four interconnected institutional elements and factors that enable the implementation of the strategy: commitment to strategic objectives; prioritizing gaps at a country-level; coordinated support to implementation; and monitoring and evaluation of commitments and projects from design to closure. The diagram below elaborates on these four areas.   Commitment to Strategic Objectives Maintaining a focus on the strategic objectives requires strong commitment from the management and governance structures of the organization. Buy-in is necessary for successful implementation of the strategy through, for example, creating staff incentives to reinforce the strategy’s aims. Without this commitment gender will not remain in focus and other areas of work will become prioritized. Implementation actions need to consistently match this commitment and be commensurate with the level of ambition in the strategy. Prioritization of a Country-driven Approach The gender strategy advances a country-driven approach as a critical pathway to support the closure of gender gaps. In the World Bank Group, a country driven approach is particularly important as country programs form the main unit to define, implement and review progress with national governments. The Gender Strategy highlights that sustained progress to closing gender gaps will accrue through coherent alignment from country objectives to projects, policy dialogue, diagnostics, and monitoring. Fully addressing gender gaps takes sustained effort, spans multiple projects, and can be addressed more strategically using Bank Group instruments collectively in a country. For example, to enable more women to enter the workplace can require a change in childcare practices, which needs a coherent approach comprising of policy change, training and private sector investments to support countrywide implementation. Coordinating Support to Implementation To build on commitment and prioritization a country program needs a range of support. The review noted that implementation of the strategy could be enhanced when four sources of support worked together: knowledge generation, curation and use; gender groups that maintain standards, advise staff who support implementation of the strategy on the prioritization of gaps and help synergize efforts between different organizational siloes; gender specialists, and focal points with contextual and sector know-how who can connect different resources; and gender innovation labs to support new influential efforts to address gaps. The review identified how these four sources enabled or constrained implementation of the strategy. For example, all four play a role in supporting the use of analysis to identify and address gender gaps. Gender groups and Gender Innovation Labs can invest in and champion evidence production, such as, impact evaluations, business cases, and specific studies that can assist project implementation. Yet, even with these sources of support in place, unless operational staff receive assistance from both gender specialists and focal points, evidence on gender gaps can be difficult to access or be too hard to translate into different contexts. Monitoring and Evaluation Cutting across all these areas is the need to monitor and evaluate. Without processes to assess commitments, project design, implementation and outcomes, actions may fail to adapt and attention to gender may weaken. The World Bank has put in place processes to measure progress on closing gender gaps through reporting on both corporate commitments and project design, but less attention to implementation and outcomes. With good monitoring and evaluation of gender gaps, opportunities for adaptation can be identified and the assessment of outcomes can help direct implementation towards success. For example, through monitoring supported by the Gender Action Learning System, a project in Kenya identified during implementation the need for enhanced targeting of women entrepreneurs. Further, as a result of a range of evaluation activities, a commercially viable and effective technical assistance(?) and training program for women-owned and women-led small and medium enterprises was scaled-up. Together monitoring and evaluation help to maintain focus on priority gaps and help understand if the gaps are closing meaningfully. Final Thoughts Ensuring synergies in support helps to overcome implementation bottlenecks. Having well organized support enables actions to be contextualized and focus on prioritized gender gaps. Enhancing internal organizational support models through improved coordination, standards and evidence translation are within the control of development agencies and as review shows, requires continued effort. Read the World Bank Group Gender Strategy Mid-Term Review Photo: © Stephan Gladieu / World Bank. Prof. Amivi Kafui Tete-Benissan (left) teaches cell biology and biochemistry at the University of Lomé. She’s also a vocal activist who encourages girls to pursue science as a career path. “Female students represent only 10 percent of our student body in science and engineering,” she says sadly.

Meet the Evaluator: Elena Bardasi

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Elena Bardasi
Building evaluative evidence for the Bank’s gender strategyBuilding evaluative evidence for the Bank’s gender strategy

Doing Business Indicators and Country Reforms (Approach Paper)

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Doing Business is recognized as highly influential in business regulatory reform worldwide, and it is the most used set of indicators on business regulation. Its indicators are widely used and analyzed in the academic literature. They are a component of many other influential indexes, including the World Economic Forum’s Global Competitiveness Index, the Heritage Foundation Index of Economic Show MoreDoing Business is recognized as highly influential in business regulatory reform worldwide, and it is the most used set of indicators on business regulation. Its indicators are widely used and analyzed in the academic literature. They are a component of many other influential indexes, including the World Economic Forum’s Global Competitiveness Index, the Heritage Foundation Index of Economic Freedom, and the Fraser Institute Economic Freedom Index. It is cited by many countries in their reform plans and in many World Bank Group project documents and country strategies. Although popular, the DB indicators have also been the subject of controversy regarding their methodology, accuracy, and potential biases and the way they are used in shaping and assessing country policy reforms. The Bank Group and the Independent Evaluation Group (IEG) have been called on several times to review DB, largely to respond to such criticisms. In this report, IEG has committed to examine the relevance and effectiveness of the use of DB indicators in guiding client country business environment reforms—both those supported by the Bank Group and those undertaken without its support. This includes an initial stocktaking of literature and existing evaluative evidence to inform an Issues Paper, which will be followed by a Focused Evaluation to assess the DB’s strategic relevance to countries’ reform priorities and to the Bank Group’s strategic agenda. This request came just before the late-August 2020 suspension of the DB report to probe alleged irregularities in the underlying data.

After the Pandemic: evidence for building back better

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After the Pandemic: evidence for building back better
Charting a path to recovery will require evidence on what is working, why, and for whom.Charting a path to recovery will require evidence on what is working, why, and for whom.

Covid-19 has exposed the fragilities of aging countries

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Elderly women are talking and maintaining a safe distance. Thailand. Photo credit: Shutterstock/CGN089
A forthcoming report focuses on much needed areas of attention.A forthcoming report focuses on much needed areas of attention.

From the Great Wall of Trees to Sustainable Management of Landscapes

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IEG visit to Weinalem Watershed in Raya Azebo, Tigray Regional State, Ethiopia, Oct 2019, Photo credit: Bekele Shiferaw
Lessons from Watershed Management Programs in Africa Lessons from Watershed Management Programs in Africa

Jamaica: Rural Economic Development Initiative (PPAR)

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The national poverty rate in Jamaica declined over the two decades prior to appraisal, but rural poverty remained stubbornly high. The Government of Jamaica recognized that if the country was to achieve its goal of “Developed World” status, as indicated in the Government’s Vision 2030 plan, economic development in rural areas needed to keep pace with that experienced in urban areas. In 2008, the Show MoreThe national poverty rate in Jamaica declined over the two decades prior to appraisal, but rural poverty remained stubbornly high. The Government of Jamaica recognized that if the country was to achieve its goal of “Developed World” status, as indicated in the Government’s Vision 2030 plan, economic development in rural areas needed to keep pace with that experienced in urban areas. In 2008, the Government requested World Bank support for a project that would promote rural economic development and income generation by improving access to markets for small-holder farmers and by encouraging rural tourism development. Unusual among the Bank’s productive alliance projects, the present project sought to combine both agriculture and tourism, reflecting the unique circumstances of Jamaica’s rural landscape and the potential for agriculture to engage more with the tourism sector, a major contributor to foreign currency receipts. The Bank also determined that the rural agriculture and tourism sectors offered the most significant potential for rural growth and development. The resulting Bank project, the Rural Economic Development Initiative (REDI), was designed to stimulate rural economic growth and increase rural incomes. Ratings for the Rural Economic Development Initiative are as follows: Outcome was satisfactory, Overall efficacy was substantial, Bank performance was moderately satisfactory, and Quality of monitoring and evaluation was negligible. This assessment offers the following issues: (i) For complex productive alliance projects involving the selection of multiple rural subprojects and the introduction of new private-sector market concepts to rural communities, substantial investment to ensure project implementation readiness during project preparation can contribute to a faster and more effective project start. (ii) For productive alliance projects introducing modern technologies and new business management practices into rural populations, ensuring adequate skills and capacity in the implementing agencies will enhance the achievement of results. (iii) Technical assistance supporting private sector market approaches can be critical for linking rural agricultural and tourism operations to new and evolving markets.

South Africa CLR Review FY14-18

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South Africa is an upper middle-income country with a GDP per capita (2018) of US$6,354. GDP growth has remained slightly above one percent per year over the past decade, which has resulted in negative GDP growth per capita for every year starting 2015. This low growth has exacerbated already high unemployment (up from 25.1 percent of labor force in 2014 to a projected 28.6 percent in 2019 – and Show MoreSouth Africa is an upper middle-income country with a GDP per capita (2018) of US$6,354. GDP growth has remained slightly above one percent per year over the past decade, which has resulted in negative GDP growth per capita for every year starting 2015. This low growth has exacerbated already high unemployment (up from 25.1 percent of labor force in 2014 to a projected 28.6 percent in 2019 – and considerably higher for youth), poverty, and inequality. The government’s vision throughout the CPS period was outlined in the 2030 National Development Plan (NDP) of 2012 that identified three key priorities: raising employment through faster economic growth, improving the quality of education, skills development and innovation, and building the capacity of the state to play a developmental, transformative role.