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Madagascar Country Program Evaluation (Approach Paper)

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This Country Program Evaluation will assess the development effectiveness of the World Bank Group’s engagement in Madagascar between fiscal year (FY)07 and FY21, and will explore whether the Bank Group’s $3 billion engagement was appropriate for the Malagasy context of weak governance, widespread poverty, and economic stagnation and adapted to changing circumstances, priorities, and lessons from Show MoreThis Country Program Evaluation will assess the development effectiveness of the World Bank Group’s engagement in Madagascar between fiscal year (FY)07 and FY21, and will explore whether the Bank Group’s $3 billion engagement was appropriate for the Malagasy context of weak governance, widespread poverty, and economic stagnation and adapted to changing circumstances, priorities, and lessons from experience. It’s main goal is to distill lessons from experience to inform future engagement. The evaluation is timed to inform the formulation of the new CPF with Madagascar, and also aims to derive significant lessons for the broader development community. To these ends, it will (i) assess the relevance and effectiveness of the Bank Group’s support to Madagascar between FY12 and FY21 and (ii) examine the Bank Group’s contribution to improving governance and fostering rural development during FY07–21.

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

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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

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.

Bhutan CLR Review FY15-19

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This review of the World Bank Group (WBG) Completion and Learning Review (CLR) covers the period of the Country Partnership Strategy (CPS) FY15-19, as updated in the Performance and Learning Review (PLR) dated May 8, 2017. Bhutan is a small, land-locked, lower middle-income country. Between 2015 and 2019 the annual real GDP growth has varied between 6.2 percent and 3.7 percent. The country’s Show MoreThis review of the World Bank Group (WBG) Completion and Learning Review (CLR) covers the period of the Country Partnership Strategy (CPS) FY15-19, as updated in the Performance and Learning Review (PLR) dated May 8, 2017. Bhutan is a small, land-locked, lower middle-income country. Between 2015 and 2019 the annual real GDP growth has varied between 6.2 percent and 3.7 percent. The country’s economic growth was bolstered in recent years by investments in hydropower. Gross National Income (GNI) per capita is now only ten percent below the threshold for upper middle-income countries. Between 2007 and 2017 the poverty headcount ratio (measured at the US$3.20 poverty line in 2011 purchasing power parity terms) dropped from 36 to 12 percent of the population. The CPS noted that Bhutan needed to sustain macroeconomic stability while creating a business environment to promote private sector growth and job creation. The hydro-led growth had created some short-term macroeconomic imbalances, which called for careful management of fiscal and monetary policies. At the same time, it was critical to provide a better investment climate that would be more conducive to private sector development, diversification of the economy and job creation. Also, Bhutan’s large stock of natural capital called for increasing its sustainable contribution to the economy, while protecting the environment and human well-being. Related challenges included rapid urbanization, low agriculture productivity, limited infrastructure, difficult topography, and vulnerability to disaster and climate change. The 2020 Systematic Country Diagnostic (SCD) confirmed these development challenges.

State Your Business!

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An Evaluation of World Bank Group Support to the Reform of State-Owned Enterprises, FY08-18
This is IEG’s first systematic assessment of World Bank Group’s support for the reform of State-Owned Enterprises (SOEs), looking at what works and the factors of success. It parallels Bank Group efforts to provide more integrated support to SOE reform in client countries and to empower staff with new tools. This is IEG’s first systematic assessment of World Bank Group’s support for the reform of State-Owned Enterprises (SOEs), looking at what works and the factors of success. It parallels Bank Group efforts to provide more integrated support to SOE reform in client countries and to empower staff with new tools.

Ukraine Country Program Evaluation (Approach Paper)

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Ukraine has significant economic potential, but over the past decade economic growth has been slow and highly volatile. A lower-middle-income country with a population of 44 million and a per-capita gross national income of $2,660 in 2018, Ukraine is endowed with a well-educated and entrepreneurial population, vast areas of fertile land, other natural resources, and a geographic location at the Show MoreUkraine has significant economic potential, but over the past decade economic growth has been slow and highly volatile. A lower-middle-income country with a population of 44 million and a per-capita gross national income of $2,660 in 2018, Ukraine is endowed with a well-educated and entrepreneurial population, vast areas of fertile land, other natural resources, and a geographic location at the crossroads of Europe and Asia.2 Ukraine aspires to join the European Union (EU), but after decades of stagnation, income per capita remains far below that of its neighbors and comparators. The primary goal of this Country Program Evaluation (CPE) is to assess the development effectiveness of World Bank Group support to Ukraine between fiscal years (FY)12 and FY20. A key focus of the CPE will be to examine how well the Bank Group adapted its support to Ukraine’s changing circumstances over the evaluation period and helped build resilience in the face of major crises. The CPE is also expected to provide strategic insights for the preparation of the next Ukraine Country Partnership Framework (CPF), scheduled for FY22.

Comoros CLR Review FY14-19

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This review of the Comoros Completion and Learning Review (CLR) of the World Bank Group (WBG) Country Partnership Strategy (CPS) covers the CPS period, FY14-FY19, and the Performance and Learning Review (PLR) of December 2018. This is the first CPS for Comoros following a series of Interim Strategy Notes (ISNs), the latest of which was prepared in 2010. The WBG programs under the ISNs were Show MoreThis review of the Comoros Completion and Learning Review (CLR) of the World Bank Group (WBG) Country Partnership Strategy (CPS) covers the CPS period, FY14-FY19, and the Performance and Learning Review (PLR) of December 2018. This is the first CPS for Comoros following a series of Interim Strategy Notes (ISNs), the latest of which was prepared in 2010. The WBG programs under the ISNs were limited in scope reflecting the high level of political instability, serious governance issues and related low IDA allocations. The CLR highlighted several lessons about a need to ensure a streamlined project design and flexibility in implementation; value of increased WBG presence on the ground; importance of donor coordination; and a need for greater realism and selectivity in the program. IEG particularly agrees that there is need for greater realism and selectivity in the program, throughout the program, beyond the governance area on which the lesson in the CLR focuses. Being excessively ambitious with respect to institutional targets in a fragile environment increases the risk of program underperformance. IEG adds the following lesson: The decision on a large program expansion at the PLR stage requires a detailed discussion and careful justification in the PLR document because it poses a longer-term implementation risk.

Pakistan: First and Second Programmatic Fiscally Sustainable and Inclusive Growth Development Policy Credit (PPAR)

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This Project Performance Assessment Report evaluates a programmatic series of two development policy operations for Pakistan. The series was the World Bank’s first policy-based operation in Pakistan in more than a decade. The project development objective was to (a) foster private and financial sector development to bolster economic growth, and (b) mobilize revenue while expanding fiscal space to Show MoreThis Project Performance Assessment Report evaluates a programmatic series of two development policy operations for Pakistan. The series was the World Bank’s first policy-based operation in Pakistan in more than a decade. The project development objective was to (a) foster private and financial sector development to bolster economic growth, and (b) mobilize revenue while expanding fiscal space to priority social needs”. The objective was matched by two policy areas. The first policy area covered reforming trade tariffs, privatizing state-owned enterprises, improving business registration, developing the microinsurance sector, and improving the availability of credit information. The second policy area covered improving revenue performance and enhancing the social safety net program. Ratings for the First and Second Programmatic Fiscally Sustainable and Inclusive Growth Development Policy Credits are as follows: Outcome was moderately satisfactory, Risk to development outcome was high, Bank performance was moderately satisfactory, Borrower performance was moderately unsatisfactory, and Quality of M&E was modest. This PPAR offers the following lessons: (i) In Pakistan, the World Bank reengagement with development policy lending after a long break benefited from a longer-term strategy (or program) that provides for several interrelated DPCs, a large and relevant technical assistance program, and close cooperation with the IMF. (ii) Dividing important sectoral issues among separate operations could be an effective strategy when the government is facing multiple reform challenges. (iii) Political economy analysis and communication support related to politically sensitive reforms were insufficient.

What do past crises tell us about coping with the economic shocks of COVID-19 (coronavirus)?

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What do past crises tell us about coping with the economic shocks of COVID-19 (coronavirus)?
The ways in which international organizations help countries respond may define not only the future trajectory of the pandemic, but also the duration of the current economic crisis and the direction of the world’s eventual recovery. IEG has studied the responses to past crises and identifies five lessons to help both countries and the World Bank Group address Show MoreThe ways in which international organizations help countries respond may define not only the future trajectory of the pandemic, but also the duration of the current economic crisis and the direction of the world’s eventual recovery. IEG has studied the responses to past crises and identifies five lessons to help both countries and the World Bank Group address the social and economic impacts of the coronavirus.   Governments the world over face a familiar, if more urgent, issue similar to past crises: how to “flatten the curve” of economic and social decline and “steepen” the curve of subsequent economic recovery when government budgets, the private sector, and households are all under stress at the same time. Developing countries face these challenges with far fewer resources and more vulnerable populations.   Five lessons  For the World Bank Group to be effective in supporting client countries cope with the social and economic crises caused by the pandemic, IEG’s crisis-related evaluations suggest that it needs to pay attention to five lessons from the past:  1. Speed and flexibility. The speed of response is of essence in these situations, as is Bank Group flexibility to adjust its programs, resources, and portfolios to support clients’ most urgent needs.  With the COVID-19 crisis unfolding much faster than the global financial crisis of 2008, this cannot be overemphasized. In fact, it appears that the Bank Group has learned this lesson: over 90 countries benefited from Bank Group support by May 1, 2020, with additional country support programs underway, barely two months after the outbreak intensified around the world. Development Policy Financing(DPF), which provides fast-disbursing budget support to client countries,  is typically the World Bank’s workhorse instrument in responding to crises because it is flexible in terms of policy focus and adaptability to different situations (e.g., standalone, programmatic, and DPF with deferred-drawdown option), and large amounts of cash can be transferred to client governments very quickly. So, it is not surprising that the Bank Group has quickly scaled up DPF support to client countries, along with other support modalities. 2. Criticality. In a crisis, there is no time to address the full range of complex reform issues that may be needed in normal times. Instead it is important to focus on the most critical issues. In this crisis, that is likely to include Bank Group interventions focused on urgent priorities with short-term impact: support for public health; budget support for social safety nets; and budgetary and financial sector support for economic recovery. This is also likely to include intensive policy dialogue and assistance to help governments shift their budgetary priorities in response to crisis needs. 3. Foresight It is not just about money. While it is critical to provide financial support and relief in the short term, it is also important to think beyond the immediate needs to recovery for the long term. That often requires focusing on select, critical policy and institutional reforms that can begin to be implemented during the crisis and extended in the recovery period to help “build back better” systems and strengthen crisis preparedness for the future. And because we now know that the world will have changed after the crisis in important ways, including how people interact, travel, work, and engage in a myriad of collective endeavors, it is important to think outside the box now on how future preparedness might look like and how it might need to differ from the past for greater effectiveness. Some countries may need to rethink their development strategies in view of these tectonic changes in the internal and external economic and social environment. 4. Focus on people – especially those in poverty. During economic crises, it is often necessary to focus on businesses and banks who are at the forefront of the economic impact, but the fact is that all crises are human crises. The COVID-19 crisis began as a public health crisis. So, focusing interventions to maximize their positive impact on the poor and vulnerable is imperative. Indeed, early Bank Group response providing urgent financing to client countries in the first two months of the crisis was concentrated on many of the poorest countries.  Given the dire warnings of hunger,  food insecurity and a rise in extreme poverty in the most vulnerable client countries, the Bank Group should be at the forefront of the fight to preserve past gains on poverty reduction and human development while working to rebuild social protection and economic systems after the crisis for more rapid recovery. 5. Coordination. The Bank Group is most effective in crises when it also coordinates effectively with its development partners. This helps the World Bank leverage its knowledge, global footprint, policy dialogue, and financial firepower with development partners on the urgent and immediate goal of helping countries cushion the impact and better prepare for recovery.  It also requires sound monitoring and evaluation based on evidence to ensure transparency and accountability. This is a clear and consistent lesson from past crises. It relates not only to collaboration with the International Monetary Fund and other multilateral agencies, but also with major donor countries, the Group of G-7 and G-20 countries (G-20), and regional development banks. On May 1, 2020, a new debt relief initiative for the poorest countries was announced.  If the World Bank Group heeds these lessons and acts in a concerted fashion, with speed, criticality, foresight, focus on people and poverty, and coordination with partners, it will be in a strong position to help its client countries deal with and ultimately overcome the COVID-19 crisis.  For more on IEG’s resources on the COVID-19 crisis and past crises, see our Lessons Library.  View the related infographic

World Bank Group Support to International Development Association Countries for Integration into Global Value Chains (Approach Paper)

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The rise of global value chains (GVCs) in the past two decades has dramatically altered the world economy. Lower transport and communication costs and falling barriers to trade have allowed firms to organize production processes into discrete tasks that can be performed in different countries. This has given rise to a finer international division of labor and greater gains from specialization, Show MoreThe rise of global value chains (GVCs) in the past two decades has dramatically altered the world economy. Lower transport and communication costs and falling barriers to trade have allowed firms to organize production processes into discrete tasks that can be performed in different countries. This has given rise to a finer international division of labor and greater gains from specialization, which opens opportunities for developing countries to participate in global production networks without having to master the entire production process. About 80 percent of global trade occurs through GVCs (UNCTAD 2013). Integration into GVCs helped many fast-growing economies increase exports, create jobs, acquire technologies, develop skills, and improve productivity. These countries have experienced the steepest declines in poverty (WTO 2017). The purpose of this evaluation is to shed light on what worked and why in Bank Group support to IDA countries’ efforts to enhance integration into GVCs. To this end, the evaluation will (i) take stock of Bank Group engagement with IDA countries on GVCs, (ii) assess the contribution of Bank Group support to enhancing GVC participation and benefits, and (iii) identify the main factors that have influenced the Bank Group’s ability to contribute to GVC-related outcomes.