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Topic:Development Policy Financing (DPF)
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🎧 Learning from Development Policy Financing

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Learning from Development Policy Financing
Development Policy Financing (DPF) is a major instrument of multilateral development banks and has played a prominent role in the World Bank’s pandemic response. Also known as policy-based lending, DPF is a fast-dispersing instrument that provides non-earmarked funds to a country's national budget. How does DPF work and how successful has it been in achieving its various objectives? The World Show More Development Policy Financing (DPF) is a major instrument of multilateral development banks and has played a prominent role in the World Bank’s pandemic response. Also known as policy-based lending, DPF is a fast-dispersing instrument that provides non-earmarked funds to a country's national budget. How does DPF work and how successful has it been in achieving its various objectives? The World Bank’s Director of Policy Operations, Stéphane Guimbert, and IEG host Jeff Chelsky take stock of the trends and lessons of using policy-based lending to support developing economies.   Listen on Spotify, Apple Podcasts, or Stitcher. Related resources World Bank Report – 2021 Development Policy Financing Retrospective: Facing Crisis, Fostering Recovery (2022) IEG Evaluation – Addressing Country-Level Fiscal and Financial Sector Vulnerabilities: An Evaluation of the World Bank Group’s Contributions (2021) IEG Evaluation – World Bank Support for Public Financial and Debt Management in IDA-Eligible Countries (2021) IEG Evaluation – The International Development Association's Sustainable Development Finance Police: An Early-Stage Evaluation (2021) Conversation highlights [00:04-07:55] How does Development Policy Financing (DPF) and its prior actions work? [07:56-14:44] What are key lessons emanating from the Bank’s fifth DPF Retrospective? [14:45-20:07] The role of Development Policy Operations (DPOs) in crisis response. [20:08-22:25] Measuring success – what makes a DPO good? [22:26-25:08] The use of DPOs in countries affected by fragility, conflict or violence (FCV). [25:09-27:30] Determining the size of a Development Policy Operation.

A closer look at World Bank Development Policy Financing in fragile states

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A monument of a broken cylinder being held up by a statue with five arms. The “Saving Iraqi Culture” monument in Baghdad designed by sculptor Mohammed Ghani Hikmat. Iraq is one of top five DPF recipients in FCV settings. Credit: Rasool Ali/Shutterstock
Revaluating what “good” looks like in volatile and uncertain situations to promote more informed risk-taking. Revaluating what “good” looks like in volatile and uncertain situations to promote more informed risk-taking.

Colombia: Programmatic Productive and Sustainable Cities Development Policy Loans (PPAR)

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This is the Project Performance Assessment Report (PPAR) for the programmatic Productive and Sustainable Cities Development Policy Loans (DPLs; P130972) intended to support the strengthening of the government of Colombia’s policy framework on productive, sustainable, and inclusive cities. The DPL’s objective was and remains highly relevant to the national policy and sector context, and most of Show MoreThis is the Project Performance Assessment Report (PPAR) for the programmatic Productive and Sustainable Cities Development Policy Loans (DPLs; P130972) intended to support the strengthening of the government of Colombia’s policy framework on productive, sustainable, and inclusive cities. The DPL’s objective was and remains highly relevant to the national policy and sector context, and most of the project’s prior actions were substantially designed to fulfill the aims of the DPL reform areas. However, the alignments of some prior actions show weaknesses, especially in the area of achieving more sustainable cities, and with the definition of outcomes and their measurement. Ratings for this project are as follows: outcome was satisfactory, risk to development outcome was modest, bank performance was satisfactory, and borrower performance was satisfactory. Several lessons emerged from this assessment of the Colombian DPL series: (i) Tacit assumptions that additional fiscal outlays will be forthcoming to support prior actions in development policy operations (DPOs) can create risks to the sustainability of policy reforms. (ii) When designing prior actions that require local-level implementation, it is important to consider municipal capacity and the time required to enact local-level reforms. (iii) In designing multisectoral DPOs with many prior actions across sectors, which include local implementation requirements, municipal capacity building may be required. (iv) In the context of multisector DPOs, it is critical that prior actions be directly linked to results indicators so a clear line of sight and envisioned impact is identified ex ante, thus supporting a strong design at entry.

Guatemala: Enhanced Fiscal and Financial Management for Greater Opportunities DPL Series (PPAR)

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This Project Performance Assessment Report (PPAR) evaluates a series of two development policy loans (DPLs) to Guatemala: Fiscal Space for Greater Opportunities ($200 million, P131763), and Enhanced Fiscal and Financial Management for Greater Opportunities ($340 million, P133738). The assessment aims to verify whether the operation achieved its intended outcomes, to understand what worked well Show MoreThis Project Performance Assessment Report (PPAR) evaluates a series of two development policy loans (DPLs) to Guatemala: Fiscal Space for Greater Opportunities ($200 million, P131763), and Enhanced Fiscal and Financial Management for Greater Opportunities ($340 million, P133738). The assessment aims to verify whether the operation achieved its intended outcomes, to understand what worked well and what did not, and to draw lessons for the future. The objectives of the series were to (i) strengthen tax administration and tax policy, (ii) strengthen budget management and increase the results orientation of public spending, and (iii) improve the management and coordination of social policies. Ratings are as follows: Outcome was moderately satisfactory, Risk to development outcome was high, Bank performance was moderately unsatisfactory, and Borrower performance was moderately unsatisfactory. This Project Performance Assessment Report offers the following lessons: (i) Tax administration and tax policy reforms in the face of major governance issues and long-standing opposition from influential interest groups are unlikely to be successful, even if backed by the World Bank’s analytical support, policy dialogue, and financing. Under these conditions, directly and indirectly targeting the governance issues over a longer period is necessary. (ii) Achieving progress on results budgeting requires strengthening of capacity, political commitment, sound monitoring and evaluation indicators, and cross-agency collaboration. (iii) Achieving results in policy lending requires a sound results framework, a credible theory of change, close linking of objectives with policy actions, and outcome-oriented target indicators.

Jamaica Economic Stabilization and Foundations for Growth Development Policy Loan (DPL) (PPAR)

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This Project Performance Assessment Report (PPAR) reviews the Economic Stabilization and Foundations for Growth Development Policy Loan (DPL), approved on December 12, 2013. The objectives of the operation were to improve (i) the investment climate and competitiveness, and (ii) public financial management for sustainable fiscal consolidation. Objectives were highly relevant to country Show MoreThis Project Performance Assessment Report (PPAR) reviews the Economic Stabilization and Foundations for Growth Development Policy Loan (DPL), approved on December 12, 2013. The objectives of the operation were to improve (i) the investment climate and competitiveness, and (ii) public financial management for sustainable fiscal consolidation. Objectives were highly relevant to country conditions and the need to avoid fiscal insolvency and begin implementing a comprehensive program of stabilization and reform. They were closely aligned with the World Bank’s strategy and government priorities. The design of the operation was substantially relevant to challenges, with policy priorities identified based on significant analytical work and nonlending technical assistance. The theory of change was convincing, with clear links among inputs, outputs, and expected results, although some indicators could have been more outcome oriented and clearer in their relation to objectives. One shortcoming of the design was the ambitious time frame for the implementation of some of the reforms related to investment climate and pensions, given the limited institutional capacity and a realistic assessment of the time needed for major legal reforms. Achievement of both objectives is rated substantial. Under the investment climate objective, reforms targeted improvements in contract enforcement, approval of building permits, and registration of micro, small, and medium enterprises to encourage their participation in the formal sector. Under the public financial management and fiscal consolidation objective, the program targeted progress on pension reform, tax reform, civil service reform, cash management, and public investment management. The impact of all reform actions was measured relative to specific indicator targets, which were substantially achieved or exceeded. These achievements were confirmed by additional quantitative indicators, qualitative gauges, and international benchmarking data. Some reforms, such as those in investment climate and pension reform, took longer than originally envisioned, but they proceeded and deepened over time. Cumulative evidence suggests that the reforms supported by the operation have been sustained and, in several areas, deepened during the past six years. This is reflected in the new development policy financing series supported by the World Bank and the International Monetary Fund Stand-By Arrangement that followed the successful conclusion of the three-year arrangement under the International Monetary Fund’s Extended Funding Facility.

Conversations: Creating Markets, what are the drivers of success?

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Conversations: Creating Markets, what are the drivers of success?
An expert panel discussion about the factors underlying the success of IFC's new corporate strategy.An expert panel discussion about the factors underlying the success of IFC's new corporate strategy.

Poland: Public Finance, Resilience and Growth Development Policy Loans (PPAR)

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This Project Performance Assessment Report (PPAR) evaluates four lending operations implemented in Poland from 2012 to 2016. The development objectives of the first series were to support Poland’s fiscal consolidation agenda while strengthening fiscal institutions and improving the efficiency and sustainability of social spending. The objectives of the second series were to enhance macroeconomic Show MoreThis Project Performance Assessment Report (PPAR) evaluates four lending operations implemented in Poland from 2012 to 2016. The development objectives of the first series were to support Poland’s fiscal consolidation agenda while strengthening fiscal institutions and improving the efficiency and sustainability of social spending. The objectives of the second series were to enhance macroeconomic resilience, strengthen labor market flexibility and employment promotion, and improve private sector competitiveness and innovation. Ratings for the First and Second Public Finance Development Policy Loans are as follows: Outcome is satisfactory, Risk to development outcome is low, Bank performance is satisfactory, Borrower performance is moderately satisfactory. Ratings for the First and Second Resilience and Growth Development Policy Loans are as follows: Outcome is moderately satisfactory, Risk to development outcome is moderate, Bank performance is satisfactory, and Borrower performance is satisfactory. Lessons include: (i) Development policy lending can help mitigate global economic and financial shocks and protect vulnerable groups in high-income countries when accompanied with timely, high-quality, and responsive technical assistance that supports the reforms. (ii) Where a high-income country is required to implement constitutional provisions or agreed reforms with a regional body, providing support for the implementation of such reforms is likely to enhance the likelihood of success. (iii) RAS are a promising tool for engaging governments in high-income countries when Bank Group staff demonstrate the capacity to produce timely and high-quality analytical products in response to government requests. (iv) Coordinating with other partners in situations where the World Bank is not the largest stakeholder is important for successful implementation of reforms. (v) Analyzing the political cost of implementing proposed reform measures is an important part of policy lending.

The World Bank Group’s Approach to the Mobilization of Private Capital for Development - An IEG evaluation (Approach Paper)

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Transformations in the global economy and international finance have reinforced the view that private sector and private capital are key to economic development. Private capital is expected to play an increasingly important role given the relative high volume of financial resources at its disposal: an estimated US$15 trillion--excluding international bond markets—compared with ODA annual flows of Show MoreTransformations in the global economy and international finance have reinforced the view that private sector and private capital are key to economic development. Private capital is expected to play an increasingly important role given the relative high volume of financial resources at its disposal: an estimated US$15 trillion--excluding international bond markets—compared with ODA annual flows of just US$150 billion, international public finance flows of US$ 2 trillion and domestic resource mobilization of US$ 12 trillion. The Sustainable Development Goals identify global development priorities and highlight potential uses of private capital. This evaluation has two key objectives: (a) to gain a better understanding of the WBG’s approach to private capital mobilization (for e.g. instruments, engagements with investors and clients), its relevance for client countries and its contribution to development outcomes; (b) to identify the factors and enabling conditions that contribute to successful outcomes in mobilizing private capital for development. The evaluation will synthesize lessons of good practice to help the WBG enhance its future capital mobilization role.

How to maximize impact of development policy financing in a rapidly changing country context: Lessons from Burkina Faso

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How to maximize impact of development policy financing in a rapidly changing country context
Successful reforms require close consideration of—and adaptation to—changing country contexts.Successful reforms require close consideration of—and adaptation to—changing country contexts.

World Bank Group Support for the Reform of State-Owned Enterprises, 2007-2018: An IEG Evaluation (Approach Paper)

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State-Owned Enterprises (SOEs) play a critical role in many developing and emerging economies. Governments use SOEs to pursue economic, social and political objectives. These can include such objectives as promoting growth in promising sectors or lagging regions, delivering services to the urban or rural poor or general population, addressing market failures such as natural monopoly, filling Show MoreState-Owned Enterprises (SOEs) play a critical role in many developing and emerging economies. Governments use SOEs to pursue economic, social and political objectives. These can include such objectives as promoting growth in promising sectors or lagging regions, delivering services to the urban or rural poor or general population, addressing market failures such as natural monopoly, filling perceived market gaps, financing investments whose size or risk make private investment unlikely, or addressing issues of heightened national priority or security. The evaluation will review the experience of the WBG supporting SOE reforms over the ten-year period 2008-2018. It will: (i) assess the ways in which WBG support to SOE reform achieved its stated objectives (including the extent to which those objectives were aligned with the strategies of the Bank Group, country, and relevant sectors); (ii) identify what worked (success factors and examples of good practice); and (iii) draw lessons from factors associated with successful and unsuccessful interventions and country engagements to inform the Bank Group’s future response to needs for SOE support.