Search

Topic:Finance, Competitiveness & Innovation
Displaying 1 - 10 of 244

Benin: Ninth and Tenth Poverty Reduction Support Credit (PPAR)

PDF file
Benin was a low-income country with a gross domestic product per capita of $1,291 at the time of preparation of the Poverty Reduction Support Credit (PRSC) 9 and 10 series in 2014. Its economy was driven by agricultural production (of cotton in particular) and reexport and transit trade with Nigeria. As a result, Benin’s economy was vulnerable to trade policy changes or economic downturns in Show MoreBenin was a low-income country with a gross domestic product per capita of $1,291 at the time of preparation of the Poverty Reduction Support Credit (PRSC) 9 and 10 series in 2014. Its economy was driven by agricultural production (of cotton in particular) and reexport and transit trade with Nigeria. As a result, Benin’s economy was vulnerable to trade policy changes or economic downturns in Nigeria. The development objectives of this series were to: (i) promote good governance and high-quality public financial management, and (ii) strengthen private sector competitiveness. Ratings for the Ninth and Tenth Poverty Reduction Support Credit project are as follows: Outcome was moderately unsatisfactory, Risk to development outcome was substantial, Bank performance was unsatisfactory, and Borrower performance was not applicable. This assessment offers the following lessons: (i) Relevant lessons from previous operations need to be taken on board when designing new DPF operations. (ii) Prior actions need to be substantive, that is, be critical to reforms with value added. (iii) The World Bank should design projects with a clear understanding of the likely “winners and losers;” failure to do this makes it more likely that projects will not be implemented as planned or sustained over time. (iv) Distributional impact analysis from DPF-supported reforms should inform the design of operations.

The World Bank Group’s Experience with the IDA Private Sector Window: An Early-Stage Assessment

PDF file
Employees of Vita Foam working in Freetown, Sierra Leone on June 19, 2015. Photo © Dominic Chavez/World Bank
This report is an early-stage assessment of the World Bank Group’s experience with the International Development Association (IDA) Private Sector Window (PSW).This report is an early-stage assessment of the World Bank Group’s experience with the International Development Association (IDA) Private Sector Window (PSW).

The private sector in low income and fragile countries needs more than credit

Web Resource
Kitabi Tea Processing Facility A worker sorts the green leaf tea before it reaches the main processing floor. The Kitabi Tea Processing Facility in Kitabi, Rwanda has a capacity of 48 000 tons of green leaf per day. The facility employs 200 people during its peak season and about 70 during the rest of the year. Photo: A'Melody Lee / World Bank
Lessons from the early implementation of the IDA Private Sector Window (PSW)Lessons from the early implementation of the IDA Private Sector Window (PSW)

The Drive for Financial Inclusion: Lessons of World Bank Group Experience – Approach Paper

PDF file
Financial inclusion is expected to help address poverty and shared prosperity by improving and smoothing household incomes at the same time as reducing vulnerability to shocks, improving investments in education and health, and encouraging the growth of businesses and related employment. The poor face immense financial challenges. The income of the poor is not only lower but also more volatile. Show MoreFinancial inclusion is expected to help address poverty and shared prosperity by improving and smoothing household incomes at the same time as reducing vulnerability to shocks, improving investments in education and health, and encouraging the growth of businesses and related employment. The poor face immense financial challenges. The income of the poor is not only lower but also more volatile. They often rely on a range of unpredictable jobs or on weather-dependent agriculture. Transforming irregular income flows into a dependable resource to meet daily needs represents a crucial challenge for the poor. Another challenge lies in meeting costs if a major expense arises (such as a home repair, medical service, or funeral) or if a breadwinner falls ill. Savings, credit, insurance, and remittances can each help the poor to smooth volatile incomes and expenses, providing a margin of safety when income drops or expenses rise, or providing the needed funds for children’s education or health care. Additionally, financial inclusion in the form of financial services for microentrepreneurs and very small enterprises has been guided by the intention that it can help them to survive, grow, and generate income for the poor. Nonetheless, evidence that financial inclusion directly takes people out of poverty is mixed. The main objective of this evaluation is to enhance learning from the Bank Group’s experience, including the World Bank, IFC, and MIGA, in supporting client countries in their efforts to advance financial inclusion over the period of FY14–20. It both updates and expands on a 2015 IEG evaluation, which assessed Bank Group activity for FY07–13. It not only updates an evaluation of WBG activity in financial inclusion and in support of national financial inclusion strategies, but also plans for a deep focus on the following: (i) A retrospective look at the drive for universal financial access (the UFA 2020 initiative), including outcomes achieved in its 25 focus countries; (ii) Progress and challenges in women’s access to financial services (gender); (iii) An in-depth examination of digital financial inclusion efforts and the role of digital financial services as vehicles for financial inclusion. This work intends to focus more deeply on outcomes on the ground for poor households and microenterprises. It intends to understand the relevance and effectiveness of these activities, including the outcomes and the mechanisms by which observed outcomes were achieved. The evaluation aims to identify lessons applicable to the World Bank, IFC or MIGA by obtaining evidence-based findings of what works, why, and for whom.

Early-Stage Evaluation of the International Development Association's Sustainable Development Finance Policy (Approach Paper)

PDF file
IEG is undertaking an early stage evaluation of Sustainable Development Finance Policy (SDFP) of the International Development Association (IDA), which came into effect on July 1, 2020. The SDFP, adopted in response to concern with mounting external public debt vulnerabilities in IDA-eligible countries, seeks to create incentives to strengthen country-level debt transparency, enhance fiscal Show MoreIEG is undertaking an early stage evaluation of Sustainable Development Finance Policy (SDFP) of the International Development Association (IDA), which came into effect on July 1, 2020. The SDFP, adopted in response to concern with mounting external public debt vulnerabilities in IDA-eligible countries, seeks to create incentives to strengthen country-level debt transparency, enhance fiscal sustainability, and strengthen debt management. In light of significant past efforts to restore debt sustainability to heavily indebted poor countries (HIPCs), including through large scale bilateral and multilateral debt relief, the World Bank Board’s Committee on Development Effectiveness seeks early feedback from implementation of the SFDP to identify lessons to enhance its effectiveness. IEG will assess the relevance of the SDFP in addressing the sharp rise in debt stress in many IDA-eligible countries as well as the early implementation of the policy.

Brazil: Rio State Fiscal Efficiency for Quality of Public Service Delivery Development Policy Loan (DPL III) (PPAR)

PDF file
This is a Project Performance Assessment Report (PPAR) by the Independent Evaluation Group (IEG) of the World Bank Group for the Fiscal Efficiency for Quality of Public Service Delivery Development Policy Loan (DPL) III (P126465) to the state of Rio de Janeiro for $300 million. The program covered three policy areas: (i) tax administration, (ii) public financial management, and (iii) education Show MoreThis is a Project Performance Assessment Report (PPAR) by the Independent Evaluation Group (IEG) of the World Bank Group for the Fiscal Efficiency for Quality of Public Service Delivery Development Policy Loan (DPL) III (P126465) to the state of Rio de Janeiro for $300 million. The program covered three policy areas: (i) tax administration, (ii) public financial management, and (iii) education and health. It achieved some of its objectives and targets in the short term (in fiscal years 2013–14), but these achievements were not sustained. Ratings for the Rio State Development Policy Loan III are as follows: Outcome was unsatisfactory, and Bank performance was moderately unsatisfactory. The assessment offers the following lessons: (i) Subnational programs supporting institutional reform in areas such as tax administration, public financial management, education, and health require a long-term strategic vision and sufficient time for implementation. (ii) It was difficult to achieve fiscal sustainability in Rio state by reforming only a few technical aspects of tax administration without accounting for important issues, such as pensions, dependence on unstable oil revenues, weak institutions, and chronic corruption. (iii) An assessment of the Rio state’s fiscal situation, its implementation capacity, and medium-term perspectives could have improved the program’s design since the state was in dire financial situation and lacked the bandwidth to properly prepare and execute the 12 loans it was simultaneously negotiating with multiple lenders.

Malawi CLR Review FY13-17

PDF file
This review of the World Bank Group’s (WBG) Completion and Learning Review (CLR) covers the period of the Country Assistance Strategy (CAS), FY13-FY17. Malawi is one of the poorest countries in the world. It is an agrarian landlocked country, with a population of 18.6 million (2019) growing at 3 percent per year. Between 2013 and 2017 real GDP and real per capita GDP grew at 4.0 and 1.2 percent Show MoreThis review of the World Bank Group’s (WBG) Completion and Learning Review (CLR) covers the period of the Country Assistance Strategy (CAS), FY13-FY17. Malawi is one of the poorest countries in the world. It is an agrarian landlocked country, with a population of 18.6 million (2019) growing at 3 percent per year. Between 2013 and 2017 real GDP and real per capita GDP grew at 4.0 and 1.2 percent per year, respectively. The poverty headcount ratio at the national poverty line was 51.5 percent in 2016, slightly above the 50.7 percent in 2010. The Gini index (World Bank estimate) stood at 44.7 in 2016, below its 2010 level of 45.5. The Human Development Index improved from 0.441 in 2010 to 0.47 in 2015 and to 0.477 in 2017. During the review period, Malawi faced several challenges including the governance and public financial management crisis in September 2013 and two natural disasters- the flooding in 2015 which affected half of the country and the drought in 2016. The “cashgate” led to temporary suspension of donor budget support and sharp reduction in disbursement of aid funds through government systems with the consequent impact on the fiscal deficit.

World Bank Group Support for Domestic Revenue Mobilization (Approach Paper)

PDF file
Effective domestic revenue mobilization (DRM) is essential for developing countries’ abilities to finance their development goals in a sustainable and equitable manner. DRM—the generation of government revenues from domestic activities (World Bank and IMF 2015)—is relevant to at least 2 of the 17 Sustainable Development Goals (SDGs). This evaluation focuses on the World Bank Group’s support to Show MoreEffective domestic revenue mobilization (DRM) is essential for developing countries’ abilities to finance their development goals in a sustainable and equitable manner. DRM—the generation of government revenues from domestic activities (World Bank and IMF 2015)—is relevant to at least 2 of the 17 Sustainable Development Goals (SDGs). This evaluation focuses on the World Bank Group’s support to its clients to improve central government DRM, which includes revenue from tax (VAT, direct taxes, excises and customs) and nontax collections (including royalties from extractives). Recently, DRM has faced challenges aggravated by the ongoing coronavirus (COVID-19) pandemic and the attendant collapse of economic activity in many countries. The pandemic is expected to affect many aspects of DRM, including tax payments and tax compliance. This evaluation aims to assess the relevance, effectiveness, and coherence of Bank Group–supported strategies and interventions over FY16–19 to help clients improve DRM, as well as assess the extent to which the World Bank identified the distributional implications of its support to DRM in country interventions.

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

Web Resource
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

Doing Business Indicators and Country Reforms (Approach Paper)

PDF file
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.