• Debt relief and growth

Debt relief and growth

This paper reviews the performance over the preceding two years of the World Bank’s new comprehensive operational policy governing all fast-disbursing policy-based lending. In addition to providing an assessment and recommendations, it also discusses client and staff perceptions and feedback, and describes how the good practice principles on conditionality have been reflected in recent operations.

The review finds that the new policy provides a flexible framework that is adaptable to a variety of country circumstances and incorporates a strong focus on results in supporting government-owned programs. Positive findings include that a majority of supported programs build on some type of participatory and consultative process. The review also finds that the quality at exit of policy-based lending remains high.

Problems identified include:

• the number of conditions remained largely unchanged over the two years studied
• macroeconomic horizons are frequently focused on the short-term and tend to neglect the long-term macroeconomic and growth outlook, and binding constraints to growth are rarely identified or linked to program actions
• documentation of participatory processes underpinning government programs is weak and lacking in 80 percent of reviewed documents, making it difficult to gauge the breadth of participation and how participatory process may have contributed to program design
• though there is an increasing use of outcome indicators, teams continue to struggle to find a relevant set of monitorable and meaningful indicators and to align them with poverty reduction strategies and Country Assistance Strategies
• the number of nonbinding benchmarks remains high

To strengthen policy implementation, the report recommends:

• systematic descriptions of participatory processes that underpin supported programs
• more strategic upstream consideration of distributional and environmental effects, better use of existing analytic work for poverty and social impact analysis, and preparation of analytic work on the environment
• improved assessment of the strength and timely implementation of public financial management programs, more systematic tracking of progress in public financial management and better analysis of residual fiduciary risks
• improved benchmarking of results indicators and better integration of capacity and institution building for monitoring and evaluation into the program.

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