World Bank

Budget Support to

IDA Countries

Anjali Kumar

Independent Evaluation Group, World Bank

Presentation to the Overseas

Development Institute

London, 24 September 2010

1

PRSCs were introduced in2001, to

improve aid effectiveness, and…

2

► Promote country ownership (Killick 1996, Collier et al. 1997, Killick et al. 1998,

Dollar and Pritchard 1998, Dollar and Svensson 2000)

► Ease conditionality (Gilbert, Powell, Vines 1999)

► Increase predictability to permit incorporation in domestic

budgets (Koeberle 2003)

► Support domestic governance/institutions (Barro and Sala-i-Martin

1997; Barro 1998; Mauro 1995)

► Increase efficiency through the fungibility of budget support

aid (Devarajan, Swaroop, and Zou 1999)

► But concerns remain – Crowding out local initiative (Moyo 2009);

potential for leakage (Collier 2007, 2009); or waste (Calderisi 2006)

From 2001-09, 99 PRSC operations

were approved

2

4

8

13

20 20

1819

2 2

7

10

17

15

19

15

0

5

10

15

20

25

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

…worth $8 billion, in 27 countries

Countries with

ongoing PRSCs

New PRSCs

approved

From 2001 to September 2009, 99 PRSC

operations were approved

► 20 more operations

($1.7billion) under

preparation (for FY10)

► One-fourth of Bank

policy lending but 30-40%

of disbursements to

PRSC countries

► But PRSC share of

country budgets is

declining (7 % in 2001;

1.5% in 2008)

3

Objectives of Budget Support

through the PRSC:

► Help strong performing IDA countries with

responsible fiduciary environments to implement

domestically owned Poverty Reduction Strategies

► Support poverty-oriented growth and emphasize

pro-poor service delivery

► Strengthen domestic planning and budgeting

with predictable medium-term aid commitments

► Provide a framework for aid harmonization

► Strengthen the institutional framework for

budget and public financial management

► Focus on the achievement of results, in a clearly

articulated Results framework4

Evaluation Objective and Scope

► Assess the extent to which PRSCs

were able to meet their core

objectives

► Examine their relevance and

effectiveness as a vehicle to support

growth, improve social conditions,

and help alleviate poverty

► Scope: All PRSC operations from

their introduction in 2001 until end

June 2008

5

Building Blocks: Data Sources

6

► Sources of information:

• Desk review: objectives, design, effectiveness, results framework of 88

PRSC projects

• Field evaluations: 7 country case studies covering 31 PRSC operations, 8

completed PRSC series, 4 four ongoing series, and 33 percent of PRSC

disbursements over FY01-FY08. Available at the IEG website.

• Surveys: Task team leaders, Sector specialists, Government stakeholders

• Relevant databases, including:

WB evaluative data, ALCID, POVCAL, CPIA, ROSCs,

OECD Aid Aggregates, Monitoring of Paris Declaration, IMF IFS

► Extensive literature including other case studies

► Quality control: 3 internal peer reviewers; three external experts

Evaluation Methods

7

► Triangulate data to establish plausible causality

• Establish a Results chain

• Account for other determinants

► Compare „before and after‟ changes in performance of PRSC

beneficiaries

• But: „before‟ and „after‟ comparisons of outcomes are limited by

problems of identification due to the endogeneity of policy

responses within each country

► Therefore, also compare changes in PRSC countries to

changes experienced by IDA countries that have not benefited

from PRSCs

• “Difference in difference” approach

• Add controls for „better performing‟ IDA countries

Evaluation Questions and Results Chain

8

Inputs

• Appropriate program design and analytical underpinning

• Aligning resource flow with domestic processes and timetable

• Enhancing donor collaboration

Outputs

• Implementation of a strategic subset of the PRSP

• More predictable resource flows and resource use aligned with PRS

• Harmonization of donor programs

• Improved domestic accountability

Outcomes

• Improved climate for growth and improved pro-poor service delivery

• More effective public administration

Impact

• Sustained growth

• Reduction of income and non-income poverty

Challenges and Caveats

9

► Parallel changes affecting all World Bank Development Policy

Lending occurred over the period of analysis

• New Bank guidelines in August 2004 for all DPLs;

• PRSC Interim Guidelines were not formalized though PRSC

operations continued

• Analysis adds a filter for two sub-periods, 2001 to 2004 and

2005 to 2008

► PRSC is usually one part of a larger basket of donor funded

general budget support

► Both the Bank and other donor partners use a range of

instruments to support country development programs.

• Account for role of other donors and other instruments

Evaluating the PRSC aid process

10

Evaluating Conditionality

11

► Did conditionality ease with PRSCs? Was conditionality more

flexibly applied?

• Compare numbers of prior actions (legally binding) and

program benchmarks (not legally binding) in PRSCs compared

to non-PRSC policy based loans

during FY80-00 period – prior adjustment lending

during the PRSC period FY01-08

during PRSC subperiods FY01-04 and FY05-08

► Triangulate with Client Perceptions of Conditionality

• Nature and numbers of Conditions

• Program Implementation and Political Change

• Recognition of Implementation Constraints

12

0

10

20

30

40

50

Ave

rage

# o

f co

nd

itio

ns p

er

op

era

tio

n

Conditions in Bank adjustment loans, FY1980 -- FY2008

28 383336303842 3228 23483629292727 323032322931 23161699 144

2 1916171072 15

PRSC legal conditionsNon-PRSC legal conditions

…conditionality declined in all policy lending

Eased conditionality -

13

0

10

20

30

40

50

Ave

rage

# o

f co

nd

itio

ns p

er

op

era

tio

n

Conditions in Bank Adjustment loans, FY1980 -- FY2008

28 383336303842 3228 23483629292727 323032322931 23161699 144

2 1916171072 15

PRSC program

benchmarks

Non-PRSC program

benchmarks

…conditionality declined in all policy lending

Eased conditionality -

Evaluating Flexibility– Modification of

Conditions

14

► Numbers of adjustments made to proposed future prior

actions (triggers):

• Modifying content

• Modifying timing or

• Dropping conditions if they proved unrealistic.

► Comparisons with numbers of waivers of tranche release

conditionalities across pre-PRSC adjustment operations

► Triangulation: survey of task team leaders; government

stakeholders

► Triggers between FY01 and

FY08:

• 59% met

• 15% downgraded

• 9% amended

• 8% dropped

• 9% replaced/postponed

► Sometimes new prior actions

were included15

More flexibility in interpreting

conditionality…

► PRSCs introduced „triggers‟ -

indicative prior actions in

place of legally binding

tranche release conditions

Evaluating the Predictability of PRSCs

16

► Predictability measured by:

• Likelihood, based on past frequencies, of a PRSC recipient country

receiving a PRSC in a given year, compared to previous adjustment loans.

• Likelihood, based on observed past frequencies, of a PRSC country

receiving any policy-based budget support, compared to previous

adjustment lending.

• Stability of volumes of budget support received via PRSCs compared to

previous adjustment lending, in absolute terms and as a proportion of total

IDA/IBRD flows received

► Comparison of PRSC lending projections envisaged in country strategy

documents vs. actual disbursements

► Other studies measured predictability by comparing:

• Actual budget vs. predicted budget support disbursements

• Commitments vs. disbursements

Evaluating the regularity and timing of

PRSC disbursements

17

► Alignment of budget support relative to the

budget needs:

• Timing of disbursements relative to

country budget year:

• Percentage of operations that disbursed in

last quarter of the preceding fiscal year

• Or in the first quarter of the current fiscal

year

► Regularity of disbursements measured by:

• Percentage of operations in a series that

disbursed in the same quarter, in each

successive year

Burkina Faso is a good example…

18

0

10

20

30

40

50

60

70

80

90

100

Millio

ns

Q4

Q3

Q2

Q1

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

PRSC 1

PRSC 2

PRSC 3

PRSC 4

PRSC 7

PRSC 6

PRSC 5

A steady volume of disbursements, in the same quarter per series…

More predictable resources …

Evaluating Alignment, Ownership and

Operationalization of National Plans

19

► Country Case Studies and Client and Team leader interviews were

the main instruments. They suggest that:

• PRSCs are well aligned with national development strategies

and enjoy greater ownership than preceding adjustment lending,

at least in core ministries

• PRSC countries improved their operationalization of national

development strategies better than other IDA-eligible countries

• PRSC countries have been more successful at operationalizing

national development strategies, but gap is closing

• PRSCs are effective in raising the importance of the budget as a

tool for policy formulation

• Inter-ministerial dialogue improved, but the quality of sector

dialogue may have lost some depth

20

as in other DPLs

0% 10% 20% 30% 40% 50% 60% 70%

Education

Finance

Health

Ind. & Trade

Public sector

non-PRSC PBL (IDA) FY95-00 - 92 projects

0% 10% 20% 30% 40% 50% 60% 70%

Education

Finance

Health

Ind. & Trade

Public sector

PRSC (01-08) 87 Operations

0% 10% 20% 30% 40% 50% 60% 70%

Education

Finance

Health

Ind. & Trade

Public sector

non-PRSC PBL (IDA) FY05-08 - 57 projects

Evaluating sector support through PRSCs:

Increased spending on education, health, PFM

21

► PRSCs were initially perceived a potential vehicle for all lending,

including sector lending

► But ultimately, PRSC support complemented sector lending;

replacement was rare

► IEG‟s comparison of PRSC operations with the Country

Assistance Strategies for PRSC countries shows that:

• Many countries tried to channel sector lending through the

PRSC:

Of 15 CASs in health & education, only 2 achieved sustained

results

Of 6 CASs in nutrition, water supply, agriculture or

environmental management, 1 on a sustained basis

Evaluating Budget support through PRSCs

compared to sector lending…

22

► How well defined were PRSC results frameworks, in

particular regarding the definition of measurable end-of-

series, intermediate, and baseline targets and indicators?

► Was the PRSC results framework well adapted to the

implementation of the PRSC?

► How consistent was the reporting of results?

► To what extent did the PRSC draw on national M&E systems

used for domestic accountability outside the framework of

aid flows?

► Was capacity building for developing national M&E

addressed?

Evaluating PRSC Results Frameworks:

Evaluative questions - examples

► On average PRSC countries score better

than others on results frameworks, but

this is not obviously linked to the PRSC

Need for:

► More clearly defined indicators

► Better baseline data, intermediate and

end-of-series indicators, milestones

► Consistency over time

Shortcomings due to:

► Weak upstream PRSPs/ CASs

► Multi-donor process differences

► Modest M&E frameworks, often

reflecting weak country statistical

capacity 23

Results Frameworks – Findings:

Weak but improving

24

Often as member of a multi-

donor group

e.g., in many countries in Africa,

notably Mozambique and Ghana,

via a joint ‘PAF’

Evaluating PRSC‟s role in improving

donor harmonization

Did PRSCs serve as a focal

point? Sometimes

e.g., Vietnam, where the Bank-led

PRSC matrix was adopted by the

government

Achievements

► Did the PRSC process help to harmonize

donor matrices and align them with the

national plans? Yes, PRSCs played a

supporting role

► Were transaction costs for recipients

reduced? Yes, to some extent

► Did other donors benefit? Yes, Bank

expertise was made available to recipients

and other donors

► Based on OECD data, the Bank harmonized

more missions than other donors - in PRSC

as well as non-PRSC countries, especially in

weaker IDA countries25

Donor harmonization through PRSCs

had notable achievements…

► Limited integration of PRS reviews

with the joint matrix (PAF)

► Initial perception of increased

conditionality

► Increased transaction costs for

Bank (e.g. Mozambique, Ghana)

► Some loss in Bank relevance

alongside undue influence of small

donors

26

Donor harmonization: challenges remain

PRSC Outcomes –

Public Financial Management

Easier objectives accomplished

27

28

Methodology of PFMP Evaluation of PRSCs

Diagnostics• Were diagnostics comprehensive?

• Extend of coverage

• Treatment of fiduciary risk

• Were weaknesses addressed by PRSC program?

• Was PRSC reform program consistent with action plans from diagnostics?

Design & Implementation• How well designed was results framework for PFMP?

• Integrated action plan supported by key donors?

• Significant delays in reforms?

• Extent and quality of capacity building

Results• Before/After reform improvement in PFMP performance where PRSC reforms

focused

• Achievement of PFMP objectives in PRSCs

• General improvement in PFMP systems (CPIA etc.)

►Reforms well grounded in diagnostics led to well

sequenced strategy agreed with donors

►Program achievements were in easier areas (e.g.,

budget classification reform)

►More difficult reforms show less success (e.g. bringing

extra-budgetary funds and donor funds on budget;

timely resource transfer to sector ministries)

29

Most PRSCs achieved their PFMP reform

objectives, with minor shortcomings

PRSC Outcomes in Growth and

Poverty Alleviation…

are difficult to establish

30

1985-1999 2000-2007

Per Capita GDP growth

PRSC countries 0.8 4.2

Better Performing Non-PRSC 0.5 3.3

All IDA countries 0.2 3.0

31

Attribution to the PRSC is difficult

PRSC countries grew faster in the

PRSC period… but so did other countries

Poverty Rates for PRSC and Non-PRSC Countries (% of population below $38 per month)

PRSC

countries

(20)

Better performing

non-PRSC

(24)*

Non-PRSC

counties

(36)

All IDA

countries

(56)

% change

(1984-99)-16.2 -12.6 -2.1 -7.8

% change

(1999-

2005)

-19.3 -13.0 -10.8 -14.1

but the decline began before the PRSC was introduced

33

PRSC countries had more income

poverty reduction…

PRSC and Other Countries: MillenniumDevelopment Goal Achievement

Difference (%)

(% of population) (1990/1–2000/1) (2001–06)

Primary enrollment, net

PRSC 9.7 14.8

All IDA countries 11.6 9.1

Infant mortality (per 1000)

PRSC -19.0 -13.3

All IDA countries -14.5 -9.6

Access to safe water

PRSC 20.2 7.3

All IDA countries 12.6 4.8

…and progress was faster than before the PRSC period

…and faster than all other IDA countries in the PRSC period

34

PRSC Countries had greater progress with

Millennium Development Goals…

► Income poverty rates fell faster in

PRSC countries, in the PRSC

period, but also fell faster prior to

the PRSC

► In non-income measures of poverty

PRSC countries did better, and

improvement in the PRSC period

was faster

► Most PRSC programs do not trace

links between actions and poverty

outcomes

► Parallel sector projects increase the

difficulty of attribution32

Attribution of declining poverty rates

to the PRSC remains difficult

1. PRSCs improved aid processes

• Enhanced country ownership

• Eased, flexible, conditionality

• Better predictability - volume,

frequency and budget alignment

• More pro-poor service delivery

2. Growth and poverty outcomes are

unclear

• Weak Results frameworks

• Partial Support to Sectors

3. Other Policy Based Lending converged to

a similar design

35

Evaluation Findings - Three Key Messages

1. Strengthen results frameworks, link with

underlying PRS; increase poverty focus

2. Focus sector content on high-level or

crosscutting issues

3. Further simplify the language of

conditionality and eliminate the term

„triggers‟

4. Synchronize Bank‟s internal processing

with country and donor processes to enable

greater „voice‟ for Bank in multi-donor

budget framework

5. Underpin PRSCs/DPLs with

comprehensive pro-poor growth diagnostics

6. Phase out PRSC “brand name” or clarify

when it is to be used36

Evaluation Recommendations

IEGINDEPENDENT EVALUATION GROUP

37

Thank you

www.worldbank.org/ieg/prsc