Abstract

In recent years, bilateral aid channeled through multilateral organizations like the World Bank has become an important vehicle for concessional finance for development. At the end of FY09, the World Bank held US$23.9 billion in trust, an amount that has doubled since FY05. While much of the growth reflects the increase in large Financial Intermediary Funds (FIFs), there has also been a rapid increase in Recipient Executed Trust Funds (RETFs). This paper aims to inform internal Bank audiences and stimulate discussion on some selected issues - primarily the growing importance of RETFs as a source of finance and relevance to Bank's country level operations. The report also examines briefly the link between RETF allocations and country performance. The report finds that disbursements of RETFs grew by twenty percent over FY03-FY09. Over this period the trends in regional disbursement shares shifted away from East Asia and Pacific and South Asia Regions to Africa Region. Recipient country concentration is evident: fifty percent of the disbursements have been from six countries - Afghanistan, West Bank and Gaza, Ethiopia, Vietnam, Indonesia and China. RETF disbursements, as a share of the combined International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), and RETF, grew from five percent in FY03 to twelve percent in FY08, while that of IBRD and IDA fluctuated. The bulk of the disbursements from RETF grants were from IDA eligible countries. RETFs appear to have substituted for IDA in fragile and conflict affected states. Disbursements from RETF grants and IDA credits were broadly aligned by sector. There may be some correlation between RETF grants allocation and country performance but the results are not conclusive. The report identifies some areas for further examination: whether RETFs should complement or substitute for Bank operations in specific cases; and whether RETF allocations should be made on the basis of some need or performance based country priorities, outcomes and results. Document type: Book

Abstract

This study investigates the impact of World Bank development policy lending for public sector governance on the quality of public sector management and institutions. The World Bank’s Country Policy and Institutional Assessments (CPIA) are used to measure the latter, the study considers only policy conditions targeted at improvements in those areas. The analysis uses a comprehensive country-year panel data set of aid receiving-countries and finds a significant and inverse U-shaped effect of public sector conditions on the quality of public sector governance. For most observed values in the data, the impact is positive, but it turns negative beyond a value of 80 conditions. At that point, the predicted CPIA score is about 0.25 point (0.3 standard deviation) higher than with zero conditions. For most observations, the number of cumulative conditions is below 80, so the estimated effect of more conditions is generally positive. The analysis corrects for potential endogeneity and shows that the results are robust to sample restrictions, the use of an alternative governance measure, and the inclusion of an extended set of control variables. Falsification tests are also consistent with a causal interpretation from conditions to quality of public sector governance. The paper shows that conditions related to public financial management and tax reforms are more effective than those related to anti-corruption or civil service and administrative reform, where progress requires changing the behavior of a larger set of “deconcentrated” actors. The paper concludes by describing some innovative ideas in the Bank’s ambitious new public sector management strategy that could improve the effectiveness of its support for public sector governance reform. Document type: Book

Abstract

This paper benchmarks the quality of project economic analysis in South Asia against other World Bank regions, using data on project exits between 1975 and 2015. The results show that the South Asia region performs on par with the other regions, in that the share of project documents that report estimated economic rates of return have declined from 70 to 36 percent for South Asia and the other regions. This finding suggests there is less attention to project economic analysis (especially for sectors where this has been a traditional practice, such as energy, transport, water, and agriculture). The finding also indicates that the incidence of reporting rates of return in project documents and the dispersion or difference between rates of return estimated at project appraisal and completion are significantly correlated with project performance (after correcting for country- and project-level variables). For the project-level variables, the task team effect is a key variable that explains project outcomes. The paper discusses the implications of the analyses for strengthening project performance and risk mitigation. Document type: Book