Poverty Reduction Support Credits An Evaluation of World Bank Support Anjali Kumar 1 April 6th, 2010 IEG INDEPENDENT EVALUATION GROUP

PRSCs reflected the Bank’s response to shift s in the aid paradigm 2 Anchored in country-owned development strategies Implementation through country systems Responsible fiduciary environments Explicit poverty-oriented growth Pro-poor service delivery

From , 99 PRSC operations were approved 3 …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)

Introduced under Interim Guidelines in 2001 …PRSCs were not a separate instrument after 2004, but the PRSC label retains many distinguishing features: ► Built around credible poverty reduction strategies ► Broad-based programmatic support ► For better-performing IDA countries ► Oriented toward poverty-reducing growth 4

1. PRSCs improved aid processes Enhanced country ownership Eased conditionality Better predictability 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 5 Three Key Findings

Inputs Predictable medium term resources Aligned with country needs Outputs Implementation of PRSP Improved accountability Enhanced donor harmonization Outcomes Effective public administration Improved climate for growth Better pro-poor service delivery Impact Sustained growth Reduction of poverty Evaluation Results Chain 6

PRSCs improved the aid process 7

PRSCs were expected to ease aid processes 8 Eased conditionality Increased flexibility Greater predictability in volume and frequency Better alignment with client budget cycles Improved vehicle for donor harmonization

Eased conditionality - 9 …conditionality declined in all policy lending PRSC legal conditions Non-PRSC legal conditions

Eased conditionality - 10 …conditionality declined in all policy lending PRSC program benchmarks Non-PRSC program benchmarks

More flexibility in interpreting conditionality… PRSCs introduced ‘triggers’ -- indicative prior actions in place of legally binding tranche release conditions Triggers between FY01 and FY08: 59% met 15% downgraded 9% amended 8% dropped 9% replaced/postponed Sometimes new prior actions were included 11

More lending for social services and public sector management… 12 as did other DPLs

More predictable resources … Burkina Faso is a good example… 13 A steady volume of disbursements, in the same quarter per series…

Budget support through PRSCs complemented sector lending… 14 …Replacement was rare Many tried to channel sector lending through the PRSC: Of 15 CASs in health and education, only 2 achieved sustained results Of 6 CASs in nutrition, water supply, agriculture or environmental management, 1 on a sustained basis

Weak but improving results frameworks Need for: Clearly defined indicators Baseline data Consistent over time Intermediate milestones Shortcomings due to: Weak upstream PRSPs/ CASs Multi-donor process differences Modest M&E frameworks, often reflecting weak country statistical capacity 15

PRSCs improved donor harmonization 16  Sometimes as a focal point for donors  Often as member of a multi-donor group  Harmonized common donor matrices and alignment with the national plans  Reduced transaction costs for recipients  Provided Bank expertise to recipients and other donors  Bank harmonized more missions than other donors in PRSC as well as non-PRSC countries, especially weaker IDA countries

Donor harmonization challenges remain 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 17

PRSC Outcomes – Public Financial Management Easier objectives accomplished 18

Most PRSCs achieved their PFMP reform objectives, with minor shortcomings 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) 19

PRSC Outcomes in Growth and Poverty Alleviation… are difficult to establish 20

Per Capita GDP growth PRSC countries Better Performing Non-PRSC All IDA countries Attribution to the PRSC is difficult PRSC countries grew faster in the PRSC period… but so did other countries

Attribution of declining poverty rates to the PRSC is difficult Poverty rates fell, but were falling (faster) prior to the PRSC Poverty in all IDA countries declined, especially among better performers Most PRSC programs do not trace links between actions and poverty outcomes Parallel sector projects increase the difficulty of attribution 22

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 ( ) % change ( ) but the decline began before the PRSC was introduced PRSC countries had more income poverty reduction… 23

PRSC Countries had great progress with Millennium Development Goals… PRSC and Other Countries: Millennium Development Goal Achievement Difference (%) (% of population) (1990/1–2000/1)(2001–06) Primary enrollment, net PRSC All IDA countries Infant mortality (per 1000) PRSC All IDA countries Access to safe water PRSC All IDA countries …but improvement was greater before the PRSC period …and other IDA countries made parallel strides 24

Evaluation Recommendations 1.Underpin PRSCs/DPLs with comprehensive pro-poor growth diagnostics 2.Strengthen results frameworks, link with underlying PRS; increase poverty focus 3.Focus sector content on high-level or crosscutting issues 4.Further simplify the language of conditionality and eliminate the term ‘triggers’ 5.Synchronize Bank’s internal processing with country and donor processes to enable greater ‘voice’ for Bank in multi-donor budget framework 6.Phase out PRSC “brand name” or clarify when it is to be used 25

IEG INDEPENDENT EVALUATION GROUP 26 Thank You!