World Bank (2006) - Good Practice Principles For The Application of Conditionality - A Progress Report

Public Disclosure Authorized
37977
GOOD PRACTICE PRINCIPLES FOR THE

APPLICATION OF CONDITIONALITY:
A PROGRESS REPORT
OPERATIONS POLICY AND COUNTRY SERVICES

WORLD BANK
November 6, 2006
ABBREVIATIONS AND ACRONYMS
DPL Development policy lending

DPO Development policy operation
GPP Good practice principle
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IMF International Monetary Fund
I-PRSP Interim PRSP
MDG Millennium Development Goal
OPCS Operations Policy and Country Services
PRGF Poverty Reduction and Growth Facility
PRS Poverty reduction strategy
PRSC Poverty reduction support credit
PRSP Poverty Reduction Strategy Paper
PSIA Poverty and social impact analysis
WTO World Trade Organization
GOOD PRACTICE PRINCIPLES FOR THE APPLICATION OF CONDITIONALITY:
A PROGRESS REPORT
CONTENTS
Executive Summary................................................................................................................... i
I. Introduction .......................................................................................................................... 1
II. Recent Trends in World Bank Conditionality ................................................................. 4
A. Number and Content of Conditions .................................................................................. 5

B. Incorporating the Good Practice Principles into Bank Operations.................................... 7
III. Implementation of the Principles..................................................................................... 8

A. Ownership ......................................................................................................................... 8
B. Harmonization ................................................................................................................. 10
C. Customization .................................................................................................................. 11
D. Criticality......................................................................................................................... 17
E. Transparency and Predictability ...................................................................................... 19
IV. Conclusions and Recommendation ................................................................................ 20
Boxes
Box 1. Good Practice Principles................................................................................................. 2
Figures
Figure 1. Average Number of Conditions ................................................................................. 5

Figure 2. Average Number of Benchmarks............................................................................... 6
Figure 3. Thematic Coverage of Conditionality in Policy-Based Lending ............................... 7
Tables
Table 1. Operations and Commitments (in US$) ....................................................................... 3

Table 2. Select Policy Reforms Supported by World Bank Operations ................................. 13
Annexes
Annex A. Operation Reviewed and Commitment Amounts .................................................... 23

Annex B. Review of Implementation of the Five Good Practice Principles ............................ 25
A PROGRESS REPORT
EXECUTIVE SUMMARY
1. This report responds to the stipulations in the IDA14 Report with respect to additional
contingent contributions to IDA. Under the IDA14 replenishment arrangements, donors could
make contingent contributions tied to the fulfillment of certain agreed sets of actions, including a
determination by IDA’s Executive Directors that “satisfactory progress has been made in
implementing the recommendations of the 2005 Review of World Bank Conditionality.”1 The
report provides the necessary information to make such a determination.
2. Recommendation of the Conditionality Review. The 2005 conditionality review
proposed five good practice principles to strengthen the quality of the Bank’s application of
operational policy for development policy lending (DPL), which are summarized below.2
Good Practice Principles
Ownership Reinforce country ownership.
Harmonization Agree up front with the government and other financial partners on a
coordinated accountability framework.
Customization Customize the accountability framework and modalities of Bank support to
country circumstances.
Criticality Choose only actions critical for achieving results as conditions for
disbursement.
Transparency and Conduct transparent progress reviews conducive to predictable and
predictability performance-based financial support.
3. Coverage. This report reviews the application of good practice principles in development
policy operations (DPOs) that have gone through a complete processing cycle since the
Development Committee endorsed the findings of the conditionality review in late September
2005 and that were approved by the Board of Executive Directors before September 30, 2006.
Among the 19 relevant operations reviewed here, 12 (63 percent) were for IDA-only countries
and 7 (37 percent) for IBRD or blend countries.
A. Conditionality Trends
4. By historical standards, the number of conditions per operation continues to be low for
both IDA and IBRD borrowers. The average number of conditions per policy-based operation
declined from above 30 in the mid-1990s to about 11-13 in recent operations. The number of
benchmarks—other policy actions that are not part of conditionality—in Bank-supported policy-
based operations for both IDA and IBRD countries rose sharply with the introduction of
programmatic lending in 1999. For the operations reviewed here in IDA-only countries, the
number of benchmarks has declined to about 27 from an average of over 30 in operations
approved before the good practice principles were adopted; the number has declined even further
1
Additions to IDA Resources: Fourteenth Replenishment. Working Together to Achieve the Millennium
Development Goals. Report from the Executive Directors of the International Development Association to the
Board of Governors, March 10, 2005, Schedule B to Attachment I.
2
Review of World Bank Conditionality (DC2005-0013), September 9, 2005.
ii
(to 7 on average) in IBRD and blend countries. Conditionality content remains concentrated in
the area of public sector governance (about 50 percent of conditions), followed by financial and
private sector development and social sectors (15-20 percent each).
B. Implementation of the Good Practice Principles
5. The paper examines the implementation of the good practice principles in the 19
operations reviewed.
6. Ownership. A realistic assessment of ownership relies on the government’s expressed
policy intentions and its track record of reform; it acknowledges the political economy
dimensions that reforms may be owned by some constituencies and opposed by others who stand
to lose from them. All of the operations reviewed here relied explicitly on government strategy
documents in outlining the program supported by the Bank. In most cases, the Bank was also
able to rely on the country’s broader track record of reforms to gauge commitment to the
program over the medium term. The operations show the Bank’s capacity to give policy space
where needed (as in Guyana), and to take into consideration the political economy of reform.
Bank and other financial partners’ analytic work has played an important role in underpinning
policy choices, with a number of emerging good practice examples such as Ghana. However, as
the DPL retrospective pointed out, early disclosure of such work would strengthen its inclusion
in countries’ policy dialogue and strategy development.
7. Harmonization. The conditionality review suggested that, under the lead of country
authorities, Bank staff should reach understandings with the government and other partners on a
single and internally coherent framework for measuring progress under the government’s
program. All the operations set out such accountability frameworks in the form of policy
matrices showing policy actions and expected results. These can be joint frameworks (i.e.,
Ghana, Indonesia) or can serve to coordinate broader donor support, including technical
assistance (e.g., Lao PDR). Broadly, it appears that accountability frameworks are being used
flexibly to achieve different levels of coordination, responding to country circumstances.
8. Customization. The conditionality review stated that accountability frameworks should
never be used to add policy actions to the government’s agenda, or leverage outside preferences.
It noted that any agreed accountability framework should be fully consistent with the
government’s expressed policy intentions and internal accountability mechanisms. Bank
Program Documents in the operations reviewed here explicitly refer to the government program
as the primary source of policy actions used to gauge progress. Although the core area of support
is public sector governance, several programs support reforms that are considered politically
sensitive and where governments may need to make hard choices about reform, such as
privatization, trade reform, price liberalization, and user fee adjustments. In all of the operations
that involved privatization (such as the privatization program in the Indian State of Orissa), the
privatization measures derived from a government-led process of reform. In other countries—for
example, Vietnam, the Bank supported the government in reforming public enterprises. Three
operations had price reform and liberalization measures; in one of these cases it would have been
more appropriate to highlight future reform steps rather than the liberalization as Bank
conditionality, given the fragility of the policy environment and the limited policy space afforded
the government. Trade reform measures in reviewed operations were largely linked to WTO
accession, and were uniformly presented as important objectives in the government strategy
iii
documents. User fee conditions (in Burkina Faso and Niger) focused on reducing or removing
user fees to increase access to health care, particularly for poor and vulnerable groups.
9. Criticality. The 2005 conditionality review noted that in establishing the conditions for
lending, Bank and country staff should choose from the agreed accountability framework policy
and institutional actions that are critical for achieving the results of the program. Most actions
identified as conditions in Bank programs reviewed were clearly critical to program objectives.
However, further progress can be made in reducing or better explaining conditions related to
processing steps (such as adoption of action plans). Managing the size of program matrices also
remains a challenge, especially in harmonized donor settings, with different outcomes in
different countries (e.g., Ghana with 40 benchmarks vs. Tanzania with no benchmarks).
10. Transparency and Predictability. The 2005 review suggested that in the context of
medium-term Bank support, progress should be reviewed regularly and in line with a country’s
monitoring and evaluation cycle, drawing to the extent possible on internal accountability
processes. All reviewed operations spelled out conditions, triggers, and expected results,
although further progress is possible in avoiding vague formulations of triggers and in providing
result baselines. Some programmatic series (Armenia, Burkina Faso, Vietnam), explicitly
integrated a review of results into the next operation. When countries have voiced a clear
preference for a review cycle aligned with government budget cycles, the Bank has generally
responded. However, in some countries further progress in aligning joint donor reviews with
budget cycles can be made and is already under discussion. Challenges for predictable support
can also arise with new operations in fragile policy environments.
C. Conclusions
11. The Bank’s recent practice in the use of conditionality is broadly consistent with the good
practice principles: most Bank programs are well aligned with government priorities and
customized to country circumstances, and they clearly spell out expectations. They make
frequent use of opportunities for harmonization, generally highlight critical actions as conditions,
and respond to government needs for predictability of financing decisions. Management is
therefore of the view that the Bank has made satisfactory progress in implementing the
recommendations of the 2005 Review of World Bank Conditionality. Further progress can be
made in (a) disclosing analytic work; (b) avoiding conditions on sensitive policy areas if
ownership is uncertain or the political environment is fragile, and avoiding duplication of IMF
conditions; (c) avoiding process conditionality; (d) reducing benchmarks; (e) aligning
harmonized review cycles with financing needs; and (f) providing baselines for results.
12. Next Steps. Management will continue to use internal training and corporate review
processes to further improve DPO design. The use of conditionality and the adherence to the
good practice principles will be subject to regular monitoring under biannual development policy
lending retrospectives, with the next retrospective planned for early FY09
13. Recommendations. On the basis of this review, Management recommends that, for the
purposes of additional contingent contributions to IDA14, the Executive Directors make a
determination that the Bank has made satisfactory progress in implementing the
recommendations of the 2005 Review of World Bank Conditionality.
A PROGRESS REPORT
I. INTRODUCTION
1. In October 2004, the Development Committee requested a review of the Bank’s “policy
and practice on conditionality” and a “report on the continued efforts by the Bank and the Fund
to streamline their aggregate conditionality.”3 Responding to that request, during 2004-05 the
Bank undertook an extensive dialogue with the Board, donors, civil society, and governments.
The resulting Review of World Bank Conditionality discussed the rationale for and modalities of
conditionality in policy-based lending (now known as development policy lending), and looked
at trends and key challenges in the application of conditionality.4 In September 2005 the
Development Committee endorsed the review’s findings and the related good practice principles
for the application of conditionality.
2. Main Findings of the 2005 Review. The main findings of the review were as follows:
• The operational policy framework for development policy lending that the Bank
adopted in August 2004 is robust and consistent with a view that conditionality is not
coercion to undertake reform, and does not prescribe policy content.
• By historical standards, the number of conditions per operation—11-13—was low
during FY04-05.
• Conditionality content has shifted away from such sensitive areas as privatization,
trade liberalization, and user fees to public sector governance and social sectors.
• The Bank has fully recognized the importance of country ownership for development
effectiveness but, like other development agencies, it is grappling with the practical
challenges of assessing ownership and responding to changing policy environments.
• The Bank has made important strides in adapting its policy-based lending to complex
reform programs and focusing on critical actions. However, it needs to avoid an
increasing use of large and complex policy matrices, particularly in multisectoral
operations and when coordinating with other donors.
• The Bank’s loan conditions have typically been transparently disclosed and clearly
defined. However, the flexibility of programmatic approaches, which allows adapting
prior actions for subsequent operations, needs to be exercised cautiously to balance
predictability with performance.
3
Development Committee Communiqué, Joint Ministerial Committee of the Boards of Governors of the Bank
and the Fund on the Transfer of Real Resources to Developing Countries, October 2, 2004, para 7.
4
Review of World Bank Conditionality (DC2005-0013), September 9, 2005. Policy conditions in investment
lending have since been reviewed in Policy Conditions in Investment Lending: A Stocktaking (SecM2006-
0349), August 2, 2006. The report suggests that use of policy conditions in investment lending has declined and
is rare. It also reinforces existing corporate guidance to avoid such conditionality.
2
• The Bank’s approach is fully compatible with the goal of harmonizing financial
support with that of other development partners while retaining the Bank’s distinct
accountability.
3. Good Practice Principles. The review proposed five good practice principles to
strengthen the quality of the Bank’s application of operational policy for development policy
lending (DPL), which are summarized in Box 1.
Box 1. Good Practice Principles
Ownership Reinforce country ownership.
Harmonization Agree up front with the government and other financial partners on a
coordinated accountability framework.
Customization Customize the accountability framework and modalities of Bank support to
country circumstances.
Criticality Choose only actions critical for achieving results as conditions for
disbursement.
Transparency and Conduct transparent progress reviews conducive to predictable and
predictability performance-based financial support.
4. Objective of this Report. This report responds to the stipulations in the IDA14 Report
with respect to additional contingent contributions to IDA. Under the IDA14 replenishment
arrangements, donors could make contingent contributions tied to the fulfillment of certain
agreed sets of actions, including a determination by IDA’s Executive Directors that “satisfactory
progress has been made in implementing the recommendations of the 2005 Review of World
Bank Conditionality.”5 During an informal Board meeting in July 2006, Executive Directors
reviewed early experiences in the use of the good practice principles in the context of the DPL
retrospective.6 Several Directors suggested that information based on broader and longer
experience would be useful in reaching a definitive conclusion on the implementation of the
principles. This report draws on a set of operations approved during FY06 and the first quarter of
FY07 to provide that information in a systematic way, and seeks a determination by the
Executive Directors that the Bank has made satisfactory progress in implementing the
5. Coverage. This report reviews the application of good practice principles in development
policy operations (DPOs) that had their concept review since the Development Committee
endorsed the findings of the conditionality review in late September 2005 and that were
approved by the Board of Executive Directors before September 30, 2006.7 Hence, in line with
the Bank’s common treatment of policy changes, this report covers all those operations that have
gone through a complete processing cycle; but it excludes those operations that had already been
conceptualized and partially processed at the time the good practice principles were adopted and
where it may have been difficult to make adjustments. In total, the resulting set includes 21
DPOs (Annex 1); however, this report excludes two supplemental operations for Pakistan
5
Additions to IDA Resources: Fourteenth Replenishment. Working Together to Achieve the Millennium
Development Goals. Report from the Executive Directors of the International Development Association to the
Board of Governors, March 10, 2005, Schedule B to Attachment I.
6
Development Policy Lending Retrospective (SecM2006-319), July 13, 2006.
7
In accordance with Bank Procedures (BP) 8.60, the preparation cycle includes a concept review and a corporate
review, typically at the level of the Regional Operations Committee.
3
following the October 2005 earthquake since they financed an ongoing program and involved no
additional conditionality. Among the remaining 19 operations reviewed here (Table 1), 12 (63
percent) were for IDA-only countries and 7 (37 percent) for IBRD or blend countries.
Table 1. Operations and Commitments (in US$)
Operation Concept Review Board Approval
Indonesia DPL-2 10/14/2005 12/15/2005
Armenia PRSC-2 11/01/2005 01/19/2006
Bangladesh Education-2 01/11/2006 03/07/2006
Guyana PRMPO-1 02/28/2006 04/27/2006
Lao PDR PRSC-2 01/30/2006 04/27/2006
Tanzania PRSC-4 12/12/2005 05/09/2006
Bhutan DPL-1 12/01/2005 05/25/2006
Pakistan North-West Frontier Prov.-1 09/27/2005 06/01/2006
Brazil Equitable Growth-2 02/13/2006 06/06/2006
Niger Rural and Social-1 12/20/2005 06/13/2006
Egypt Financial Sector-1 11/11/2005 06/15/2006
Ghana PRSC-4 03/13/2006 06/15/2006
Burkina Faso PRSC-6 02/15/2006 06/20/2006
Vietnam PRSC-5 03/01/2006 06/22/2006
Madagascar PRSC-3 03/30/2006 07/13/2006
Colombia Labor-3 04/17/2006 07/25/2006
Burundi Economic Reform 10/06/2005 08/01/2006
India Orissa Social-3 10/11/2005 08/01/2006
Guatemala DPL-2 07/05/2006 08/29/2006
Source: Business Warehouse.
6. Outside Views. Conditionality issues have received and continue to receive attention by
outside parties, notably civil society organizations. In recent months, reports published by
Christian Aid in the United Kingdom, Eurodad, and Action Aid International addressed aspects
of World Bank conditionality.8 None of these reports directly addressed the application of
conditionality in the set of operations reviewed here. However, they provide a perspective on
how Bank conditionality is perceived and where and why outside observers are concerned about
Bank conditionality. Among these reports, Christian Aid’s and Eurodad’s reports do not address
the implementation of the good practice principles, and both largely interpret all supported policy
action in sensitive areas as “imposed” without further review of government intentions or
objectives. The Eurodad report furthermore considers all policy actions in policy matrices as
conditionality, and suggests that because policy matrices have grown larger in subsequent
operations of a Bank-supported programmatic series, conditionality in Bank operations has been
rising (an issue discussed in the conditionality review and addressed in this paper). The report by
ActionAid International directly reviews the good practice principles and considers them to be
useful guidance, but suggests that the Bank is not making sufficient efforts to follow the
principles.
7. Structure of the Report. Section II discusses recent trends in the number and content of
conditions in DPOs and summarizes the activities the Bank has undertaken to foster the
8
World Bank and IMF Conditionality: A Development Injustice, Eurodad, June 2006; Challenging Conditions: A
New Strategy for Reform at the World Bank and IMF, Christian Aid, July 2006; What Progress? A Shadow
Review of World Bank Conditionality, ActionAid International, September 2006.
4
implementation of the good practice principles. Section III briefly discusses the objectives of the
five good practice principles and reviews their implementation. Section IV summarizes early
lessons, discusses areas for improvement, and provides a recommendation.
II. RECENT TRENDS IN WORLD BANK CONDITIONALITY
8. As part of the regular review of its operational practices, the Bank monitors the number
and content of conditions attached to its DPOs. The 2005 conditionality review analyzed trends
through the end of FY05, and the recent DPL retrospective updated key figures through the end
of FY06. This section briefly reviews the terminology attached to conditionality, summarizes
trends through end-FY06 excluding operations with concept reviews after the adoption of the
good practice principles, highlights the use of conditionality in the 19 operations approved
during FY06 and FY07 that are being evaluated here, and discusses how the Bank has worked to
incorporate the good practice into the operations it finances.
9. Definition of World Bank Conditionality. Conditionality in the World Bank context and
for the purposes of this paper is defined as the set of conditions that, in line with the Bank’s
Operational Policy 8.60, para. 13 must be satisfied for the Bank to make disbursements in a
development policy operation.9 These conditions are (a) maintenance of an adequate
macroeconomic policy framework; (b) implementation of the overall program in a manner
satisfactory to the Bank; and (c) implementation of the policy and institutional actions that are
deemed critical for the implementation and expected results of the supported program. Only
these conditions are included in the Bank’s loan agreements.
10. Typology of Conditionality. Policy-based loans are made available when the borrower10
accomplishes critical policy and institutional actions, or loan conditions (see Operational Policy
8.60, para. 13). In the context of different loan designs, the Bank uses different terminology for
conditionality. Actions to be met before an operation is approved by the Board are referred to as
prior actions and are listed in a schedule to the legal agreement. All conditions for single-tranche
operations are prior actions. In an operation with more than one tranche, the borrower complies
with certain conditions after Board approval and effectiveness (in addition to any prior actions),
termed tranche-release conditions. Unless all tranche-release conditions are met, a tranche may
be released only if the Board approves a waiver of the unmet condition(s).
11. Triggers and Benchmarks. In addition to the critical policy and institutional actions that
are recorded as prior actions or tranche-release conditions in legal agreements, the Bank uses
triggers and benchmarks to review and describe progress under programmatic series of loans.
• Triggers represent critical actions for achieving and sustaining the results of the
medium-term program. Achievement of triggers normally indicates sufficient
progress to move from one operation to the next. Triggers offer greater operational
flexibility than using tranche-release conditions, because triggers can be adapted
more easily to a changing program environment. Bank operational documents are
9
Review of World Bank Conditionality: Legal Aspects of Conditionality in Policy-Based Lending, September
2005, para. 9.
10
For simplicity, the term borrower is used throughout the report independent of the financial terms attached to
Bank support.
5
expected to lay out how triggers were adapted and modified to support program
objectives before being converted into the prior actions of a follow-on operation.
• Benchmarks in program matrices describe the contents and results of the
government’s program in areas supported by the Bank. They are frequently used to
describe small steps in a reform process that represent significant, though not
necessarily critical, progress markers for the implementation of the program.
Although they help define an area of the Bank’s policy involvement, they are not
intended to determine disbursements of Bank loans or grants.
A. Number and Content of Conditions
12. By historical standards, the number of conditions per operation continues to be low for
both IDA and IBRD borrowers (see Figure 1).11 The average number of conditions per policy-
based operation declined from above 30 in the mid-1990s to about 12-13 in FY06 for operations
whose concept review preceded the adoption of the good practice principles (“2006 pre-GPP”).
Operations for which the concept review followed the adoption of the good practice principles in
September 2005 are consistent with this trend (“post-GPP”).
Figure 1. Average Number of Conditions

40
38
35 35 35
33 33
32 32
31 IBRD
30
IDA
28
26 27
25
22
21 19
20 20
18 19
17
15 16
12
12 13 13
12 11
11
10
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 pre- post-
GPP GPP
Source: Staff calculations.
13. Number of Benchmarks. The number of benchmarks in Bank-supported policy-based

operations for both IDA and IBRD countries rose sharply with the introduction of programmatic
lending in 1999 (see Figure 2). For IDA countries, the number of benchmarks increased from 5-
10 in the mid-1990s to 32 in FY04, with a further increase in 2006 (pre-GPP). This trend is
closely associated with the emergence of large policy matrices under multisectoral programs
11
Conditions include prior actions, tranche-release conditions, and conditions of effectiveness (which are very
rarely used in DPOs; indeed, their use is discouraged), all of which are set out in the Bank’s legal agreements.
The number of conditions is not a measure of the complexity of each action, which may vary greatly from
condition to condition.
6
supported by a poverty reduction support credit (PRSC). The use of benchmarks for both IDA
and IBRD borrowers declined compared to FY04-05 in operations for which a concept review
was held since the adoption of the good practice principles (Figure 2, post-GPP). The declining
use of benchmarks, to about 27, in the most recently processed post-GPP operations reflects in
part the greater discipline under newly emerging programmatic series (such as Tanzania’s PRSC-
4). For IBRD operations, the declining use of benchmarks that began in FY04 has continued in
FY06 and with most recent operations. This development largely reflects the greater ease with
which teams in IBRD countries now use small policy matrices in lending documents that are
focused on prior actions and triggers, leaving the description of the broader program to
government documents or analytic underpinnings.
Figure 2. Average Number of Benchmarks

40
37
35
IBRD
32
IDA
30
30 27
25
19
20 23
17 17
16 16
15 15
12 12
11 10
10 10
8 8
6 7
5 5
5 5
4
2
0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 pre- post-
GPP GPP
14. Thematic Coverage of Conditionality. As the 2005 conditionality review highlighted,

while overall conditionality declined, the weight of conditionality in recent years has shifted to
public sector governance in response to stakeholder demand for more transparent and efficient
use of aid and public resources. Public sector conditions, on average per operation, remained
between 5 and 7 in recent years, with the decline in overall conditionality stemming from a fall
in trade and economic management conditions and conditions related to private sector and
financial sector development (including conditions related to privatization) since the early and
mid-1990s (see Figure 3). This trend has continued for FY05-06 (2005-06 pre-GPP) and in
operations reviewed here (post-GPP).
7
Figure 3. Thematic Coverage of Conditionality in Policy-Based Lending

16.0
1990-94 1995-99 2000-04 2005-06 pre-GPP post-GPP
13.7
14.0
Avg. Number of Conditions by Theme
12.0
11.0
10.0
8.8
7.7
8.0 7.3
6.4
5.7 5.6 5.8
6.0 5.4
5.1
4.8
4.4 4.4
4.0
2.3 2.2 2.1
1.9 1.9 1.7
2.0 1.4 1.5
1.2 0.9
0.8
0.0
T rade and economic Environment, rural, Social sectors Public sector Financial and private
management and urban governance sector development
development
B. Incorporating the Good Practice Principles into Bank Operations
15. Since adopting the good practice principles, the Bank has begun to systematically use
these principles in internal processes and external presentations as guideposts for quality in
policy-based lending.
16. Internal Training. The good practice principles have been fully integrated into the
Bank’s internal training on DPL design. In regular events, such as the “DPL Academy” and
PREM week, which involved more than 100 DPL task team leaders and DPL task team members
during FY06, presentations highlighted the Bank’s corporate approach to conditionality. The
principles were shared with Regional task managers through a range of events in late 2005 and
were further disseminated through frequent presentations on operational issues in Network
training events.
17. Corporate Review Process. Since October 2006 the good practice principles have
underpinned the corporate review process for development policy lending. Bank Procedures 8.60
require that each DPO be reviewed in a concept meeting (typically chaired by the Country
Director) to authorize preparation of the operation, and that appraisal and negotiation be
authorized by a Corporate Review (the Regional Operations Committee typically chaired by the
Regional Vice-President or the Operations Committee typically chaired by the responsible
Managing Director).12 Concept reviews and Corporate Reviews, for which documents are copied
to Bank-wide distribution lists, consider the benefits and risks of proposed operations and review
their consistency with Bank policies. Since the adoption of the principles, the review meetings
have allowed verifying consistency with the principles and provided guidance to teams on
12
Bank Procedures 8.60, para. 5.
8
strengthening the design of DPOs as regards prior actions and triggers, and on making
disciplined use of benchmarks, particularly in multisectoral settings. Corporate review processes
have also been used to advise teams on the use of policy matrices and related actions and
indicators.
18. Outreach. International events, such as the conference on harmonization in Bamako,
Mali, in March 2006, and a conference on poverty reduction strategies in Vientiane Lao PDR in
April 2006 gave Operations Policy and Country Services (OPCS) an opportunity for additional
interactions with government officials and financial partners in which to communicate the
Bank’s approach to conditionality and receive further feedback on issues raised by the
conditionality review. These discussions drew on good practice examples such as Mozambique
to place particular emphasis on the role of government-led accountability frameworks to foster
harmonization, arrive at a coherent and disciplined set of actions and indicators for monitoring
progress, and ensure timely decisions on the volume and timing of financial assistance. On
various other occasions, discussions were also held with bilateral donors, civil society
organizations, and the press to clarify the Bank’s approach to conditionality.
III. IMPLEMENTATION OF THE PRINCIPLES
19. This section describes the good practice principles and examines the extent to which each
one was incorporated into the 19 operations under review.
A. Ownership
20. The conditionality review concluded that Bank operations and conditionality should
actively contribute to broad ownership of the programs, policies, and institutional actions
undertaken by the government. Therefore, the Bank’s DPL should support only policies and
programs for which there is some clear evidence of ownership, as described, for example, in a
poverty reduction strategy (PRS) adopted by the government after broad-based consultations.
The conditionality review also suggested that the Bank may need to allow sufficient time for
country processes, such as parliamentary debate, to be completed before establishing the details
of Bank support. Moreover, the review highlighted that the Bank and other donors should
support the government in filling any relevant analytic gaps and should help feed such analysis
into the country’s policy-setting mechanism.
21. Assessing Ownership. In practice, the level of ownership is not easy to assess. Careful
review of the country’s political economy and of stakeholders’ concerns is required to identify
the scope for a sustainable reform program. Given the complexity of country situations, such an
assessment goes beyond a simplistic notion of ownership that presupposes a uniform government
position or a full consensus. It would not be sensible to suppose that all recipient countries
respond to the interests of the majority of the population, avoid elite or foreign-interest capture,
and maintain a stable course on reforms. A realistic assessment of ownership relies on the
government’s expressed intentions and its track record of reform; acknowledges the political
9
economy dimensions that reforms may be owned by some constituencies and opposed by others
who stand to lose from them.13
22. Government Strategies. All the operations reviewed for this report and their Program
Documents relied explicitly on government strategy documents in outlining the program
supported by the Bank (see Annex 2). In all IDA-only countries the government prepared a
Poverty Reduction Strategy Paper (PRSP), or (in Burundi) an interim PRSP (I-PRSP). Although
the preparation of PRS documents does not guarantee broad ownership of the government
program, the disclosure of these documents and their participatory underpinning gives
confidence that policy priorities have been debated inside the government and been the subject of
exchanges with stakeholders. All IDA-only countries reviewed here, except for Burundi, also
were evaluated as having taken steps toward developing a national development strategy in the
context of the first indicator of the Paris Declaration on Aid Effectiveness, with Tanzania and
Vietnam being evaluated as having largely developed toward good practice.14 The government
of Pakistan’s North-West Frontier Province prepared a provincial strategy as part of the PRSP
process. In some cases, as in Bangladesh, the Bank supported more detailed sectoral strategies
underpinning the PRS. In IBRD and blend countries, the Bank relied consistently on government
policy statements—such as the “Vamos Guatemala” program or Indonesia’s government policy
statement and annual action plan—which benefited from vetting through electoral processes as
well as parliamentary involvement in implementation.
23. Track Record. In most of the cases reviewed, the Bank was able to rely on the
government’s track record of policy implementation to gauge the ownership of the policies
proposed in the government’s strategy. It is noteworthy that 14 of the 19 operations reviewed
were follow-up operations in a series of programmatic single-tranche operations, demonstrating
that government programs largely were implemented as originally envisaged. A strong track
record is typically a good indicator of the government’s ownership and of its successful
management of the processes needed to build broader support for potentially controversial policy
measures. In four cases—Bhutan, Burundi, Guyana, and to some extent Niger—there was less of
a policy lending track record on which the Bank could rely, and past Bank engagement gave less
information to judge the broader ownership of the strategies and underlying policy actions.15 In
Burundi, this lack of track record was linked to the preceding conflict situation. (Subsection C on
customization discusses the genesis and ownership of sensitive program measures in such
situations.)
13
For a discussion of conceptual frameworks for assessing ownership, see World Bank, Adjustment Lending
Retrospective, Report 22723, June 15, 2001, p.73; see also J. Johnson and S. Wasty, Borrower Ownership of
Adjustment Programs and the Political Economy of Reform, World Bank Discussion Paper No. 4, Washington
D.C., World Bank, 1986; and World Bank, An Operational Approach to Assessing Country Ownership of
Poverty Reduction Strategies, OPCS, February 2005.
14
Paris Declaration on Aid Effectiveness: Ownership, Harmonization, Alignment, Results, and Mutual
Accountability (R2005-0058), March 7, 2005. The evaluation of countries for the Paris declaration builds on the
2005 CDF Progress Report: Enabling Country Capacity to Achieve Results, World Bank, July 2005. For the
assessment of ownership of strategies, see An Operational Approach to Assessing Country Ownership of
Poverty Reduction Strategies, World Bank, February 2005.
15
One country—Egypt—did not have a track record from policy-based financing; the engagement there was the
result of a long-standing policy dialogue on financial sector reforms.
10
24. Policy Space and Political Economy. The conditionality review noted the importance of
giving governments space for policy development and using political economy analysis to
underpin Bank engagements. Some of the recently approved operations offered evidence that the
Bank can work in a way that does not interfere with internal consensus-building processes. In
Guyana, which has a complex political economy situation and difficult relations between the
government and the opposition, the program set out under the Bank’s first PRSC turned out to be
too ambitious. Therefore, recently approved new grant did not add more conditions but rather
was strategically focused on areas of broad consensus, such as fiscal transparency issues.
Moreover, during grant preparation, opposition parties were actively consulted, with the
government’s consent, to ascertain that the supported agenda would not become hostage of
“election politics” but would carry broader appeal. By contrast, less policy space than desirable
may have been given to the incoming government in Burundi, where measures related to coffee
sector liberalization were taken by the outgoing government, thus giving less confidence about
the new government’s ability to fully appropriate the agenda. In some cases—for example in
Ghana and Tanzania—the Bank used analytic work to better understand the political economy of
reforms. The Networks are encouraging and supporting more of this kind of work, and
retrospective political economy analysis is being carried out for a few reforms in such sensitive
areas as agricultural liberalization and water privatization.
25. Analytic Work. Analytic work can play an important role in informing evidence-based
policymaking and reinforcing ownership of such policies (Annex 2 illustrates the variety and
magnitude of work that has been undertaken). Most recent operations explained how the broad
set of analytic work supported by the government, Bank, or third parties was used in defining
and evaluating policy options. However, the recent DPL retrospective highlighted that more
could still be done to reinforce ownership through early disclosure of plans for analytic work—
particularly for poverty and social impact analysis (PSIA)—to ensure that the analysis would
feature in the broader policy debate. Ghana’s PRSC-4 offered an example of how PSIA has been
applied strategically and upstream to inform several sensitive policy reform areas—for example,
the discussions on electricity tariff reform. In considering the reduction of petroleum subsidies in
Indonesia, the Bank and other development partners offered some analytic support to identify
options for mitigating the poverty impact of subsidy reform, but they avoided any appearance of
being a party to the internal debate. Subsequently, the government was highly successful in
communicating the need for reform and mitigating poverty impacts with the introduction of
unconditional cash transfers for the poorest households.
B. Harmonization
26. The conditionality review suggested that, under the lead of country authorities, Bank staff
should reach understandings with the government and other partners on a single and internally
coherent framework for measuring progress under the government’s program. Typically, such an
accountability framework should comprise actions, outputs, and outcome indicators drawn from
the government’s own program over a medium-term period. The conditionality review also noted
that in countries that receive support from many partners, the accountability framework should
be used to foster coherent interventions: all financial partners would support a set of policies that
aim at achieving a single set of results agreed under the accountability framework, possibly with
a division of labor among them.
11
27. Accountability Frameworks. All 19 reviewed operations set out clear accountability
frameworks agreed with the government that contained policy actions and expected results.
These frameworks, summarized in policy matrices, contained actions taken before approval of
the operation and those expected for the future (see Annex 2 for a detailed review). All
frameworks either specified the actions that would justify disbursement of a second tranche
(Burundi, Orissa), or triggers that would justify preparation of a follow-on operation (all other
reviewed operations).
28. Harmonization with other Financial Partners. Operations’ accountability frameworks
serve as tools for different levels of harmonization with other financial partners. In some cases,
such as Ghana, Indonesia, Tanzania, and Vietnam, the financing provided by the Bank and other
partners is coordinated through the framework laid out in single policy matrix. In other cases,
when there are few or no other budget support donors—for example in Armenia, Colombia,
Egypt, and Lao PDR—there is close cooperation on supported policies. In these cases, bilateral
partners frequently play a key role in providing technical assistance that is closely aligned with
the supported policy reform program, as in Lao PDR, Pakistan’s North-West Frontier Province
and the Indian State of Orissa. Finally, when the Bank is the only financial partner offering
policy-based financing, the accountability framework may play a limited role in harmonization—
as in Brazil’s operation in support of equitable growth. Broadly, it appears that the accountability
frameworks are being used flexibly to achieve different levels of coordination with other
financial partners, depending on country circumstances. Nevertheless, in cases such as Burkina
Faso or Madagascar, additional progress in achieving closer harmonization with other budget
support donors may be possible, including through streamlining or adapting policy matrices (see
also subsection E on transparency and predictability).
C. Customization
29. The conditionality review stated that accountability frameworks should never be used to
add policy actions to the government’s agenda, or leverage outside preferences. It noted that any
agreed accountability framework should be fully consistent with the government’s expressed
policy intentions and internal accountability mechanisms. Moreover, the detail, size, and
frequency of review of progress under government programs are expected to fully reflect country
circumstances, such as country capacity and readiness for reform; and the modalities and timing
of support should respond to country- and program-specific needs. The review also highlighted
that Bank support for sensitive policy reforms (such as privatization, trade liberalization, and
user fees) should be based on an understanding of the country-specific political economy of
reform and may be warranted when such reforms are part of a well-designed and broadly owned
government strategy.
1. Alignment of Bank Support with Government Programs
30. In all reviewed cases, Bank documents explicitly referred to the government program as
the primary source of the policy actions used to gauge progress (see Annex 2 for a detailed
review). However, as the conditionality review also discussed, not all broad government
programs and PRSPs lay out a detailed implementation plan on which policy matrices can draw
to establish accountability frameworks—and thus many accountability frameworks are a
summary of a variety of policy intentions mentioned throughout government strategy documents.
Typically, the individual country circumstances determine the particular process that leads to the
12
definition of the accountability framework. In many countries with repeated Bank support and
joint donor activities—such as Armenia, Burkina Faso, Ghana, Madagascar, Tanzania, Vietnam,
and Bangladesh’s education sector—the accountability framework (or, as in Tanzania, the
performance assessment framework) is updated annually through a predefined government-led
process that draws on the PRS progress reports.16 In IBRD and blend countries—for example, in
Brazil, Colombia, Guatemala, Egypt, Indonesia, Pakistan’s North-West Frontier Province, and
the Indian State of Orissa—the Bank typically draws on an explicit sector program or
government policy statement. In Bhutan, Burundi, Guyana, and Niger, Bank support was newly
defined through the DPO. Among these countries, the process in Guyana drew on the lessons of
previous engagements and took into consideration the political economy background, ensuring
broad support for the program measures supported by the Bank. In Bhutan, the government
voiced strong interest in Bank support for its 5-year plan, and support measures were derived
from this plan. In Niger, the government supported the new focus of Bank support on the social
and rural aspects of its own program; and policy measures in the accountability framework
derived from detailed sectoral documents (for public finance management reform, rural
development, and long-term development strategies in health and education), that were either
anticipated or endorsed in the PRSP Progress Report of 2004. In Burundi, Bank support was
defined on the basis of an interim PRSP that preceded the government’s coming to power in July
2005, and received the government’s broad endorsement.
31. Core Areas of Bank Support and Conditionality. Most Bank support (and conditions) in
recent operations have focused on public sector governance and the social sectors. Under these
broad areas, there is evidence of customized support—such as public financial management
reform in Indonesia and Vietnam; improvements to customs administration in Armenia,
Guatemala, and Madagascar; procurement reform in Ghana and Guyana; government pay reform
in Tanzania; creation of a system to track government property in Burkina Faso; and improved
public information on social programs in Colombia. These examples indicate broad-based Bank
support for improvements in managing core government functions and financial accountability,
in close alignment with a government’s own program and priorities. Many of the reforms that are
the focus of conditionality bring additional benefits: increased transparency of government
activities, greater financial accountability (including to parliament and citizens), and increased
quantity and quality of social expenditure.
2. Support for Sensitive Policy Reforms
32. As part of its overall support, the Bank may support area where governments have to
make hard choices about reform, such as privatization and public enterprise reform, price
liberalization and subsidy reform, trade reform, and user fee changes. The Bank may include
such policy actions in conditionality and policy matrices if the government intends to take
advantage of structural reforms to improve economic performance and reduce poverty (see Table
2 for a comprehensive summary of such reform). In the operations reviewed, 21 percent had a
privatization-related condition (26 percent had privatization-related policy actions in the policy
16
The policy matrix for Armenia explicitly set out the links between policy areas and the PRSP. In Burkina Faso,
the matrix drew on the priority action plan of the PRSP, and the budget support group is seeking to align the
PRS and review cycle more closely in future years.
13
matrix).17 At the same time, if privatization is not the government’s priority, the Bank may
support public enterprise restructuring; 16 percent of the reviewed operations had at least one
condition in that area. One Program Document (Brazil’s) explicitly stated that the government’s
program did not include controversial privatization or trade reforms since “reforms that impose
too high costs in the short run (or that appear ideologically confrontational) may not represent an
optimal growth strategy.” Of the reviewed operations, 11 percent had conditions connected with
price liberalization or subsidy reform, and 5 percent had conditions related to trade reforms.
None of the supported programs included user fee increases, but 11 percent had measures to
reduce or eliminate user fees or subsidize access to basic social services. These sensitive policy
reforms are discussed further in the following paragraphs and summarized in Table 1.
Table 2. Select Policy Reforms Supported by World Bank Operations
Policy reform Countries Operations with Policy reform Countries Operations with
conditionality conditionality
(percent) (percent)
Privatization Burkina Faso, 21 (26) Public enterprise Guyana, Lao 16
Burundi, restructuring PDR,
Egypt, India- Vietnam
Orissa,
Pakistan
NWFP
Price Burundi, 11 (16) Commodity price None 0
liberalization or Ghana, regulation or
subsidy reduction Indonesia subsidy
introduction
Trade reform, Armenia, Lao 5 (16) Tariff increase None 0
including tariff PDR, Vietnam
reduction
User fee None 0 User fee reduction Burkina Faso, 11
introduction or or elimination Niger
increases
Note. Countries in boldface type are those with related conditionality. Parentheses indicate the percentage of
operations with related conditions and/or benchmarks.
Source: World Bank staff review of program documents.
33. Privatization. Of the 19 operations reviewed, 5 contained privatization or related

activities. In most of these cases there is clear evidence of a government-led process and
ownership; but in some, additional attention to criticality and overlap with IMF conditionality in
structural areas would have strengthened Bank engagement further.
• In Burkina Faso, the latest PRS Progress Report includes three measures related to
privatizing the telecommunications company, preparing the energy company for
private sector management and preparing a minority private participation in the state
petroleum import company.18 These were included as benchmarks of PRSC-6. All of
these actions are being implemented over several years and with signs of strong
17
As Section II explained, 18 percent of conditionality is in the area of private sector and financial sector reform,
including privatization.
18
Burkina Faso PRS Progress Report for 2004, May 2005, paragraph 694 ff.
14
ownership. The government’s strategy in the telecommunications sector builds on

broad success in Africa with using privatization to increase competition in and access
to telecommunications, and reducing prices. An earlier attempt to privatize a minority
share in the state telecommunications operator ONATEL failed, and the government
is now offering a majority share for sale, albeit recently with some vocal opposition
from ONATEL workers, which the government is managing through an active
dialogue with the unions. In the electricity sector, the government is interested in
establishing a framework that would allow a private operator to manage the state
electricity company in order to increase efficiency ahead of the interconnection with
neighboring countries, which in turn is expected to reduce the cost of power
generation. In both the electricity and petroleum sectors, the government is still
undertaking due diligence measures for private sector participation, and delays in
these processes compared with initial government intentions have not affected the
timing or volume of Bank lending.
• In Burundi the November 2003 I-PRSP referred to the government’s intention to
launch a broad privatization program; it mentioned past opposition and noted the
government’s intention to work at a pace that would allow building consensus.19 The
Bank’s grant included conditionality related to bringing two state companies (one for
enriched food, one a pharmaceutical import company) to the point of sale (prior
action) and to relaunching bids for the non-coffee-related assets of the coffee-sector
board (second-tranche condition). A number of program benchmarks also called for
adoption of a privatization strategy and activities supporting the privatization
program. The Bank’s documentation noted that the new government in August 2005
reiterated its commitment to the strategy laid out in the I-PRSP, but wanted to
proceed with simple and noncontroversial transactions while conducting preparatory
work for more complex privatization.20 Overall, the conditionality related to
privatization appears to have been based on the new government’s clear commitment
to these small and fairly noncontroversial privatizations under a broader government
privatization program. However, the fact that these transactions are simple and the
companies’ impact on the economy is likely small (the importance of the actual
transaction for the economy is not discussed in Bank documents) suggests that they
may not be the most critical; thus their use as conditionality, especially for the second
tranche, could be questioned.21 In addition, the conditions were structural benchmarks
under the second review of the IMF’s Poverty Reduction and Growth Facility
(PRGF), approved on July 27, 2005, and thus they were already covered under IMF
conditionality before the new government was appointed and the Bank operation was
prepared.22
• In the Arab Republic of Egypt the Bank supported the government’s financial sector
reform program, which included the privatization of the Bank of Alexandria and the
19
Burundi Interim Poverty Reduction Strategy Paper, November 2003, paragraph 246 ff.
20
Burundi, Economic Reform Support Grant, Report No. 36723-BI, July 6, 2006; paragraph 137.
21
The Good Practice Note for Development Policy Lending and Program Conditionality in Fragile States also
suggests a more streamlined and cautious approach.
22
Burundi: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth
Facility, IMF Country Report No. 05/322, September 2005.
15
sale of government shares in several joint-venture banks. The government’s program

was designed on the basis of technical assistance, including a 2002 Financial Sector
Assessment Program report, three Financial Sector Reform and Strengthening
Projects, and assistance by bilateral financial partners. A program for 2005-08 was
adopted after a lengthy process of consensus building and the appointment of a new
cabinet in September 2004. The government restructured and recapitalized the Bank
of Alexandria in the run-up to the privatization, and it has committed to job security
for current employees. The anticipated benefits include improved financial services
and greatly reduced financial risks for the government’s budget. In spite of some
public opposition, the government has repeatedly voiced strong commitment to the
program. The bank was sold to an anchor investor in October 2006, and the
privatization process yielded a firm bid at US$2.016 billion, exceeding expectations.
• In the Indian State of Orissa, the government initiated a public enterprise reform
program focused on selling commercial businesses, closing loss-making enterprises,
and privatizing viable units. The Bank’s support focused on overall progress in
improving the efficiency of the public sector and reducing government involvement
in commercial activities in order to reduce fiscal exposure. The Public Enterprises
Reform and Privatization Policy of 2002 included severance pay provisions and
social safety net support for voluntarily separated workers to reduce potential
negative effects. The program benefitted from technical support from donors, notably
the UK Department for International Development. The government, which is
establishing these policies as part of a broader reform program aiming at accelerating
growth and poverty reduction under the Tenth Five-Year plan, has shown steady
commitment to program implementation, and was returned to power in 2004 for a
second term. Particular conditionality associated with the Bank loan included a
general assessment of progress under the 2002 public enterprise reform program,
including selling of assets of 2 closed enterprises, privatization of 2 enterprises
(related to milling), and environmental audit of 20 further enterprises.
• In Pakistan’s North-West Frontier Province, the government’s strategy was laid out
in a provincial document. As part of the program, the government divested a minority
share in the Khyber Bank through a new emission to the public, an action that was
also a prior action for Bank lending. In addition, the government used leasing
arrangements to involve the private sector in a few small hydropower projects. These
two actions were not considered controversial, and both were directly derived from
the provincial government’s priorities.
34. Public Enterprise Restructuring. Three country programs included Bank support to
improve functioning of public enterprises, all with strong evidence of a government-owned and –
led program. In Guyana, the Bank supported the environmental due diligence surrounding the
expansion of the government’s Skeldon sugar factory; in Lao PDR, the government conducted
diagnostic work and performance monitoring through annual international standard audits of
selected large public enterprises and developed restructuring plans; and in Vietnam, the
government program supported by the Bank through PRSC-5 included changes in management
practices of state-owned enterprises to improve their performance.
16
35. Price and Subsidy Reform. Three of the 19 operations reviewed contained price
liberalization, price reforms, or subsidy reform among their measures. In one case, conditionality
could have been more appropriately directed to sector reforms than price liberalization.
• In Burundi, the (outgoing) government liberalized the pricing and marketing of
coffee, the main export crop (first-tranche condition), under a sector reform program
developed after the adoption of the I-PRSP. The new government committed to
develop a detailed implementation action plan for coffee sector reform (second-
tranche condition), including debt restructuring, setting of regulatory framework, crop
financing, and privatization of coffee washing stations and accompanying social
measures. As the Bank’s documentation explained, the Bank’s support for sector
reform was intended to help the government define an appropriate legal, regulatory,
and institutional framework for a liberalized and privatized sector in order to achieve
sustainable increases in incomes for coffee farmers.23 Key steps in the liberalization
agenda taken in January and June 2005, the last months of the outgoing interim
government, reduced the ability of the incoming government to determine the policy
agenda. Most of the reform steps—including the Bank’s prior actions—were also
included as structural benchmarks under the second review of the IMF’s PRGF-
supported program, which had been approved in July 2005. The Bank’s
documentation noted coffee farmers’ concerns about privatization and stakeholders’
limited information about coffee sector reform.24 Taken together, these facts suggest
that it may have been more appropriate to focus Bank conditionality on activities
(listed in para 113 of the Program Document) to achieve a successful sector reform,
most notably the regulatory framework, financing, and information management, and
measures to reduce possible negative effects on poor people. The Program Document
also highlights the need to more fully develop the strategy for the planned
privatization of coffee washing stations (a condition for the Highly Indebted Poor
Country Initiative completion point), especially in light of the failure of the first
attempt to sell two stations under the IMF’s PRGF-supported program.
• In Ghana, one of the program benchmarks called for a review of the electricity tariff
structure to ensure that tariffs adjust to the increased cost of energy generation
(notably from imported oil) and to separate transmission charges from generation
charges. These measures are incremental steps of a broader government reform
agenda for the energy sector, summarized in the PRSP25 and implemented with
support from several donors. The review of the tariff structure was subject to a prior
poverty and social impact study, which found that the old structure implied a higher
unit tariff for consumers with the lowest consumption and that a minimum of 50
percent of lifeline tariff benefits accrued to nonpoor people.
• In Indonesia, the Bank’s program supported the significant reduction of petroleum
subsidies by adjusting petroleum prices to be closer to world market prices.
Supported by poverty and social impact analysis, the government developed an
unconditional cash transfer program for poor people that was rolled out in parallel
23
Burundi, Economic Reform Support Grant, Report No. 36723-BI, July 6, 2006; para. 113.
24
Ibid., Annex 5.
25
Growth and Poverty Reduction Strategy II, November 2005, p. 36.
17
with the price adjustments. This measure reduced the negative effects of the
petroleum price jump on poor and vulnerable groups and avoided the potential
destabilizing political fallout of the price adjustment.
36. Trade and Tariff Reform. Three of the operations reviewed contained conditions or
benchmarks related to accession to the World Trade Organization (WTO). In Armenia, Lao
PDR, and Vietnam, WTO accession has been part of the declared policy objectives of the
government, with strong government ownership. In Armenia, WTO accession was included as
progress indicator in the PRSP,26 and a program benchmark for PRSC-2 concerned removal of
reference prices. Similarly, in Lao PDR WTO accession was an explicit objective of the PRSP,27
and two program benchmarks of PRSC-2 referred to related documentation and to
implementation of commitments under the Asia Free Trade Association. In Vietnam, the
Comprehensive Poverty Reduction and Growth Strategy made explicit reference to the objective
of WTO accession.28 Bank support under the fifth PRSC included a new intellectual property law
in line with WTO requirements as a prior action and contains several program benchmarks
related to the removal of quantitative import restrictions in line with WTO regulations, as well as
identification of measures to counter the social and economic effects of WTO accession.
37. User Fees. In none of the reviewed operations did the Bank support increases in user
fees. Instead, conditionality in the social sectors frequently included measures to reduce the cost
of access and either remove or substantially reduce user fees for certain groups. (Two operations,
in Colombian and Ghana, also included measures to create or improve health insurance coverage
for poor people.) Although reductions in user fees generally have popular support, they may face
opposition from vested interests. In the reviewed operations, the following included user fee
reduction or elimination:
• In Burkina Faso, prior actions for PRSC-6 included lowering costs for obstetric care.
This measure aimed at reducing maternal mortality rates, one of the Millennium
Development Goals (MDGs).
• In Niger, to address the MDGs on maternal and child mortality, particular emphasis
was placed on creating a scheme for free contraceptives, prenatal care, deliveries by
Caesarean section, and child health care. Additional program actions chosen as
conditions monitored the appropriate financing of these measures through the
government’s budget.
D. Criticality
38. The 2005 conditionality review noted that in establishing the conditions for lending,
Bank and country staff should choose from the agreed accountability framework policy and
institutional actions that are critical for achieving the results of the program. It also stated that
triggers in programmatic operations should be clearly marked and identified to country
authorities and in Board documents. It indicated that Bank operational documents should rely to
the extent possible on the government’s existing presentation of programs and policies, and it
26
Armenia Poverty Reduction Strategy Paper, November 2003, Box 6.1, p. 54.
27
Lao PDR National Growth and Poverty Reduction Strategy, June 2004, Table 3.10.
28
Vietnam Comprehensive Poverty Reduction and Growth Strategy, November 2003, p. 44.
18
noted that if the agreed accountability framework coherently sets out actions, outputs, and
outcomes for the government program, there should be no need for the Bank’s Board
documentation to include more than a few conditions and results indicators.
39. Documentation of Conditionality. All operations reviewed for this report showed clearly
the program supported by the Bank, and the actions that served as prior actions or tranche-release
conditions in Bank operations. The policy matrices in all these operations also clarified the
sequencing of actions over time, simplifying the review of criticality. (See also the discussion
below on transparency and results.)
40. Criticality of Conditions. In the operations under review, most actions identified as prior
actions, triggers, and conditions in the agreed accountability frameworks were clearly critical to
program objectives, but there was still some conditionality related to small and less significant
processing steps. (Annex 2 reviews in detail for each operation whether measures that have been
identified as conditions can be considered to be critical.) For example, many operations
contained conditions related to the adoption of action plans (Burkina Faso, Egypt, Indonesia, Lao
PDR, Niger, Pakistan North-West Frontier Province), which are not obviously critical. Another
problem in evaluating the criticality of conditions is vague formulations (such as a prior actions
to “begin implementation of the recommendations of the sector review” in Madagascar). A good
example of clearly formulated prior actions is Colombia’s Labor and Social Reform Loan-3.
41. Number of Benchmarks. As paragraph 12 and Figure 2 showed, since the adoption of the
good practice principles the average number of benchmarks in operations has declined
somewhat—to 27 in IDA countries and 7 in IBRD and blend countries. Despite this positive
recent trend, the use of benchmarks will need to be monitored closely in the future, in particular
in IDA countries, to ascertain that the trend continues and good practice is more consistently
applied.
42. Matrix Size and Country Circumstances. The challenge for Bank teams is how best to
present multisectoral interventions when the PRSP or sector strategy process does not yield
monitorable action plans. In such cases, as accountability frameworks are developed, joint donor
or Bank support may end up being the focal point for the definition of “implementation road
maps.”29 Whether such dialogue ultimately results in large matrices with many benchmarks may
depends on country circumstances and the dynamics of the donor community as a whole. This is
illustrated by Tanzania’s and Ghana’s fourth PRSCs, both of which are the first operations in a
new programmatic series harmonized through budget support groups. In Tanzania, past
experience with an unwieldy performance assessment framework resulted in a complete redesign
for the second PRSP, which is focused on a few selective actions, sector reviews, and selected
outcomes. The Bank no longer uses a separate matrix with “benchmarks.” By contrast, in Ghana
the government used the interaction with the multidonor budget support group as a device to
define annual implementation plans, and the multidonor budget support matrix for the second
29
It has also been suggested that it would be too much to expect the PRS process to deliver performance
assessment frameworks that satisfy donor needs, that donors should recognize the tensions between recipient
country and donor interests and find out what part of policy action monitoring can produce useful results and
apply selectivity to conditions/actions based on such evidence. See David Booth, Karin Christiansen, and Paolo
de Renzio, “Reconciling Alignment and Performance in Budget Support Programs,” in Budget Support as More
Effective Aid? Recent Experiences and Emerging Lessons, Stefan Koeberle, Zoran Stavreski, and Jan Walliser
(eds.), April 2006.
19
PRSP continues to contain about 40 benchmarks. Overall, these findings suggest that the donor
community as a whole needs to be careful not to overload program matrices and to add to the
complexity or burden of supported programs. However, the evidence shows that the Bank now
tends to use benchmarks with greater discipline in most new programmatic series: the use of
benchmarks in new programmatic series is significantly below those in countries at the end of
programmatic series in FY06—such as Burkina Faso, Madagascar, and Vietnam—which began
in FY04 or earlier.30 As these countries now enter a new programmatic cycle, there is scope in
FY07 for trimming policy matrices and supporting a further reduction in the use of benchmarks.
E. Transparency and Predictability
43. The 2005 review suggested that in the context of medium-term Bank support, progress
should be reviewed regularly and in line with a country’s monitoring and evaluation cycle,
drawing to the extent possible on internal accountability processes. According to the review, any
financial support decisions should be announced sufficiently early to be taken into account in the
country’s own decisionmaking and budget allocation processes, and performance reviews should
actively promote a culture of results management and measurement.
44. Documentation of Programs and Results. In all the operations reviewed, the
documentation spelled out all conditions, triggers, and expected results, laying the basis for a
transparent evaluation of progress under the program in line with government priorities on
financing, and jointly with other financial partners. As Annex 2 discusses in detail, weaknesses
for transparent progress reviews in a few operations may arise from vague formulation of
triggers, which may leave too much room for interpretation to be a useful progress gauge. In
several operations results indicators lacked baselines, which reduced their value as indicators of
progress.31 At the same time several operations—such as the Armenia, Burkina Faso, and
Vietnam PRSCs—are following best practice in simultaneously and consistently reporting on
both program actions and related outcome indicators in each operation of the programmatic
series.
45. Responding to Country Needs. Among the 19 operations reviewed, when countries have
voiced clear preferences for a review cycle consistent with regular annual financing, the Bank
has generally responded to that demand and been fairly predictable. The operations in, Burkina
Faso, Guatemala, Indonesia, Madagascar, and Vietnam exemplify this Bank response to requests
for regular annual program reviews and financing decisions. Countries such as Brazil, Colombia,
Egypt, or India put less weight on regular review cycles since they can access capital markets to
meet their financing needs, and the speed of program implementation and progress reviews is
more varied.
46. Managing Tensions between Predictability and Performance. The Bank cannot always
escape the tension between predictability and performance. Ultimately, performance review
requires a judgment as to whether overall progress under a program warrants additional
financing, and at what level of financing. Thus it is important to time these reviews appropriately
to avoid disruptive financing decisions (e.g., reductions in anticipated financing amounts within
the government’s fiscal year). In harmonized budget support settings, such as Ghana and
30
In Madagascar, the size of the matrix also appears to be unnecessarily large, even from a perspective of broader
program monitoring; see Annex 2.
31
See Development Policy Lending Retrospective (SecM2006-0319), July 13, 2006.
20
Tanzania, financing decisions are therefore increasingly made at a time that precedes the budget
allocation decisions so that the government can adjust the budget in line with available financing.
In Tanzania, for example, the timing of the PRSC-4 was changed to respond to the newly agreed
review cycle in that country; and efforts along these lines are under way in several countries with
recurrent budget financing under PRSCs, such as Burkina Faso and Madagascar. Going forward,
risks for predictability may arise in two-tranche designs, particularly in relatively weak policy
environments. Second-tranche conditions, if not carefully and realistically formulated, do not
allow a graduated response to performance that is weaker than anticipated, and they can hold up
all anticipated future financing. While they may give a strong performance signal (since any
single condition can hold up the second tranche), they can be less appropriate in fragile
environments where priorities may shift more frequently and predictable support is particularly
important. Challenges for predictable financing can also arise where new programs are being
designed or where interventions are considered to be stand-alone support. In Burundi, for
example, the preparation of the operations took longer than the government and other external
partners anticipated and was delayed into 2006, partially for reasons internal to the Bank
(staffing changes and prolonged internal review processes related to fragility and risks in
Burundi).
IV. CONCLUSIONS AND RECOMMENDATION
47. This report reviews a set of 19 operations that have been processed in full since the
Development Committee discussed the 2005 conditionality review. The report finds that the
Bank’s recent practice in the use of conditionality is broadly consistent with good practice
principles: most Bank programs are well aligned with government priorities and customized to
country circumstances, and they clearly spell out expectations. They make frequent use of
opportunities for harmonization, generally highlight critical actions as conditions, and respond to
government needs for predictability of financing decisions. Management is therefore of the view
that the Bank has made satisfactory progress in implementing the recommendations of the 2005
Review of World Bank Conditionality.
48. Areas for Further Improvement. The report identifies areas in which improvements in
the Bank’s application of conditionality could, along with the recommendations of the DPL
retrospective, help improve Bank operations:
• Upstream disclosure of Bank analytic work that underpins program design, to
incorporate recommendations into the government’s PRS and policymaking cycle and
give political space for debate.
• Avoiding the use of policy conditionality in sensitive areas where ownership is
uncertain or the political environment fragile, and avoiding overlap of conditionality
with the IMF unless it is clearly critical for the success of the Bank-supported
program.
• Greater adherence to the criticality principle by avoiding certain process conditions
such as those related to adopting action plans.
• Continuous monitoring of the use of benchmarks, with a particular emphasis on
reducing their use in first operations in new and mature programmatic series.
21
• Continuing work with other financial partners on defining joint accountability

frameworks with limited and disciplined use of policy actions, which are conducive
to program reviews that avoid intra-year financing cuts for government budgets.
• More systematic use of baselines for results indicators in DPO results frameworks.
49. Next Steps. Management will continue to use internal training and corporate review
processes to further improve DPO design, as indicated above. The use of conditionality and the
adherence to the good practice principles will be subject to regular monitoring under biannual
development policy lending retrospectives, with the next retrospective planned for early FY09.
50. Recommendation. On the basis of this review, Management recommends that, for the
purposes of additional contingent contributions to IDA14, the Executive Directors make a
determination that the Bank has made satisfactory progress in implementing the
ANNEX A. OPERATION REVIEWED AND COMMITMENT AMOUNTS
IBRD IDA
Country Project ID Operation Concept Review Approval Commitment Commitment
Pakistan P098866 NWFP SAC II -- 09/27/2005 10/25/2005 0 50
Pakistan P098867 Pakistan PRSC I 09/27/2005 10/25/2005 0 150
Indonesia P096594 DPL-2 10/14/2005 12/15/2005 400 0
Armenia P093459 PRSC-2 11/01/2005 01/19/2006 0 20
Bangladesh P084567 Education Sector-2 01/11/2006 03/07/2006 0 100
Guyana P078703 PRPMO-1 02/28/2006 04/27/2006 0 9.6
Lao PDR P096635 PRSC-2 01/30/2006 04/27/2006 0 8
Tanzania P095509 PRSC-4 12/12/2005 05/09/2006 0 200
Bhutan P078807 DPL-1 12/01/2005 05/25/2006 0 15
Pakistan P090689 NWFP DPC-1 09/27/2005 06/01/2006 0 90
Brazil P095675 Equitable Growth-2 02/13/2006 06/06/2006 601.5 0
Niger P096411 Rural and Social-1 12/20/2005 06/13/2006 0 50
Egypt, Arab
Republic P088877 Financial Sector 11/11/2005 06/15/2006 500 0
Ghana P095730 PRSC-4 03/13/2006 06/15/2006 0 140
Burkina Faso P078996 PRSC-6 02/15/2006 06/20/2006 0 60
Vietnam P086361 PRSC-5 03/01/2006 06/22/2006 0 100
Madagascar P096102 PRSC-3 03/30/2006 07/13/2006 0 40
Colombia P094097 Labor-3 04/17/2006 07/25/2006 200 0
Burundi P091475 Economic Reform 10/06/2005 08/01/2006 0 60
India P097036 Orissa Social-3 10/11/2005 08/01/2006 150 75
Guatemala P094897 DPL-2 07/05/2006 08/29/2006 100 0
ANNEX B. REVIEW OF IMPLEMENTATION OF THE FIVE GOOD PRACTICE PRINCIPLES
Country
Principle 2: Principle 3: Principle 5: Transparency
Operation Principle 1: Ownership Harmonization Customization Principle 4: Criticality and Predictability
Indonesia DPL-2 The government's The program document The policy matrix of the The policy matrix contains The policy matrix
medium-term program defines the actions in a operation lays out Bank 12 prior actions under transparently lays out
RPJM lays out three sequential manner and support for three (out of three pillars. There are no actions and results
main objectives: (i) safe outlines expected results. seven) priorities of the further benchmarks. The expected to be taken under
and peaceful Indonesia; The policy matrix has annual implementation plan program is well focused the program. The
(ii) just and democratic been fully harmonized of the government in the on a few actions. document also has a
Indonesia; and (iii) a with other development areas of (i) reduction of However, a few actions focused results framework
prosperous Indonesia. partners, notably the poverty and disparity; (ii) are relatively vaguely and indicators with
Its goals are translated government of Japan and employment opportunities, formulated and focus on benchmarks, allowing
into government the AsDB, which investment, exports; (iii) adoption of action plans, evaluation of changes in
activities through an provided parallel eradication of corruption, thus they may not appear indicators over time when
annual work plan called financing for the bureaucracy reform, law to outside observers to be moving from one operation
RKP. The Bank has operation. Coordination enforcement. Prior actions directly critical for to the next. However, some
supported the program has also been close with included reductions in achieving the targeted of the follow-on actions for
through analytic work in the IMF and with partners subsidies to the non-poor results. At the same time, DPL-3 are complex and
the area of public in supporting public as likely the most difficult these actions are thus may be less clear as
expenditure, growth, financial management reform, as well as actions expected to result in guideposts for future
investment climate, and reforms. aiming at improved tax concrete progress as support than would be
public financial administration and debt these action plans are desirable. The Indonesian
management and management, implemented. government has placed a
procurement. decentralization, progress high premium on
on planning for financial predictability of financial
sector reform, improved support, which for the first
regulation of public two operations followed an
financial management approximate 12-month
laws, and strengthened cycle, with a third expected
internal investigation unit in to follow the same rhythm.
MOF.
26 ANNEX B
Country
Armenia PRSC-2 The government The program document The policy matrix annexed The program matrix The policy matrix
presented its program in summarizes the activities to the program document extracts a number of key (developed by government)
the 2003 PRSP. The supported under the lays out policy areas reform measures from the lays out a transparent
program aims at (i) operation in a program supported by the Bank PRS. The 18 prior actions sequence of actions and
promoting sustainable matrix. The matrix lays under four themes: address weaknesses or expected results. The
economic growth out actions over a three- (i) consolidating bottlenecks in each of the government and the Bank
through macroeconomic year period and expected macroeconomic discipline different policy areas are engaged in a review
stability and private results. It serves primarily and strengthening summarized under the cycle aligned with the PRS,
sector development; as the summary of the governance; (ii) sharpening four themes and appear and the second PRSC
(ii) enhancing human progress reviews with the competition and to be well selected for followed the first after 14
development and Bank for the purposes of entrenching property rights; criticality. Some actions months. The results focus
improving social safety PRSCs. However, under (iii) mitigating social and were formulated vaguely of reviews is fostered
nets; (iii) implementing different components of environmental risks; (iv) ("satisfactory progress"). through a detailed
prudent fiscal policies the program, close modernizing the rural Given that the operations monitoring framework that
and reforming the tax coordination takes place economy. The link between matrix serves as broader includes baselines,
system; (iv) improving with donors present in these themes and the implementation intermediated targets, and
public infrastructure; those areas (e.g., with PRSP is clarified in the framework for the program targets with
(vi) improving core DfID and the EC on program document. Prior government in the context annual updates of
public sector functions. governance and PFM actions include measures of its PRS, it contains a indicators.
Bank supported the management; with UN to (i) improve tax broader set of actions,
government with agencies and DfID on administration and including an additional 21
analytic work on social sectors; and with customs; (ii) improve public benchmarks, exceeding
economic management, USAID and MCC on financial reporting; the Bank average in this
growth, public financial sector reform). (iii) reduce restriction on air regard. These could
expenditure, poverty, services; (iv) improve possibly be reduced if the
public financial regulatory framework for policy matrix for the
management, utilities; (v) improve laws operation develops further
competition policy, governing credit; and eventually leaves the
financial sector, rural (vi) develop draft pension definition of other actions
economy, and others. law; (vii) improve hospital to other vehicles.
The government takes and education services;
the lead in preparing the (viii) better manage forests,
PRSC policy matrix as agricultural extension, rural
part of the PRS process, infrastructure (including
in consultation with preparation for public-
stakeholders, civil private partnerships). One
society, and donors. benchmark refers to
reduced use of reference
prices in line with WTO.
27 ANNEX B
Country
Bangladesh Education Sector-2 The government The program document The policy matrix of the The program matrix The policy matrix lays out
program builds on the summarizes the previous operation presents the summarizes a broad the core actions of the
2005 PRSP. Education actions, anticipated supported areas of the reform program program in a transparent
plays and important role reforms steps, and reform program under four succinctly. The 13 prior manner, and informs about
in the PRSP, and the targeted results of the pillars: (i) overall program; actions are focused on prior actions, expected
medium-term strategies supported reform (ii) system management; critical steps to implement actions for the future, and
for the primary (PEDP program in a policy (iii) teacher quality; and the government's anticipated results.
II) and secondary matrix. The primary (iv) curriculum and program across three Transparency is somewhat
education sector education sector program textbooks, in alignment different areas. The focus diminished by the
underpin the PRS and benefits from multidonor with the government's is aided by the existence discrepancy between a few
its objectives. The support using different program. Prior actions are of comprehensive of the actions in the policy
sectoral strategies were support instruments and related to (i) external sectoral strategy matrix identified as prior
developed by line is coordinated under the evaluation of schools; documents. As a result, actions and the prior
ministries, with input PEDP II umbrella, (ii) redirection of school the use of other actions of the Legal
from experts outside ensuring the consistency construction to benchmarks in the policy Agreement summarized in
government, of the framework set out underserved areas; matrix is limited to 10. Box 6. Most results are
consultations/workshops in the policy matrix with (iii) design of stipend formulated in terms of
with stakeholders, and joint donor assistance of program for poor; targets that are
development partners. the primary education (iv) greater transparency independent of baselines
The program includes program. In secondary and tracking of (reduce indicator x to y
reforms in the education, Bank support expenditure; (v) improved percent) but gauging the
management of the is harmonized with other financial management; magnitude of anticipated
education system, donor agencies' financial (vi) reform of teacher changes may have
targets improvements in support and technical accreditation, training, and benefited further from
teacher effectiveness, assistance in select minimum requirements; availability of baselines in
and includes curriculum areas of the program. (vii) evaluation of the matrix.
and textbook reform. competitive process for
The program textbook acquisition.
formulation benefited
from support by JICA,
EC, and AsDB analytic
work.
28 ANNEX B
Country
Guyana PRPMO-1 The government The program document The policy matrix of the The policy matrix is The policy matrix lays out
program supported by defines the key actions operation lays out Bank focused on core program the actions taken before
the operation builds on that justify the operation, support in a few select steps in the three approval of the operations,
the 2001 PRSP and sets out actions areas of the government's selected areas. These are establishes a link with prior
subsequent progress anticipated for future broad program under the summarized in six prior support, and gives a
reports. The PRSP support, and defines pillars of (i) macroeconomic actions in the policy transparent indication of
contains seven strategic expected results. These stability; (ii) improved matrix, albeit some prior actions expected to be
pillars aiming at broad- together form the quality of public sector actions contain several taken before the next
based growth, accountability framework management; and (iii) steps and thus the operation to evaluate
environmental agreed with the improved climate for number of actual actions progress. Some
protection, stronger government. The policy environmentally to be taken is slightly weaknesses exist through
institutions, and better matrix serves for sustainable development. higher, but still the missing of clearly
governance, investment assessing progress for Prior actions are focused significantly below Bank specified baseline values
in human capital, the purposes of the on improvements in public average. The operation for results indicators,
investment in physical Bank's policy-based investment planning, public has no benchmarks. The making tracking of results
capital, improved safety support, although the financial management and design reflects lessons over time more difficult.
nets, and policies to interventions in different procurement reforms, learned on program focus Because of performance
address pockets of areas have been closely better PRS monitoring, and conditionality issues, the original PRSC
poverty. The PRS and coordinated and progress in environmental discussed in the ICR for series was not continued,
subsequent progress harmonized with other management of the sugar the 2002 PRSC. and under the new set of
report benefited from donors operating in the sector, and a better legal two operations, it is not
consultations and relevant sectors (e.g., basis for forestry expected that support will
participation. The Bank with IADB on public management. be annual - a fact that is
and other donors have financial management taken into consideration by
provided technical reforms). the government in planning
advice in several areas, its budget.
such as fiduciary
systems and
procurement.
29 ANNEX B
Country
Lao PDR PRSC-2 The government's The program document The policy matrix The policy matrix The matrix lays out the
program is laid out in lays out the sequence of summarizes focal areas of identifies 10 prior actions expected sequence of
the 2004 National policy actions used to Bank support under three for this operation, and actions and expected
Growth and Poverty assess performance components: (i) public contains an additional 32 results in a transparent
Eradication Strategy. under the program, in resource management; actions under the different manner. However, the
The NGPES was correspondence with the (ii) public expenditure components. Although sometimes vague
developed through a government's letter of policies; and most of the underlying formulation of actions and
participatory process development policy. The (iii) sustainable growth, reform processes are triggers reduces clarity for
and seeks to (i) maintain policy framework set out indicating the direct link of critical steps in making outside observers how
macroeconomic in the matrix serves the activities in the policy progress with budget about progress will be
stability; (ii) deepen primarily as tool for the matrix with the NGPES. management, fiscal measured, even if for those
structural reforms, Bank's dialogue, as no Prior actions aimed at management, and social engaged in the policy
including public financial other donor currently is (i) improvements in public indicators, not all of the dialogue their importance
management and state- providing budget support. expenditure management, actions are formulated in and purpose may be
owned enterprises; However, under the including budget a way that allows one to evident. The results focus
(iii) invest in social umbrella of the PRS and classification and recognize these of the operation is helped
sectors; (iv) invest in the Bank's operation, accounting; (ii) external underlying steps (e.g. the through the formulation of
infrastructure; (v) invest donors (such as EC, audit of state-owned use of the adoption of an targeted results and the
in rural development JICA, JBIC, SIDA, and enterprises; (iii) approval annual action plan for inclusion of baselines.
and natural resource AsDB) are providing for restructuring of four public expenditure
management; technical assistance for state-owned enterprises; management reform or
(v) improve capacity. related policy reforms (iv) financial sustainability the adoption of an action
The Bank offered and capacity building, of the power sector plan to render the
analytic support in form assuring closely including through future electricity sector viable).
of work on public coordinated and tariff increases; (v) regular Moreover, a number of
financial management, harmonized support. payment of teachers and benchmarks appear in
poverty, and economic Several donors are health workers; areas that are not
management, trade considering co-financing (vi) enactment of a new intended to contain critical
integration, investment of future operations. business law facilitating actions for the program
climate, and expenditure registration and business and thus the matrix could
tracking. Prior to the start-up. Two benchmarks be reduced in size without
PRSC series, the Bank refer to the establishment necessarily losing areas
was engaged under a of a checklist for identified as critical.
financial management documents required for Efforts in this regard have
reform program, which WTO accession and the already been made
provided a track record implementation of between PRSC-1 and
in a core area of the commitments for tariff PRSC-2.
reform program. reduction under AFTA.
30 ANNEX B
Country
Tanzania PRSC-4 The government's The program document The PAF is organized in six The list of prior actions is The operation sets out
program is laid out in includes a performance themes representing the shorter than the average transparently prior actions
the 2005-10 PRSP, assessment framework three MKUKUTA clusters Bank operation, with 10 and expectations for future
known as MKUKUTA. It of outcome indicators, with additional details actions. The operation engagement as part of the
is informed by underlying processes for presented regarding does not use agreement between donors
“Tanzania's Vision progress reviews, and (i) resource allocation and benchmarks. Actions and government. The
2025” and has an actions agreed among all budget consistency; represent a core element timing of the operation is
increased focus on budget support donors as (ii) public financial of the policy dialogue. In being pushed forward to
growth and governance the central accountability management; and the area of pay reform, allow for better
compared to the first framework for assessing (iii) macroeconomic the action to “agree on a predictability of funds
PRSP. The MKUKUTA progress. The stability. The PAF identifies process to reform the ahead of the budget year in
benefited from broad- performance assessment underlying review public sector allowances case of reductions in
based consultations of framework (PAF) also processes and contains regime based on the originally expected
Parliament, civil society, contains actions related policy actions. For PRSC- recommendations of an financing volumes in
faith-based groups, to "satisfactory progress 4, the Bank's prior actions ongoing review” may response to performance.
private sector, districts review" in sectors, the were necessarily derived appear to be process- The new PAF also centers
and villages, and meaning of which has from the accountability oriented and relatively far on measurement of results
donors. It is based on been agreed and defined framework established removed from the and thus the joint
targeted outcomes for between donors and prior to the PAF. Prior targeted outcomes. framework fosters results-
(i) growth and income government. Including actions focused on (i) crop However, this action focused interventions.
poverty; the Bank, 14 donors are board reform; played a central role in
(ii) improvement of part of the PAF review. (ii) operationalization of the transparently managing
quality of life and social land and village acts; the complex civil service
well-being, (iii) good (iii) business registration pay reform process.
governance. Actions reform; (iv) pro-poor
and interventions to expenditure allocation and
achieve targets are budget execution;
identified in the (v) improvements at the
MKUKUTA. national audit office;
(vi) increased resources for
procurement agency;
(vii) pay increases
consistent with government
pay reform and reform of
pay allowances;
(viii) satisfactory health
sector review.
31 ANNEX B
Country
Bhutan DPL-1 The government The program document The operation corresponds The policy matrix The operation takes into
program supported by sets out a sequence of directly to a request for attached to the account government fiscal-
the operation is defined actions agreed with the support by the government government's letter of year cycles and
by the 1999 strategy government that will be and has been developed development policy preferences for timing of
document Bhutan 2020: used to discuss program around the government's contains 30 actions as disbursements. Criteria for
A Vision for Peace, performance against own priorities. Most prior part of the 2005-06 reviewing progress have
Prosperity, and actions and indicators for actions relate to improved program that justifies the been transparently
Happiness, prepared future support beyond access and quality of operation. Eight of these established in the form of
with a broad this operation; given the education and health are highlighted in the triggers and outcome
consultative process. small size of the country services. Bank prior actions program document as indicators, with the latter
The document spells out and lack of other donor also support the labor and prior actions, 21 present generally containing
the distinct vision of engagement with budget investment climate reforms additional benchmarks baselines and targets.
Gross National support, the matrix is the government has describing the broader
Happiness. The strategy coordinated with other already undertaken as part government program.
is implemented under interventions but does of the sixth national plan to Conditionality is focused
the Ninth Five-Year not serve as a joint donor (a) create a comprehensive on core actions ensuring
Plan. The Bank matrix. policy framework for labor improvements in fiscal
provided technical markets; and (b) clarify the management and budget
assistance through rules for foreign direct allocation, reform steps to
policy notes, and the investment under existing enhance the investment
government benefited laws. climate, expansion of
from analytic support of education coverage,
bilateral donors and UN development of school
agencies in the social curricula, and piloting of a
sectors. program to raise the
percentage of deliveries
in hospitals.
32 ANNEX B
Country
Pakistan NWFP DPC-1 The government The program document The Bank support to the The policy matrix The policy matrix sets out
program supported by sets out a sequence of program laid out in the presents a very broad and transparently how progress
the operation is laid out actions agreed with the policy matrix reflects the detailed multisectoral under the program will be
in the Provincial Reform government that will be priorities of the provincial program the government assessed against actions
Program for the North- used to discuss program government with a strong is implementing and is a and results indicators. Most
West Frontier Province performance against focus on human key management tool for indicators contain both
(NWFP) and the actions and indicators for development and with a the government in piloting baseline and target values.
concomitant provincial future support beyond strong set of actions to the program. However, The provincial government
PRSP. The Bank and this operation. Since the enhance access and with 20 prior actions and has in the past received
other donors have Bank stands alone in improve quality of 42 benchmarks it exceeds Bank DPL support on a
supported the program providing budget support, education and health significantly the practice biannual basis, in line with
over several years, the policy matrix is not services. Fiscal and in other Bank operation. implementation speed,
including by offering used as a harmonization governance reforms are In particular, a number of although future support
analytic work and tool. To a significant another important part, and "process" prior actions may be more frequent.
technical assistance. extent, however, the the program also contains likely could have been There are no specific
The commitment to the program relies on a component on private dropped without losing concerns about
reform program has technical support from sector development. One critical program steps. predictability under the
been strong even bilateral donors (DfID, prior actions relate to the existing accountability
through changes in NORAD, GTZ), support involvement of the private framework.
government, indicating that is aligned with sector (NGOs) in HIV-AIDS
broad ownership of its program objectives and prevention, another to the
contents. actions laid out in the reduction of the
policy matrix. government share in a
public bank to 65 percent
by increasing the capital
and selling shares in the
market. One benchmark
relates to the lease of small
hydropower projects to the
private sector to enhance
private sector involvement
in power generation.
33 ANNEX B
Country
Brazil Equitable Growth-2 The government The program document The operation follows the The operation separates The summary program
strategy supported by sets out a sequence of government's a larger and broader matrix lays out
the operation was laid actions agreed with the implementation speed of a presentation of the overall transparently how progress
out in a December 2004 government that will be broad and multi-layered government program and under the program has
white paper on used to discuss program program of reforms, a summary matrix with been and will be assessed.
"Microeconomic performance against covering logistics costs, the core actions and The matrix also contains a
Reforms and Long-Term actions and indicators for business environment, results for the supported set of measurable
Growth." The Bank- future support beyond financial sector efficiency, program. The summary monitoring indicators, albeit
supported program this operation. Since the and innovation capacity. matrix contains only prior with some weaknesses in
explicitly takes into growth reforms are The program includes the actions and no clearly identifying
account political supported only by the definition of a framework benchmarks. The number baselines. Regarding
constraints in the reform Bank under a DPL, for public-private of prior actions is predictability, the
process, noting that harmonization issues partnerships in relatively high at 22 and government has easy
"reforms that impose too arise only in assuring infrastructure to enhance could possibly have been access to capital markets
high costs in the short broad consistency with the government's capacity reduced by deleting 1-2 and thus is less concerned
run on affected groups other reforms, which is to finance infrastructure "paper" actions; but it about annual support than
(or that appear the case through strong investment. However, as reflects a broad set of a timely response of the
ideologically government leadership. noted in the program important activities Bank to financing request
confrontational) may not document, "unilateral trade undertaken under the once the program has
represent an optimal reforms and privatization government's strong progressed sufficiently.
growth strategy." Bank may be politically difficult in leadership rather than Both the amount and timing
analytic work, at request the face of opposition from excessive conditionality. of this operation responded
of the government, diverse powerful groups" to government priorities.
supported the and, given the
development of the government's focus on
reform program. fiscal discipline and social
security, bolder reforms
may not be feasible or
optimal.
34 ANNEX B
Country
Niger Rural and Social-1 The government The program document The new 2006-08 Bank Given the lack of a strong The preparation of the
program supported by sets out a sequence of support responds to implementation operation took into account
the operation is set out actions agreed with the lessons learned from framework in the PRSP, the need to balance
in the 2002-2005 PRSP, government that will be previous DPOs in the policy matrix contains predictability and
which was the result of used to discuss program (i) moving to a more a set of quite detailed performance, incorporating
broad-based performance against programmatic medium- policy measures, with a areas where progress was
consultations with all actions and indicators for term engagement to total of 15 conditions for slower than anticipated into
stakeholders; it is future support beyond support reforms processes; two tranches and 12 the operation design
underpinned by a set of this operation; key (ii) broadening the policy benchmarks. The number without unduly delaying its
sectoral strategies; and analytic work, notably the areas from PFM reform to of conditions is fairly high, preparation so that some
analytic underpinnings PEMFAR, has been rural and social issues of especially with 9 financing could be made
by government, Bank, coordinated with the key concern for poverty conditions for the release available in mid-year. The
and third parties, such donor community, but the reduction. Conditionality is of the second tranche, intention of the operation is
as PEMFAR, education accountability framework focused largely on core which could have been to enter a regular cycle of
study, nutrition and is used at this stage only institutional and reduced to 6-7 by reviews, using the
health study, and food by the Bank. administrative reforms in removing some activities transparently laid out
security assessment PFM, social sectors, and linked to "action plan" triggers and progress
the rural sector; user fee adoption or preparation. against outcomes as
conditionality requires The number of performance indicators.
creating a scheme for free benchmarks is low However, for the time being
contraceptives, pre-natal compared to the average such reviews would likely
care, caesarians, and child of IDA operations. not be harmonized with
health care backed with other donors and their link
appropriate financing to the PRS review cycle is
through the 2007 budget; tenuous. This intention may
another core condition still be put at risk if the
relates to proper funding of second tranche of the
food security measures, operation is delayed
payment of teacher beyond the end of 2006.
salaries, and hiring of The well-established
health staff. results framework with
baseline values and targets
for monitoring indicators
reinforces the results focus
of future performance
reviews.
35 ANNEX B
Country
Egypt, Arab Rep Financial Sector The government The program matrix of The operation lists actions The operation's policy The operation is designed
program supported by the operation defines the prior to loan approval and matrix identifies 17 prior as a stand-alone single-
the operation is set out actions supported by the indicative next steps: actions, somewhat tranche operation. It sets
in the 2005-08 financial operation within a (i) strengthening the legal, exceeding the Bankwide out transparently in the
sector reform program broader medium-term regulatory, and supervisory average. It does not policy matrix activities
aiming at (i) reforming setting as part of an functions of the central contain any benchmarks, undertaken, future program
the banking system accountability framework bank and insurance but lays out future actions steps, and anticipated
through consolidation, for current and eventual supervisory body; that could be used to results for the end of the
divestiture and future support. The (ii) fostering institutional evaluate progress under program. The results are
privatization; actions supported under and operational the program. The prior frequently formulated
(ii) reforming the the program are restructuring of state- actions are largely broadly in terms of overall
insurance and consistent and fully owned banks; confined to critical actions changes and do often not
contractual saving coordinated with other (iii) supporting financial for different program discuss explicit baselines
system, financial partners (USAID restructuring of state- components, although (although the latter are
(iii) strengthening capital and the EC) that have owned banks; (iv) reducing one could consider that 2- often implicit). Given the
markets, (iv) developing provided budget support, public ownership in and 3 actions related to single-tranche stand-alone
other non-bank financial in addition to an control over the banking agreements on action nature of the operation, its
services; and equivalent parallel sector; (v) completing the plans are first but not predictability can only be
(v) strengthening the financing from the AfDB audit of state-owned banks; obviously critical program gauged against
supervisory bodies, and for the financial sector (vi) restructuring and steps and activities. government expectations
improving the legal and reform program. To privatizing of state-owned for financial support, which
regulatory framework. ensure harmonization, a insurance companies; and appear to have been met
The development of the Financial Sector Donors (vii) strengthening the with the timing of the loan.
program benefited from Group, chaired by the fiduciary framework for
support of the Bank-IMF Bank, was formed. public financial
under the 2002 FSAP, management and
technical assistance corporate financial
provided under various reporting. Prior actions
FIRST initiatives, focus on progress with
USAID, and the privatization of the Bank of
European Commission. Alexandria and divestiture
The Bank also covered of shares in other partially
financial sector issues in state-owned banks;
an investment climate settlement of non-
assessment and an performing loans; the
Access to Finance framework for restructuring
study. state-owned commercial
banks; implementation of
supervisory regime for
insurance and pensions;
and draft insurance sector
laws and preparatory steps
in insurance sector reform.
36 ANNEX B
Country
Ghana PRSC-4 The government's The government has The operation supports the The matrix contains eight The joint donor framework
program supported by agreed with all donors implementation of the prior actions and more sets out actions and
the operation is set out that are part of the multi- program laid out in the than 42 additional indicators transparently
in the second Growth donor budget support policy matrix of actions and benchmarks. The prior that will form the basis for
and Poverty Reduction (MDBS) on policy actions indicators under the three actions all are important evaluation of progress
Strategy (GPRS), with a and indicators as areas of (i) promoting steps toward targeted under the program. The
strengthened focus on accountability framework growth, income, and results. The relatively review cycle in past
growth across three for financial support. The employment; (ii) improving large number of operations has been
pillars: (i) private sector- policy matrix serves at service delivery for human benchmarks compared to conducive to deliver
led growth; (ii) vigorous the same time as device development and other "second-generation" PRSCs on an
human resource to pilot the government's (iii) improving governance multidonor is partly approximately annual
development; and PRS implementation. and public sector explained by the basis, with further
(iii) good governance The matrix is fully management, in direct particularities of the in- improvements of
and civic responsibility. harmonized across the alignment with the GPRS. country dynamics with the predictability by the entire
World Bank and donor donor group of nine Prior actions for PRSC-4 government using the donor community expected
analysis on poverty, donors and three focus on improved financial MDBS process to spell to follow after the decision
natural resources and observers. management in the out program elements. As to tie resource envelopes
the environment, youth electricity sector, a result, the policy matrix to reviews that take place
employment, public reductions in the time for carries a significant before budget execution
finance management, business registration, number of detailed begins. Although the policy
and a series of poverty improved financing of measures across the PRS matrix contains a results
and social impact work, public education, support of pillars. framework with baselines
including most recently indigent health care and targets for most
on power sector reform through health insurance, indicators, the results
and decentralization, anticorruption, budget aspect could possibly be
informed the GPRS II. management, accounting, further enhanced in the
and procurement reform. process leading to annual
None of the prior actions or progress evaluation.
benchmarks involves
privatization, trade, or user
fees. The benchmarks
include a review of
electricity tariffs and
agricultural policies (both
subject of prior PSIAs), and
the implementation of the
national water policy
(design of investment plan
and plan for rural water).
37 ANNEX B
Country
Burkina Faso PRSC-6 The government The accountability The operation supports the The program document The policy matrix and
program supported by framework for the government PRS under the identifies 12 prior actions documentation
the operation is set out operation is set out in a pillars: (i) growth and and an addition 55 transparently identify the
in the second full PRSP, policy matrix of actions employment creation; and benchmarks as actions prior actions and clearly set
adopted by the and expected results that (ii) human resource taken before credit out criteria to be used to
government in 2004, draws on the priority development, and good approval. Although the evaluate progress in
and the associated action plan of the governance, substantively majority of prior actions deciding on future support.
priority action plan. government's PRSP. A closely following the pillars identify critical steps, two- Since inception of the
PRSP-2 was adopted joint budget support of the PRS. Key reforms three process-related PRSC series, operations
following an extensive framework has been supported aim at improving actions (notably the have progressed on a
consultative process, agreed among donors agricultural productivity, development of action roughly annual basis with a
including 10 regional that includes reducing factor costs, plans replacing triggers slight acceleration of
consultations. The Bank development of a jointly improving access to health that were somewhat delivery of PRSC-4 to
and other donors have agreed performance care and education, delayed) could have been better meet government
offered extensive assessment matrix. The enhancing government avoided. The number of preferences. The series for
analytic support through joint budget support financial management, and benchmarks is very high, PRSC-4-6 also uses
public expenditure framework also includes supporting the creation of a and many are in areas annually available outcome
reviews, poverty external evaluation of decentralization framework. such as water and indicators from the PRSP
assessment, diagnostic donors performance. Prior actions include environment that are not to gauge progress against
work on public financial planning in the education at the center of the PRSC targeted results and has
management, sector, lowering costs for dialogue. As the joint further strengthened the
investment climate obstetric care, improving donor matrix is being fully results focus of the
assessment, gender procurement, accounting developed and the priority program.
assessment, and a risk for government property, action plan of the
and vulnerability study. and advancing government PRSP is
decentralization. Three strengthened further, it
benchmarks include a may be advisable to
revised scheme for the reduce the inclusion of
privatization of the other program actions in
telecommunications the matrix and streamline
company, and financial its presentation.
audits to prepare for private
management of state
assets in the electricity
sector and private sector
involvement in petroleum
imports.
38 ANNEX B
Country
Vietnam PRSC-5 The government PRSC-5 builds on four In alignment with the The program document The policy matrix has
program supported by previous operations. The CGPRS the operation's presents the actions evolved since the inception
the operation is set out sequencing of actions areas of support laid out in taken under the program of PRSC-1 into a
in the government's and the expected the policy matrix include fairly concisely when transparently set-out
comprehensive poverty development outcomes (i) transition to a market taking into account the framework for evaluating
reduction and growth have been laid out in the economy; (ii) social breadth of the supported progress on an annual
strategy. Broad policy matrix and provide inclusion and government program. basis jointly with a number
consultations were used a framework for the Bank environmental Fifteen prior actions and of other donors. Since
to identify the policies and an increasingly large sustainability; and 45 other actions are PRSC-2, operations have
best suited to attain group of donors (11 for (iii) modern governance. spread over 18 reform been presented on a 12-
targeted development PRSC-5) to assess Prior actions covered a areas, and presented on month basis, offering
outcomes. The progress under the variety of government three pages in a summary annual support for the
government also opted program in justifying activities, including fashion. The program budget. A separate table
in mid-2003 for rapid financial support. The intellectual property laws, thus clearly maintains a not only measures
WTO accession in full Bank operation thus has performance classification high degree of criticality, progress against triggers
recognition of its impact also played an important of state-owned enterprises, with a focus on a few but discusses the strength
on the policy agenda. role in harmonizing donor enterprise law, education critical actions in what is and weaknesses of
The government and the interventions. regulation, health an unusually broad program implementation in
donor community have insurance, special program program. The text different areas of the
offered technical for ethnic minorities and supports the criticality of program. The parallel
support and analysis, in mountainous areas, water the choice of most of the annual monitoring of
the case of the Bank management, public prior actions. related development
covering poverty financial management, and outcomes strengthens the
analysis, governance, anticorruption. Benchmarks results focus of the
and business climate. included the elimination of operation in assuring that
quantitative import the subsequent actions
restrictions in line with have the intended impact
WTO regulations, on key variables such as
restructuring of state- export levels, non-
owned enterprises and performing loans, access to
management reform, and education, maternal
the equitization, with mortality rates, etc.
private sector participation,
of two state-owned
commercial banks.
Benchmarks also included
identification of measures
to counter social and
economic effects of WTO
accession.
39 ANNEX B
Country
Madagascar PRSC-3 The government's A policy matrix included The operation selectively The operation's 11 prior The policy matrix lays out a
program supported by in the Bank's program supports the actions are fairly heavily series of actions and
the operation has been document lays out the implementation of the concentrated on the side associated results
articulated in a PRSP common expectations of government's PRS under of public financial indicators. The
and updated in 2005 to government and the the pillars of (i) ensuring management and budget transparency of the
incorporate a longer- Bank as regard actions good governance, management. Although accountability framework is
term vision called as well as results under (ii) fostering and promoting clearly critical overall for somewhat jeopardized by
Madagascar the program. However, systems for ensuring the results targeted under the relatively vague
Naturellement. The the matrix itself is human and material the program, the formulation of some
PRSP contains three primarily a vehicle to security and enlarged presentation of prior triggers. However, the
strategic axes: (i) good gauge progress under social protection. It does actions in the matrix is predictability of support
governance; (ii) broad- the PRSC-supported not directly support the hampered by some vague was not affected as
based growth; and program. Other donors, broad-based growth formulations ("satisfactory disbursements followed an
(iii) human and material some of which also offer aspects of the PRS. The progress, "begin originally anticipated
security. The PRS was budget support, closely program focuses on implementation of ..."). annual cycle under the first
developed through a coordinate sectoral (i) budget formulation and The matrix contains an three PRSCs.
participatory process. review processes and execution; (ii) public additional set of 64
The Bank has supported technical assistance, but financial management and benchmarks, some of
the implementation of make independent customs; (iii) procurement; which have not in fact
the PRS through assessment for the (iv) resources for been met or only partially
analytic work in all of the purposes of their own communes; (v) education; met, as explained in
pillars (e.g., though support. (vi) water, and (vii) Annex 3 of the program
poverty work and growth nutrition. document. This number of
analysis, investment benchmarks exceeds the
climate assessment, Bank's average and
land tenure study, recommended good
education and training practice. It is also appears
reports, health sector less important from the
notes, sectoral public perspective of program
expenditure reviews, management as in
and social protection several areas of the
review). program matrix no critical
actions for the Bank's
support have been
identified.
40 ANNEX B
Country
Colombia Labor-3 The government's A policy matrix of the The operation supports The operation focused on The operation transparently
program supported by operations defines an priority actions of the select prior actions across sets out the actions taken
the operation is accountability framework government under the the different program prior to loan approval, and
articulated in the laying out actions and "more egalitarian society" areas covering social their link with past
National Development expected results of Bank pillars. Measures include security/social protection, activities. The program
Plan for 2002-06. The support. The Bank (i) broader access to social health, education, and document also reports on
National Planning support is closely security benefits; monitoring. With six prior the increasing results focus
Department launched a coordinated with IADB, (ii) improved targeting of actions and nine other of the program as
participatory process in Andean Development nutrition programs; actions to describe monitoring systems are
2004 to refine the plan Cooperation, and the UN (iii) improved health government core strengthened and the
and generate national system. However, the insurance coverage; activities, the use of program matrix provides
ownership. One of the policy matrix serves (iv) expanded training conditionality is results expected by the end
pillars and objectives of primarily as reference opportunities; (v) increased disciplined and focused. of the program against
the strategy -- a more points for the Bank's fast- education coverage for 2002 benchmarks. The
egalitarian society -- in disbursing support as vulnerable students; operation follows on two
particular relates to other partners' (vi) better public previous operations but
labor and social sectors interventions were information access to was not originally
and seeks to (i) raise complementary oversee social programs. anticipated as part of the
efficiency in social (investment operations or programmatic series. It
spending; (ii) improve technical support). A first reflects a flexible response
expenditure targeting; policy-based operation of to the government request
(iii) develop better the IADB follows on the for further report of the
information for Bank's support. ongoing program.
monitoring; and
(iv) develop prevention
and social assistance
systems. The Bank and
other development
partners have
participated in the
process through
technical and financial
support to the
consultation process.
41 ANNEX B
Country
Burundi Economic Reform The government's The accountability The policy matrix lays out The two-tranche The operation was
program is laid out in framework laid out in a support to the operation makes fairly developed under difficult
the 2004 interim PRSP, policy matrix in the government's program disciplined use of circumstances.
which highlights program defines actions under two broad conditionality, with 12 Governance concerns and
(i) peace and taken before grant components: (i) improve prior actions. The Bank internal staffing and
democratic governance; approval, second-tranche public expenditure criticality for the reform processing issues led to
(ii) reintegration of conditionality, and management and its progress of most actions delays in its Board
conflict victims and expected actions over impact on the poor; and is easily established, such presentation, undermining
disadvantaged groups; the medium term that (ii) accelerate sustainable as the setting up of an to some extent the 2005
(iii) private sector could serve to review economic growth. Prior interim financial budget and threatening the
development; progress for future actions and conditions management system. viability of the PRGF-
(iv) human capital support. Coordination of include establishment of an However, the ultimate supported macroeconomic
development; budget support electronic financial importance of the bringing program. The operation
(v) fighting AIDS; and operations has been management system and to sale of two government attempts through the use of
(vi) advancing the role formalized with six issuing report; (ii) a plan for enterprises for the growth triggers to set the stage for
of women in donors (AfDB, France, improving procurement and agenda is less clear, as is a more predictable future
development as its Belgium, EC, UNDP, and adoption of a new law; the importance of the engagement, although
strategic themes. the Bank), with others (iii) identification of pro- liberalization in the coffee there are risks that the
Government programs expected to join. The poor spending; (iv) sector absent further work second tranche may not be
have further benefited harmonization framework liberalization of coffee on a sector reform disbursed as planned in
since 2004 from work defines a coordination producer prices and strategy (supported also 2006 as the operation has
undertaken to support framework for the marketing and adoption of by the Bank) or the not yet been declared
the development of the macroeconomic detailed plan for further urgency of re-launching effective (as of November
full PRS on growth, framework, PRSP restructuring (including bids for other public 1, 2006).
sector strategies, monitoring, and public privatization of washing enterprises. The number
prioritization of financial management. stations); (v) a new of benchmarks, with 27
interventions, and However, the policy insolvency bill; (vi) settling alone before adoption of
definition of matrix itself appears to of domestic arrears; the grant, is also high.
targets/monitoring be used largely for Bank (vii) bringing to the point of
indicators. purposes. sale two state companies;
(viii) re-launching of the
bidding for sale of non-
coffee related assets of
coffee board. A variety of
benchmarks also call for
adopting a privatization
strategy, and privatization-
related activities.
42 ANNEX B
Country
India Orissa Social-2 The government's The policy matrix The operation supports the The operation contains on The program matrix
program supported by attached to the government across the a few prior actions in transparently lays out
the operation is government's letter of pillars of the reform critical areas across the commitments and expected
articulated in its Tenth development policy lays program. The prior actions different elements of the results (including baselines
Five-Year Plan and a out a sequencing of identified in the program government program. It and targets) under the
long-term strategy reform actions and include activities to includes 12 prior actions program identified by the
(Vision 2020). The expected results, (i) remove state monopoly and one additional subnational government.
strategy, on which basis permitting evaluation in agricultural marketing, benchmark action. The sequencing of Bank
the state government progress under the (ii) simplify business However, several of the support, in line with the
was re-elected in 2004, program. The policy processes; (iii) sell assets prior actions, when fully intentions of the central
relies on private sector framework has been of closed public unbundled, amount to government of India, is
activity and community harmonized with DfID, for enterprises, initiate an several activities. Thus, typically not on an annual
groups as engines of which Orissa is a focus environmental audit of 20 possibly additional basis, which explains the
growth and job creation state. Although DfID enterprises, and privatize choices among these unusual two-tranche
and targets does not provide budget two viable public different actions could structure of this
improvements in support under the same enterprises; (iv) resolve have been made to programmatic operation.
financial and public umbrella, it offers critical different service payments further focus conditionality Support to Orissa has been
sector management to technical assistance for and quality issues with on critical elements of roughly biannual, and the
enhance quality of business regulation, private power distributors; these bundled actions. focus of the Bank's
public spending in public enterprise reform, (v) further consolidate the engagement and the joint
human and physical electricity regulation, budget and improve fiscal reviews/supervision with
infrastructure. The public administration accountability and government has therefore
government's strategic reform, and it may offer transparency; (vi) foster been less on predictable
vision is to (i) improve policy-based support for civil service reform, annual financial support
agricultural productivity, health. eliminate redundant posts, than on demonstrating
business environment, and redeploy education performance under the
and public enterprise and health workers. program to obtain
management; (ii) tackle resources at better
fiscal imbalances and financial terms.
improve fiscal
accountability;
(iii) improve public
service delivery. Bank
analytic work on
poverty, growth,
investment climate,
financial accountability,
education, and health
issues has supported
the implementation of
the strategy.
43 ANNEX B
Country
Guatemala DPL-2 The government's A program matrix lays The program matrix laying The criticality of the The policy matrix sets out
program supported by out key steps in the out the area of Bank measures in the program transparently how progress
the operation is government reform support is focused on matrix are underscored by under the program will be
articulated in its "Vamos program that are used to select elements of the the focus of the matrix on assessed against actions
Guatemala" program of measure progress in government reform 13 prior actions and the and results indicators. All
2004, on the basis of moving from one to the program under three absence of benchmarks, indicators agreed with the
which the current next operation. These pillars: (i) promoting growth as in this case the Bank is government contain both
administration was performance milestones and the investment climate; relying on a broader baseline and target values.
elected into office. The are also close interlinked (ii) enhancing capacity for government program In the conduct of the
program aims at with the CAS framework. public spending in priority spelled out in a variety of program, this second
(i) promoting social The matrix serves for sectors; (iii) transparency strategy documents. This operation followed the first
solidarity; evaluating progress and public sector clear focus on critical after roughly 12 months, in
(ii) accelerating growth; under the Bank's management. Prior actions actions under the different line with the request of the
and (iii) promoting program given the focus on adoption of branches of the reform government for predictable
sustainable absence other partners CAFTA-DR; improving program notwithstanding, support based on its
development. Analytic who offer policy-based customs processing; the total number of prior performance under the
support includes poverty loans -- but it has been creating better land actions exceeds the program.
work, investment discussed and registration; improving the Bank's average, and
climate assessment, coordinated with other framework for public- several actions are
growth studies, and financial partners present private partnerships; better stacked into a single prior
fiduciary assessments. in Guatemala who financial supervision and action.
support the government's payment systems,
program. improved tax administration
and collection; improved
quality of expenditure and
progress in public financial
management and
procurement.

World Bank (2006) - Good Practice Principles For The Application of Conditionality - A Progress Report

Uploaded by

Copyright:

Available Formats

World Bank (2006) - Good Practice Principles For The Application of Conditionality - A Progress Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

World Bank (2006) - Good Practice Principles For The Application of Conditionality - A Progress Report

Uploaded by

Copyright:

Available Formats

Public Disclosure Authorized

GOOD PRACTICE PRINCIPLES FOR THE

OPERATIONS POLICY AND COUNTRY SERVICES

DPL Development policy lending

II. Recent Trends in World Bank Conditionality ................................................................. 4

A. Number and Content of Conditions .................................................................................. 5

III. Implementation of the Principles..................................................................................... 8

IV. Conclusions and Recommendation ................................................................................ 20

Box 1. Good Practice Principles................................................................................................. 2

Figure 1. Average Number of Conditions ................................................................................. 5

Table 1. Operations and Commitments (in US$) ....................................................................... 3

Annex A. Operation Reviewed and Commitment Amounts .................................................... 23

Figure 1. Average Number of Conditions

Source: Staff calculations.

13. Number of Benchmarks. The number of benchmarks in Bank-supported policy-based

Figure 2. Average Number of Benchmarks

Source: Staff calculations.

14. Thematic Coverage of Conditionality. As the 2005 conditionality review highlighted,

Figure 3. Thematic Coverage of Conditionality in Policy-Based Lending

Source: Staff calculations.

B. Incorporating the Good Practice Principles into Bank Operations

33. Privatization. Of the 19 operations reviewed, 5 contained privatization or related

ownership. The government’s strategy in the telecommunications sector builds on

sale of government shares in several joint-venture banks. The government’s program

• Continuing work with other financial partners on defining joint accountability

You might also like