An Evaluation of Poverty Reduction Support Credits: World Bank Budget Support to IDA Countries

1. An Evaluation of Poverty Reduction Support Credits: World Bank Budget Support to IDA Countries Anjali Kumar Independent Evaluation Group, World Bank Presentation to the American Evaluation Association November 11th 2010 www.worldbank.org/ieg/prsc

2. A Budget Support Lending Instrument • Mode of aid that disburses directly into a country’s budget – in contrast to project aid • PRSCs were intended to help responsible IDA countries to implement their Poverty Reduction Strategies, in a results-based framework • Provide harmonized, predictable aid commitments • Strengthen budget processes and public finance • Evaluation Objectives: • Assess the extent to which PRSCs were able to meet their core objectives • Examine their relevance and effectiveness in supporting growth and alleviating poverty From 2001 to 2009, there were 99 PRSCs in 27 countries worth $8 billion. PRSCs were intended to… 4

3. Building Blocks: Data Sources • Sources of information: • Desk review: objectives, design, effectiveness, results framework of 88 PRSC projects • Field evaluations: 7 country case studies covering 31 PRSC operations, 8 completed PRSC series, 4 four ongoing series, and 33 percent of PRSC disbursements over FY01-FY08. Available at the IEG website. • Surveys: Task team leaders, Sector specialists, Government stakeholders • Relevant databases, including: • WB evaluative data, ALCID, POVCAL, CPIA, ROSCs, • OECD Aid Aggregates, Monitoring of Paris Declaration, IMF IFS • Extensive literature including other case studies 6

4. Evaluation Methods • Triangulate data to establish plausible causality • Establish a Results chain • Account for other determinants • Compare ‘before and after’ changes in performance of PRSC beneficiaries • But: ‘before’ and ‘after’ comparisons of outcomes are limited by problems of identification due to the endogeneity of policy responses within each country • Compare changes in PRSC countries to changes experienced by IDA countries that have not benefited from PRSCs • “Difference in difference” approach • Add controls for ‘better performing’ IDA countries 7

5. Evaluation Questions and Results Chain • Appropriate program design and analytical underpinning • Aligning resource flow with domestic processes and timetable • Enhancing donor collaboration • Inputs • Implementation of a strategic subset of the PRSP • More predictable resource flows and resource use aligned with PRS • Harmonization of donor programs • Improved domestic accountability • Outputs • Outcomes • Improved climate for growth and improved pro-poor service delivery • More effective public administration • Sustained growth • Reduction of income and non-income poverty • Impact 8

6. Challenges and Caveats • Parallel changes affecting all World Bank Development Policy Lending occurred over the period of analysis • New Bank guidelines in August 2004 for all DPLs; • PRSC Interim Guidelines were not formalized though PRSC operations continued • Analysis adds a filter for two sub-periods, 2001 to 2004 and 2005 to 2008 • PRSC is usually one part of a larger basket of donor funded general budget support • Both the Bank and other donor partners use a range of instruments to support country development programs. • Account for role of other donors and other instruments 9

7. 1. PRSCs improved aid processes Eased, flexible, conditionality Better predictability - volume, frequency and budget alignment Enhanced country ownership More pro-poor service delivery 2. Growth and poverty outcomes are unclear Weak Results frameworks Partial Support to Sectors 3. Other Policy Based Lending converged to a similar design Evaluation Findings - Three Key Messages

8. Evaluating Conditionality • Did conditionality ease with PRSCs? Was conditionality more flexibly applied? • Compare numbers of prior actions (legally binding) and program benchmarks (not legally binding) in PRSCs compared to non-PRSC policy based loans • during FY80-00 period – prior adjustment lending • during the PRSC period FY01-08 • during PRSC subperiods FY01-04 and FY05-08 • Triangulate with Client Perceptions of Conditionality • Nature and numbers of Conditions • Program Implementation and Political Change • Recognition of Implementation Constraints 11

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

10. Evaluating the Predictability of PRSCs • Predictability measured by: • Likelihood, based on past frequencies, of a PRSC recipient country receiving a PRSC in a given year, compared to previous adjustment loans. • Likelihood, based on observed past frequencies, of a PRSC country receiving any policy-based budget support, compared to previous adjustment lending. • Stability of volumes of budget support received via PRSCs compared to previous adjustment lending, in absolute terms and as a proportion of total IDA/IBRD flows received • Comparison of PRSC lending projections envisaged in country strategy documents vs. actual disbursements • Other studies measured predictability by comparing: • Actual budget vs. predicted budget support disbursements • Commitments vs. disbursements 16

11. Evaluating the regularity and timing of PRSC disbursements • Alignment of budget support relative to the budget needs: • Timing of disbursements relative to country budget year: • Percentage of operations that disbursed in last quarter of the preceding fiscal year • Or in the first quarter of the current fiscal year • Regularity of disbursements measured by: • Percentage of operations in a series that disbursed in the same quarter, in each successive year 17

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

13. Evaluating sector support through PRSCs: Increased spending on education, health, PFM as in other DPLs 20

14. Evaluating Budget support through PRSCs compared to sector lending… • PRSCs were initially perceived as a potential vehicle for all lending, including sector lending • But ultimately, PRSC support complemented sector lending; replacement was rare • IEG’s comparison of PRSC operations with the Country Assistance Strategies for PRSC countries shows that: • Many countries tried to channel sector lending through the PRSC: • Of 15 CASs in health & education, only 2 achieved sustained results • Of 6 CASs in nutrition, water supply, agriculture or environmental management, 1 on a sustained basis

15. EvaluatingDonor harmonization Achievements and Challenges Achievements • Did the PRSC process help to harmonize donor matrices? Yes, PRSCs played a supporting role • Were transaction costs for recipients reduced? Yes, to some extent • Did other donors benefit? Yes, Bank expertise was made available to recipients and other donors • But – there were initial perception of increased conditionality • And increased transaction costs for the Bank (e.g. Mozambique, Ghana) 25

16. Diagnostics • Were diagnostics comprehensive? • Extend of coverage • Treatment of fiduciary risk • Were weaknesses addressed by PRSC program? • Was PRSC reform program consistent with action plans from diagnostics? Methodology of PFMP Evaluation of PRSCs • Design & Implementation • How well designed was results framework for PFMP? • Integrated action plan supported by key donors? • Significant delays in reforms? • Extent and quality of capacity building • Results • Before/After reform improvement in PFMP performance where PRSC reforms focused • Achievement of PFMP objectives in PRSCs • General improvement in PFMP systems (CPIA etc.)

17. Reforms well grounded in diagnostics led to well sequenced strategy agreed with donors Program achievements were in easier areas (e.g., budget classification reform) More difficult reforms show less success (e.g. bringing extra-budgetary funds and donor funds on budget; timely resource transfer to sector ministries) Most PRSCs achieved their PFMP reform objectives, with minor shortcomings

18. PRSC countries grew faster in the PRSC period… but so did other countries Attribution to the PRSC is difficult 31

19. PRSC countries had more income poverty reduction… but the decline began before the PRSC was introduced 33

20. PRSC Countries had greater progress with Millennium Development Goals… …and progress was faster than before the PRSC period …and faster than all IDA countries in the PRSC period 20

21. Poverty rates declined in PRSC countries although attribution is difficult Income poverty rates fell faster in PRSC countries, in the PRSC period, but also fell faster prior to the PRSC In non-income measures of poverty PRSC countries did better, and improvement in the PRSC period was faster Yet most PRSC programs do not trace links between actions and poverty outcomes Parallel sector projects increase the difficulty of attribution 21

22. IEGINDEPENDENT EVALUATION GROUP • Thank you • www.worldbank.org/ieg/prsc