IDA13 IMPLEMENTATION OF IDA13 RECOMMENDATIONS: PROGRESS AND CHALLENGES International Development Association October 2003 Implementation of IDA13 Recommendations: Progress and Challenges 1. At the time of the IDA13 negotiations, Deputies agreed to hold a Mid-Term Review (MTR) meeting to discuss the implementation of a number of recommendations that had emerged from their discussions and were articulated in the IDA13 Deputies' Report. As background for the MTR, Management has prepared the attached matrix which uses as its basis the IDA13 Action Plan and reports on the steps taken to advance IDA13 objectives over the first 15months of the replenishment period. This fact base is complemented by a number of papers that go into depth on specific issues about which Deputies requested information or analysis at the time of the mid-term review. It may be useful, however, to stand back a little from the detail reported therein and reflect on progress with respect to a few critical themes of the discussions in preparation for IDA13. 2. First, there was a strong focus in the IDA13 discussions on the importance of growth, both as a necessary condition for reducing poverty, and as a powerful instrument for doing so when properly designed. It is clear that most IDA countries need to grow more vigorously and continuously than they currently do, and at the same time improve the quality of growth policies from the viewpoint of poverty reduction. Growth, and the productivity of poor people, are at the heart of the policies supported by IDA's performance-based allocation, and also underpin a number of important specific developments in IDA13. Thus, for example, IDA resources are being put to work in an imaginative initiative in partnership with IFC to build technical and financial services for small and medium entrepreneurs in Africa, helping to redress a critical "missingmiddle" in private sector-led growth. The Bank's new rural strategy underscores the importance of cross-sectoral reforms to develop rural markets and institutions which create capacity not only to access industrial country markets, but also to build non-farm enterprises and employment in the rural sector where the majority of poor people continue to live. Trade, as a crucial component of economic growth, is receiving increased support in IDA, not only through instruments such as a revitalized Integrated Framework, but notably through stronger programs to develop regional trade and infrastructure linkages, especially in Africa where domestic markets are small and intra-regional trade grossly underdeveloped. 3. Second, the emphasis laid on the importance of country ownership is being realized in the PRSP process, which has now become firmly established at the heart of IDA's engagement with its borrowing countries. During FY03 the number of full PRSPs reached 32, of which 14were completed during that year. Work proceeds in other IDA countries along the track to PRSP completion. Starting in July 2002, each IDA CAS was preceded by a full PRSP, and underpinned by a current poverty analysis. The alignment of country-owned development strategies and IDA's country assistance priorities is without question greatly strengthened by these developments. A notable feature in this respect is a stronger focus on the consistency of government budgetary priorities with PRSP objectives -- and here the PRSC, seven of which were approved in FY03, is proving a very useful instrument to help IDA and borrower countries improve that alignment. The implementation of the PRSP process has put a sharp and positive focus on collaboration with other development partners -- most importantly at country level, where the interaction has in many instances undergone a sea-change, and also in international - 2 - dialogue with donors, other development institutions, academia and international civil society organizations. At the same time, it is clear that there remain considerable challenges not just of day-to-day implementation, but of strengthening the basis on which the PRSP process can further mature and evolve. Thus, for example, it is no surprise that PRSPs have not been flawless in their depth of analysis, realism of target-setting, or breadth of consultation. In some cases, there is clearly scope for integrating the PRSP process more fully into representative institutions and processes, rather than using special consultation mechanisms. For many IDA countries, there is still a way to go before budgetary allocation decisions and outcomes are fully aligned with PRSP poverty reduction priorities: institutional capacity, fiscal inertia and interest group pressures necessitate careful, sustained effort to bring this about. IDA, the countries and other development partners need also to underpin the continuing PRSP-led effort by investing more to strengthen the quality of poverty data and the analytics of pro-poor growth policies. The agenda of work, in other words, is demanding, but the utility and promise of the approach has proven strong. 4. Third, the IDA13 discussions stressed the central importance of IDA basing its support on country performance -- and IDA has a strong record in that respect. Further steps towards strengthening the performance basis of IDA by public disclosure of IDA's country ratings are underway, and are being discussed in the World Bank Board prior to the Mid-Term Review. At the same time, Deputies were concerned about the challenge for IDA posed by countries in conflict, and more generally by countries that are performing poorly, and where the achievement of even the most basic of the Millennium Development Goals seems a difficult stretch. Clearly there is a tension between a strong performance orientation and these considerations, which must be recognized and managed transparently. In this respect, the post-conflict framework agreed for IDA13 is proving its usefulness, and further work is proceeding within the LICUS framework to define appropriate types of engagement, particularly non-financial, which maintain a strong performance framework but also provide the means to help poorly performing countries turn around. This latter is less a discrete "deliverable"than an important stream of analysis and action to deal with the challenges of governance and capacity in the poorest and most difficult IDA countries. 5. Fourth, and closely linked to the performance base for allocating IDA's resources, IDA13 has initiated important movement towards a results-based development assistance system. The first stages of this, also reported separately -- the interim performance measures for IDA13, the results agenda -- have been energetically pursued, and Deputies have been part of this process. design work on a fuller approach, and engagement with other development partners around the Once again, it is clear that these are early steps in an effort which, to realize its promise, must be sustained by and be coherent across the entire development community, for at least three reasons. The measurement and assessment framework needs to be robust, relevant and, crucially, broadly owned by both the countries concerned and their international partners. Substantial investments need to be made to build (or rebuild) in IDA countries the statistical and analytical capacity required for meaningful results measurement. And development results need to be a common and shared responsibility, since results beyond a micro (and ultimately insignificant) level can rarely either be delivered by, or attributed to, a single participant in the development effort. The important initiative which IDA13 has established needs to be viewed in that light. - 3 - 6. As noted above, Management has prepared the attached matrix as background for the MTR. The basis for the matrix is the IDA13 Action Plan, and it reports on the status of specific IDA13 commitments and the steps taken to date to advance IDA13 objectives. In addition to the matrix, the papers for the Mid-Term Review fall into three broad categories: Factual reports requested by Deputies or otherwise needed to provide an adequate empirical base for Deputies' discussions. These include - 0 Progress on harmonization, especially in the areas of financial management, procurement, safeguard assessments and country analytical work; 0 Progress towards the Millennium Development Goals; 0 Implementation of the Bank's private sector development strategy; 0 IDA commitments, disbursements and financing in FY03; 0 Coverage of Economic and Sector Work (ESW); and 0 Update on alternative outcome indicators for the IDA Results-Measurement System. Analytical reports on specific topics of importance, notably - 0 Grants, with papers on FY03 implementation experience and on options for financing the cost of grants; 0 Selectivity, both with respect to the Bank's management of development priorities and with respect to the management by Deputies of selectivity in the upcoming replenishment process; and 0 The Performance-Based Allocation system, including poverty weighting in the PBA, the impact of allocation caps, the experience with the governance factor, and plans for CPIA disclosure. Forward-looking reports, dealing with issues arising in the near term of relevance to the mid- term discussions. These include - 0 Debt sustainability, in the form of a presentation of current thinking (rather than a paper) on this important topic, since the joint work by the Fund and Bank is underway but incomplete, and due for presentation to the institutions' Boards by early 2004; 0 The IDA pilot program for regional projects; and 0 Innovative approaches to leveraging IDA'Sresources and aid partnerships. EU LL cd-c0 m E E 0 c\1 I I m 3 d Q 0U.- >Q s c m I I ct - cd 3 B z E 0 f .3 E M 0 f .- C M d I I E m IA I I E \o I I #a .5 e 0 e L 0 W e e 5U irE 10 00 I I s 8 Q .-2 0 0 I I 0 I3 I v. \9 z m v. . . I3 d I e 0 2 I I 00 mw 00 mb 00 mb 4m I I e 0 e e 8 2 e s 3 0 2 2 .3Yc B 3 3.-B 2 8 " 2 8 85 0 E M .- v)e, e, 0 0 0 C M 1 e, m L e, 0.3c M 0 4 2 Es 3 fl