95264 March 2015 · Number 2 RWANDA EXPERIENCE: PREPARING A PFORR OPERATION Yoichiro Ishihara and Hilda Emeruwa1 Practice (GMFDR). In leading the operation, the Bank team gained knowledge and experience on In 2012 the World Bank introduced a new how to effectively and efficiently prepare for a lending instrument, Program-for-Results PforR program. The purpose of this note is to (PforR). PforR differs from the Bank’s other share that knowledge and experience within the instruments—development policy financing and World Bank and beyond. investment project financing—by linking the disbursement of funds directly to the delivery of defined results (see Figure 1). PforR is intended Figure 1. PforR, IPF, and DPF to help countries improve the design and implementation of their own development programs and achieve lasting results by strengthening their institutions and building capacity. PforR also focuses on strengthening the country’s systems that are associated with the program (financial management, procurement, monitoring and evaluation, and environmental and social systems). Thus, the Rwanda country team felt that PforR would be a very good fit for Rwanda, a country with results-based development management and strong country Introducing PforR to the Client: PforR systems, and the Government was very much operation is conceptually easy and attractive, but interested in this type of financing. its success requires broad engagement and collaboration around the potential value-added This note reflects on the experience with this of the instrument. Country directors, managers, instrument in one operation in Rwanda. The and task teams need to be engaged with key Public Sector Governance Program PforR counterparts—for example, Ministries of Finance (P149095) was approved by the Board of and Planning and sectoral ministries. Frequent Directors in October 2014. This program, discussions are also needed within the Bank focusing on public financial management (PFM) between country and sector management and and statistics, is Rwanda’s first PforR operation within the government between line ministries and the first led by the World Bank’s and concerned sector ministries (and, where Macroeconomic and Fiscal Management Global appropriate, local governments) to build 1 This Knowledge Note was cleared by Albert G. Zeufack, Practice Manager (GMFDR). understanding and consensus on the way partners should also be included as members of forward. It is also critical to reach out to other these teams. partners and stakeholders and share information at all levels. The preparation of a PforR program Rwanda experience. The Bank’s task team leader requires three thorough assessments (technical, prepared a detailed processing schedule and fiduciary, and environmental and social) and the division of labor for the team, including preparation of a Program Document. It is designating one member to oversee the important that neither the Bank team nor the preparation process. On the client side, the government underestimate the amount of work program involved five implementing agencies that can be involved. plus those dealing with environmental and social issues—a complicated team that had Rwanda experience. When the instrument was coordination problems at the beginning. first introduced, the Government team thought that preparing a PforR operation would involve Recommendation. It is highly recommended that simply setting some disbursement-linked one team member—ideally one with PforR indicators (DLIs). Thus, the amount and type of experience—oversees the timeliness and dialogue and data/information that were progress of the preparation. Having strong involved far exceeded their original expectation counterparts on the government side also helps, and led to some initial dissatisfaction. Also, as especially in multisectoral operations like this this is the first PforR in Rwanda, there was little one, which may be dealing with complex issues. understanding of the differences among the three instruments. We found that holding Coordination with Development Partners: workshops and follow-up discussions to engage A PforR program can strengthen partnerships, the various stakeholders was a good approach to since development partners can work through bringing everyone on board. the program systems, ideally around a common set of results owned by the government. Recommendation. It is important to introduce Generally, development partners welcome the the instrument to the client, taking the necessary prospect of such a program, but not all partners time to build consensus. The Bank team and in the field know how the instrument works. management should set aside enough time at the beginning of PforR preparation to explain the Rwanda experience. Because the Rwanda Public procedures and requirements clearly, and set the Sector Governance PforR Program is about three right expectations. times larger than the other development partners’ interventions combined, and because Team Composition: A PforR program is this was the first PforR operation prepared in prepared by a Bank team and client counterpart Rwanda, some of the development partners were team working together. For all Bank-funded concerned about how it would align with their operations, but especially for PforR, the Bank projects and programs. In response, the Bank team must bring together complementary skills team took time to explain to the development in policy dialogue, technical design, and partners how the PforR program would bring implementation support, including subject- additional value to the sectors and would align matter experts. The PforR team should also with their interventions. To reduce the client’s include staff who are very familiar with the transaction costs for monitoring and evaluation, PforR instrument. It is helpful if this team has a the Bank team adopted the same indicators that strong field presence. Similarly, the client other development partners used. The counterpart team needs to include not only development partners reacted well to this ministries and agencies relevant to the technical approach, welcomed the PforR, and readily area of the program, but also those dealing with cooperated with the Bank on it. environmental and social issues and fiduciary issues. Where appropriate, development March 2015 · Number 2 · 2 Recommendation. It is important to reach out to Recommendation. A quality expenditure other development partners at the very framework requires information not only at the beginning, briefing them on the PforR’s potential program and subprogram levels, but also at the as a means of coordination with partners, as well output and activity levels. It should support the as on the specific program that is being prepared. key elements of the results chain. If this activity reveals that the government does not have an Program Boundary and Expenditure appropriate budget structure, it can be an Framework: PforR finances part or all of a opportunity for the Bank team to help the program of the government—whether national, government enhance its budget structure. It is subnational, sectoral, or subsectoral—that leads particularly important that the Bank team have to defined development results. One of the most expertise in this area. important tasks in preparing a PforR operation is working with the counterpart team to define the Results Chain and DLIs: Part of defining the scope and boundaries of the PforR Program. The Program’s scope is identifying the key results to Program should be sufficiently ambitious to be achieved under the Program. The Bank and have real development impact, but it should not counterpart teams then work together to develop be so complex that it becomes unmanageable for the indicators by which to measure the the client. As part of the Program definition achievement of those results. Formulating a exercise, constructing a credible expenditure results chain linking the program development framework is very important. Carefully objective (PDO), results areas, results indicators, reviewing the budget structure and classification and DLIs is a core part of a program design. of government expenditures, and assessing the Program’s financial sustainability and funding Rwanda experience. Because Rwanda has strong predictability, helps to (a) define the Program results-oriented development management, the boundary and scope of the assessments, (b) PFM sector strategic plan (SSP) and the national identify relevant implementing agencies, and (c) statistics development strategy include a great analyze the efficiency of the Program’s deal of information from which to construct a expenditures. However, developing a quality results chain. However, the Bank and client expenditure framework can be challenging, teams started by developing DLIs and trying to especially for a cross-cutting sector such as PFM, work backwards to finalize the results chain, where multiple ministries and agencies are using the results indicators and policy actions of involved. the PFM SSP and the national statistics strategy. This was not the right approach. In addition, the Rwanda experience. For Rwanda’s PforR, it was teams were overly ambitious in terms of the challenging for the Bank team to convince the numbers and contents of DLIs. Therefore, after a client of the importance of the expenditure few iterations, the Bank team significantly framework and it was not easy on part of the simplified the DLIs by limiting their number and Bank team to define the right scope of analysis. using the same indicator in each DLI across Also, some of the PFM program and different years. subprograms were not aligned with the country’s budget classification, and the Bank Recommendation. Our experience pointes to the team requested the counterpart team to construct importance of first developing a results chain a matching table between the PFM that leads to sound and SMART (specific, program/sub-program and budget measurable, attainable, relevant, and timely) classifications. As a result, it took a few months DLIs. In designing DLIs, the teams should be for the client to construct a quality expenditure careful not to make them too complex to be framework satisfactory to the Bank team, which implementable. caused a delay in parts of the preparation. March 2015 · Number 2 · 3 Addressing Capacity Constraints: The Recommendation. The teams should put preparation of a PforR operation involves three capacity building at the core of program design assessments—a technical assessment, a fiduciary from the beginning. Also, the expenditure assessment, and an environmental and social framework should clearly identify expenditure assessment. As part of carrying out the three items related to capacity development. assessments, the teams identify areas of Conclusion weakness and capacity constraints that would hinder the client from successfully implementing The preparation of the PforR program in the Program. Such constraints can be addressed Rwanda generated useful experiences and through DLIs, in the program action plan, or in lessons that could be useful for the preparation separate programs/projects financed by the of PforR programs in other countries. The World Bank or other development partners. authors of this note hope that it will add to the accumulating knowledge on how to effectively Rwanda experience. Although the Bank and and efficiently prepare a PforR operation. client teams had recognized the importance of capacity issues in designing the PforR program, they found it was difficult to design a DLI on About the authors: capacity; thus they included measures to address Yoichiro Ishihara, Senior Economist and capacity constraints only in the program action Task Team Leader of Rwanda Public Sector plan. Management later advised the Bank team Governance Program for Results, World to include capacity issues in the DLIs and to Bank’s Macroeconomics & Fiscal Management Global Practice (GMFDR) identify capacity-related expenditures in detail. email: yishihara@worldbank.org On the basis of that advice, the Bank and client teams developed a DLI related to capacity Hilda Emeruwa, Operations Analyst, World Bank’s Shared Operational Services Global development, and identified expenditures Practice GPSOS) related to capacity development. email: hmeruwa@worldbank.org; _______________________________________________________________________________________________ This note series is intended to summarize good practices and key policy findings on MFM-related topics. The view expressed in the notes are those of the authors and do not necessarily reflect those of the World Bank, its board or its member countries. Copies of these notes series are available on the MFM Web site (http://worldbank.org/macroeconomics) March 2015 · Number 2 · 4