New adjustment credit guidelines revealed

18 June 2001

Impact assessments and participatory monitoring and evaluation processes will be key features of the World Bank’s new Poverty Reduction Support Credit (PRSC) according to guidelines. The guidelines note that such approaches would require disclosure of President’s Reports and tranche release memoranda. This is being considered as part of the Bank’s disclosure policy review. The paper also recommends borrowers disclose their Letters of Development Policy (LDP).

Eligibility for the credit will be based on a sound poverty reduction plan and capacity and willingness to improve budgetary and public sector management arrangements. PRSCs will also require up-front implementation of specified social and structural reforms that are “critical” for the success of the programme. The guidelines state that an integrative, cross-cutting assessment of the country’s social, structural, and key sectoral policies, which will include social and environmental impact assessments, will underpin the development of a PRSC programme. The President’s Report will spell out how the policies and institutional reforms supported by the PRSC will contribute to the achievement of the country and CAS objectives, and what steps are being taken before and during the programme to prevent or mitigate adverse social or environmental impacts.

The first Poverty Reduction Support credit was agreed for Uganda in June. Vietnam is also being considered.

The European Commission (EC) has agreed to co-finance the PRSC. Indicators, objectives, timetables and conditionalities will be defined jointly with the Bank, but the EC wants to put more emphasis on linking disbursements to outcomes. There will be joint ECWB missions. Nineteen African countries have been tentatively identified for co-financing, and a multi-donor fund for public expenditure management and accountability has been established to which the EC will contribute over US$1.5 million.

The PRSC guidelines will be kept under review and updated. Lessons from experience with PRSCs will be incorporated into the new Operational Policy and Bank Procedures for adjustment lending.

The papers are on the World Bank’s website