World Bank lending to poorest countries examined

10 September 2001

As governments are again being asked to contribute to the World Bank’s International Development Association (IDA) facility, NGOs and others are raising questions about the role and effectiveness of the Bank’s lending through IDA to the poorest countries. Should grants be favoured over loans (see article below)? Should lending to countries with “weak governance” be withheld? Do World Bank selection criteria for access to IDA funds support reforms set out in countries’ PRSPs?

The Bank recently published findings of a survey of 200 officials, academics and NGOs from IDA-borrower countries. Less than half of participants found the Bank’s approach to assessing the government’s economic and social policies and record on governance appropriate and fair. One official said “at times IDA acts in a dogmatic manner stressing the paradigm that is in fashion”.

Over half of survey respondents were from African countries and 80 per cent had involvement in IDA‘s activities for more than three years – mostly in national government. Four out of ten respondents disagreed that IDA lending to countries with very weak governance should be scaled back or stopped entirely. “Limiting assistance to countries with weak governance would only worsen the situation of the poor,” one respondent commented. However, “without strict monitoring and evaluation, IDA funds might become one of the major sources of corruption and unfairness in the country and even make weak governance worse,” another pointed out.

A large majority of survey respondents thought IDA resources should help strengthen local training and research organisations, developing effective government management systems and procedures, and building capacity at community level. Nearly all respondents thought IDA should emphasise social sector development and said PRSPs should include progress indicators based on thorough diagnosis of the country’s poverty situation. There was also full agreement that PRSPs should be highly participatory.

Donor government officials negotiating the refinancing of IDA have urged the Bank to review the index by which it judges countries’ performance and allocates IDA resources. The Country Performance and Institutional Assessment index (CPIA) is a series of 20 policy criteria. These are standardised across all countries, not tailored to each country’s reform priorities. Nor are they specifically poverty focused. Moreover, they ignore important aspects of the Poverty Reduction Strategy process such as the quality of participation. For the first time the Bank has agreed to discuss its ratings with the governments concerned, but not to reveal them to the public.

An independent review of IDA‘s performance since 1994 has concluded that poverty trends in most IDA countries have been disappointing during that period. In particular, it notes the linkages between country programmes and poverty outcomes need to be better articulated and that more needs to be done on governance and institutional capacity. IDA has lent US$ 42 billion to 77 low-income countries during this period.

The review recommends improving implementation of Country Assistance Strategies and programmes in the context of PRSPs. “This will call for even greater country and programme selectivity, far more effective donor coordination and harmonisation as well as systematic monitoring and evaluation, focusing on results and the international development goals,” the report concludes.

See also Will grants kill IDA?

Deskstudy of good practice in the development of PRSP indicators & monitoring systems, Overseas Development Institute, UK