Programmed for Results?

Concerns raised over new World Bank lending instrument

14 September 2011

In August, the Bank released a policy paper and draft operational policy for its controversial new Program For Results (P4R) lending instrument, aiming to rush through its approval by the end of the year despite significant concerns raised by civil society groups.

The thrust of the instrument has changed little since the concept note released earlier this year (see Update 75), with a focus on supporting government programmes, and procedures and standards developed for each individual programme rather than following existing Bank practices.  In fact, the proposed five and a half page operational policy, which is the mandatory reference document for Bank staff, is surprisingly light on detail.

Extremely flexible

P4R could finance Bank lending at any level from local to national, and is designed to allow the Bank to contribute to government-backed programmes as part of pooled funding arrangements with other institutions and donors. In some ways it will operate like the Bank’s Development Policy Lending (see Update 66), with disbursement against agreed indicators and governments able to “request that the Bank loan proceeds be disbursed … into the government’s account at the central bank”.

It is also designed to be an alternative to project-based investment lending (see Update 71) and will allow Bank staff in the field a great deal more flexibility in terms of working with other donors, and designing programme-specific standards, procedures and monitoring and evaluation systems. This attractiveness to Bank staff, who many have noted have an embedded ‘approval culture’ with strong incentives to lend quickly (see Update 45), helps explain why the Bank is expecting P4R to rapidly become a major instrument.  Despite previous promises to pilot it carefully, the Bank is now expecting to lend up to $5 billion through P4R within 18 months of its introduction.

P4R is intended to “place more direct emphasis on development results by linking disbursements to results”, but the definition of results is broad.  The Bank will work “with the client to frame and refine the programme and establish expected results”, but the actual results that will trigger bank disbursements could vary from outcomes like “number of children vaccinated” to processes like the “implementation of an information system”.

NGO Oxfam International raised concerns with this definition in a July submission: “The problem is that many poor countries need up-front funding to enable them to deliver results in the first place … We are also concerned that this aspect of the instrument will limit the predictability of World Bank financing.”

Safeguards out of the window?

The set of safeguards that the Bank uses for investment lending, the major part of the Bank’s portfolio, are swept away and replaced by some “key principles” to aid the design of P4R programmes.  For example, operational policies on indigenous peoples do not have to be followed. Instead staff are advised that “special attention [should be] provided to the rights and interests of the indigenous peoples and to the needs or concerns of vulnerable groups.”

This appears to be a significant step backwards for the Bank, whose private sector arm, the International Finance Corporation (IFC), had finally given limited recognition to the UN-agreed principle that indigenous peoples should instead exercise free, prior and informed consent over projects that affect them (see Update 77). A similar approach is taken with environmental impacts, natural habitats, involuntary resettlement, forests, dams, and other critical areas.

Civil society groups, who had campaigned for the safeguards to be introduced because Bank staff had not followed previous, similarly vague guidelines, reacted angrily.  Nancy Alexander, of German political foundation Heinrich Boell, author of a previous in depth critique of the new instrument (see Update 75),  said “the Bank risks enormous harm to communities across the world and its own reputation if it allows a sizeable proportion of its portfolio to be based on vague advice on how to prevent negative impacts rather than concrete policies.”

While the Bank says its new access to information policy will apply (see Update 68), there are significant exceptions in this policy for information produced by third parties, likely to be much of the information in P4R programmes. Oxfam’s submission also notes that the Bank “does not provide for any measures or instruments that create transparent external review or accountability mechanisms for external stakeholders, including civil society.”

Risky projects – still on the table?

The Bank had previously said that ‘category A’ projects – those that could cause “significant and irreversible damage to the environment and/or affected people” – would be excluded from P4R, but the new paper introduces significant leeway, and a short note of the board discussion indicates that this is still a bone of contention.  The Bank’s new document suggests that category A projects – mostly large infrastructure – could be financed as an add-on to a P4R programme, or even as part of the programme “where such activities are deemed to be important to [its] integrity” and “their monetary value and/or potential environmental and social impacts in relation to the overall programme are modest.”

How will it be used?

Perhaps the most surprising part of the paper is the section dedicated to “challenges and risks”, which has no discussion of how Bank staff will use P4R in the context of the incentives and pressures they face.  For example, risks of the dilution of standards will be met by ensuring “systems assessments will be carried out rigorously, consistently, and transparently”, without reflection on why, for example, the Bank’s arms-length evaluation body, the Independent Evaluation Group has found that implementation is a major problem in other areas of the Bank’s work (see Update 71). The concern that P4R could potentially enhance Bank power when there is a lack of country ownership is deemed unlikely simply because the act of requesting a P4R programme means the “intent of the instrument and the government objective would be aligned”.

The Bank also plans to introduce a new internal team to double check projects for the roll out – expected to take 18 to 30 months – and have a full board discussion of the first two projects for each region. A web-based consultation on P4R will run until end September, and board approval is expected before the end of the year.