2003 Annual Review of Development Effectiveness : The Effectiveness of Bank Support for Policy Reform

The Annual Review of Development Effectiveness (ARDE) 2003, examines the effectiveness of Bank support to borrower countries, in particular, the help to foster reform policies, and institutional frameworks. The Review focuses primarily, although not exclusively, on the years from 1999 through 2003. This is done to facilitate the juxtaposition of recent evaluation evidence with trends in policy indicators. Recent trends in developing countries ' policies suggest that the various dimensions of policy, and institutional performance have, on average, improved modestly, although recent reforms have touched most areas of development policy. In most countries that accomplished strong reform over the period 1999-2003, change was driven by necessity, or opportunities such as transition from socialism, economic crisis, European Union accession, and change of government. Development research suggests that such factors tend to galvanize support for change, and thus make the politics of policy reform easier. Countries whose policies improved over the period 1999-03, grew on average, at more than twice the rate of those that did not. Evaluation evidence links Bank support to recent improvements in policy. At the project level, good country policy ratings tend to be associated with good evaluation ratings on project outcomes. The Bank was less successful in linking its support to policy reform, in countries with no, or weak track records, or with deteriorating policy environments. The uncertainties associated with policy reform are reduced, when the Bank ' s support is aligned with country priorities that have been validated through country-led, inclusive political processes. A start has been made through the Poverty Reduction Strategy (PRSP) process. However, the PRSP ' s potential as a vehicle for fostering country ownership is undermined, according to some borrowing countries, by its role as condition for access to external financial assistance. And, in countries where recent outcomes of Bank assistance were evaluated as satisfactory, high quality, relevant, and timely, Economic and Sector Work (ESW) generally made a substantial contribution. Therefore , it is suggested the Bank should not normally engage in lending, before ESW has established a base of county and sector knowledge.