An Evaluation of Bank Group Policy-based Lending Operations, 1986-97

Evaluation Team

This report was produced by Messrs. O. OJO, OPEV and F. ATABANI, consultant. Questions on the report should be addressed to Mr. G.M.B. KARIISA, Director, OPEV on extension 4052 or to Mr. O. OJO on extension 4262.

Objective

In response to the directives of ADF VI mid-term review, Management, in 1993 commissioned a study on Bank Group experience in policy-based lending operations for the period 1986-1993. The study was carried out by a team of two consultants. The present report is written in response to a similar directive on ADF VII to: "Assess the development impacts of policy-based lending (PBL) instrument and report on experience".

Main Recommendations

Recommendation(s) to the Bank:

• Design weakness of Pbls in Africa: The Bank should use its understanding of African realities to test programme design against such critical features as: (i) consensus around the programme and its acceptability; (ii) the institutional ability to implement and sustain the programme; (iii) selectivity, sequencing, pace and realism of reform taking into account the country's institutional capacity (iv) the assessment of risks and uncertainties and the necessary flexibility to adapt the strategy; (v) clarification of the conditions necessary for programme coherence and consistency; (vi) enumeration of performance and implementation indicators and the conditions that would trigger revision in programme design. The Bank should also take a longer-term view of the adjustment process by refocussing Pbls on issues of long-term development and the integration of African economies

• Future of Policy-Based Lending (PBL) Operations (PBL): The Bank should continue to be involved in policy-based lending operations as they facilitate policy dialogue with member countries. But the Bank should be more involved in upstream operation such as extensive and intensive ESW, and preparation of PFPs and downstream activities such as poverty alleviation and ISOs as well as direct dialogue with the RMCs. When co-financing a pbl operation, the Bank should clearly define its domain of intervention and modalities and adapt the programme design to maximize performance. Together with more stringency in country eligibility and selectivity in the type of operations to be supported, the Bank also needs to improve the quality of its intervention through better management of the whole project cycle and enhancement of the quality of Bank resources in terms of volume, timely approval and disbursement of loans.

• For the RMCs Governements: In order to further enhance its effectiveness in Pbls the Bank will need to strengthen its capacity for policy analysis and economic and sector work and its ability to translate its sensitivity to and understanding of Africa realities into workable operational models. It will also need to foster indigenous thinking and programme preparation for a more effective role in pbl operations, utilizing its comparative advantage as an African institution in constructive dialogue with member countries.