Objective

The overarching objective of the evaluation is to examine the relevance, efficiency and effectiveness of the PBL instrument as used by the Bank in regional member countries over the period 1999 – 2009. Specific attention is being given to the evaluation of:

• The AfDB’s institutional and policy framework for the design, appraisal and delivery of PBL: to evaluate the Bank’s formal policy framework, procedures, skills and organisational structure for the delivery of PBL. How well does this reflect emerging international (and Bank) best practice; and is the Bank organisationally equipped to deliver best practice PBL efficiently and effectively?

• Policy and practice: to evaluate the Bank’s approach to the design, appraisal and delivery of PBL instruments in practice and how well this fits or deviates from Bank policy guidelines, with international best practice and country context and needs.

•  Choice of aid instruments: to evaluate how choices are made about the use of aid instrument in the country programmes and how relevant it is to the partner country’s problems, policies and priorities

•  Effects at country level: To assess the contribution made by the AfDB to policy dialogue, joint processes, institutional strengthening and other relevant areas where PBL is focused.

Main Findings

• AfDB’s main added value in Morocco is its considerable financial contribution .Morocco is the most important client of the ADB window, giving Morocco an important role within the Bank. Whilst the GoM has stated its preference for GBS it welcomes AfDB's PBO lending which provides an important monetary contribution to strengthen the Government's reform agenda. AfDB PBO lending is relatively attractive because of competitive loan conditions, long time frames, and the initial grace period. Additionally, for the GoM, AfDB funding contributes to diversifying its lending sources.

• There has been a positive trend in AfDB participation in policy dialogue, but its capacity and added value in policy dialogue remains limited .AfDB participation in policy dialogue has deepened over the evaluation period. The opening of the Morocco Field Office (MAFO) in 2006 coincided with a move to greater harmonisation and alignment led by the GoM. This included the division of labour (DoL) among DPs, and a narrowing down of the AfDB portfolio to fewer areas of intervention and fewer projects. These factors have impacted positively on AfDB's participation in dialogue and coordination. All of the currently ongoing AfDB PBOs are multi-donor undertakings where AfDB participates in the design, discussion, and monitoring. AfDB does not, however, take the lead in any of the thematic/working groups. AfDB's small country presence limits its influence on decision making and contributes to the assessment that AfDB does not have a strong influence on policy dialogue. The context requires a level and specificity of expertise which can only be sourced from AfDB's HQ. As a result, AfDB has relied quite heavily on other DPs to do the analytical work and to provide the necessary inputs

• AfDB has moved towards greater harmonisation and alignment over the evaluation period, reducing transaction costs for Government .Over the evaluation period there has been a clear trend in harmonisation and alignment of the AfDB portfolio in Morocco. AfDB has moved increasingly towards multi-donor programmes, all its PBOs use country systems. DPs conduct joint preparation, appraisal and monitoring missions. Matrices of conditionalities/triggers, as well as joint indicators and monitoring frameworks are agreed among partners. In Morocco 81% of DPs use country systems and 70% of aid is programme based. The main exception to a harmonised and aligned approach is the use by AfDB and some other DPs e.g. the World Bank of specific conditionalities/triggers. The establishment of parallel projects by the AfDB also stands in contrast to their commitment to move towards greater harmonisation and alignment.

• AfDB facilities for capacity development (CD) and technical assistance (TA) do not respond to the needs of Morocco .For the GoM, non-lending assistance is a key area of potential added value from its DPs in general and with the AfDB in particular. CD and TA are considered essential by the GoM who are pursuing ambitious reforms in a fast-changing environment. However, the AfDB has not been able to respond to the GoM expectations in this respect. Some improvement has come from the establishment of the Country Office but very few resources have been mobilised for technical inputs and studies. Funding through the Technical Assistance Fund (TAF) has proved ineffective as obtaining grants is a laborious, complex process resulting in the release of funds – and the implementation of the corresponding technical work being often been out of step with the timing of the reforms in the sectors targeted by the PBOs.

• PBO procedures do not recognise that reform processes entail a level of uncertainty, and this limits the effectiveness of PBO support .AfDB procedures require that all agreed conditions be satisfied for a tranche to be disbursed. Disbursement is then for the full amount agreed upon with the partner government. This aspect of PBO procedures penalises reform programmes which are overall on track, but for which one or two conditionalities may have been poorly negotiated, were harder to implement than anticipated, and/or require additional reforms. When funds are not released predictability is jeopardised. The requirement of full compliance limits the effectiveness of AfDB PBO support. In some cases the solution has been to front load funding so as to avoid having a major amount of funding held up during implementation. Alternatively, AfDB (and the GoM) have opted for choosing conditionalities that have already been achieved or partially achieved. In practice these approaches limit AfDB's capacity to contribute to the policy dialogue in a serious manner.

• The decentralisation process has facilitated project monitoring and improved dialogue with partners; however, decision making remains centralised and inefficient .The opening of MAFO contributed to a better understanding of the local context, a smoother implementation process, improved monitoring, and enhanced the visibility of the AfDB. This has allowed the AfDB to become a more active and valued DP in country dialogue. Nonetheless, it is clear that the decentralisation process has not been sufficiently accompanied by delegation of authority and this impacts on the effectiveness and efficiency of the portfolio. MAFO continues to have to refer to Tunis for many decisions which results in delays. In addition MAFO staff shortages (technical and administrative) impact on AfDB's capacity to participate in and contribute to dialogue and to deal with day-to-day programme management. The evaluation was told by GoM officials and DPs that responsiveness needs improving and communication channels must be streamlined.

• Predictability continues to be constrained .Overall levels of disbursements have improved significantly over the evaluation period, and the average age of operations has come down. However, predictability has been a problem for AfDB PBOs. Efforts have been made by AfDB to improve performance in this area, but there are still issues in predictability both from year to year and in-year.

• PBO support has gained importance and is targeted in its use but is still a small percentage of the overall AfDB portfolio in Morocco .PBO support has become a more important part of the AfDB portfolio. Morocco’s strong economic and financial management record has enhanced confidence in the GoM vision, has strengthened systems, and has been accompanied by a growing capacity to manage development aid. PBOs are favoured by the GoM because of their contribution to balance of payments support and for legitimising the reform agenda. Despite this trend, the bulk of the AfDB portfolio in Morocco is still project based. The support by AfDB PBOs of reforms in systems and procedures, such as public procurement, and the continued use of parallel systems for its project support are perceived by the GoM and some of the more aligned donors e.g. EC as contradictory to the principles of harmonisation and alignment.

• The Morocco Country Strategy Paper (CSP) provides general guidance on the use of PBO support. In practice use of PBOs is strongly influenced by GoM preferences .The Morocco CSP 2007–2011 provides clear guidance on the choice of aid instruments. It distinguishes between project loans for investment projects, and budget support for reform programmes. It highlights the GoM preference for budget support modalities. However, it does not establish what proportion of the country programme should be for PBOs or how PBO support might develop in the future. In practice decisions on the use of PBOs have been strongly influenced by the GoM preferences for this instrument.

• The use of conditionality has evolved as a result of lesson learning and has been strengthened, but it is used unevenly across the portfolio .Over the evaluation period AfDB has progressively moved to: a) fewer conditions; b) more harmonised conditions; c) conditions that are more ‘manageable’ and focus on a select number of priorities; and d) where complex reforms are concerned conditions have become more process-oriented (i.e. preparation for Parliamentary discussion of a certain law, rather than approval of that law). Overall, there has been a trend in the right direction, especially when conditionalities have been jointly agreed upon with other partners. However, there are also inconsistencies: AfDB still maintains specific conditionalities which are not necessarily in line with the main areas of reform, although are included in an agreed joint matrix. In addition, the level of ‘difficulty’ of conditionalities differs across sectors and PBOs. In the case of the area of administrative reform a programmatic approach has been adopted where each successive PARAP has a single tranche disbursement up front. This makes conditionalities easier to meet and allows AfDB to adapt the next PBOs to progress made.

• AfDB PBOs have influenced key areas of policy reform. However, attribution is difficult because of the joint nature of the programmes .PBO support is aligned with GoM key policy reform areas. However, attribution to the AfDB of changes in policy and processes is next to impossible given the joint nature of PBO financing. Nonetheless there is evidence that joint DP support to government reforms has contributed to strengthening administrative and financial systems, and to reforms in the social sectors (health and water). In the context of these programmes, AfDB has shown a focus on results, which has manifested itself in lesson learning resulting in improvements in the design of PBOs

Main Lessons

Main Recommendations

Recommendation(s) to the Bank:

• The question of whether stronger engagement in policy dialogue would produce better results needs to be considered. In a context where reform programmes are clearly driven and owned by the GoM, it may be well be that additional input from AfDB has no significant added value. However, this reflection needs to be done by MAFO with HQ, and a clear strategy with respect to policy dialogue should be elaborated. At present the strategy of limited engagement appears to be dictated by staffing and organisational constraints and not to be the result of deliberate reflection on the added value that this can have in the Moroccan context.

• Technical support and capacity building are areas where the GoM is actively seeking an input from the AfDB, and this makes sense in the context of a MIC which is grappling with problems of a complex nature. The possibility of including these areas in the PBO (as has been done in Burkina Faso – see case study) should be considered so that technical support and capacity building are developed in parallel with the policy reform process. Current mechanisms for providing technical support and capacity building through the TAF are inefficient and not working and should be reviewed.

• For the Bank Group: Other countries can learn from the clear statement of the purpose of PBOs in the CSP for Morocco which has contributed to there being important clarity on when this instrument is used. However, the CSP, and AfDB as a whole, should more clearly spell out what the target is in terms of the PBL (ceiling), what the medium term vision is, how PBLs will contribute to the success of the overall portfolio? In this context the extent to which PBL ceilings are necessary at all, or might differ across countries that are in different stages, should be considered.

• AfDB needs to review its requirements for disbursement for PBOs. This evaluation has highlighted the need for an approach to policy reform that can accommodate partial progress and unexpected developments/changes in the context or the priorities. AfDB's contribution to policy reform is affected by its current procedures for disbursement (i.e. the all or nothing approach). One option would be for AfDB to adopt a set of weighted reform achievements (along the lines of the EC variable tranches) but with full disbursement (rather than proportional disbursement) against a predetermined overall achievement score (e.g. 70-80%) on the selected set of reform measures. Innovation in this area could have an important impact on the effectiveness of PBO support, and on AfDB country programmes overall. Sufficient experience exists in other agencies for this to serve as a basis for reflection and reform in this area.

• The establishment of the MAFO has brought important benefits to the programme and to the interaction with the GoM and other partners. However, the capacity is not sufficient to allow for in-depth engagement with the priority sectors. Strengthening the human resources at country level, in particular in priority sectors, will enhance the quality of the policy dialogue with the GoM.

• Greater delegation of authority from HQ to the MAFO would make the use of PBOs more efficient. In practice MAFO staff have little authority and have to refer to HQ for many even minor decisions. MAFO should take over a selection of functions of the Task Manager at HQ and corresponding adjustments should be made in the authority of the Resident Representative in areas related to staffing and budgeting to allow MAFO to play a more significant role at country level.