> home > News
World Bank fails to assess the impacts of their advice on the poor
22 February 2010
By Nora Honkaniemi
A recent evaluation by the Independent Evaluation Group (IEG) of the World Bank, “Analysing the effects of policy reform on the poor,” finds that the Bank systematically fails to assess the impact of its own advice on poor people. The evaluation of the effectiveness of the World Bank Poverty and Social Impact Analysis (PSIA) reveals that PSIAs, despite a few successes stories, have in general had a “moderate effect on country policies and Bank operations and a negligible effect on country analytic capacity.” In other words, the systems put in place by the World Bank to assess the impact of its suggested policy reforms before they are recommended to developing countries are either not being used at all, or the resulting advice is not implemented.
As the 16th replenishment of World Bank’s concessional arm, the International Development Association (IDA), starts on the 2nd of March in Paris, governments party to the negotiations should make sure that the Bank’s grants and loans to developing countries do not advise policy reforms which could hinder, rather than help, the world’s poor.
The Bank’s own evaluation group finds that PSIAs do not inform policy-making
PSIAs were introduced in 2002 as a result of successful advocacy by civil society organisations who highlighted the increased need for systematic analysis of poverty and social implications of policy reforms that the World Bank attached as conditions on poor countries to access their development finance. On paper, PSIA recognised “the importance of understanding the institutional and political impacts of policy reforms, development, building domestic ownership of policy reforms, and assessing the distributional impacts of policy actions.” They were intended to inform the Bank and client governments of the impacts of policy reforms on development, and to shape policy advice and programme design. However, the IEG evaluation confirms earlier CSO findings that PSIAs have failed to deliver on initial expectations.
The evaluation found that, on average, PSIAs only had a moderate effect on country policies. The evaluation found that lack of country ownership on the priorities and topics chosen; lack of engagement with the parts of the government which have policy jurisdiction over the area covered by the PSIA; and alignment to the timing of the country’s decision-making process were the main reasons to make PSIAs irrelevant to inform the country’s decision-making process. For example, in Mozambique, the PSIA analysing labour policies was carried out too late to inform labour law reforms that had already been discussed and submitted to Parliament. The Bank also failed to engage with the relevant Ministries.
The evaluation also showed that PSIAs have failed to build country capacity to assess the impacts of policy reforms on the poor, which was one of the main reasons behind the setting up of the Bank’s assessment tool. The evaluation recognises that “the PSIAs reviews…suggest a negligible contribution to country analysis capacity, on average.” The evaluation lists a number of explanatory reasons behind this failure, but fails to provide the number of PSIAs that were contracted to local consultants and institutions – as opposed to international ones. CSOs have strongly criticised the strong donor bias to contract international consultants to deliver technical assistance which prevents building local capacity and uses up a big share of aid monies to pay salaries in the North.
Last but not least, most disappointing is the IEG finding that evidence provided by PSIAs on the impact of Bank-advised policies on the poor has not been used to reassess Bank programmes. The evaluation indicates that World Bank staff consider the PSIA more of a luxury prodcut to be used when time and resources allow. Even when evaluations are executed, the results are not necessarily used to inform policy decisions: “Most Bank management and staff interviewed felt that the utility of PSIAs is yet to be proven.” However, the failure to assess the potential impact of policies before they are recommended comes with obvious dangers.
What the World Bank must do
To improve PSIA effectiveness the evaluation makes several recommendations, such as ensuring that Bank staff understand the usefulness of PSIAs; that the PSIA has clear objectives and is integrated in the Bank’s country assistance programme; and to strengthen its effectiveness. Unfortunately, the IEG fails to give clearer recommendations to ensure that:
-
PSIAs are always conducted before decisions have already been taken on a particular policy reform (ex-ante), and they should be country-led;
-
the results are used in a public debate, which is then reflected in the advice the institution gives that country;
-
there should be a genuine attempt to survey a range of policy options – and not exclusively assess the policy options proposed by the Bank;
-
PSIAs are systematically conducted prior to all key structural and economic reforms or projects with a significant distributional impact (where “significant distributional impact” is clearly defined so the process is transparent);
-
PSIA is a requirement of Development Policy Loans (DPL), which currently, it is not.
What governments involved in IDA 16 replenishment negotiations must do
As donors consider their contributions to the 16th replenishment of the World Bank’s concessional lending arm the International Development Association (IDA) – providing loans and grants to the world’s poorest countries – the lamentable findings of the IEG evaluation should be a wake up call to the governments’ negotiators.
At this time of replenishment, another evaluation for these donors worth taking note of is “Review of IDA Internal Controls,” (by IAD, IEG, and INT April 2009) which reviews reporting on financial and procurement matters, compliance with laws and regulations, and effectiveness and efficiency of operations. Nancy Alexander, Program Director of Economic Governance at the Heinrich Boell Foundation highlights in her recent article the fact that IDA internal controls are also failing to perform, and that multiple breaches of IDA’s founding principles and articles of agreement are common place.
Governments should ensure that, at the very least, the failures highlighted by the independent evaluations are seriously taken into account. They should ensure that the final IDA 16th agreement makes sure that IDA internal controls are duly respected, including its own operation policies. They should also ensure that country-led PSIA be used in all IDA-supported lending with a major distributional impact, and pressure the World Bank to ensure that proper PSIA is conducted in a way which enhances country ownership.
Key links:
Blind Spot: The continued Failure of the World Bank and IMF to assess the impact of their advice on poor people, Eurodad 2007
Major Overhaul at the World Bank
: Kb