© The World Bank

The Bank is helping to build a global framework for effective development and attainment of the Millennium Development Goals, addressing its own institutional efficiency, and examining the effectiveness of its programs.

THE GLOBAL MONITORING REPORT

The second Global Monitoring Report, Millennium Development Goals: From Consensus to Momentum, published jointly by the Bank and the IMF, sets out a five-point agenda of actions that can help developing and developed countries build the momentum needed to attain the MDGs. Recommendations include anchoring actions in country-led development strategies; improving the environment for stronger, private sector–led economic growth; scaling up education and health services; dismantling barriers to trade in developing and developed countries; substantially increasing the level and effectiveness of aid by at least doubling the level over the next five years and aligning the pace of the increase with recipient countries' absorptive capacities; and improving the quality of aid. Special attention must be given to accelerating progress in Africa, the region farthest from attaining the goals. (See www.worldbank.org/globalmonitoring.)

MANAGING FOR RESULTS

The need to use information to improve decision making and steer country-led development processes toward clearly defined goals is now at the forefront of the global development agenda. During fiscal 2005 the pilot phase of the results-based Country Assistance Strategy methodology was completed, and a stocktaking paper was reviewed by the Board. Efforts to strengthen country-level statistical capacity continued, and the IDA14 (14th Replenishment of IDA) Results Measurement System was developed. (See “Low-Income Countries” in “Summary of Fiscal Year Activities” for more on IDA.) At the global level, the Bank coordinated the preparation of a sourcebook on managing for development results with the Joint Venture on Managing for Development Results. (See www.mfdr.org/sourcebook.html.)

INCREASING INTERNAL EFFICIENCY

The Bank's review of the effectiveness of its operating units sought to identify ways to enhance their performance in the context of a changing external environment with increasingly differentiated client demands. The review looked at the Bank's client service delivery model, the effectiveness of the Bank's thematic networks, and issues related to Bank decentralization, staffing, and staff skills.

The findings of the review were discussed and endorsed during the Bank's annual Strategic Forum, attended by senior managers. Recommendations under consideration include ways to strengthen both the Bank's services to country clients and its work on global issues; options for further Bank decentralization; and options for enhancing the effectiveness of thematic networks by strategically managing staff skills, improving knowledge sharing, and reducing overlapping mandates.

PROMOTING BUDGET REFORM

The Bank's recent budget reform initiative, launched during fiscal 2005, builds on improvements made over the past several years and supports the Bank's long-term focus on results. Corporate and unit strategic decision making and performance management will increasingly be driven by a process of setting clear strategic objectives and deploying resources to achieve desired impacts. The three core goals of the reform are to strengthen the new multiyear budget framework, to give management the flexibility and room to manage effectively, and to hold management accountable for its performance. Business planning and monitoring processes will be simplified, and the focus of attention will gradually shift from hitting absolute targets at the end of each fiscal year toward supporting continually improved resource management in pursuit of medium-term goals.

A principal element of the new system is the Strategy and Performance Contract, which summarizes each unit's strategic direction, explains the trade-offs and choices it makes in allocating its resources, discusses the risks it faces in achieving its objectives, and identifies key performance indicators, which will be used to track results and performance.

SIMPLIFYING BANK PROCESSES

The Bank continued its program to simplify and modernize its instruments, processes, and policies this year. Adjustment lending was renamed development policy lending to emphasize and reflect country ownership and support the efforts of client governments to meet their countries' needs. Changes were introduced in documents and procedures to allow for faster processing, so that borrowers receive funds and can address needs more promptly. As part of its work to support new ways of doing business, the Bank began implementing an updated policy on expenditure eligibility that makes it easier to finance expenditures that borrowers must make to implement projects. (See www1.worldbank.org/operations/eligibility.)

The Bank has also begun to simplify and modernize legal agreements that underpin IBRD loans and IDA credits and grants, with a view to clarifying their content, facilitating negotiations with member countries, and harmonizing them with the legal agreements of other international financial institutions in the long term.

Simplification is an ongoing process, and although the focus is now on implementation, the Bank will continue to readjust its policies, procedures, and instruments as necessary to meet borrowers' changing needs.

HARMONIZING WITH OTHER DONORS

During fiscal 2005 the Bank helped organize the High-Level Forum on Aid Effectiveness, held in Paris. The Forum brought together 620 participants representing 90 donor and partner countries, 27 aid institutions, and a range of civil society organizations. It adopted the Paris Declaration, which commits parties to improving ownership, harmonization, alignment, managing for results, and mutual accountability. It also agreed on 12 indicators for monitoring progress, with targets for 2010 to be set by September 2005.

Bank support that pools funds with other donors and governments through common mechanisms, often under sectorwide and program-based approaches, accounted for $773 million in 9 projects in fiscal 2005, including support for health in Bangladesh and Nepal, and education in Morocco and Vietnam. The Bank also coordinated 17 Poverty Reduction Support Credits worth $1.4 billion with other donors, including credits for Ethiopia, Ghana, and Rwanda. It collaborated with other donors to produce analytic reports on poverty assessment and governance, and fiduciary diagnostics in Kenya, Tanzania, and several Central American countries. (See http://www.aidharmonisation.org/ and http://www.countryanalyticwork.net/.)

INCREASING TRANSPARENCY

Fiscal 2005 was a landmark year for the Bank's transparency and disclosure agenda. In March the Board approved a number of revisions to the Bank's disclosure policy that will extend and simplify information disclosure, reaffirming the Bank's commitment to ensuring transparency about its activities. These changes included adopting a unified Country Assistance Strategy disclosure policy for IBRD and IDA; disclosing Board minutes (except those of executive sessions), the staff manual, the budget paper, and the staff compensation paper; and simplifying the disclosure clearance procedures.

This fiscal year also witnessed the introduction of more open policies on the disclosure of development-policy lending documents and Country Policy and Institutional Assessment (CPIA) ratings. CPIA ratings assess the quality of a country's policy and institutional framework and its suitability for fostering sustainable, poverty-reducing growth and effectively using development assistance. (See “Institutional Integrity” in “Addressing Worldwide Poverty,” and “Low-Income Countries under Stress” in “Summary of Fiscal Year Activities.”)

EVALUATING THE BANK'S WORK

The Operations Evaluation Department (OED) is an independent unit within the World Bank that reports directly to the Bank's Board of Executive Directors. Its evaluations seek to ensure accountability, provide an objective basis for assessing the Bank's work, and allow Bank staff to learn from experience.

OED's 2003 Annual Review of Development Effectiveness found that developing countries have improved their policies. Moreover, countries whose policies improved over the period 1999–2003 tended to grow at more than twice the rate of those whose policies did not improve. However, growth is not enough to reduce poverty. The 2004 review reported that the Bank's poverty reduction strategy appropriately highlights both growth and the social aspects of development. But it may downplay sectors that cut across and complement these pillars, such as infrastructure, rural and urban development, and environment.

OED has evaluated a wide range of activities relevant to these development and poverty reduction issues. A review of Country Assistance Evaluations found that successful country programs are tailored to the country context. The Bank needs to deepen its country knowledge and link its assistance programs more closely with progress on country reforms.

OED's review of global programs found that the Bank is exploiting its comparative advantage more effectively at the global level than at the country level. But linkages between global programs and the Bank's country operations are weak.

A joint evaluation with the IMF's Independent Evaluation Office found that the poverty reduction strategy process has helped focus stakeholders in low-income countries on poverty, results, and an overarching framework for aid management. In many cases, however, countries have focused more on completing documents that give them access to resources than on improving their poverty reduction efforts.

Finally, OED assessed the relevance and effectiveness of Bank support for building public sector capacity in Africa. It found that the Bank's success varies across sectors as well as from country to country. Most capacity-building support is designed and managed project by project, the report concluded, making it difficult to capture cross-sector issues and learn lessons across operations.