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Patterns of Bank Support for Public Sector Reform
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Almost all countries received some analytical and advisory assistance (AAA) on public sector issues over 1999-2006, but coverage varied by theme. Most IDA and blend countries had extensive AAA and three-fourths had PSR lending, including policy-based projects. For instance, Burkina Faso had nine PSR loans, including eight development policy credits, with major components in all four thematic areas, plus six AAA products.
About half of IBRD countries had no PSR lending in 1999-2006, and about a quarter had two or more loans. In most IBRD countries, the Bank stayed engaged, even with problem governance states. It did so with AAA or with lending if the countries wanted it; and the lending was usually associated with considerable improvement in the public sector performance.
The higher frequency of PSR lending to IDA countries reflects both a greater need in these countries for PSR and stronger pressure from the Bank and other donors to do PSR.
Among countries getting PSR lending, more than 80 percent of IBRD borrowers and 69 percent of IDA borrowers showed improved performance. The country cases identify three factors contributing to success in the different areas:
- Being realistic about what is politically and institutionally feasible, as well as being opportunistic in preparing technical foundations for what might become feasible in the future. In Bangladesh, the Bank supported preparatory work on difficult areas of civil service and anticorruption when substantive reform was not on the table, These later proved useful when a reform-minded government came to power.
- Recognizing that enhancing technology is not enough by itself, that the most crucial and difficult part is changing behavior and organizational culture. In Ghana, implementation of the integrated financial management system stalled until attention turned to changing the behavioral patterns and incentives.
- Dealing with the basics first, such as ensuring that taxpayers have unique identification numbers before installing a complex collection system or ensuring that the government is executing a one-year budget reasonably well before launching sophisticated multiyear budgeting. Some projects in Bulgaria, Cambodia, Guatemala, The Russian Federation, and Sierra Leone did this relatively well. In many countries, however, the policy-based lending conditions were across the board and exceeded the government's technical or political implementation capacity. Projects in Ghana, Guatemala, Guyana, Honduras, and Indonesia had difficulty because they went straight to sophisticated measures, such as installing accrual accounting, when the personnel capacity was missing and the government was not successfully administering cash accounting.
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