International financial institutions

IFIs play an essential role in development, providing financing and policy advice. IFIs of particular interest here are the World Bank Group, the IMF and regional development banks.

The WB has been a lead player for many years, having participated in UN summits and other development finance meetings, subsequently taking an active part in the preparation and delivery of High Level Forums. It issued a report on “Aid Financing and Aid Effectiveness” (WB/IMF, 2005b), which outlined new aid commitments (including at the G8 Gleneagles Summit), new innovative financing modalities, and reviewed progress in

achieving the aid effectiveness agenda. The WB was to “ensure delivery on aid commitments”, as a substantial increase in ODA flows was expected, which totalled an anticipated extra US$ 50 billion in real terms by 2010. ODA flows had started recovering from its low levels of 2001 – levels that had caused widespread concern among partner countries at a time when their development efforts were gathering steam. The expected ODA increase was meant to satisfy one of the two major issues in aid effectiveness, i.e. to increase the volume of ODA and improve its quality.

Innovative financing has received more attention since the early years of this century, as both aid providers and recipients have searched for new means to mobilise additional development funding sources. Debt relief – an established modality – plus the creation of an international financial facility, advance market commitments (whereby aid providers would guarantee set funding for new vaccines to meet given requirements) and blending arrangements (mixture of grants and concessional loans) were being explored to mobilise more funding. Airline ticket taxation proposals emerged in 2005 and were being considered by the EU and others to assess their impact on airlines and passengers. The WB established core principles, including efficiency to minimise administration costs, respect country ownership, improve predictability and transparency in the use of these funds, and avoid extra conditionalities.

To meet the Paris Principles, the WB decided to focus on the following areas:

 supporting partner countries in strengthening strategic planning and building results-based public-sector management as well as statistical capacity and monitoring and evaluation systems;

 continuing to focus on results in all WB strategies and systems;

 establishing strong partnerships with working groups, including the OECD/DAD joint venture on managing for development results.

Regional development banks devised their own plans to meet Paris commitments. The African Development Bank reported (African Development Fund, 2007) a series of actions at the institutional, country and global levels. Institutionally, it was focussing on building

“harmonisation-friendly” programming instruments, implementation and monitoring tools, and enhancing internal capacity. At the country level, the

WB was improving coordination and use of common arrangements, and supporting strengthening of country capacities. Globally, it strengthened its participation in international aid effectiveness forums.

Evaluation of the WB’s performance indicated “strong progress” in aligning assistance with national priorities and undertaking joint country-analytic work; “moderate progress” in coordinating assistance with other providers, use of country systems and common arrangements; and “insufficient progress” in aid predictability and avoiding parallel implementation unit arrangements. Remedial actions were being adopted, including reviewing staff incentives, strengthening the WB’s internal capacity, creating greater flexibility in rules and procedures, and putting more emphasis on strengthening country capacities.

The Asian Development Bank undertook an evaluation study of its performance under the PD. It had previously no corporate plan to implement its commitments; it adopted a bottom-up approach under which country offices took actions consistent with the Paris Principles. The WB had been applying concepts of country ownership and building country capacities in member countries prior to the Rome and Paris HLFs. On ownership and leadership, it revised its guidelines to support the PD and noted that some policies, strategies and processes were hindering efforts to meet some targets of the Paris indicators.

The WB’s costs for harmonisation and coordination were found to be

“significant”. Its staff had low awareness of the “managing for results”

principle and had no specific incentive to implement the Paris Accord.

Implementation differed across departments and among resident missions.

It was concluded that actions were needed to improve performance over a 9- to 12-month period:

 Provide stronger management to implement the Paris Declaration.

 Designate a focal point to provide guidance.

 Set up a framework to design action plans and track progress.

 Strengthen staff capacity.

 Improve understanding of resource implications to implement the Declaration more fully.

The Inter-American Development Bank conducted a comprehensive realignment to increase the effectiveness of its activities through “greater country focus, deeper sector expertise and improved management based on risk management and attainment of results” (IDA, 2009). In 2009, the IDB planned an evaluation of its realignment activities. Since 2007, the WB has increased its lending sharply to enhance its role as a development partner.

All in all, the IFIs took actions soon after the Paris HLF to implement the Paris Principles. These varied from one institution to another, though they shared the same common objective. They also faced common challenges, particularly the need to improve staff incentives to encourage implementation and mobilise resources to upgrade harmonisation and alignment efforts, as these were described as “not resource neutral”. The results of these actions varied, as described later.