# **III. Findings from the World Bank Portfolio Review**

The World Bank is one of the largest financial and technical advice sources on public sector reforms in LICs and MICs.<sup>20</sup> Hence, a review of its portfolio is highly pertinent better to understand political economy drivers, how these affect public sector reforms and how they are or can be addressed.

This portfolio review has three parts. First, it maps how widespread and varied in scope public sector operations are across countries. A narrow spread would suggest selectivity with regard to countries with (more) propitious conditions. If instead engagement is wide, unfavorable conditions are likely in some countries. The second part explores whether the expected relationship between more or less difficult country contexts and success of public sector operations is apparent for the World Bank‘s support to public sector reforms for the decade 2000-2010. Based on this, the part then revisits the frequency and nature of political economy problems encountered. Third, the portfolio review revisits what effort task teams make to understand and mitigate political economy challenges, and whether stronger efforts are associated with better results.

The portfolio review is based on a set of project documents produced at the design stage and expost, project ratings and existing cross-cutting assessments, as well as on selected interviews with task teams.<sup>21</sup> The review includes development policy operations, which involves general lending (or grants) to the government once agreed upon policy triggers have been met, as well as investment lending (or grant) operations, i.e. operations in which the government borrows to cover costs associated with public sector reforms specifically.

## **III.1 Public Sector Reform Efforts: Spread and Scope**

The Bank‘s recent public sector portfolio suggests borrowing for public sector reforms has been spread across a large share of (potential) client countries. Of a total of 128 potential client countries or territories with populations of over 500,000 in 2000, only 41 (32 percent) did not borrow for some form of public sector reforms between fiscal years 2000 and 2010 (see Table 2).<sup>22</sup> They include countries where Bank operations are generally non-existent or limited (e.g. Islamic Republic of Iran) as well as those with significant other operations (Togo, Uzbekistan, Panama, or Egypt).<sup>23</sup>

> 20 In 2009, funding from the World Bank‘s _International Development Association (IDA) alone_ accounted for 40% of all donor funding on PFM reforms, nearly 14% of all donor spending on PS policy and administration (surpassed only by EU institutions and the United States), and nearly 26% of all donor funding on decentralization according to the OECD aid statistics database. No detailed sector breakdown is available for the International Bank for Reconstruction and Development (IBRD).

> 21 Documents reviewed include Project Appraisal Documents (PADs), Implementation Status Reports (ISRs) and Implementation Completion Reports (ICRs). Ratings refer to outcome ratings confirmed by the Independent Evaluation Group (IEG) unless noted otherwise. These ratings are composites of ratings for sometimes quite divergent project components and do not formally take the level of risk of an operation into account – either in terms of country context or in terms of the change being sought.

> 22 Based on board approval dates.

> 23 The count only includes Public Sector Governance Board (PSGB) mapped development policy and investment operations for the decade of fiscal year (FY) 2000-2010. If operations mapped to the Bank‘s Financial Management

23