How have policies and institutions in low-income African countries fared?


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Last Friday, the World Bank released its Country Policy and Institutional Assessment (CPIA) of low-income countries.  While the assessments are mainly used to determine the allocation of concessional IDA resources to poor countries, they can also provide a useful picture of the evolution of policies and institutions in Africa, as a recent note by my colleagues Delfin Go and Vijdan Korman shows.  They find that:

  • Over the past eight years, African countries’ performance is about average compared with East Asia and South Asia.
  • Within Africa, Cape Verde, Tanzania, Uganda and Ghana have consistently had strong CPIA scores, while Zimbabwe, Comoros, Central African Republic and Eritrea seem to be stuck at the low end of the scale.
  • Over the past five years, the biggest improvements in CPIA scores were registered by Ghana, Rwanda, Zambia and Mozambique, while Eritrea, Chad and Zimbabwe experienced the largest deterioration.  Seven of Africa’s nine oil exporters (Angola and Nigeria were the exceptions) saw their CPIA scores decline.
  • For Africa as a whole, most of the improvement in policies and institutions was in the category called “economic management”—essentially macroeconomic and fiscal policies.  The average scores on the other dimensions—structural policies, equity and social inclusion, and public management—stagnated.  While some countries showed improvements along these other dimensions, an equal number of countries saw their scores go down.


Shanta Devarajan

Senior Director, DEC and Acting World Bank Group Chief Economist

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Thierry Kangoye
July 19, 2009

The global financial crisis beyond its macroeconomic effects will also probably affect institutions in african countries not only directly, by also through growth performances.

A blog post by Jorge Arbach on 02/23/2009 highlighted that governance and conflict indicators are substantially affected by growth volatility. He pointed out some empirical evidence showing that the World Bank’s Country Policy and Institutional Assessment (CPIA) scores in Africa which is a broad measure of policy and institutional performance, has proved to be low during decelerations between 1975 and 2005. We know that one strong channel through which the financial crisis will affect Africa is the rapid decline in commodity prices that will generate terms-of-trade and growth volatility in commodity exporters.

Some recent studies on aid effectiveness have shown that aid is more effective in vulnerable countries (i.e. the marginal effect of aid on growth is higher in these countries) and succeed in making growth more stable. The reasoning being that in cases shocks occcur, aid smoothes public expenditures and limit the risk of fiscal deficits.

The point I want to raise is that aid can be given a role in these times of crisis in terms of helping to build institutions in the medium and long term by avoiding them to be negatively affected by instability, since growth stability matters for institutional building (e.g. investing in political institutionnal building - establishment of a strong and independent judiciary system, organization of independant elections, etc - requires stable and sustained growth resources)
So, If the potential of aid to cushion the negative effects of external shocks on economic growth (and then on institutions) could be associated with strong investment policies on institutional building in Africa, institutions could be improved in the medium or long term and donors should care about this in designing funding strategies to respond to the global crisis for Africa.