Almost two years ago Program for Results (PforR), the newest financing instrument for World Bank operations, was introduced to great expectations within the Bank and the international development community.
PforR operations followed “payment by outcomes” initiatives implemented by the governments of the United Kingdom and Australia (to mixed results), and inserted itself to the growing experience of “output-based aid” initiatives, also explored by DFID and the European Union. It also followed the World Bank’s own experience with the use of disbursement linked indicators (DLIs) in its financing operations (such as SWAPs). In particular, the PforR instrument was designed to support government programs and link the disbursement of funds directly to the delivery of defined results, with a special focus on strengthening institutions.
So with more than ten projects approved and several more in the pipeline, have PforR operations lived up to the expectations?
Discussions in a recent workshop [internal link] suggest that it is too early to tell how these operations will perform. However, the early experience of project preparation and implementation provides important insights for the value, utility, and risks associated with the use of this instrument for public sector management (PSM) operations.
For instance, one important advantage of PforR for public sector operations is that it could promote a more strategic design for government interventions in the area of public sector reforms. Since the instrument is designed to support existing government programs, governments could be incentivized in this way to develop more “complete” programs and thus reflect more carefully on issues such as feasibility and realism of reform paths, sequencing and timelines, returns on investment and most importantly on the expected results. Whereas it is not common for governments to typically have reform programs for public sector management and Bank teams have worked with counterpart governments to develop these, this process has proved to be valuable and has focused government attention on results.
A second advantage is that the approach focuses attention on the various elements of the results chain. A project that addresses delivery of health services (for example, availability of drugs in health centers in Mozambique) finds that it needs to address “upstream” public sector management constraints in, say, PFM, procurement or HR management. This combination of a problem solving and results-based approach helps to break the silos that characterize traditional approaches and promotes a more holistic approach to reform.
However, this also puts a lot of responsibility on the quality of the indicators being used. While some characteristics that these indicators should have are obvious (while not always easy to implement!) such as having them be simple, measurable, relevant, and challenging; other attributes – some particularly relevant to public sector projects - are less obvious. For instance, best practices advice to push indicators down the results chain, but with so many things out of the government’s control, are we running excessive risks of disbursement? But, if indicators are too basic how do we guarantee that by achieving them we’ll have the desired impact? Moreover, with limited results-based public sector indicators usually available, can we adequately measure public sector results?
A third advantage of using the PforR instrument for public sector interventions is that, it shifts the focus from financing and procurement and forces a conversation around reforms and results between the Bank and the client government and within the client government. As the example of Sierra Leone (an investment loan that also had indicators linked to disbursement), these processes can increase coordination and ownership of the project across different government agencies. This goes in line with The Bank’s Approach to Public Sector Management for 2011-2020.
So, what is the downside?
One important concern is related to the possible paternalistic role the instrument is forcing the Bank to play - from “helping” governments to create programs, to “helping” them construct chains of expected results and outcomes. Yes, the processes are conducted together, but doesn’t the Bank hold the upper hand? May the Bank be forcing governments’ hands too much?
While the instrument provides ex ante flexibility, it retains some of the rigidities of the traditional Investment Lending (IL) instrument (now Investment Project Financing, IPF) during implementation. Even with this instrument the Bank and the Government have to define actions and results sometimes more than five years in advance. In an uncertain profession and a rapidly changing world, setting specific goals is already a risky proposition; but linking those results to disbursement? That could be asking too much. Any change in the DLIs during implementation would continue to be subject to the rigors of restructuring.
My early take on PforR operations however is positive, and that the rewards outweigh the risks. The Investment Lending instrument was designed for infrastructure projects and was always and awkward fit for public sector management projects. It is precisely for this reason that task team leaders started to use IL/IPF with DLIs, an option that is available and relevant even today. As more projects are prepared and implemented we will better develop a more nuanced understanding of when and how to use the instrument and how to use it more effectively.