P4R: Looking to the Pilot Phase

This is a joint post with Rita Perakis.After many stages of drafting, debates, and consultations, the World Bank´s proposed results-based financing instrument, Program-for-Results is going for approval to the Bank´s Board on January 24. The latest draft of the policy can be found here; we´re pleased to see that Bank staff listened to comments at a CGD roundtable and many other consultation meetings and incorporated changes to previous drafts. CGD hosted a final discussion of P4R on Thursday January 19, with a presentation by World Bank VP for operations, Joachim von Amsberg, and a panel that included Anne Perrault of the Center for International Environmental Law, Marta Garcia Jauregui, who represents Spain, Mexico and several Latin American countries on the World Bank board, and CGD president Nancy Birdsall (see event video here).Where are we now? The proposal limits P4R to 5% of the Bank’s financing for the first two years. This gives space for about $1 billion, perhaps 20 projects per year. The new draft assures skeptics that this new approach will be rolled out gradually, evaluated, and learned from. Verification of results acceptable to the Bank will be required, and this can include ‘independent/third party monitoring, where appropriate’. The proposal is somewhat more specific than previous drafts on safeguards, the biggest issue for its critics. It excludes activities with potentially significant and irreversible environmental or social impacts (so-called A projects), and asserts the right of the Bank’s Integrity unit (INT) to investigate indications of fraud and corruption. High-value procurements are also excluded.Several points emerged from CGD discussion. Marta Garcia noted that governments opting for P4R financing over traditional project support are aware that the linkage of disbursement to results exposes them to greater risk. But they increasingly feel the confidence in their own systems to assume disbursement risk and the need to demonstrate impact to their electorates. Some NGOs still have strong reservations over the exemption of P4R operations from the specific safeguard policies of the Bank. Anne Perrault called for clarity on transparency and disclosure policy, and worried that the operational guidelines were insufficiently clear in this area. NGOs also urged that the range of eligible projects should be constrained to those with low risks (C projects and only low-risk B’s). Nancy Birdsall called for limiting the number of disbursement-linked-indicators (DLIs), and worried that more than a few in any one operation would undermine citizens’ ability to hold their governments accountable.We at CGD welcome the emphasis on verification, although we are disappointed that the policy falls short of requiring independent third party verification in all cases. We think this should be a crucial part of any program where funding is linked to results, as Alan and Bill Savedoff argued in these earlier comments to the Bank about P4R, and as Nancy and Bill emphasize in their book on Cash on Delivery Aid.Based on how the Bank’s clients respond during the two-year pilot, this new lending instrument could open a significant number of development assistance programs to a results-based approach. Results-based aid is not the answer to all development challenges, but in many settings it can offer huge benefits, including making country ‘ownership’ something that’s real and not just talked about, and making governments more accountable not just to donors but to their citizens for results. For much more, check the COD Aid initiative page and for more on how this applies to P4R specifically, see this blog post by Nancy and her open letter to Senator Leahy.We are glad to see the debate move from principles to implementation and like others in the development community will be watching with great interest.