Country Assistance Strategies

Building on and incorporating existing country knowledge, the CAS is the business plan that guides Bank Group activities in a client country. Prepared in consultation with the government, CSOs, development partners, and other stakeholders, the CAS sets out a program of lending and of knowledge and advisory services linked to the country’s development strategy as defined in a PRSP, a Comprehensive Development Framework, or other country-owned process.

During fiscal 2003 the Bank aligned its CASs for IDA-borrowing countries with those countries’ PRSPs. CASs for Azerbaijan, Ethiopia, The Gambia, Guinea, Guyana, Honduras, the Kyrgyz Republic, Malawi, Nicaragua, Niger, Rwanda, Senegal, Sri Lanka, Tajikistan, Vietnam, and the Republic of Yemen followed this model. Also in fiscal 2003 the Bank introduced a new CAS product, the Country Re-engagement Note (CRN), to support work in low-income countries under stress (LICUS).

In fiscal 2003 the Board discussed 41 CAS products, including a Country Brief/CRN for Haiti, a CRN for Somalia, and 4 transitional support strategies for postconflict countries, including Afghanistan, Angola, Kosovo, and Serbia and Montenegro (formerly the Federal Republic of Yugoslavia). In fiscal 2003 the Bank prepared 15 CAS documents jointly with the International Finance Corporation (IFC). All of the fiscal 2003 CAS products have been, or are in the process of being, disclosed.

The third CAS Retrospective, completed in fiscal 2003, focused on improving the results orientation of the CAS. The challenge will be to substantially strengthen the monitoring and evaluation frameworks so that the country governments and the Bank can assess periodically the progress made in carrying out the strategy, ultimately measuring the results achieved. To this end, in fiscal 2003 the Board discussed the first pilot of a results-based CAS, for the government of Sri Lanka. Pilot projects are introducing the CAS completion report, a CAS annex that presents a comprehensive self-evaluation to be reviewed by the Bank’s Operations Evaluation Department that assesses the extent to which results were achieved under the previous CAS and draws lessons for the next strategy. An assessment of experience with pilot results-based CASs is expected to be carried out in fiscal 2004.

Low-Income Countries

Carrying out the Bank’s two-pillar strategy in low-income countries, where the vast majority of the world’s poorest people live, presents special challenges. The investment climate in these countries may not be conducive to sustainable growth. Limited institutional, human, and physical resources can keep poor people from participating in development.

A key tool in the Bank’s support for low-income countries is the PRSP, which was introduced at the end of calendar 1999. PRSPs are country-authored, results-oriented, comprehensive road maps that are based on broad consultation with internal and external partners and stakeholders. PRSPs are intended to serve as the framework for domestic policies and cross-sectoral programs to reduce poverty and for development aid. The process emphasizes country ownership in forming plans that reflect each country’s special circumstances and needs. The Bank plays an active role in helping clients strengthen the role of stakeholders in the PRSP process. (See “Poverty Reduction and Economic Management” in chapter 4.) The Bank also encourages countries to integrate the MDGs into their strategy paper preparation, considering the cross-sectoral actions needed to achieve the goals. This approach will ensure that the tradeoffs inherent in achieving the MDGs are addressed by country strategies.

Because of the country-owned nature of strategy papers and because the process can be complex and time consuming, Interim PRSPs (I-PRSPs), which use a simpler format, were introduced to avoid delaying poor countries’ access to IDA concessional lending and HIPC debt relief. Countries can also seek support for poverty reduction strategy preparation from the Poverty Reduction Strategy Trust Fund, which was initially funded by a $20 million contribution from the Netherlands and Japan. The Trust Fund provides grants of up to $500,000.

PRSP-based IDA assistance to low-income countries includes Poverty Reduction Support Credits, which are designed to support country-owned poverty reduction priorities. These credits focus on building government capacity and institutions, particularly those serving poor people. As of June 30, 2003, the Executive Directors of the World Bank had approved 7 credits in 7 countries. There is also a new provision to allow the use of IDA funds for projects in the private sector.

Low-Income Countries under Stress

In an era of performance-based lending, the Bank and other donors have realized that many of the poorest countries have been left behind. They have recognized the need to engage much more actively in low-income countries with the most chronically weak policy and governance environments. In June 2002 the Task Force on Low-Income Countries Under Stress recommended to the Board of Executive Directors that the Bank work in close cooperation with its partners to expand and improve its analytical work, invest in capacity building, and identify innovative project mechanisms to improve governance and deliver basic social services in LICUS.

Work on the LICUS Task Force recommendations began in fiscal 2003 and is centered at the country level, as each country has different defining characteristics and each moves ahead at its own speed. Currently, seven Bank country teams have volunteered to pilot the LICUS initiative in their work for fiscal 2003, and more will be added in fiscal 2004. At the country level, LICUS principles have been incorporated in CASs. Examples of these strategies include a highly selective program in Angola that focuses on natural resource revenue management, demobilization of combatants, and community-driven social action; activities to rebuild the knowledge base and donor–government dialogue in Haiti; completion of a multidonor mission in the Central African Republic; demonstration projects for the provision of public goods in Somalia; policy dialogue and capacity building in support of the peace process in Sudan; and sectoral programs that combine top-down public finance management with community-driven initiatives to support improved governance in Tajikistan.

Partnerships are critical to success in LICUS. Research has shown that the most effective way for development partners to significantly affect these difficult and risky environments is to join forces to work on priority reforms. The Bank is working with OECD/DAC to establish a learning and advisory group that brings together donors and representatives of developing countries to share ideas, research, and lessons learned. Four of the pilot LICUS country teams are developing joint strategies with UNDP; the other three are in close cooperation with bilateral partners. The pilot LICUS teams have found that increased engagement with our partners early in the strategy development cycle is vital.

Middle-Income Countries

Poverty remains a challenge for middle-income countries, which are home to three-quarters of the world’s poor people. These countries face significant and diverse development challenges.

The crucial roles for the Bank here are to assist the countries with reforms that improve the investment climate, support economic restructuring and investment needs while their access to long-term capital is limited, help them reduce the remaining concentrations of poverty and mitigate their vulnerability to economic shocks, and support country-level action on the global public goods agenda.

The Bank continues to help middle-income countries achieve growth in the private sector by helping them complete fundamental market-opening reforms that make the country more attractive for investment, and by supporting ensuing structural and social reforms. Toward these ends the Bank uses a number of tools to advance its policy dialogue with countries and to continue engagement with inactive borrowers.

One of these tools is the more effective use of diagnostic reports, which deepen the understanding of a country’s development priorities and of the cross-sectoral links and implications for reducing poverty. Furthermore, the Bank offers partial-credit and partial-risk guarantees to mobilize private sector financing for individual projects. The Bank’s support for financial sector development draws on the complementary roles of IBRD, IFC, and the Multilateral Investment Guarantee Agency (MIGA).