New assessment of African government policies and institutions finds uneven performance, governance remains a challenge

Stocks and Financial Services Press Releases Thursday June 27, 2013 09:05
NAIROBI--27 Jun--World Bank
NAIROBI, June 26, 2013 - The latest World Bank review of policies and institutions in Sub-Saharan Africa shows an overall stable environment for growth and poverty reduction despite divergence across countries.

The review is part of the annual World Bank Country Policy and Institutional Assessment (CPIA) that rates the performance of poor countries. Since 1980, CPIA ratings have been used to determine countries' allocation of zero-interest financing under the International Development Association,* the World Bank Group's fund for the world's poorest countries.

The scores of 11 countries rose by 0.1 points or more, reflecting a strengthened policy agenda, and the indexes of another 12 countries declined by at least 0.1 points. Cape Verde and Kenya had the highest scores, although Cape Verde saw a decline in its CPIA for the third year in a row. South Sudan and Eritrea--both countries that suffer deep policy challenges--had the lowest scores. Countries recovering from conflict--such as Cote d'Ivoire and Comoros--have shown solid improvement. On the contrary, conflict and political instability have weakened policies and institutions.

The CPIA examines 16 key development indicators covering four areas: (i) economic management, (ii) structural reforms; (iii) policies for social inclusion and equity; and (iv) public sector management and institutions. Countries are rated on a scale of 1 (low) to 6 (high) for each indicator. The overall CPIA score reflects the average of the 16 indicators.

"African countries with better policies tend to have higher economic growth," says Punam Chuhan-Pole, Acting Chief Economist, World Bank, Africa Region and main author of the report. "But a redoubling of effort is needed to translate this growth into broad welfare gains."

There is variation between the CPIA scores of different country groupings. For example, poor governance, weak public sector capacity, and civil conflict have reduced the average scores for African fragile states to 2.7--well below the 3.5 average score for non-fragile countries. Similarly, the region's resource-rich countries, which have an average CPIA score of 3.0, continue to lag its non-resource counterparts, which averaged 3.2 for 2012.

"Conflict and instability can greatly affect the policy gains of non-fragile states as well," added Chuhan-Pole. "For example, Madagascar has seen its scores slip in the last two years following a political crisis, and the same has happened in Mali as a result of conflict and political instability."

As was the case last year, scores are higher in the area of economic management across countries. This pattern reflects the consensus among African policy makers that macroeconomic stability can facilitate the emergence of a productive private sector. It also reflects the fact that managing macroeconomic policy is not as politically-charged as changing institutions (such as the judicial system).

The upward trend of scores assessing social reforms shows that they are taking hold in Sub-Saharan Africa. Governance scores, which cover the quality of public sector management and institutions of accountability, continue to lag all other areas assessed by the CPIA, reflecting the deep-rooted challenges facing African countries in this important area.

* The World Bank's International Development Association (IDA), established in 1960, helps the world's poorest countries by providing zero-interest credits, and grants, for projects and programs that boost economic growth, reduce poverty, and improve poor people's lives. IDA is one of the largest sources of assistance for the world's 81 poorest countries, 39 of which are in Africa. Since 1960, IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged about $15 billion over the last three years, with about 50 percent of commitments going to Africa.

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