IDB-9: Country Programming

This paper analyzes whether IDB-9 requirements surrounding the country programming process of the Inter-American Development Bank (IDB, or Bank) are being implemented fully and effectively. The country programming process includes two documents: the Country Strategy, which provides a multiyear overview of the Bank¿s work program; and an annual document that lays out lending allocations and the work program. The main requirements of IDB-9 related to country programming are that Country Strategies include development and macro-fiscal frameworks, that they build on these frameworks and country dialogue to align country programs to country needs, and that they reflect country demand for the Bank¿s lending and nonlending products. The annual programming document is then meant to implement the program laid out in the strategy to ensure that the projects funded by the Bank are in line with country needs. OVE finds that the Bank¿s Country Strategies fulfill some but not all of the IDB-9 mandates. They provide a general description of the characteristics and development challenges in the country, including recent macroeconomic performance, as well as summary diagnoses of sector needs and possible areas of Bank intervention. But they do not generally articulate a strategic approach for the Bank in key sectors or discuss the implications of the macro-fiscal analysis on the role of IDB or the size of IDB lending allocations. They rarely discuss or build on past successes and failures of the Bank in selected areas of intervention, explore the Bank¿s comparative advantage, or fully incorporate relevant analytic work. They provide limited if any information on the NSG lending envelope or portfolio and thereby miss an opportunity to build on potential synergies between SG and NSG instruments. It is only by identifying the synergies between various Bank activities and instruments¿including SG and NSG lending, technical cooperation, and analytic work¿that the Bank can make the most of its resources and tap into its full comparative advantage. With regard to the annual programming process, it is common for projects to be approved and undertaken in sectors that were not envisioned in the Country Strategy, and annual lending allocations do not necessarily accord with the lending envelopes included in Country Strategies. Indeed, the criteria used to determine lending envelopes and annual allocations are not transparent and appear to be closely correlated to past disbursements. In addition, the annual nature of the programming process puts time constraints on loan preparation that hurry the process and lead to year-end bunching of approvals¿and possibly squeeze out time for needed analytic work as well as opportunities for careful discussion and review. In light of these findings, OVE suggests that (i) the Board and Bank Management undertake an in-depth exercise to revisit the Country Strategy guidelines and consider carefully the appropriate role and structure of Country Strategies and Country Program Documents going forward; (ii) the methodology for determining both lending envelopes in country strategies and annual lending allocations in country programs be made more transparent and the Operational Program Report presented to the Board show how those annual allocations relate to IDB-9 priorities and country needs; and (iii) the programming process be carried out on a rolling two-year basis (with the first year being binding and the second year showing notional allocations and work programs) to allow greater time for planning and executing loans and other Bank support.