27 June 2014

Ghana: Africa Countries Improve Policy Environment to Cut Poverty

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The latest World Bank review of government policies and institutions in Africa shows that 20 percent of countries improved their policy environment to boost growth and cut poverty in 2013.

The review is the annual Country Policy and Institutional Assessment (CPIA), which rates the performance of poor countries. Since 1980, CPIA ratings have been used to determine the allocation of zero-interest financing and grants for the 39 African countries that are eligible for support from the International Development Association (IDA), the World Bank Group's fund for the world's poorest countries.

CPIA scores assess the quality of countries policy and institutional progress using 16 development indicators in four areas: economic management, structural policies, policies for social inclusion and equity, and 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 four areas of the CPIA.

Eight countries in Sub-Saharan Africa (SSA) had a rise in overall CPIA scores, and another eight saw the overall CPIA score decline. The Democratic Republic of Congo scored the largest gain, from 2.7 to 2.9. A broad-based deepening of policy reforms lifted Rwanda s CPIA score, putting it alongside Cape Verde and Kenya at the top of the score range.

South Sudan and Eritrea both countries struggling with deep policy challenges had the lowest scores. Countries transitioning from conflict, such as Côte d'Ivoire, recorded solid gains in their policy environment. At the same time, the Central African Republic's CPIA rating was sharply lower, showing that conflict rapidly sets back policy gains.

Although there are a number of highly performing countries, African IDA-eligible countries on average continue to lag behind those in other regions in their policy and institutional ratings, Francisco Ferreira, Chief Economist, World Bank Africa Region said. There is still a lot of work to be done in Africa to meet the region's needs for effective public services, and transparent and efficient government operations.

There were significant differences between country groups. The overall CPIA score for fragile countries, which are beset by deep governance challenges, was 2.8, much lower than the non-fragile group score of 3.5. The CPIA score for Africa's IDA-eligible fragile countries continues to be lower than that of fragile countries in other regions. Conversely, the quality of policies and institutions for Africa s non-fragile countries is now similar to that of non-fragile countries elsewhere.

Fragile countries, especially post-conflict countries, accounted for over half of the improvement in overall CPIA scores in the region, Punam Chuhan-Pole, Lead Economist, World Bank Africa Region and Author of the Report added. The gains in post-conflict countries illustrate that peace and stability support the growth of governance, and underpin economic expansion, less poverty, and better living standards for the majority of people.

This year's report expands coverage to include two countries in the Middle East and North Africa (MENA) region: Djibouti and Yemen. The latest CPIA scores for both countries are stable relative to 2012. Yet over a longer horizon, neither country has improved its overall CPIA rating since 2005, and Yemen s policy environment score has declined. The Arab Spring uprisings in 2011 brought down the CPIA ratings throughout the Middle East and North Africa region, with some short-term impact on Yemen.

The relatively strong performance of CPIA scores for the economic management indicator across countries indicates that these reforms are taking hold in Sub-Saharan Africa. Weaknesses in public sector governance, which include property rights, rule-based governance, and the quality of budgetary and financial management, continue to drag behind all other areas assessed by the CPIA indicators, highlighting the embedded challenges facing Africa country governments as they strive to bring quality lives to all of their citizens.

Instructively, the World Bank's International Development Association (IDA), established in 1960, helps the world s poorest countries by providing zero-interest loans 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 82 poorest countries, 40 of which are in Africa. Resources from IDA bring positive change for 2.5 billion people living on less than $2 a day. Since 1960, IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged about $16 billion over the last three years, with about 50 percent of commitments going to Africa.

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