24 July 2017

Africa: World Bank Review Reveals a Weakening of Policy and Institutional Performance in Africa

press release

Ouagadougou — The quality of policies and institutions weakened in Sub-Saharan Africa in 2016 amid challenging economic conditions, according to the latest review by the World Bank.

This weaker trend was observed in 40% of the region's IDA countries, notably commodity exporters and fragile states.

The review is the annual World Bank Country Policy and Institutional Assessment (CPIA) Africa analysis, which scores the progress Sub-Saharan African countries are making on strengthening the quality of their policies and institutions. Since 1980, CPIA ratings have been used to determine the allocation of zero-interest financing and grants for countries that are eligible for support from the International Development Association (IDA)*, the concessional financing arm of the World Bank Group.

CPIA scores are based on 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.

The average CPIA score for the 38 African countries assessed in the 2016 review edged lower to 3.1. Rwanda again led all countries in the region with a score of 4.0, closely followed by Senegal and Kenya, both with a score of 3.8. Although some countries saw a strengthening in policy and institutional quality, the number of countries with worsening overall scores outpaced improvers by a margin of two to one.

A common pattern across countries that experienced a weakening in their overall policy and institutional quality was slippage in economic management: monetary and exchange rate, fiscal, and debt policies. This can in part be explained by unfavorable economic conditions--deteriorating terms of trade, sluggish global growth, and difficult economic conditions--that continued to take a toll on countries across the region, deepening macroeconomic vulnerabilities. Weakening of fiscal and external buffers constrained the scope for macroeconomic policies to mitigate the effects of adverse shocks to economic activity.

On the upside, Côte d'Ivoire, the Comoros, Cameroon, Guinea, Madagascar, Mauritania, and Sudan have experienced a modest gain in the CPIA score, with most of these countries showing a stronger performance in the quality of governance. In a few countries, the quality of policies for social inclusion and equity also improved, reflecting a strengthening of safety net programs.

"Governance underpins all sectors of World Bank Group engagement, and moving forward, despite these slight gains, it will remain critical that Sub-Saharan countries implement or expand governance and public-sector reforms that will upgrade financial management systems, increase transparency, reduce corruption, protect rights, and improve public services," notes Albert Zeufack, World Bank Chief Economist for Africa.

The latest CPIA results reveal that performance on policy and institutional quality in Sub-Saharan Africa's non-fragile IDA countries is comparable to that of similar countries elsewhere. However, this is not the case for fragile countries, which generally fall behind other fragile countries outside the region. The combination of the two categories of countries pulls the overall CPIA score for the region's IDA countries below the average for other IDA countries.

"African countries exhibiting economic resilience tend to have stronger macroeconomic policy frameworks, better quality of policies that promote sustainable and inclusive growth, and more effective public institutions than other countries," explains Punam Chuhan-Pole, Lead Economist for the World Bank Africa Region and author of the report. "Nonetheless, there is scope for all countries in the region to speed up policy reforms and strengthen institutional quality."

* The World Bank's International Development Association (IDA), established in 1960, helps the world's poorest countries by providing grants and low to zero-interest loans 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 75 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.5 billion people who live in IDA countries. Since 1960, IDA has supported development work in 113 countries. Annual commitments have averaged about $18 billion over the last three years, with about 54% going to Africa.

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