The latest Country Policy and Institutional Assessment (CPIA) Africa results show that policy and institutional quality weakened in Sub-Saharan Africa in 2016 amid a difficult global economic landscape and challenging domestic conditions.

CPIA Africa is an annual report that describes the progress Sub-Saharan African countries are making on strengthening the quality of their policies and institutions. The report presents CPIA scores for the 38 African countries that are eligible for support from the International Development Association (IDA), the concessional financing arm of the World Bank Group.

CPIA scores reflect the quality of a country’s policy and institutional framework across 16 dimensions, grouped into four clusters: economic management (cluster A), structural policies (cluster B), policies for social inclusion and equity (cluster C), and public sector management and institutions (cluster D, also referred to as the governance cluster). The scores, which are on a scale of 1 to 6, with 6 being the highest, are computed by World Bank staff and based on quantitative and qualitative information. The assessment also relies on the judgments of World Bank staff. CPIA scores are used mainly to inform IDA’s allocation of resources to poor countries. Yet the information contained in the CPIA is potentially valuable to governments, the private sector, civil society, researchers, and the media as a tool to monitor their country’s progress and benchmark it against progress in other countries. By presenting the CPIA scores for African countries, this report aims to provide stakeholders with information that can support evidence-based debate that can, in turn, lead to better development outcomes.

This year’s report assesses developments in policy and institutional quality in 2016 as measured by the CPIA score.

Sub-Saharan Africa faced another challenging year in 2016. Economic activity continued to weaken, amid less favorable terms of trade, slowdown in global growth, and difficult domestic conditions. Output growth decelerated sharply to 1.3 percent, the slowest pace in over two decades and not as stellar as the average annual growth of around 5 percent in the pre-global financial crisis period of 1995-2008. Regional growth in 2016 was insufficient to raise gross domestic product (GDP) per capita, which contracted by 1.3 percent. At the same time, Sub-Saharan Africa’s poverty rate remains high: 41 percent of the region’s population – nearly 390 million people – were living in extreme poverty in 2013. Weak economic performance threatens gains in poverty reduction, and the region urgently needs to regain momentum on growth and make it more inclusive.

Some countries have shown signs of economic resilience, growing at much faster rates than others. Recent analysis undertaken in Africa’s Pulse identifies countries that have experienced strong growth, and examines the links between the quality of policies and institutions and better economic performance. Countries with a strong GDP growth rate – above the top tercile of the Sub-Saharan African distribution (5.4 percent) between 1995 and 2008 – in recent years and over a longer period are classified as “established.” “Improved” countries are those with a growth rate below the top tercile in 1995-2008, but with a recent rate of growth higher than that of the top tercile. Established and improved performers are viewed as being resilient. The latest data show that only seven of 45 countries in Sub-Saharan Africa exhibit resilience: Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania. Overall, the analysis finds that the difficult economic conditions facing the region in 2015 and 2016 have taken a toll on countries’ economic resilience.

Resilient countries have better policy and institutional quality than other countries. Although macroeconomic policy vulnerabilities, especially fiscal vulnerabilities, have increased across the region, the quality of the monetary framework and fiscal policies remains generally stronger in established and improved performers compared with other countries. Public debt-to-GDP ratios are also lower in these countries. Relatively stronger macroeconomic policy frameworks mean that these countries have more flexibility to formulate a policy response to economic shocks. In tandem, resilient countries perform better on policies that help bolster and sustain growth over the longer term and make it more inclusive. For example, on structural policies that boost competitiveness, foster private sector development, and promote diversification, these countries perform better, as evidenced by higher scores on the quality of the business regulatory environment and greater level of financial depth. Finally, the countries categorized as established and improved exhibit greater quality of government effectiveness, respect for the rule of law, and transparency and accountability of the public sector. Nevertheless, there is considerable scope across all countries in the region to accelerate and deepen structural and institutional reforms that will boost productivity and provide the basis for sustainable and inclusive growth.

2016 CPIA Results

Policy and institutional quality weakened in Sub-Saharan Africa amid challenging global and domestic conditions. The average CPIA score for the region’s IDA-eligible countries edged lower to 3.1 in 2016. Rwanda again led all countries in the region with a score of 4.0. Other countries at the high end of the score range were Senegal and Kenya, each with a score of 3.8. The number of countries with relatively weak performance – that is, with scores of 3.2 or less – ticked up and account for more than half the countries in the region. The regional dispersion in policy and institutional quality increased, as a deterioration in all four clusters of the CPIA in South Sudan pulled down the low end of the score range.

Nearly 60 percent of the IDA countries in the region saw a measurable change in overall policy and institutional quality in 2016, mostly on the downside. Weaker performance was especially evident among commodity exporters and fragile countries, but also in other countries. Forty percent of the countries (15), more than in 2015, experienced a deterioration in their CPIA score. Far fewer countries (7) saw improvements, similarly to the outcome in 2015. Broadly, the number of countries with weaker overall scores outpaced improvers by a margin of two to one.

There were some common patterns across countries that experienced a weakening in their overall policy and institutional quality. All but two of these countries posted a decline in the economic management cluster. The deterioration in other clusters was less widespread, at six countries apiece for the structural policies, policies for social inclusion and equity, and governance clusters. The sharpest fall in the aggregate CPIA score was witnessed in Mozambique and South Sudan, a decrease of 0.3 point. For Mozambique, the decline reflects the economic crisis in the country following the discovery of hidden debts in 2016. For South Sudan, the deterioration in the score indicates the broad-based erosion of policy and institutional quality amid conflict and political instability. Both countries have seen a cumulative decline of 0.5 point in their score since 2012. Zimbabwe’s 0.2-point decline, which reversed the 0.2-point gain in the CPIA in 2015, was largely due to lack of fiscal prudence and central bank financing of the fiscal shortfall. Other countries experienced a less sharp slippage in policy and institutional quality: Benin, Burundi, the Central African Republic, Chad, Cabo Verde, the Democratic Republic of Congo, the Republic of Congo, Ghana, Niger, Nigeria, Sierra Leone, and Uganda all saw a 0.1-point drop in the CPIA. In some cases, the slippage reflects a continuing weakening of the policy framework (Burundi, Cabo Verde, and Nigeria).

Countries with improvement in policy and institutional quality experienced modest gains in the aggregate CPIA. Gains were capped at 0.1 point in all seven countries in this category: Côte d’Ivoire, the Comoros, Cameroon, Guinea, Madagascar, Mauritania, and Sudan. All but one of these countries experienced stronger performance in the quality of governance, especially in the quality of budgetary and financial management. In a few countries, the quality of policies for social inclusion and equity also improved. The higher score in the Comoros and Guinea represents the second consecutive year of gains. A few countries saw tangible improvements in one or more policy areas of the CPIA that did not translate into a lift in the aggregate country score (Burkina Faso, Tanzania, and Togo). Elsewhere, improvement in one policy area was offset by weakness in another (Senegal and Ethiopia).

There were notable divergent trends in the regional performance of the components of the CPIA. Unfavorable economic conditions continued to take a toll on countries across the region, deepening macroeconomic vulnerabilities. With macroeconomic policy buffers continuing to erode, the scope for fiscal and monetary policy to mitigate shocks to economic activity was constrained. A more challenging policy environment pulled down the quality of economic management to an average score of 3.2. This movement reflects a continuing weakening trend in the quality of economic management in recent years (2014-16). The slippage in performance was evident across all three policy areas: monetary and exchange rate, fiscal, and debt. The most affected was fiscal policy, with nearly one-fourth of the region’s countries experiencing a worsening of this component. In some cases, weakness in the macroeconomic framework was evident across all policy areas of economic management (the Republic of Congo and Mozambique). Among the structural policies cluster, rising risks in the financial sector in several countries pulled down the performance of this sector (and the CPIA score of this component), but the cluster score was unchanged. Improvements in financial inclusion were observed across the region, and financial infrastructure is being strengthened as well.

There were positive developments in policies for social inclusion and equity. Namely, the human development policy area improved slightly, reflecting gains in health sector performance in a few countries, and the quality of social protection and labor edged up due to a strengthening of safety net programs in some countries. Yet, these favorable trends did not translate into measurable improvements in the policies for social inclusion and labor cluster score. Reversing the trend observed in 2015, there was a modest net gain in the number of countries registering an improvement in performance of the public sector management and institutions cluster: 10 countries experienced an increase, while six recorded a decline. Within this cluster, there was an uptick in the quality of public administration, but not in the cluster score.

The divergent trends across the components of the CPIA narrowed the gap between the four policy clusters. A deterioration in the quality of economic management in recent years has pulled down the score for this cluster to that of structural policies and policies for social inclusion and equity. At the same time, the governance cluster continues to lag all other clusters, with a score of 3.0. The pattern of a weaker macroeconomic framework marks a departure from the generally sound macroeconomic policies that countries had adopted in the period preceding the global financial crisis and in the wake of the crisis. This worsening trend, along with limited improvement in other policy areas, constrains countries’ efforts to regain the momentum on growth.

Not surprisingly, there is considerable variation in performance across country groups in Sub-Saharan Africa. Resilient countries lead other countries in the region on strength of policy and institutional quality. The performance gap between these two groups is especially large in the quality of economic management (0.9-point difference in CPIA score), but also in other policy areas. The gap between non-fragile and fragile countries is likewise large across all policy areas. The latest CPIA results show that performance on policy and institutional quality in Sub-Saharan Africa’s non-fragile IDA countries remains comparable to that of similar countries elsewhere. The reverse pattern is seen for the region’s fragile countries, which generally continue to lag fragile countries outside the region. Overall, the average CPIA score for the region’s IDA countries is weaker than the average for other IDA countries. Countries with resilient growth performance tend to have better quality of policies and institutions than non-fragile countries outside the region.