World Bank review reveals unchanged quality of policies and institutional performance in Africa
The average quality of policies and institutions in Sub-Saharan Africa was broadly unchanged in 2017, according to the latest review by the World Bank. This is a shift from the deterioration observed in the previous year.
This analysis covers 38 countries and describes the progress these countries are making on improving the quality of their policies and institutions. Countries are rated on a scale of 1 (low) to 6 (high) for 16 dimensions reflecting four pillars: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions.
In 2017, the regional Country Policy and Institutional Assessment (CPIA) score was 3.1. This average CPIA score for Sub-Saharan Africa remains slightly below the average of 3.2 for other IDA countries.
“In 2017, African countries had a more favorable global environment that provided them with space to implement reforms” explained Punam Chuhan-Pole, lead economist and lead author of the report. “According to our analysis, nearly 30 percent more countries strengthened their policy and institutional quality in 2017 compared with 2016. This is an encouraging trend.”
Favorable global economic conditions supported a turnaround in economic activity in Sub-Saharan Africa in 2017, easing pressure on weak policy frameworks.
Country-level policy and institutional quality varied widely across the region. Rwanda continued to lead at the regional level and globally, with a CPIA score of 4.0. Other countries at the high end of the regional score range were Senegal, with a score of 3.8, closely followed by Cabo Verde, Kenya, and Tanzania, all with scores of 3.7.
Overall, slightly more than half (20) of the region’s IDA borrowers posted relatively weak performance – that is, a score of 3.2 or lower. The fragile countries had difficulties to face the challenges posed by their environment regarding the high risks of conflict, commodity price shocks, or climate threat.
“The CPIA is important for African countries not only because a better score leads to an increase in concessional financing from the World Bank, but also because it’s an excellent tool for policy formulation and monitoring. Our countries should pay more attention to this important tool and use it accordingly,” declared Albert Zeufack, the World Bank’s Chief Economist for Africa.
Since 1980, CPIA scores are used in determining IDA’s(*) allocation of resources to the poorest countries. They are also useful for monitoring country progress and benchmarking it against progress in other IDA-eligible countries.
* 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 percent going to Africa.
Understanding the Africa Country Policy and Institutional Assessment (CPIA) Report for 2017
The Country Policy and Institutional Assessment (CPIA) for Africa is an annual diagnostic tool which measures the quality of policies and institutional frameworks, and their ability to support sustainable growth and poverty reduction. The report provides scores for 16 criteria for each country and an overall regional score, which informs governments of the impact of the country’s efforts to support favorable growth and poverty reduction. It also helps determine the size of the World Bank’s concessional lending and grants to low-income Sub-Saharan African countries.
Here are the top five highlights from the 2017 Africa CPIA:
1. Rwanda continues to be the top performer
Countries are rated on a scale of one (low) to six (high) for 16 dimensions reflecting four areas: economic management, structural policies, policies for social inclusion and equity, and public-sector management and institutions. In 2017, the regional Country Policy and Institutional Assessment (CPIA) score was 3.1. However, policy and institutional quality varied widely across the 38 International Development Association (IDA) borrowers in the region in 2017. Rwanda continued to lead at the regional level and globally, with a CPIA score of 4.0. Other countries at the high end of the regional score range were Senegal, with a score of 3.8, closely followed by Cabo Verde, Kenya, and Tanzania, all with scores of 3.7.
2. Countries with better policy frameworks exhibit higher efficiency of investment
The efficiency of investment measure is positively associated with policy and institutional quality, and this association is stronger with respect to quality of government effectiveness (cluster D). While correlation does not establish causality, a country’s institutions may create incentives for investment and technology adoption and the opportunity for workers to accumulate human capital, thereby facilitating higher growth over the longer term. Weak institutions, by contrast, may encourage rent-seeking activities and corruption, leading to less productive activities; discourage firm investment and human capital accumulation; and lead to worse growth outcomes.
3. The decline in the average quality of polices and institutions observed in the previous years halted in 2017
The average quality of policies and institutions in Sub-Saharan Africa was broadly unchanged in 2017. This is a shift from the decline observed in the previous years. The flattening trend in the region’s overall CPIA score in 2017 is mirrored in that of economic management (cluster A).
4. African countries need to pay attention to the rising public debt relative to GDP
The regional score in the debt policy area fell to 3.1 in 2017, the second consecutive year of decline. The worsening performance in this component of the CPIA reflects the rising burden of public debt across African countries. Rising debt burdens are translating into heightened risks to debt sustainability. The composition of debt has changed, with countries shifting away from traditional concessional sources of financing and towards more market-based ones. In March 2018, nearly half of the region’s low-income countries were classified at high-risk of debt distress or in debt distress, more than twice as many as in 2013.
5. Harnessing the potential of new technologies will be key to Africa’s development
The share of adults with mobile money accounts jumped from 12 to 21% between 2014 and 2017, and it is by far the highest among all the regions. The gradual implementation at the individual country level of regional credit registries offers prospects for gains in financial inclusion during the next few years. Harnessing the potential of new technologies and fully embracing innovation perhaps represents the biggest opportunity of all for Africa.