Adaptation and Refinement of the World Bank’s Country Policy and Institutional Assessment (CPIA)

Project Context

The CPIA is an annual exercise conducted by the World Bank to rate the policy and institutional frameworks of individual countries. It plays an important role in the performance based allocation system of the International Development Association (IDA) and is also used by some regional development banks as well as bilateral donors. The CPIA rating thereby strongly influences how much support individual developing countries receive.

The World Bank has periodically revised the CPIA criteria since their inception in the 1970s. As part of these reviews, the criteria were refined, new criteria were added, others discarded and the CPIA process was modified. Thus, for example, assessment criteria have evolved from an almost exclusively macroeconomic focus to include governance aspects and a wider range of social and structural dimensions. The most recent major review took place in 2004, when the Bank commissioned an external panel to review the CPIA ratings and methodology. As a result, the number of criteria has been reduced from 20 to 16, the rating options for all criteria have been fully specified and the ratings are now made public. Thereafter, major reviews are scheduled to take place every six years.

Despite such efforts to improve, the CPIA continues to be very controversial. Critics argue that it is an incomplete set of criteria still largely committed to the “Washington Consensus”, prescriptive in its underlying assumptions about the character of good policies and institutions and blind to country-specific characteristics. Some critics also voice concern that the CPIA might penalize some of the least-developed countries which may in fact have the greatest need for assistance. Furthermore, the CPIA has been disparaged as being unresponsive to rapid changes in the circumstances of countries and poorly suited for ensuring that World Bank grants and loans can “turn-around” situations. 

Project Objectives

The study was commissioned by the German Ministry for Economic Cooperation and Development (BMZ) and the German Agency for Technical Cooperation (GTZ) with a view to informing their position in the ongoing reform discussions relating to the CPIA. GPPi will conduct a study analyzing the core characteristics of the current CPIA, discussing various reform options and spelling out concrete policy recommendations. The study will take up the following core questions:

• Are the criteria internally consistent and logically linked to the World Bank’s declared aims?

• Do they cover all aspects of a country’s policy and institutional framework relevant to development?

• Do they reflect any particular development paradigm?

• Do they allow for different development policies or paths?

• Do they take into account country specific circumstances and dynamics?