The World Bank’s Scorched Scoring Terrain
As an independent panel criticized and recommended new direction for the World Bank’s decade-old Doing Business rankings, the fresh leadership under President Kim began releasing the Country Policy and Institutional Assessment (CPIA) scores used to determine credit and assistance to the poorest countries under the grant-heavy IDA window. The outside review responded to numerous member complaints over lack of consultation and legal system divergence, and it found that the methodology was too reliant on attorney input and aggregate results were misleading. A revised version should break out individual categories with equal weight and allow government feedback to correct or reinforce findings for the record. The CPIA for its part was confidential until five years ago and divides along four themes: economic, structural, social and public sector. The Africa outcomes for 40 members were just released with 2011 data putting the average at half the 6 maximum, with 15 fragile states like Zimbabwe at the lower end and a better performance by “non-resource rich” ones. Macro-economic stability gets the top marks and official governance the bottom. On trade, non-tariff barriers have worsened as services engagement increased, while the region is under-banked at fewer than 20 percent of the population compared to double that figure in Asia and Europe, despite the spread of mobile technology. On the health front, maternal mortality remains severe, and clean water access is sporadic. On public administration quality and accountability results were below 3 as only one-quarter of the group improved over the tracking period.
Senegal and Tanzania, which have issued external sovereign bonds and were selected as stops along with South Africa for a US presidential visit, have been ahead of the pack in anti-corruption and transparency measures while lagging in other areas. The IMF circulated June program reviews with specific cautions as additional commercial borrowing is contemplated. Senegal’s political and security conditions are “tense” with the approach of local elections and armed rebels in Mali, and continued investigations into alleged wrongdoing under the previous regime. GDP growth is put at 4 percent this year despite uncertain cereal and groundnut prices and the enduring Eurozone crisis. The fiscal deficit target of over 5 percent of GDP may not be reached with state electricity firm troubles and gaps in new VAT application. Another Eurobond may be tried to lengthen the debt maturity profile and pay for flood damage to infrastructure. Tanzania’s reserves were drained to support the currency before Fund help as the economy should expand 7 percent in 2013 aided by natural gas discovery. Headline inflation has reverted to single-digits on reduced money growth although government worker wage pressure persists. Power company reform and exchange rate flexibility are priorities, and banks are liquid and profitable, according to the document. With the debt-output ratio at 45 percent the risk of distress is low, but private-placement investors in the inaugural bond would still prefer a public rating however searing the exercise.
