Managing economic change : institutional dimensions

Although a great deal of work has been done on the analysis and design of economic policies to support policy reform and adjustment, knowledge about how to best strengthen the institutions responsible for those policies is less developed. The purpose of this paper, consequently, is to bring the issue of institutionalizing policy capacity into sharper focus, and suggesting ways of improving approaches to adjustment lending, public sector management assistance, and economic analysis in support of policy reform. The operational need to address these problems is most obvious in the countries where policy institutions are very weak and the pool of skilled and experienced personnel extremely small, such as the majority of African countries. Even in more advanced economies, however, the institutional dimension of policy management is also a crucial issue. In addition, reform initiatives must often deal with institutions which may have become part of the policy reform problem rather than the means for its solution. If the promise of successful adjustment and policy reform is to be sustained over the longer run, current efforts to institutionalize improved policy capacities in a wide range of developing countries should be extended and strengthened.