Public expenditure reform under adjustment lending : lessons from World Bank experiences

During the past three decades the World Bank, in partnership with member countries, has pursued expenditure policy reform through its adjustment lending programs. These reform efforts have focused on reducing and restructuring capital expenditures, reducing subsidies, reforming public employment, reducing the public sector wage bill, emphasizing operations and maintenance, and increasing on social services. This paper takes a critical look at this experience and draws lessons for improving the effectiveness of public expenditures. The report argues that future World Bank work should follow a systematic approach to developing guidance on public expenditure reform. Selected elements of such an approach are to determine the appropriate role in government and its agents and to specify their partnership with civil society and the private sector in furthering public sector mandates; to clarify the goals of reform and specify performance monitoring and evaluation indicators; to target unproductive and inequitable expenditures for elimination; to emphasize poverty alleviation; to promote equity; and to adopt general guidelines on policy environment prerequisites and goals for external assistance.