IDB-9: Country Systems

Mar 2013
The Inter-American Development Bank (IDB, or Bank), in its Ninth General Capital Increase (IDB-9), committed to improve country systems in order to increase their use in programs financed by Bank resources. This report examines the implementation of that commitment. It assesses the Country Systems Strategy developed in late 2009 for that purpose, the quality of the fiduciary assessments that underpin the opportunities for increasing the use of country systems by the Bank, and the new organizational arrangements. It then reviews the progress since late 2009 in implementing the Strategy in the three main areas of financial management, procurement, and monitoring and evaluation (M&E), and identifies major issues. The Country Systems Strategy is sound and addresses effectively the main factors that have constrained the increased use of country systems in the past. Overall, progress in implementing the fiduciary aspects of the Strategy has been satisfactory. Often, the use of fiduciary country systems is demand-constrained-with government officials seeing IDB procedures as a guarantee of integrity and a way to minimize reputational or corruption risks (as well as limit personal exposure). The reluctance of some governments to accept the responsibility of relying on their national systems should lessen as the initial good experience continues. In contrast to the fiduciary systems, progress on strengthening and encouraging the use of national M&E systems in Bank-financed activities was either minimal or quite unrelated to the Country Systems Strategy. The Bank's arrangements for handling this important area of work ought to be reviewed for stronger leadership and clearer accountability. Among the several suggestions, the most important concern the essential integration between the function of diagnosis/validation of specific country systems, and the projects and other activities to strengthen public management; addressing the risk of slippages and reversals; and achieving the right balance between the Board's governing authority and Management's flexibility. The report concludes by underlining the need to avoid giving the impression that a move to country systems is a quick, costless, and riskless proposition which would risk backlash and backtracking when the validation and subsequent use by the Bank of a particular national system is not accompanied in a very short time by improvements in project efficiency.