Why does the Bank need a new instrument? Isn’t the Bank already supporting results-based lending through existing instruments?
The Bank currently has two lending instruments: investment lending (IL), which supports specific investments and development policy lending (DPL) which supports policy actions. At present the menu of instruments does not include one that is designed to support government programs—a type of operations that clients increasingly request and that has potential for building capacity and improving development impact. Although clients and staff have tried over the years to support such programs under existing instruments, this has led to a range of issues from high transaction cost, to selectivity regarding which activities and programs can be supported and so forth as current policies are designed for specific, transaction-based projects or budget support. Thus, after careful consideration, the Bank is now proposing a third instrument that will fill the unmet needs of client countries.
