Updating the guidance framework. Changes in the international context, calls for more internal guidance, and shortcomings in design and implementation indicate that the 2014 guidelines on implementing the 2012 policy need to be updated. The analysis indicates that a strong relationship between the government and the development partners and the presence of an ongoing IMF program are fundamental to the achievement of reforms.

Recommendation 1: Update or complement the PBO guidelines 

• Reflect AfDB’s response to the 2017 G20 principles on coordination with the IMF. 
• Provide detailed guidance to staff on the most challenging areas of the results frameworks, including: conducting effective policy dialogue, post-conflict concerns, and promoting reforms in support of gender equality and environment and climate change. 

Enforcing compliance. Although the assessment of programming and design was satisfactory (most of the PBOs in the sample were assessed to have been satisfactory against selected criteria), AfDB aims for every PBO to be satisfactory, especially in relation to 100% compliance with the provisions of AfDB’s own policy and guidelines.

Recommendation 2: Fully enforce the provisions of the 2012 policy 

• Use of non-programmatic operations or operations that are not already programmed in the country strategy paper (CSP) or CSP midterm review (MTR) should be done only on an exceptional basis as per the 2012 policy. Such operations should have a convincing rationale and should be based on sound analysis, including an evaluation of the alternative options. 
• Conduct fiduciary risk assessments when the decision is first made to use a PBO. The assessment should be updated at appraisal, and the proposed risk mitigation measures should be adequate to address the identified risks within the timeframe of the planned PBO. 

Focusing PBO ambitions. Some PBOs were spread over a broad range of reform areas. Moreover, analysis was not always undertaken to identify where AfDB could add most value, including through the expertise it could provide, or which reform actions would pave the way to “landmark policy changes.”

Recommendation 3: Design all future PBOs with a focus on a limited number of medium-term reform areas from within broader government reform plans

• Assess which reforms have the potential to pave the way to landmark policy changes. 
• Evaluate AfDB’s complementarity with other development partners and with its wider portfolio. 
• Judge the ability of AfDB to add value in these areas, especially in terms of analytical work, expertise, and policy dialogue. 

A tight focus should be combined with a strengthening of the medium-term dimension in the design, i.e., programmatic PBOs should follow a clearly defined multi-year reform path, as well as paying attention to how AfDB might accompany reform processes over the medium term over one or more PBOs. 

Prioritizing policy dialogue. Policy dialogue is a central part of how PBOs achieve results and how AfDB adds value to reform processes. Yet there was a lack of clarity and insufficient prioritization of policy dialogue in AfDB PBOs.

Recommendation 4: Reflect the vital role of policy dialogue in PBOs in practice 

• Make unequivocally clear at the design stage what policy dialogue will entail, what mechanisms will be used, what the priorities will be, how policy dialogue will be underscored by relevant technical expertise, and who will be responsible for conducting and reporting it. This can be done by including a standard annex on policy dialogue priorities and responsibilities in the PBO’s project appraisal report. This would provide a starting point that could be adapted over time to respond to new policy needs as they arise. 
• Align practices with plans in the 2012 policy and the development and business delivery model (DBDM) by more clearly allocating responsibility for PBO design and management to country offices and regions. Ensure country offices and regions have sufficient resources and the necessary reporting structures to take up this responsibility, and provide strong technical support from headquarters teams. (Alternatively, if AfDB prefers to operate a centralized model, the policy and DBDM documents should be adjusted to reflect this approach to remove any confusion). 
• Ensure that budget lines for PBO appraisal and supervision take account of the need to involve the appropriate range of expertise in the case of PBOs that cover a range of areas. 

Using technical assistance more efficiently. The other complementary input supporting PBOs was technical advice and capacity support. AfDB has tied its hands by relying on a limited menu of instruments on which it can call to provide this support, and some of these do not provide support in a timely or efficient manner.

Recommendation 5: Provide PBOs with appropriate and timely expertise and capacity support 

• Examine how to refine and expand AfDB’s menu of options when it comes to providing expertise and technical assistance. This should include: (i) reviewing how to make the MIC Trust Fund and other trust funds more flexible so as to improve their relevance; (ii) investigating other instruments, including short-terms options, such as framework contracts with specialist companies that can provide quick and high-quality technical expertise that is not available internally; and (iii) providing longer-term solutions such as a fast-track technical assistance scheme. 
• Require clear justification if relevant capacity support or expertise is not already in place or at least planned by the time approval for any PBO is sought. 

Investing in supporting institutional infrastructure for PBOs. AfDB has not appropriately invested in its most important tool for making PBOs an effective and value-for-money instrument: its people. It has no central support team charged with supporting the instrument at a technical level or for cross-learning purposes. It has established only minor differences between quality at entry and processes for PBOs as compared with those for investment projects.

Recommendation 6: Invest in the supporting infrastructure for PBOs 

• Invest in continuous training for staff involved in PBO design and implementation. Such training could take the form of an accreditation scheme and draw on the rich experience that has been gained internally, while also drawing on lessons from elsewhere. 
• Invest in upfront analytical work to support PBO design and the focus of policy dialogue and capacity support, which will require forward planning and resources to allow teams to conduct or commission it.eview the extent to which AfDB’s quality assurance processes are appropriate for PBOs, in particular the readiness review. Strengthen supervision and reporting of supervision.