World Bank programs for adjustment and growth

Abstract

The experience of developing countries in the last decade has helped dramatize the importance of macroeconomic policies for sustaining economic growth and adjusting successfully to unfavorable external shocks. Although developing countries have responded to external shocks with significant changes in their economic policies in the last few years, as a group they have not been able to recapture their growth momentum. This paper addresses three main questions. First, what should be the main focus and content of domestic policy reform designed to promote sustainable growth in developing countries? Second, what are the implications of past experience with designing policies for adjustment and growth for future World Bank programs in support of developing country policy reform efforts? Third, what kind of financial packages are suitable to support adjustment with growth in different country settings and what are the issues the World Bank faces in putting together such packages? In attempting to answer these questions, the paper explores the analytical underpinnings of, and developing country experience with, policy reforms aimed at adjustment and growth. The last section of the paper presents conclusions and implications of the analysis for future World Bank programs.