Informing the Approach of Multilateral Development Banks to Use of Country systems: Policy Briefing

A greater use of countries’ public financial management (PFM) and environmental and social frameworks (ESFs) could offer developing countries a larger stake in their development trajectory. Greater use of country systems (UCS) will also assist developing countries to enhance their capacity (through strengthened legislation, regulations and institutions) to better manage this process. Multilateral development banks (MDBs) have a significant role to play in this process by facilitating infrastructure finance to developing countries using domestic PFM and ESF systems. However, significant political and technical challenges hinder greater uptake of a UCS approach by MDBs. These challenges include increased financial, reputational and development risks; persistently weak country systems; wavering or questionable commitment to the UCS agenda; significant procurement issues in MDB-financed projects; and inadequate capacity of key stakeholders. This briefing highlights these challenges and offers recommendations on how MDBs and borrowingand non-borrowing countries can contribute to greater UCS.