Why Early and Substantive Project Restructuring Improves World Bank Project Performance

The paper shows that World Bank projects that restructure during implementation perform better, with improvements in performance ratings that persist over time, especially when restructuring happens early and involves substantive changes. It argues that restructuring should be treated as a normal tool of adaptive management rather than a sign of failure.

Produced by researchers from the World Bank’s Outcomes Department and published in the World Bank Policy Research Working Paper Series, a study examines whether restructuring projects during implementation actually improves development outcomes. The paper starts from a simple but important observation: World Bank projects operate in uncertain environments, and even well-designed operations often face shocks ranging from political change to economic crises or capacity constraints. Restructuring is the Bank’s formal way of responding to these realities, allowing teams to revise objectives, reallocate funds, adjust indicators, or change implementation arrangements without canceling the project. Yet despite its widespread use, there has been little systematic evidence on whether restructuring truly improves performance while projects are still ongoing.

How the Study Measures Performance

Instead of focusing on final project ratings at closure, the authors analyze Implementation Status and Results (ISR) ratings, which are updated regularly during implementation. These ratings cover two dimensions: Implementation Progress, which reflects how smoothly activities are being carried out, and Project Development Objectives, which capture whether the project is on track to achieve its intended goals. ISR ratings are central to World Bank supervision, portfolio monitoring, and internal accountability, making them the most direct place to look for the effects of restructuring. Using a large panel of World Bank investment projects, the authors compare how ISR ratings change before and after projects undergo restructuring.

Does Restructuring Improve Results?

The core finding is clear: projects that restructure tend to perform better afterward. On average, both implementation progress and development objective ratings rise following a restructuring, and these improvements persist over multiple reporting cycles. Importantly, the authors use advanced statistical methods to address the concern that restructurings might simply coincide with changes in how projects are judged. By matching projects with similar performance histories before restructuring, they show that the gains are not just statistical artifacts. Instead, restructuring appears to change the trajectory of projects in a meaningful way, helping them recover momentum and credibility during implementation.

Why Timing and Scope Make a Difference

Not all restructurings are equally effective. The World Bank distinguishes between Level I restructurings, which involve major changes to objectives or institutional arrangements and require Board approval, and Level II restructurings, which involve more routine adjustments approved by management. The study finds that Level I restructurings are associated with much larger and more lasting improvements in performance ratings. This suggests that when projects face serious design or institutional problems, bigger and more decisive changes work better than small fixes.

Timing also matters greatly. Projects that restructure early, before the midpoint of implementation, experience the most durable improvements. Early restructuring gives revised designs time to be implemented, tested, and reinforced over several reporting cycles. Late restructurings still help, sometimes producing sharp short-term improvements, but their effects are naturally limited because the project is close to closing. In simple terms, early action allows learning and improvement to compound, while late action can only do so much in the time remaining.

What This Means for Development Practice

Beyond the numbers, the paper offers an important shift in perspective. Restructuring is presented not as a sign of failure, but as a learning moment built into project governance. It forces teams to confront evidence, reassess risks, and realign expectations between the World Bank and borrowers. Some improvements reflect real changes on the ground, such as unblocking procurement or reallocating funds to what matters most. Others reflect clearer and more realistic objectives. Both are valuable. In complex development settings, credibility and feasibility are themselves critical inputs into success.

The authors conclude that development institutions should treat restructuring as a normal management tool rather than a last resort. Encouraging early, substantive course correction, embedding structured review points in the first half of project implementation, and rewarding teams for timely adaptation could significantly improve results. As projects become more complex and exposed to shocks, the ability to learn and adapt during execution may matter just as much as getting the original design right.