Reducing poverty in any individualcountry is increasingly intertwined with making progress onshared global challenges fostering global public goods(GPGs) such as climate protection and communicable diseasecontrol. This year's Annual Review of DevelopmentEffectiveness (ARDE) tracks Bank performance in part one andexamines the Bank's work in fostering GPGs in part two.Development outcomes from Bank lending have improved overthe medium term. But in FY07 over-optimism in theBank's ongoing assessment of project performance rosesharply, while the share of projects rated moderatelysatisfactory or better dropped to 76 percent from 83 percenta year earlier. Vigilance is needed to identify problemprojects in real-time and ensure that the FY07 drop inperformance does not foreshadow a persistent decline.Practical steps can be taken to better use monitoring andevaluation (M&E) in projects and programs, includingproper baseline information and clearer links betweenoutputs and outcomes. The Bank's country-based modelhas worked relatively well in fostering global public goodswhen national and global interests dovetail and grantssupport country investments. But the greatest challenges,such as climate change, arise where local, national andglobal benefits actual or perceived diverge significantly.Here the country model comes under considerable strain. Tomore effectively bridge the gap between global needs andcountry concerns, the Bank should consider: creatingdedicated budgets and better incentives for country teams towork on GPGs; better deploying its global knowledgenetworks; and more powerfully using its standing to givegreater voice to developing countries in the governance ofglobal programs.