Reducing poverty in any individual country is increasingly intertwined with making progress on shared global challenges fostering global public goods (GPGs) such as climate protection and communicable disease control. This year's Annual Review of Development Effectiveness (ARDE) tracks Bank performance in part one and examines the Bank's work in fostering GPGs in part two. Development outcomes from Bank lending have improved over the medium term. But in FY07 over-optimism in the Bank's ongoing assessment of project performance rose sharply, while the share of projects rated moderately satisfactory or better dropped to 76 percent from 83 percent a year earlier. Vigilance is needed to identify problem projects in real-time and ensure that the FY07 drop in performance does not foreshadow a persistent decline. Practical steps can be taken to better use monitoring and evaluation (M&E) in projects and programs, including proper baseline information and clearer links between outputs and outcomes. The Bank's country-based model has worked relatively well in fostering global public goods when national and global interests dovetail and grants support country investments. But the greatest challenges, such as climate change, arise where local, national and global benefits actual or perceived diverge significantly. Here the country model comes under considerable strain. To more effectively bridge the gap between global needs and country concerns, the Bank should consider: creating dedicated budgets and better incentives for country teams to work on GPGs; better deploying its global knowledge networks; and more powerfully using its standing to give greater voice to developing countries in the governance of global programs.