Introduction - Poverty Reduction Strategy Papers (PRSPs)

Research

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Introduction - Poverty Reduction Strategy Papers (PRSPs)

In recent years, the international donor community has made poverty reduction the central objective of development co-operation. This is a reflection of the fact that although economic growth is essential to poverty reduction, this growth may not automatically trickle down to the poor.

In 1999, the World Bank and IMF developed a new instrument for poverty reduction: the Poverty Reduction Strategy Papers (PRSPs). A PRSP sets out the macroeconomic, structural and social policies and programs a country wishes to pursue to promote growth and reduce poverty. It includes a budgetary framework and identifies external financing needs.

The World Bank and IMF identify five core principles underlying the development and implementation of PRSPs:

• Country-driven. Ownership and participation are key to the PRSP preparation process. This means that national governments are responsible for the preparation of the PRSP, in consultation with all stakeholders, including civil society and the private sector.
• Results-oriented. The PRSPs should focus on the outcome of policies on poverty.
• Comprehensive. PRSPs should reflect the multi-dimensional nature of poverty.
• Partnership-oriented. PRSPs should be developed in coordination with development partners (multilateral, regional and bilateral donors and NGOs).
• PRSPs should be based on a long-term perspective.

The development and implementation of PRSPs is a pre-requisite for World Bank and IMF concessional lending and for debt relief under the HIPC Initiative (See Debt relief section). As of January 2003, 21 countries have presented their PRSPs to the World Bank and IMF Boards. Many other countries are in the process of preparing a PRSP.

There is quite some criticism on how the development of PRSPs works in practice. Many of the problems with the PRSPs were also identified in the World Bank/IMF review of the PRSP approach published in March 2002. The criticism focuses on the following elements:

• Country ownership. Effective ownership is hindered as a result of a donor-bias in the PRSPs. Since the papers are partly written as guiding documents for donors, there is an incentive to write them in such a way that they attracts funds. Developing countries have to conform the ideas of the IFIs, which support those countries that liberalise their trade and financial markets.
• Participation process. Most countries do not have established consultation mechanisms. Often the formulators of a PRSP decide which stakeholders to consult and some parties seem to be excluded from the PRSP process. Also within the government often only a few officials of one ministry are actively involved in the PRSP process. In many countries the PRSPs are not discussed in democratic institutions such as parliaments, despite the fact that the PRSPs also include budgetary aspects of policies.
• Impact analysis of the poverty reduction strategies. The PRSPs include many policy plans and recommendations, but very often no analysis has been undertaken to assess the impact of these policies on poverty reduction. While the importance of it is generally recognised, most developing countries miss the required technical skills and resources to undertake such analyses.
• Monitoring. Most developing countries lack an institutional structure for monitoring the implementation of the PRSP. In particular, public expenditure management systems (PEM) in developing countries are often too weak to support a meaningful presentation of the overall expenditure programme in the PRSP and to monitor implementation.

PRSPs and the EU

The EU has recognised the benefits of the PRSPs and is co-operating with the IMF and the World Bank in the PRSP process. The role of the Commission in the development of PRSPs is two-fold. First, it wants to play an active and constructive role in PRSP design. In addition, once PRSPs are developed, the Commission has the opportunity to provide an assessment of their content from the EC’s perspective. The Commission has committed itself to firmly base its aid decisions on country-owned PRSPs. PRSPs serve as an important input for the EC’s Country Strategy Papers (CSPs), which are country-specific programming documents showing how the EC’ external assistance will be implemented.

For more information on the role of the European Commission in the PRSP process, see the DG Development website.

Research

PRSPs have received a lot of attention in the literature. Below you can find a selection of the literature.

In the annual EU-LDC Conference 2002, one session focused on Poverty Reduction Strategy Papers. Proceedings of session during the EU-LDC Conference 2002 “Improving global governance for development: issues and instruments”. For the proceedings click here.

Poverty Reduction Strategy Source Book, World Bank, continuously updated, World Bank PovertyNet 

The Sourcebook is a guide to assist countries in the development and strengthening of poverty reduction strategies. It does not provide prescriptions but is intended only to be suggestive and to be selectively used as a resource to provide information about possible approaches. It is described as a "living document" which is expected to change in light of experience and comments. It covers both process aspects of building a poverty reduction strategy and practical aspects such as poverty diagnostics, specific sectoral challenges with respect to poverty reduction objectives, etc. Each chapter has: a short summary, a detailed guide, and supporting materials. Part I focuses on the core techniques (poverty diagnostics, monitoring and evaluation, etc.), part II covers macro and sectoral policies (e.g. trade policy, health, transport, energy etc.) and part III addresses cross-cutting issues including gender and environment.

For the full text of this document, click here.

Blinding with Science or encouraging debate? How World Bank analysis determines PRSP policies, A. Wilfs and F. Lefrancois, September 2002, Bretton Woods Project

The briefing aims to inform interested parties – particularly NGOs in the South – about the World Bank’s in-country analysis, to examine some concerns about its scope and content, and to discuss some possible strategic approaches. The briefing urges NGOs, parliamentarians and other interested parties to focus more attention on the analytical work conducted or commissioned by the World Bank in their countries or sectors which may influence negotiations and financial allocations. They can monitor who carries out the studies and how, or can consider challenging those studies considered too limited in design or execution. Recipient countries should be allowed to specify their own needs and priorities and be able to buy in assistance from a range of official organizations or independent research institutes. The briefing concludes that the World Bank must be persuaded to allow others to lead in many issue areas; and for areas where it continues to conduct policy analysis, to do so in a much more open manner throughout the process. 

For the full text of this document, click here.

From Adjustment to poverty reduction: What is new? UNCTAD, 2002, Economic Development in Africa, United Nations

This document describes the change in policy orientation of the international financial institutions from structural adjustment to poverty reduction programmes. The report focuses on the policy content of the poverty reduction programmes. Specific attention is paid to the issues of ownership, participation and the voices of the poor. The report compares the policies pursued in the poverty reduction strategies with the policies pursued in the macroeconomic stabilisation and adjustment programmes. It concludes that the focus on poverty reduction does not replace development strategies under structural adjustment programmes, but complements them. Economic growth is still considered to be most important for poverty reduction, but it is recognised that growth may not automatically trickle down to the poor. Three concerns are expressed: 1) the continued emphasis on structural reforms, while these have not led to growth and poverty reduction over the last decades; 2) the lack of social impact analysis; and 3) the emphasis on market mechanisms in the education and health sectors.

For the full text of this document, click here.

Good Practice in the Development of PRSP Indicators and Monitoring Systems, D. Booth and H. Lucas, ODI working paper 172, July 2002, ODI, London

This paper, commissioned by DFID for the Strategic Partnership with Africa (SPA), consists of two parts. The first part focuses on the institutional and procedural questions about monitoring systems for PRSPs. It examines the degree to which the PRSP-related documents contain ideas or initiatives for monitoring activities. It finds that in general attention is paid to final poverty outcome measurement, but that there is less attention for the monitoring of inputs and intermediate achievements. The fact that administrative reporting systems are generally of poor quality is neglected. It also addresses the choice of indicators, and the technical and institutional issues this raises. The second part looks at the questions that need to be tackled in monitoring PRSPs, at the input, intermediate output, and final impact level. The three questions that are put central in this part are what to monitor, how to monitor, and for what purpose to monitor.

For the full text of the document, click here.

How, when and why does poverty get budget priority? Poverty reduction strategy and public expenditure in five African countries, M. Foster, A. Fozzard, F. Naschold and T. Conway, May 2002, ODI Working paper 168, ODI, London

This paper focuses on the budget aspects of poverty reduction strategies. It examines how public expenditure management in five countries (Ghana, Malawi, Mozambique, Tanzania and Uganda) has been linked to poverty reduction goals. The PRSP process has helped to reinforce the position of reformers that want to increase allocations to the poor. It also finds that the commitment to poverty reduction was fragile in all five countries. In most countries, planning and budgeting functions were not properly co-ordinated. It is very important to have a good public expenditure management (PEM) system. In particular, it is important that the Medium Expenditure Framework focuses on strategic priorities in the medium term. The MTEF is an important and comprehensive document covering all sources of revenues and public sector expenditures. To increase the effectiveness of pro-poor spending, it is important to increase incentives and salaries, in return for better performance. Corruption needs to be overcome. Decentralisation can help with poverty reduction, but requires capacity building and monitoring systems.

For the full text of the document, click here.

Reducing poverty: is the World Bank's strategy working? Panos Institute, Panos report No. 45, 2002, Panos Institute, London

This report looks at the experience so far of the PRSP approach. It discusses the new aspect of the PRSP approach and asks a number of questions, such as “are PRSPs doing what is needed to ensure that the poor benefit from economic growth”, “what is meant by participation”, “how will PRSPs be affected if poor countries’ position in global trade worsens”. It also notes some positive changes like the increased attention for poverty reduction, the improved relation between government and civil society, and more openness of the government’s budgeting process and spending. The report finds that it is too early to say if PRSPs can make a difference, but wants to identify what remains to be done. The report includes country studies on Uganda, Lesotho and Ethiopia.

For the full text of the document, click here.

Review of the Poverty Reduction Strategy Paper (PRSP) Approach: Main Findings, prepared by staffs of the World Bank and IMF, March 2002, IDA and IMF

This document assesses the implementation of the PRSP approach. Both the development and implementation of PRSPs are a major challenge, in terms of analysis, organisation and monitoring. This paper specifically addresses the following issues:

• Interim PRSPs;

• the PRSP participatory process;

• conflict-affected countries;

• poverty diagnostics, targets and indicators, and monitoring and evaluation;

• priority public actions;

• public expenditure management;

• integration of PRSPs into other decision-making processes;

• donor alignment and harmonisation;

• the relation between speed and quality for HIPCs.

For each of these issues, the review identifies current problems and “good practices” for countries and development partners. Special attention is paid to the priorities for knowledge and capacity building in low-income countries.

For the full text of this document, click here.

Making PRSPs Work: the role of poverty assessments, Oxfam international, Oxfam policy paper, April 2001

In this paper, Oxfam argues that although the concept of PRSP is good, after 18 months there is no visible reorientation of IMF and World Bank programmes towards poverty reduction, and there is no evidence that PRSPs are determining the nature of their programmes. The policy recommendations of the Bank and IMF are simply copied into the PRSP. The Bank and IMF should get more involved in the ex-ante impact assessments of reforms. All reforms proposed by the Bank and the IMF should assessed in terms of poverty impact, and include public participation.

For the full text of this document, click here.

Many dollars, any change? EURODAD, October 2001

This papers looks at the experience with PRSPs after two years. The paper is positive about the principles of country-ownership, participation and the focus on poverty reduction. But in particular regarding country ownership, there are a number of obstacles that obstruct ownership from taking hold. The paper provides a number of suggestions to overcome these obstacles for both domestic and external stakeholders. In the second part of the paper, attention is paid to the impact of structural adjustment policy reforms, in particular on poor people. The focus is on trade liberalisation and financial sector reforms. It draws some common lessons, which are also applicable to structural adjustment reforms in other sectors. It concludes that an important tool for making reforms work better for the poor is an enhanced role for ex-ante poverty and social impact analysis.

For the full text of the document, click here.

Links 

World Bank - section on Poverty reduction Strategies and PRSPs

Contains background of the PRSP process, interim and final PRSP documents, information on related World Bank instruments, outcomes of the Review of the PRSP approach, and policy guidance documents to develop a PRSP. It is also possible to subscribe to the PRSP newsletter on this site.

IMF - section on PRSPs

Contains a PRSP fact sheet, interim and final PRSP documents, some background documents, results of the comprehensive review, and information on related IMF instruments.

DG Development website.- section on poverty reduction

Gives an overview of EU development policies related to poverty reduction, and the role of the EU in the PRSP approach.

Eldis- section on PRSPs

Contains a long list of publications on the PRSP approach and process, including summaries. 

Eurodad- section on PRSP

Gives an overview of important World Bank and Eurodad publication on PRSPs, and contains a long list of references to relevant papers.

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