Aid instruments & aid effectiveness

Poverty reduction strategy papers

In September 1999, the World Bank Group and the IMF endorsed proposals that Poverty Reduction Strategy Papers (PRSPs) be prepared in all low income countries receiving concessional lending from the two institutions. Countries would also need at least an interim PRSP before they could access debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC2) facility; they would be entitled to final, irrevocable relief once they had a full PRSP in place and had implemented agreed poverty reduction actions. 

The Poverty Reduction Strategy idea builds on, and operationalises, the World Bank’s Comprehensive Development Framework (CDF). This embodies a new approach to poverty reduction, and to partnership between governments and donors, which, it is hoped, will lead to more effective policies for attacking poverty, and hence more effective aid. Unlike previous approaches to aid conditionality, the CDF/PRSP philosophy emphasises adherence to a process of policy making, rather than the implementation of particular policies.

The core principles of the CDF and PRSPs, are:

• National ownership: poverty-reduction priorities and policies should be developed by governments based on consultation with constituents of wider society.
• Multi-dimensionality: poverty should be analysed and addressed holistically: strategies should consider the macroeconomic, structural, sectoral and social policies that will contribute to poverty-reduction.
• Results- (or outcome-) orientation: since policies should be based on a detailed analysis of poverty in a country, monitorable targets can be set to measure their effectiveness at reducing poverty over time.
• Long-term planning: strategies should articulate how policies and short-term goals support medium- and long-term visions for poverty reduction.
• Partnership: strategies should form the basis of a partnership for poverty reduction, embracing government, civil society, the private sector and international actors.

Page contents

Where is a good place to start?

Booth, D. (ed), 2003, 'Fighting Poverty in Africa: Are PRSPs Making a Difference?', Overseas Development Institute, London
This book, based on a study commissioned by the Strategic Partnership for Africa, examines PRSPs through case studies of seven Sub-Saharan African countries. It finds that, while there are some grounds for optimism, full national ownership of the process has not yet been achieved. 
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International Monetary Fund and World Bank, 2003, ‘Poverty Reduction Strategy Papers-Progress in Implementation’, IMF and World Bank, Washington
Since the Poverty Reduction Strategy Paper (PRSP) process was introduced, participant countries have made progress in producing and implementing papers. However, their experiences also highlight problems that still need to be addressed. This report for the International Monetary Fund (IMF) and International Development Association (the World Bank) assesses both ongoing and new challenges, and reviews what could be done to tackle them.
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How does DFID engage in PRSPs?

DFID is committed to the PRS approach and attempts to align its programmes with PRSPs and to influence other donors to do the same. Country Assistance Plans set out how DFID will work in support of the objectives laid down in national PRSPs. 

PRSP Synthesis Project, 2003, ‘The PRSP Process and DFID Engagement : Survey of Progress’, Overseas Development Institute, London
How does DFID engage with Poverty Reduction Strategy (PRS) processes? To what extent are PRS principles of partnership, country ownership and results-orientation key tools in poverty reduction? This second survey, by the Poverty Production Strategy Paper (PRSP) Monitoring and Synthesis Project explores DFID’s views on PRS progress country to country in light of pending Millennium Development Goal deadlines.
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PRSPs and governance priorities

Wherever PRSPs contain commitments on the effective delivery of basic services, the guarantee of personal security and access to justice, efficient public financial management, and macroeconomic stability, they imply a concern with governance. However, if PRSPs are to meet their poverty reduction goals, they must articulate a strategy for tackling existing shortcomings in governance and implementation capacity.

The following paper examines the extent to which PRSPs have incorporated strategies for dealing with governance problems. It offers advice for DFID staff concerned with PRSPs and governance, and suggest which governance issues should be prioritised. 

Grindle, M. 2001, ‘The PRSP Process: What Next?’, Kennedy School of Government, Harvard University
This paper considers how governance commitments can be put into practice given the constraints faced by Heavily Indebted Poor Countries. The paper suggests ways in which DFID can support this, through developing a realistic ‘minimalist’ agenda for poverty reduction, and by providing assistance geared to promoting reform. In particular, the paper examines institution creation and strengthening, capacity building and promoting participation.
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PRSPs and participation

Participation is the process through which national stakeholders influence decisions over priority setting, policy-making, resource allocations and access to public goods and services. By emphasising participation, PRSPs attempt to nurture open and accountable political systems in which all people, including the poor, have a voice. The following document discusses the extent to which this theory has been reflected in practice. 

Cash, K. and Sanchez, D., 2003, ‘Reducing Poverty or Repeating Mistakes? A Civil Society Critique of Poverty Reduction Strategy Papers’, Paper commissioned by Church of Sweden Aid, Diakonia, Save the Children Sweden and The Swedish Jubilee Network
Under the PRSP approach, national governments are meant to formulate a plan for alleviating poverty together with civil society. This paper, published by a coalition of  Swedish non-governmental organisations, argues that the PRSP process privileges growth over poverty reduction, and has not incorporated broad-based participation.
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PRSPs and political systems

By encouraging participatory policy-making, the PRSP process has the potential to engage a broader group of stakeholders in national debates, including those who have previously been marginalised. PRSPs may in theory, therefore, challenge both traditional policy-making processes and received policy priorities; they may also offer an entry point for institutionalising a more accountable political system.

This paper examines the various political dimensions of the PRSP process, and assesses how the political context in which a PRSP is developed and implemented can affect its potential as a tool for poverty reduction.

Piron, L.-H. and Evans, A., 2004, ‘Politics and the PRSP Approach: Synthesis Paper’, Working Paper 237, Overseas Development Institute, London
PRSPs are often seen as purely technical instruments of development assistance, with a negligible political dimension. This paper argues that it is impossible to disentangle development assistance and PRSPs from their political contexts. But do PRSPs contribute to or hinder political development and pro-poor reform? 
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While the PRSP process offers an opportunity to improve policy-making procedures, it is important that existing arenas for debating policy and overseeing government action are not bypassed and thereby weakened. The following document identifies potential points of engagement for parliaments in the PRS process.

Hubli, S., and Mandaville, A.P., 2004, ‘Parliaments and the PRSP Process’, WBI Working Paper, Series on Contemporary Issues in Parliamentary Development, World Bank, Washington
How can Parliaments in poor countries strengthen the PRSP process? How can donors help integrate Parliaments into poverty reduction? This paper by the World Bank Institute provides a range of options to address these issues, identifying activities that will strengthen the impact and sustainability of recipient countries’ PRSPs, and ensure political legitimacy and national ownership of the process.
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PRSPs and the budget process

Implementation of poverty reduction strategies is dependent on efficient and effective public expenditure management systems. Studies of PRSP implementation to date have found that it is more likely to be successful where public financial management reforms are underway, and where strategies have been linked to medium-term plans. The following paper examines this issue in the light of evidence from five African countries:

Foster, M., Fozzard, A., Naschold, F. and Conway, T. 2002, 'How, When and Why Does Poverty Get Budget Priority? Expenditure in Five African Countries'
This working paper from the Overseas Development Institute synthesises the key findings from case studies in five countries (Ghana, Malawi, Mozambique, Tanzania and Uganda), each of which examined how public expenditure management has been linked to poverty reduction policy goals.
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PRSPs and conflict-affected countries

Donors face a dilemma in conflict-affected countries: to what extent should strategies for conflict reduction be allied to those for poverty alleviation? While potential synergies exist between peace building and poverty reduction, there may also be trade-offs. The following documents provide guidance on the PRSP processes appropriate for conflict-affected countries.

Evans, A., Coyle, E. and Curran, Z., 2003, 'National Poverty Reduction Strategies (PRSPs) in Conflict-Affected Countries in Africa', PRSP Monitoring and Synthesis Project, briefing note no. 6, London
This briefing note from the PRSP Monitoring and Synthesis Project at the Overseas Development Institute assesses the synergies and trade-offs between poverty reduction strategies and conflict prevention strategies. In particular it considers how governments and donors can best take advantage of the synergies to promote long-term development.
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McLean Hilker, L., Evans, A., and Norton, A., with Piron, L.H. and Coyle, E., 2003, 'Strategic Framework for Engagement in National PRSs in Conflict-Affected Countries', attachment to PRSP Monitoring and Synthesis Project, briefing note no. 6, London
This strategic framework from the Overseas Development Institute aims to help DFID country teams to analyse their engagement strategies in conflict-affected countries. It explains how to analyse the country context, assess the opportunities, risks and likely impacts of donor engagement, and how to design an effective PRSP engagement strategy.  Checklists of key considerations are provided to assist this.
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Monitoring the implementation of PRSPs

Results-orientation is a key feature of PRSPs. However, a shortage of relevant data in many countries means it can be hard to measure progress towards poverty reduction. The following two papers review thinking on monitoring systems and make suggestions for improvements. 

Booth, D. and Lucas, H. 2002, 'Good Practice in the Development of PRSP Indicators', Working Paper 172, Overseas Development Institute, London
How can poverty reduction strategies best be monitored? And how can monitoring lead to greater success in reducing poverty? This study draws conclusions about best practice from a review of PRSPs and suggests ways in which monitoring can be improved.
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Lucas, H., Evans, D. and Pasteur, K., 2004, ‘Research on the Current State of PRS Monitoring Systems’, Report commissioned by DFID, Institute of Development Studies, Brighton
What are the key factors that determine the success or failure of Poverty Reduction Strategies (PRS) monitoring efforts? Who should be involved? How should the information gathered be put to use? This study by the Institute of Development Studies reviews the main issues arising from the implementation of PRS monitoring systems. It draws on the experience of different countries and suggests possible monitoring approaches to suit specific contexts.
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Bedi, T., et al., 2006, 'Beyond the Numbers: Understanding the Institutions for Monitoring Poverty Reduction Strategies', World Bank, Washington DC
Monitoring systems are central to the effective design and implementation of a Poverty Reduction Strategy (PRS). Many existing PRS monitoring systems lack coordination and a coherent institutional framework linking monitoring and decision making. This World Bank report draws on 12 country studies to conclude that PRS monitoring systems should build on existing elements to begin a process of gradual change. Clearly defined relationships, incentives and activities and identification of entry points in decision-making processes facilitate the supply of monitoring information and its integration into improving PRS policies.
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What other resources are available on the GSDRC?

 Users of this page may also find it helpful to refer to the GSDRC topic guide on PFM, poverty and aid effectiveness.

 Additional information resources

The PRSP Monitoring and Synthesis project 2001-04 was commissioned by DFID to support its involvement in the PRSP process. The PRSP Synthesis Team, based at ODI, collated information on the PRSP process from a variety of sources and provided updates, topic notes, and in-depth analysis on key issues around PRSPs.

The World Bank Poverty Reduction Strategies and PRSPs webpages contain links to published PRSPs, progress reports, and the PRSP Sourcebook which contains operational guidance on the PRSP process.

Eurodad: The European Network on Debt and Development collates resources on PRSPs as well as information on aid financing, debt and empowerment. 

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