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April 2003 (Revised 9 April 2003)
Contents
Acknowledgments
Conditions of use
About the Bretton Woods Project
What is the Poverty Reduction Strategy Paper (PRSP)?
How does the PRSP relate to WB and IMF lending?
Do PRSP countries still get structural adjustment loans?
What is the connection with the HIPC debt relief initiative?
Are PRSPs really nationally owned? What does ownership
mean?
Do PRSPs do away with conditionality?
Do PRSPs depart from the Washington Consensus in the
choice of policies?
On what basis do the IMF and Bank Boards accept a PRSP?
Who assesses the coherence between poverty reduction
and the macroeconomic framework?
Does the Bank have tools for assessing the poverty
reduction impact of macroeconomic policies?
To what extent can civil society participate?
What institutional arrangements have been created in
countries?
How is implementation monitored? What is the timing
for revising a PRSP?
The PRSP cycle: successive steps and actors involved
General PRSP resources
Acknowledgments
Thanks to Rachel Marcus, Søren Kirk Jensen and Jeni Klugman
for their input.
Comments welcome. Please send to flefrancois@brettonwoodsproject.org.
Conditions of use
The text of this publication may be freely used for educational
purposes. For other purposes quotations may be used provided the
source is credited. Civil society groups are encouraged to adapt
this information for their own purposes and audiences.
Please send the Bretton Woods Project a copy of any publications
citing or based on this one.
About the Bretton Woods Project
The Bretton Woods Project monitors the World Bank and IMF in collaboration
with NGOs and researchers. Established by a network of 30 UK-based
NGOs in 1995, it circulates information, undertakes research, and
advocates for change in the institutions. Issues it has addressed
include structural adjustment programmes, conditionality, the World
Bank/IMF growth model, and a number of controversial projects.
The Project produces a regular bulletin, the Bretton Woods Update,
which is available in print, e-mail and web versions.
The Project receives core funding from the C.S. Mott Foundation
and annual contributions from UK network members.
Bretton Woods Project
c/o Action Aid Tel: +44 (0)20 7561 7546/47
Hamlyn House Fax: +44 (0)20 7272 0899
Macdonald Road London info@brettonwoodsproject.org
N19 5PG
UK
Poverty Reduction Strategy Papers (PRSPs): A Rough Guide
In September 1999 the World Bank and the IMF approved the Poverty
Reduction Strategy Papers approach. At the time Bretton Woods Project
published an "ABC to PRSPs". Since then 28 countries have
completed a full Poverty Reduction Strategy document another 45
countries have produced an interim document. The aim of this short
briefing is to provide information to a non-specialist audience
on some key aspects of PRSPs. It does not cover all areas or provide
detailed strategic insights.
What is the Poverty Reduction Strategy Paper
(PRSP)?
The PRSP outlines a national programme for poverty reduction which
is the foundation for lending programmes with the IMF and the World
Bank and for debt relief for Heavily Indebted Poor Countries (HIPCs).
The Bank and Fund invented the PRSP to ensure that debt relief money
would go to poverty reduction, and to respond to evident weaknesses
in relations between poor countries and the Bretton Woods Institutions
- in particular, lack of poverty focus, and no country ownership
of reforms. There are five core principles underlying the development
of poverty reduction strategies, namely:
· Country driven - involving broad-based participation by
civil society and the private sector in all operational steps;
· Results oriented - focusing on outcomes that would benefit
the poor;
· Comprehensive in recognizing the multidimensional nature
of poverty;
· Partnership oriented-involving coordinated participation
of development partners (bilateral, multilateral, and nongovernmental);
· Based on a long-term perspective for poverty reduction.
PRSPs should build on existing national plans when possible. While
some countries such as Uganda and Mozambique have succeeded in re-presenting
their existing plans as a PRSP, these have often been overlooked
in the new process.
How does the PRSP relate to WB and IMF lending?
PRSPs are intended to be the basis for all foreign aid to poor
countries. All HIPC countries are required to produce a PRSP as
a basis for concessional lending. They must have a PRSP before they
can seek new programme support from the IMF or Bank. The Bank and
Fund Boards must approve a country's PRSP before a lending programme
is agreed. In addition, a number of countries which receive a blend
of concessional and non-concessional lending-like Pakistan, Albania
and Indonesia are preparing PRSPs as a basis for their assistance
programmes.
Do PRSP countries still get structural adjustment
loans?
The IMF and the Bank have renamed their lending facilities for
poorer countries. The IMF has replaced its Enhanced Structural Adjustment
Facility (ESAF) with the Poverty Reduction and Growth Facility (PRGF).
Countries that previously were receiving ESAF loans are now receiving
PRGF loans. The interest rate and repayment conditions are the same.
The Bank's Poverty Reduction Support Credit (PRSC), a lending instrument
designed to support implementation of PRSPs, has been created to
complement traditional adjustment loans. In fiscal year 2001/2002,
roughtly 40% of World Bank lending was adjustment lending - 30%
for poorer countries that get loans from the International Development
Association (IDA). In addition to the PRSP, countries still need
a Letter of Intent (LOI) and a Country Assistance Strategy (CAS)
spelling out their targets and actions to request IMF and World
Bank loans.
Adam
and Bevans stocktaking exercise of the PRGF on behalf of DFID
IMF
PRGF factsheet
PRSC
guidelines
New
strategies, old loans conditions? Bretton Woods Project
What is the connection with the HIPC debt relief
initiative?
To reach their 'decision point' triggering partial debt relief
in the HIPC framework countries have to devise an Interim PRSP (IPRSP)
or PRSP. To address the issue of the tension between qualifying
for debt relief and allowing time to develop a good PRSP, countries
have been allowed to develop Interim PRSPs. I-PRSPs are required
to diagnose poverty in the country and outline a consultation process
for the drafting of the final PRSP.
Beyond HIPC countries, the PRSP is now the official basis for IFI
lending in low-income countries. Many other donors have adopted
PRSPs as the framework to channel their aid, therefore building
coordination around plans that are still heavily influenced by the
Fund and the Bank in terms of growth assumptions and poverty reduction
approaches.
Are PRSPs really nationally owned? What does ownership
mean?
The government is responsible for writing the PRSP and for commissioning
and organising technical and donor input into it. In practice it
often means building 'ownership' around pre-existing, IFI-preferred
standard economic policies. While there have been examples of innovation
in some areas, the macroeconomic framework has remained largely
unchanged. There is a contradiction between the rhetoric on ownership
and the request for WB/IMF Boards to endorse the PRSP. Many NGOs
are concerned that this contradiction means that governments opt
for programmes that they know will be accepted even if this conflicts
with priorities identified through consultative processes.
The Bank and IMF staff have argued that a government can present
whatever plan it wants. The staff then writes a "joint staff
assessment" (JSA) which highlights areas of disagreement and
perceived weaknesses in the PRSP. A positive JSA does not signify
agreement with all the analysis, targets, or actions included in
the PRSP or that the PRSP represents the best possible strategy
for the country. What it does indicate is staffs' "bottom line"
judgement as to whether the PRSP is a 'credible' framework within
which the World Bank and IMF will provide financial and other support.
Without a positive JSA and Board concurrence in this assessment,
the government will not get Bank or IMF funding and will be unlikely
to get bilateral funding. Thus it is ultimately questionable to
what extent a programme can be truly government or nationally owned.
It is more honest to say that the process is government-led. Even
a government-owned programme would not be country-owned without
broad participation that translates into objectives.
Do PRSPs do away with conditionality?
No. Conditions continue to be attached to loans.
Bank activities in IDA countries are organised under a Country
Assistance Strategy "business plan" responding to the
PRSP. Each loan supports a specific programme of reforms which form
the basis of a policy matrix negotiated between the Bank and the
borrower. This matrix spells out the specific priority actions (conditionality)
considered critical to the success of the program. The medium-term
program supported by the loan is set out in the government's accompanying
Letter of Development Policy.
In principle policy targets and actions defined in the PRSP should
be the basis of IMF and Bank conditions. However most of the time
PRSPs build on loan agreements rather than vice versa. In addition
it seems that little has changed in terms of the Fund's and the
Bank's 'negotiating style'. Loan negotiations are still conducted
behind closed doors within Ministries of Finance and Central Banks,
and lack disclosure, public involvement and oversight. While the
IMF has engaged in the process of 'streamlining conditionality'
(and the Bank claims to be doing this too, unofficially) there is
little evidence to date that freedom of choice for borrowing countries
has increased or that IMF conditionality will be strictly limited
to macroeconomic issues, among other remaining issues.
IMF
streamlining conditionality
Do PRSPs depart from the Washington Consensus in
the choice of policies?
PRSPs have been introduced as an official recognition that there
is no single blueprint for development. However most actors, including
the Bank and the Fund, have acknowledged that while PRSPs have improved
diagnostics on the various dimensions of poverty and allocation
of related social spending, they have not differed much from previous
adjustment programmes as far as the core economic policies are concerned.
Generally speaking the macro-economic framework has been little
subject to debate and sticks to what the IMF considers as 'sound
policies'. In many cases, the World Bank's 'Economic and Sector
Work' - the studies it carries out or commissions in its client
countries - still are the source of official views which dominate
the policy process at the expense of civil society inputs. The Bank's
studies range from overviews of public expenditure or poverty statistics,
to detailed analyses of particular sectors or institutions.
Blinding
with science or encouraging debate? How the World Bank analysis
determines PRSP policies
On what basis do the IMF and Bank Boards accept
a PRSP?
In addition to requiring a coherent policy strategy for poverty
reduction (i.e. one which is pursuing 'sound policies'), assessed
jointly by Bank and Fund staff in terms of its objectives and policy
content, the Boards are also concerned with the extent to which
governments have consulted with civil society and how governance
issues are addressed.
Bank and Fund local staff work together on 'Joint Staff Assessments'
(JSA) of each PRSP to assess whether it constitutes a sound basis
to be used as a framework to design their programmes. On the participatory
process the Bretton Woods Institutions recognised at the outset
that there will be substantial variation with regard to the nature
and extent of participation across PRSPs. As such there is not uniform
threshold; rather a commitment to openness and transparency is considered
important. Many NGOs consider that Bank and Fund staff is not well
equipped to assess participation anyway. However, numerous concerns
expressed by civil society organisations about the participation
process in their country appeared to have been overlooked by the
Boards, as in the case of Bolivia or Cambodia for example.
JSA
guidelines
Who assesses the coherence between poverty reduction
and the macroeconomic framework?
This is done through JSAs. Whilst the IMF still leads the dialogue
on the macroeconomic framework it is the Bank's responsibility to
assess what impact it has have on poverty reduction. This would
suggest that the Bank should have the final say on whether a framework
is acceptable or not (currently the IMF has the ultimate authority
to judge the macro policy content). Apparently no institution has
the final word; instead there is now a clear dispute resolution
procedure, which means that any differences between the two institutions
are ironed out.
JSA
guidelines, World Bank
Does the Bank have tools for assessing the poverty
reduction impact of macroeconomic policies?
The World Bank and the IMF, under pressure from NGOs and some governments,
have agreed to introduce more systematic analysis of the likely
poverty impact of policies proposed in their loans. While social
impact analysis was part of the PRSP logic from the start, progress
has been very slow and it will still take time before it is mainstreamed.
NGOs have argued that Poverty and Social Impact Analysis (PSIA)
should look at macro-level policy alternatives, not just at the
'fine-tuning', timing and sequencing of pre-determined policies.
PSIA should encourage broad public debate about a range of options.
NGOs and officials, including finance ministers from HIPC countries,
have also argued that the analyses must be conducted independently
- not by the Bank, which faces conflicts of interest.
Poverty
and Social Impact Analysis, World Bank and
Blinding
with science, Bretton Woods Project
To what extent can civil society participate?
Obviously a government can seek as much participation as it wishes.
However, the participation until now, as suggested implicitly by
initial IMF and Bank documents, is largely confined to analysing
the extent and causes of poverty, suggesting some priority actions,
as well as monitoring programme implementation and, in some cases,
impact. There seems to be little encouragement in the documents
for including civil society in a detailed policy dialogue. Generally
participation seems to be viewed as a means for ensuring more efficient
implementation of programmes rather than as a right or a means to
improve policy content. In most cases involvement of civil society
has been limited to consultation and provision of information.
NGOs are keen to ensure that civil society is able to participate
as effectively as possible to the extent that they want to do so.
This includes participation in the design of the macroeconomic framework
as well as open negotiations of IMF loans and the attached macroeconomic
conditions.
What institutional arrangements have been created
in countries?
A range of in-country institutional arrangements has been developed
at the various stages of the PRSP process. They usually combine
ministerial or inter-ministerial committees, steering committees
involving various sectors of society, thematic groups addressing
crosscutting issues, monitoring multi-stakeholder groups, etc. Such
groups tend to be most active in the PRS development stage. In many
countries there is a specific PRSP secretariat, often inside the
President's Office. In some countries, budget setting processes,
such as Public Expenditure Reviews, have been opened up to civil
society as a result of the PRSP process. Similarly, other aid-related
fora, such as the Consultative Group meetings where donors pledge
funds to support particular countries, are now focused around the
PRSP in poor countries and have been opened up to a wider range
of civil society organisations. In many cases NGO platforms have
been created to participate in and monitor the PRSP process, and
some have extended their activities to budget monitoring. Others
are monitoring implementation - how far are governments and donors
upholding the commitments they have made, and some are starting
to monitor impact. In all cases, this may be as part of the national
poverty monitoring system, or as an alternative civil society effort.
How is implementation monitored? What is the timing
for revising a PRSP?
Countries must submit annual progress reports to the Boards of
the IMF and the Bank. NGOs are also monitoring implementation independently.
Initially it was expected that PRSPs would be revised every three
years. However many actors have complained that this time frame
was too short and that an automatic time frame determined externally
is seldom aligned with country programming timetables. Following
the first major review of the PRSP approach some flexibility (up
to five years) in the periodicity of full PRSPs has been introduced.
Annual
progress reports, World Bank
The PRSP cycle: successive steps and actors involved
1. Understanding the nature of poverty
- Government
- Civil society
- World Bank
- Other multilateral, bilateral donors
2. Choosing poverty reduction objectives
- Government
- Civil society
- (Based on Millennium Development Goals)
3. Defining the strategy for poverty reduction and growth (prioritisation)
- Government
- Civil society
IMF/WB Board 'endorsement', loan negotiations etc
4. Implementation of programmes and policies
- Government
- Civil society
5. Monitoring outcomes and evaluation impact
- Government
- Multi-stakeholder groups
- Civil society (as part of formal structures or informally)
- IMF and WB (Joint staff assessments, annual progress report...)
Step 5 then feeds back into the beginning of the cycle.
General PRSP resources
As well as the links indicated above, the following provide a good
starting point for understanding PRSPs
Official
The World Bank main
PRSP page with links to country documents, policy papers, etc
Pamphlet
on PRSP 'good practices'
IMF page
on PRGF with useful links
UNCTAD's general assessment of the PRSP
approach in Africa
DFID-sponsored
website with updates, topic notes, and in-depth analysis on
key issues around PRSPs
Other
European Network on Debt and Development's page
on PRSPs with policy papers, country info, etc. Subscribe
to PRS-watch, Eurodad's email list with regular updates on PRSPs
Bretton
Woods Project page on adjustment and PRSPs featuring briefings,
articles etc.
Subscribe
to the bi-monthly Bretton Woods Update, a digest of information
and action on the World Bank on the IMF:
Oxfam's
guide to PRSPs
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