I.  Introduction

1.   In September 1999, the Development and Interim Committees endorsed a new framework for Bank and Fund efforts to achieve sustainable poverty reduction. This approach, building on the principles of the Comprehensive Development Framework (CDF), required that nationally-owned, participatory poverty reduction strategies (PRSs)—embodied in Poverty Reduction Strategy Papers (PRSPs)—serve as the basis for concessional lending and for debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.¹ It was also the expectation that these national strategies would serve as a framework for other donor assistance.

2.   During the discussion of the Joint Paper on Poverty Reduction Strategy Papers—Operational Issues (December 21, 1999), Bank and Fund Directors agreed that it would be appropriate to conduct a review of the PRSP approach at the latest by the end of 2001 and for the staffs to prepare earlier progress reports. A first progress report outlining initial developments² was prepared for the Spring Meetings of the Development Committee and the International Monetary and Financial Committee. This paper reports on developments in the PRSP process since the Spring Meetings, and highlights key themes that have emerged from discussions with countries preparing PRSPs and their development partners. Although the new approach is still in its early stages, experience thus far indicates that momentum is accelerating and that countries are generally working effectively in line with core principles (summarized in Annex II). Part II highlights the main elements of progress to date and the outcomes of dialogue with countries and development partners. Part III outlines some operational responses to issues that have arisen from experience with early implementation.

II.  Present Status and Recent Experience

3.   Program momentum has continued to build over the past six months. Developing countries have responded favorably to the call to prepare country-driven poverty reduction strategies to serve as the focal point for development assistance in support of sustainable poverty reduction. Many have moved ahead with preparing I-PRSPs and PRSPs, in two cases completing full PRSPs. Development partners have also been supportive of the notion that PRSPs should serve as the basis for their development assistance programs and recognize that they have an important role to play in providing both technical and financial assistance if these country-owned strategies are to be successfully developed and implemented. Bank and Fund staff have expanded their efforts to improve internal coordination (Part III.A) and to support countries’ capacity to prepare poverty reduction strategies (Part III.B and C, and Annex III).

4.   At the same time, and although early experience has been mainly confined to I-PRSPs, a number of challenges are already emerging. Developing countries face capacity constraints with respect to the institutional and technical demands and the administrative costs of preparing PRSPs, especially in light of apparently rising expectations for coverage. Introduction of broad-based participatory processes also represents a challenge for countries without a prior tradition of such participation. Development partners often remain uncertain about their specific role, and the process of coordination can be time consuming and costly. Bank and Fund staffs need to respond to country requests for clarification about what constitutes an “acceptable” I-PRSP (Annexes III and VI) or full PRSP (Part III.C), including the participatory processes involved, while not compromising the principles of flexibility and country ownership. Donors also need to be involved in this process.

5.   Finally, early experience with the PRSP program has highlighted the need for further research, in addition to work already underway, in a number of critical areas. A central topic for more work is that of the linkages between expenditures on interventions and inputs designed to reduce poverty on the one hand, and results in terms of actual outcomes for the poor on the other. Not enough is yet known about what the programs and actions that constitute the core of a PRS will in practice “buy” in terms of poverty reduction, or about the timeframe over which outcomes are likely to emerge. Without more knowledge of the relationship between expenditures and results, it is difficult to evaluate the impact of proposed strategies. Other areas for further work to supplement existing knowledge include: the determinants of pro-poor growth; the linkages between economic growth, macroeconomic policies and poverty reduction; the mainstreaming of trade policy issues into poverty reduction strategies; and the design and role of monitoring processes that allow countries and partners to ascertain “what works” and ensure the participation of civil society in these processes.

6.   Both early progress and emerging challenges should be viewed against the backdrop of some tensions that were recognized from the outset as being inherent, given the multiple objectives of the program. First, there is a tension between the need to move forward quickly with strategy preparation so that countries can obtain timely concessional assistance and debt relief, and the need to secure country ownership based on broad participatory processes. This tension is intended to be relieved by the development of I-PRSPs, which do not require the participatory processes or the degree of analysis expected for full PRSPs. But the issue of the expected timeframe for moving from I-PRSPs to full PRSPs is increasingly coming to the fore. Both governments and development partners have expressed concern that preparation will require more time than is currently envisaged (see Part III.B). Second, there is a tension between the concept of country ownership and the prerogative of the Boards to determine whether an I-PRSP/PRSP provides a sound basis for Bank and Fund concessional assistance and/or HIPC debt relief. In many cases, this tension is being reduced by an active, constructive dialogue between the country and the staffs throughout the PRSP process and by openness on the part of the Bank and Fund to home-grown approaches. At the same time, it is essential that scarce donor resources, including those of the Bank and Fund, be deployed in a manner, and within a policy environment, where they can have the desired impact. In this context, it will be important to emphasize the evolving “learning by doing” nature of the process over the medium to long term, and to exercise judgment in light of specific country situations and international experience.

A.  Present Status of I-PRSPs and PRSPs

7.   As of the Spring Meetings, the Boards had considered I-PRSPs prepared by three countries (Bolivia, Mozambique, and Tanzania), together with HIPC Decision Point documents with PRSP content for Mauritania and Uganda. As shown in Table 1, as of September 7, the Boards had considered an additional 12 country documents—the first two full PRSPs, for Burkina Faso and Uganda, and I-PRSPs for ten more countries, eight in Africa, one in Europe and Central Asia, and one in the Western Hemisphere. Meanwhile, other countries are moving forward with the process and some have already prepared draft I-PRSPs (e.g., Guyana, Nicaragua and Yemen). By mid-2001, over 30 more countries are tentatively expected to have prepared I-PRSPs, and 10 or more to have prepared full PRSPs, depending on individual country circumstances (see Annex Table 1).

B.  Lessons from Recent Experience with I-PRSPs and PRSPs

8.   Most country documentation to date has been in the form of I-PRSPs, the minimum requirements for which are  a commitment on the part of the authorities to poverty reduction, a summary of current knowledge about and analysis of poverty, a description of the existing poverty reduction strategy, a three-year macroeconomic framework and policy matrix, and a description of the process for producing a fully developed PRSP in a participatory fashion. In practice, differing degrees of preparedness and capacity has meant that the quality of I-PRSPs has varied. Nevertheless, some preliminary lessons can be drawn from experience with I-PRSPs prepared to date and with the two full PRSPs. These lessons have emerged from country documents, the Bank-Fund Joint Staff Assessments (JSAs), and direct dialogue with governments.

Ownership and commitment

9.   Countries have responded positively to the invitation to take the initiative in preparing nationally-owned poverty reduction strategy documents. The information provided in I-PRSPs has generally exceeded the minimum levels expected—in some cases substantially so (e.g., Honduras, Kenya, and Mozambique). In several cases, countries have specifically noted that work on I-PRSPs has been managed and guided at very high levels of political authority (examples include the I-PRSPs for Honduras, Mozambique, and Tanzania, and both full PRSPs). Burkina Faso’s PRSP calls for “a new form of partnership [with development partners]..based on the concept of ownership.” Several countries have explicitly stated that poverty reduction is the central goal of their development strategies (e.g., Ghana, Kenya, Mozambique, Sao Tome and Principe, Tanzania, and Uganda). Although, as expected, I-PRSPs have drawn heavily on existing programs rather than undertaking significant re-examination of current poverty policies and programs, progress is being made in I-PRSP countries to mobilize resources and institutions as the transition is being made to full PRSPs. However, the program is still at too early a stage to draw firm conclusions on ownership; its extent will become clearer as evidence emerges about how effectively new programs are being implemented.

Quality and availability of poverty data

10.   Timely and accurate poverty data are critical to any meaningful poverty diagnostic or impact evaluation. Countries preparing I-PRSPs were expected to identify gaps in their poverty data and indicate how these gaps would be addressed during the period leading up to the full PRSP, including through technical assistance. The availability of poverty data has varied widely. Several I-PRSPs (e.g., those for Bolivia, Ghana, Honduras, Kenya, and Mozambique) and the two full PRSPs for Burkina Faso and Uganda have up-to-date data. Other I-PRSPs countries were hampered by out-of-date or relatively limited household survey data (e.g., Albania, Chad, Sao Tome and Principe, Senegal, and Tanzania). The lack of gender-disaggregated data is a general problem for most countries. There is an urgent need to address these problems, which will require both time and money. In this respect, the PARIS 21 data initiative for building statistical capacity in developing countries and the IMF’s General Data Dissemination System (GDDS)—a means to help countries develop and broadly disseminate their statistical frameworks—are helpful initiatives. In several cases, development partners (including the African Development Bank, UNDP, the World Bank, and bilateral donors) are helping or plan to help with data improvement. During the interim, expectations will need to be moderated in cases where countries have little choice but to use existing data, despite their limitations, in developing their initial poverty reduction strategies.

Building on prior work

11.   Many of the relatively substantial I-PRSPs, as well as the Uganda and Burkina Faso full PRSPs, have built effectively upon existing poverty data, analysis, and strategies. Examples of prior work in I-PRSP countries include Bolivia’s National Dialogue, Ghana’s Vision-2020, Honduras’ Master Plan for Reconstruction and Transformation, Kenya’s National Plan for Poverty Eradication, Mozambique’s National Action Plan for the Reduction of Absolute Poverty, and Tanzania’s National Poverty Eradication Strategy. While some of these strategies are more comprehensive and/or up-to-date than others, all provide a useful foundation upon which their respective PRSP processes can be built. In this regard, the effectiveness and sustainability of country programs will likely be enhanced by embedding them into existing, well-designed country arrangements for program costing, budgeting, and preparation of Medium Term Expenditure Frameworks (MTEFs). Tanzania’s MTEF and annual Public Expenditure Review (PER) have provided the context for monitoring priority expenditures. Uganda’s full PRSP is firmly anchored in the government’s comprehensive Poverty Eradication Action Plan (PEAP), first developed in 1997 and revised to take into account new poverty data, detailed sector plans, direct consultation with the poor, and a strengthened MTEF. Burkina Faso’s PRSP is based on the government’s statement of intentions as laid out in its 1995 “Letter of Intent for Sustainable Human Development” and subsequent policy papers regarding growth, poverty reduction and sector strategies. The Uganda PRSP and the Bolivia and Ghana I-PRSPs have also benefited from the fact that these countries are three of the 13 CDF “pilots”; the CDF and PRSP processes are based on common principles and are mutually reinforcing, for example with respect to their emphases on country ownership, partnerships, and a multidimensional approach. Finally, in some cases (e.g., Tanzania and Uganda) prior work has included bringing together various poverty analyses prepared by government, NGOs, and academia, thereby providing a useful base of information drawn from multiple sources.

Participatory processes

12.   Countries were not required to carry out participatory processes in preparing I-PRSPs, but rather to develop action plans and timetables for putting such processes in place in the context of their full PRSPs. In practice, however, there has been a much greater degree of participation in I-PRSP preparation than originally envisaged, reflecting countries’ existing processes. The extent and quality of participation has nonetheless varied, as has the degree of engagement with civil society. For example, in Albania, civil society has been included in the national PRSP steering committee from the start. In Honduras, civil society was extensively involved in the I-PRSP process, although the document itself was not made available to civil society groups before its submission to the IMF/World Bank Boards. While I-PRSPs have included proposals for participatory processes to be adopted in preparing full PRSPs, these too have varied in depth and breadth with respect to, e.g., arrangements for bringing the poor themselves into the process and ensuring that the otherwise voiceless groups, including women, are heard. The Executive Boards of the Bank and Fund have praised cases where proposed participatory processes have been comprehensive in scope and have taken note of cases where participation arrangements have been less well-specified.

13.   The two countries that have completed full PRSPs differed in the comprehensiveness of their participatory processes. In Uganda, broad consultations took place across ministries and at different levels of government; existing democratic consultation processes were used as the basis for the PRSP and the poor were directly consulted through the Uganda Participatory Poverty Assessment Project. Civil society helped draft the PRSP and is presently involved in monitoring its implementation. In both Burkina Faso and Uganda, the PRSPs were considered and approved by the national parliaments. Participatory processes in Burkina Faso, however, despite the country’s strong tradition of participation, were less comprehensive than in Uganda. While the participation of key ministries and consultations with civil society were a feature of the drafting phase of the PRSP, a missing element was systematic consultation directly with the poor. The final document lacked a summary of the main issues raised in the consultation process or a discussion of the role of organizations representing the poor in future monitoring of implementation. These issues were recognized in the PRSP and the Joint Staff Assessment (JSA).

14.   The staffs are conducting a retrospective review of the participatory processes used in countries that have formulated I-PRSPs and full PRSPs. Early experience suggests that wide dissemination—not only within government but also among the public at large—of  information about planned participation arrangements is critical for the success of the process, and that there is a critical distinction between “consultation” and broad-based participation. Participation is also important for monitoring and tracking poverty-related public expenditure: if given enough information, citizens can actively participate in this process and thereby enhance transparency and accountability.

Policy priorities

15.   Common themes have been emerging regarding governments’ priorities for poverty reduction efforts. I-PRSPs and PRSPs prepared since the Spring Progress Report have confirmed the importance accorded to broad-based growth as a sine qua non for sustainable poverty reduction. All have also stressed the importance of social sector investments (e.g., education and health). Other common themes include the central importance of rural development and of special efforts to assist disadvantaged groups (e.g., women, children, the elderly, and ethnic minorities) as key components of an overall growth and poverty reduction strategy. Several countries (e.g., Burkina Faso, Ghana, Kenya, and Tanzania) have explicitly noted the linkage between their poverty reduction priorities and the OECD/DAC International Development Goals (IDGs) for 2015. Equally important, based on consultations with civil society and non-government organizations, new issues are also being placed on the poverty agenda in areas such as governance (Kenya), anti-corruption (Ghana), transparency and fiscal accountability (mentioned in virtually all country documentation), and improving the access of the poor to public services. Discussions in the Boards of the Bank and Fund have emphasized the importance of cross-cutting issues such as gender, the environment and intersectoral linkages. At the same time, as countries move from I-PRSPs to full PRSPs, a key challenge for governments and the international community alike will be to move forward from broad statements of intent across a wide front to well-specified, prioritized, realistic and achievable programs and action plans that evaluate trade-offs and make clear choices among competing needs.

Costing of poverty reduction strategies and outcomes

16.   Costing of poverty reduction strategies is proving to be more difficult than originally envisaged. Input costs need to be reliably estimated, and it has long been recognized that some inputs, such as institutional reform and better governance, are inherently difficult to cost in a reliable way. Moreover, the relationship between inputs and outcomes is often difficult to define (see above, para. 5); hence the costs of achieving final outcomes cannot, in many cases, be realistically estimated. These difficulties can make it hard to determine whether a poverty reduction strategy is consistent with a country’s fiscal framework, or to make a case for changing the framework to accommodate a poverty reduction strategy. While detailed costings were not expected at the I-PRSP stage, several countries have underscored their intention to improve their costing capacity and to integrate such costing into their budgetary processes, including MTEFs. With respect to the two full PRSP countries, poverty eradication programs are embedded in Uganda’s budgetary process and the MTEF (although further work is needed on costing), and a special Poverty Action Fund has been established to prioritize budget allocations that directly benefit the poor. In Burkina Faso, the PRSP provides estimated costs for priority poverty programs and indicates how additional donor assistance and HIPC resources are to be integrated into the national budget. Donor support for poverty reduction strategies in other countries will likely be enhanced by clear links between costed strategies and fiscal frameworks.

Tracking poverty-related public expenditures in PRSP countries

17.   An important element of a poverty reduction strategy is tracking poverty related public spending. For virtually all PRSP countries, developing effective tracking systems will require improvements across the full range of budgetary and financial management practices, from budget formulation to monitoring, evaluation, and auditing. The underlying objective is to ensure that countries have the capacity to manage and use public expenditures effectively, and specifically in the PRS context, to ensure that resources for poverty reduction are appropriately used. Additionally, to the extent that countries restructure expenditures to emphasize poverty orientation, such restructuring would need to be tracked. Bringing PRSP countries to the stage at which they will all have effective, comprehensive budgetary systems (including well-established MTEFs) will take political will, many years and substantial resources, including technical assistance. Until such improvements take place, it will be important for governments to adopt interim measures such as expenditure tracking surveys and monitoring of poverty focused programs with respect to poverty expenditures of the kind outlined in Part III.D. At the same time, focusing on spending that is directly poverty-related should not lead to neglect of public actions that may have substantial indirect effects in terms of bettering the lives of the poor (such as governance and institutional reform).

Macroeconomic framework and structural policies

18.   In contrast to I-PRSPs, full PRSPs are expected to integrate a fully costed poverty reduction strategy into a consistent macroeconomic framework. This presents considerable challenges, as the linkages between macroeconomic policies and poverty reduction are complex, and the macroeconomic and poverty data available are often unreliable. Moreover, movement to pro-poor and pro-growth budgets would be undermined if it compromised fiscal sustainability and did not allow for constraints on absorptive capacity. In Uganda, the authorities are developing the PRSP under the revised PEAP, which compares the poverty reduction strategy with planned outlays. Although adjustments have had to be made on account of the resulting shortfall, it is hoped that this could eventually lead to an increase in donor assistance to support larger fiscal deficits in line with the targets identified in the PRSP. On structural reforms, the Uganda PRSP analyzes some of the impacts on the poor—for example, with respect to the progressiveness of the taxation system and removing distortions in it.

C.  Outreach and Feedback

19.   Bank and Fund staffs have intensified their dialogue with PRSP countries and development partners with a view to ensuring that the PRSP program moves forward smoothly and in line with countries’ capacities and needs. As the PRSP program has gained momentum in recent months, outreach to PRSP countries has increasingly taken place in the context of learning events (Annex III, para. 3) as well as Bank and Fund missions and dialogue with countries. Bank-Fund sponsored outreach to development partners since the Spring Meetings has been complemented by events sponsored by the partners themselves (e.g., the May OECD/DAC High Level Meeting, the June U.N. Social Summit, the June meetings of the Strategic Partnership with Africa, and the June IDA-12 Deputies Mid-Term Review Meeting), at which the PRSP approach has been a featured issue for discussion. In addition, conceptual and analytical commentaries on the PRSP approach have been prepared by several development partners (Annex IV).

20.   Three key messages have emerged from exchanges with countries and development partners. First, both groups are generally supportive of the PRSP process since it embodies CDF principles with which they broadly agree and encompasses many of their own development priorities, including the promotion of enhanced partnerships, better governance, stronger country ownership, enhanced donor collaboration, and a more unified approach to countries’ needs. As a result, some countries and development partners are already beginning to work together on key areas (such as improving poverty data), and some partners have made specific arrangements for working cooperatively with the Bank and Fund in supporting country programs (Annex V). Second, however, there remains a perception that the PRSP process is dominated by the Bank and Fund, and uncertainty about prospects for change in this regard. Third, both countries and partners have sought clarification about the core content of PRSPs and the minimum requirements for a participatory process (Part III. C). These and other major points emerging from consultations with countries, civil society groups, and donors are discussed below.

Poverty at the forefront

21.   Countries and partners see the PRSP as an important vehicle for placing poverty reduction at the top of the development agenda, for promoting the goal of “pro-poor growth,” and for encouraging a multidimensional approach to the realization of this goal that includes raising rates of economic growth, investing in social sectors, and supporting governance objectives. However, partners have noted, as countries move from I-PRSPs to full PRSPs, the need for detailed analysis of the links between growth and poverty reduction, the role of institutional constraints, and the impact of past and present structural reform efforts on the poor, women, and the environment. Donors and NGOs have expressed concern that the focus on short-term economic stability often comes at the expense of long-term sustainable development.

Participation

22.   Countries and partners have strongly supported the central importance of ownership of and participation in the PRSP process. At the same time, some have raised concerns about the tensions between “speed and ownership” and “speed and quality,” related in part to concern about the rate of progress with HIPC debt relief. Countries have emphasized that governments must take the lead in initiating participatory processes, and they have stressed the need to ensure that taking account of the views of civil society does not undermine the authority of national parliaments and existing democratic processes. Countries have also noted that participation is a much more comprehensive concept than consultation, that governments will need to disseminate timely information to civil society organizations, and that efforts would be needed (including by development partners) to ensure that these organizations can play their important role in the process. NGOs have emphasized the need for genuine participation that involves a cross section of civil society including the poor. In the longer term, this approach would provide broader based support for policy change. NGOs have also stressed the need for greater transparency to encourage wider participation. In this regard, they have noted that posting PRSP material on Bank and Fund websites (Annex III, para. 6) does not meet the transparency needs of those countries that have limited access to the Internet.

Content of PRSPs

23.   NGOs and donors are supportive of linking countries’ poverty reduction strategies to the International Development Goals. However, they recognize that linking goals to measurable intermediate indicators is difficult, as is linking poverty reduction strategies to the budget. With respect to specific content items (see also para. 15), partners and countries have stressed the need to focus on women as key agents in promoting growth and poverty reduction, and on the adverse effects of external and domestic shocks on the poor. Along with partners, countries have also noted the importance of addressing rural poverty and the devastating impact of HIV/AIDS in Africa. Countries and development partners have also emphasized the critical importance of trade policy in low income countries and of reducing barriers to the exports of poor countries. Finally, countries, NGOs, and donors have also stressed the importance of focusing on employment and the problem of “jobless growth,” and on environmental sustainability.

Capacity

24.   Countries have expressed concern about capacity constraints with respect to PRSP preparation. Some have indicated that they see little benefit in preparing highly-specific PRSPs when the challenges facing developing countries are so enormous, capacity is so limited, and the urgency of addressing poverty issues is so immediate. In the context of limited capacity, countries have suggested that once an initial PRSP has been prepared, full updates should be spread out over five years (versus three years) to better reflect the resource constraints facing these countries. While this question has not yet arisen in practice, it will be important to consider it in the context of the 2001 PRSP review. Donors and NGOs have also expressed concern about the issue of domestic capacity in PRSP countries both to formulate and implement strategies and to coordinate donor assistance. Additionally, some partners have expressed concern about the limited capacity of civil society in some countries—reflecting past lack of consultation and limited data availability—to participate in dialogue on complex policy issues such as the macroeconomic framework, the sequencing of structural reforms and policy trade-offs. NGOs have suggested that donors should play a role in building the capacity of civil society groups.

Macroeconomic framework and structural policies

25.   Some development partners are concerned that there will be limited flexibility and change in IMF-supported programs in PRSP countries. NGOs have stated that IMF macro-conditionality for these countries remains stringent; that recent PRGFs are not different from previous ESAFs (for example in Tanzania and Honduras); that there are no references to changes in the macroeconomic framework with respect to integrating poverty reduction concerns; and that it remains unclear how full PRSPs will integrate a fully costed poverty reduction strategy into a consistent macroeconomic framework. Both donors and NGOs also stress that analysis of the equity and distributional effects of growth remains limited. Development partners in general recognize that structural weaknesses or distortions in land ownership, financial markets, labor markets, the civil service, and the foreign trade regime can limit the extent to which the poor can contribute to, and share more fully in, economic growth. At the same time, many express concern over the lack of analysis regarding the appropriate sequencing of structural reforms, the short- and long-term poverty effects of structural policies, and the action needed to offset any temporary adverse effects of reforms on the poor.

Aid modalities and donor support

26.   There is a general consensus that donors need to be open to new ways to address the development agenda. There is also broad support for making the PRSP the focal point of donor assistance programs and for improved donor assistance coordination in implementing these programs. To this end, both Burkina Faso and Uganda have presented their full PRSPs to donors. Countries have proposed, and many partners have agreed, that donor procedures need to be streamlined and simplified. This point has also been explicitly made with respect to Bank-Fund conditionalities (Part III.E). Countries have also proposed that donors redesign their assistance programs to better reflect the medium- to long-term timeframe of their poverty reduction strategies, and that donors move towards providing assistance in the form of broad-based sectoral and budgetary support. There is not consensus among donors on this point, and some donors intend to explore modalities for supporting PRSPs through more conventional vehicles. With respect to technical assistance linked to work on PRSPs, several countries have identified the issue of limited poverty data availability, and have noted their intention to seek donor support in this area. Others have underscored their need for more broad-based support in preparing their PRSs. Donors have expressed interest in supporting a range of activities, including poverty surveys and diagnostics, information systems, public finance management systems, and civil society institutional capacity building.

Role of the World Bank and the IMF

27.   While donors are broadly supportive of the PRSP approach, they have cautioned against I-PRSPs becoming an all encompassing effort and urged that these documents be kept manageable and not overloaded with process. They have also called for better links between the PRSP process and the Bank’s Country Assistance Strategy (CAS) (Part III. F) and clearer links between the PRGF and the PRSP. Some also question what would happen if a country-owned PRSP or I-PRSP were to propose a strategy that differed from Bank-Fund thinking, and wonder under what circumstances, if any, the Bank and/or Fund might reject a country strategy. NGOs have expressed concern that PRSPs which were technically sound but with limited participation might still be considered as a basis for Bank/Fund concessional lending and HIPC debt relief. Partners have also questioned whether improved collaboration would, in reality, lead the Bank and the Fund to be more selective in its activities within each country, deferring to other development partners where these partners have a comparative advantage in the country context.

III.  Addressing Issues in Implementation

28.   The issues outlined in Part II represent important challenges for the effective implementation of the PRSP approach. The sections that follow highlight six areas where action is being taken to respond to these challenges. At their meetings on September 5, the Boards of the Bank and Fund broadly supported the actions described below, and gave specific guidance on the actions proposed in sections B and C.

A.  Improving Coordination: Joint Implementation Committee

29.   The Bank and Fund have established very close collaboration on PRSP work, including joint missions to support countries in preparing I-PRSPs and full PRSPs, and joint preparation of JSAs. In order to further smooth the implementation process for both the PRSP process and the HIPC Initiative, a Bank-Fund Joint Implementation Committee (JIC) was set up in May. The Committee, which meets at least bi-weekly, monitors progress, deals with emerging policy and process issues, coordinates production of reports and briefings to the Executive Boards, and works to support consistent and effective external communications. It has set up three Task Groups to deal with specific issues with respect to: (1) governance, public expenditure, and expenditure tracking; (2) Bank and Fund roles regarding country issues and policy, and respective approaches to conditionality; and (3) options for accelerating HIPC Decision Points.

30.   The JIC also takes the lead in designing initiatives to respond to emerging challenges (discussed in the sections that follow) and in guiding other activities designed to facilitate the PRSP process, such as capacity building, through learning events for PRSP country officials and development partners and preparing and updating the PRSP sourcebook; measures to enhance program transparency and information dissemination; and preparation of Guidelines for I-PRSPs and their accompanying JSAs (Annexes III and VI).

B.  Using the I-PRSP to Balance Timeliness with Quality

31.   The I-PRSP is serving reasonably well as a means to launch country-driven efforts to develop participatory poverty reduction strategies without delaying access to concessional assistance and HIPC debt relief. However, when the PRSP process was designed, it was expected that countries would prepare one I-PRSP and then a PRSP or PRSP progress report on an annual cycle.³ In practice, some countries (Albania, Sao Tome and Principe, and Senegal) have indicated in their I-PRSP that they may require more than one year to develop fully participatory PRSPs that adequately address their prioritized poverty reduction efforts. In reviewing other I-PRSPs (Benin, Bolivia, and Chad), the Bank and Fund Boards have noted that the one-year timetable for development of the PRSP proposed by the government appeared ambitious. As implementation proceeds, it is apparent that a number of countries with severe institutional and governance constraints, very limited poverty data and/or a limited tradition of participation (including post-conflict countries) may require two years or more to develop PRSPs.

32.   To encourage appropriate balance between providing timely access to interim debt relief and concessional assistance from the Bank and Fund and the need to encourage governments to take the time needed to develop both the content and the participatory processes of a full PRSP, the JIC has proposed that, where countries have not completed a full PRSP within one year of their initial I-PRSP, the authorities could provide a report to the Boards indicating the progress that has been made in implementing their interim strategy for poverty reduction, relating progress to the timetable and action plan set out in the I-PRSP, noting constraints to finishing the process, and providing a credible, time-bound program for PRSP completion. This report together with an accompanying JSA would form the basis on which the Boards would be asked to judge the eligibility of the country for continued access to concessional lending and interim debt relief.

33.   At their meetings on September 5, the Boards of the Bank and Fund agreed with the importance of ensuring the quality and country ownership of PRSPs and noted the possibility that one year might be insufficient for completion. The Boards therefore supported the proposal outlined in para. 32 above.

C.  Using Early Experience to Provide More Guidance on PRSP Content and the Joint Staff Assessment

34.   The Joint Paper setting out early parameters for PRSPs highlighted five possible elements of poverty reduction strategies. These were: (i) assessing poverty and its key determinants; (ii) setting targets for poverty reduction; (iii) prioritizing public actions for poverty reduction; (iv) establishing systematic monitoring of poverty trends, and evaluating the impact of government programs and policies; and (v) describing the main aspects of the participatory process. These key elements formed the basis of early efforts to develop the PRSP Sourcebook materials⁴ designed to provide countries, Bank and Fund staff, and development partners with guidance on examples of good practice in designing the content of nationally owned poverty reduction strategies and provided early guidance to staff in undertaking the JSA. While experience with I-PRSPs and PRSPs has confirmed the utility of this framework, some key aspects of poverty reduction—especially with respect to items (iii) and (v) above—were not well covered in the earlier Board papers.

35.   Having clear expectations with respect to core or standard elements of a PRSP is in no way inconsistent with the aim of flexibility and country ownership. For example, expecting that the PRSP will be clear about priorities does not diminish the country’s scope to set those priorities. While the shift to country-ownership will allow substantially more leeway in terms of policy design and choices, the assessment of PRSPs should be based on both international and country specific experience on what has been found to be effective in lowering poverty. At the same time, any attempt to define exhaustively the set of core elements would be excessively prescriptive. With this tension in mind, the JIC is in the process of developing further guidance to Bank and Fund staff on the criteria to be used in JSAs, specifically with respect to prioritizing public actions for poverty reduction and describing the participatory process. It is intended that further guidance will be made available in draft for discussion with countries, development partners, and the general public, before final dissemination to Bank and Fund staff. The staffs are also revising the first chapter of the PRSP Sourcebook, reflecting early experience with the content of PRSPs and I-PRSPs (and proposed internal guidance on the JSA) in order to provide a synthesis that countries might find useful as they develop their own PRSPs. Finally, another important area—how to deal with cross-cutting issues such as gender and the environment—will also be addressed in the Sourcebook.

(i)  Prioritizing public actions for poverty reduction

36.   The priority public actions to raise sustainable growth and reduce poverty constitute the heart of a PRSP. Staff are expected to assess whether these priority public actions are clearly stated and consistent with what is known of the linkages between different policies and their appropriate sequencing. In order to clarify the nature of this task, it is worth distinguishing four key areas of content that a JSA would be expected to cover:

• Appropriate sectoral policies and programs;
• Macro and structural policies to support sustainable growth in which the poor participate;
• Realistic costing and appropriate levels of funding for major programs; and
• Improving governance—including public sector financial management and
• accountability.

(ii)  Describing the main aspects of the participatory process

37.   As is widely recognized, it is not appropriate to have rigid guidelines for participation since countries’ contexts and political systems vary. However, both governments and civil society groups are requesting clarity on the key elements of a participation process. Ideally, the process for selecting groups to include in the process should involve joint decision making by government and Civil Society Organizations (CSOs). Transparent decisions as to who participates, when, and how, will add legitimacy to the participatory process. Participation will vary from country to country, depending on the political economy, but over time would be expected to bring in groups such as parliament, local government, local representative bodies, civil society, the private sector, and excluded segments of society. An effective PRSP process would include direct consultations with groups of the poor which can contribute towards a PRSP in substance (analysis of poverty), process (participation in policy making) and implementation (monitoring of results).

38.   To provide greater clarity and to help structure the description of the participatory process, the JSA should focus on the following questions:

1. Does the I-PRSP include: (a) a plan for the participation process (including estimates of the costs of implementation) with a time line for the preparation and dissemination of the PRSP; (b) a description of key stakeholders; (c) a description of existing governance structures and participation processes; and, (d) if consultations took place, a summary of who was consulted for the I-PRSP preparation and an outline of major discussions?
2. Does the full PRSP include: (a) a description of who was consulted, when and how, compared with the plan detailed in the I-PRSP; (b) a review of the major discussions emerging from the consultations; (c) a summary of the impact of the consultation process on the design of the full PRSP; and (d) a plan for participatory involvement in the implementation and monitoring of the PRS?

39.   At their meetings on September 5, the Boards of the Bank and Fund endorsed the proposal for using early experience to provide more guidance to staff on assessing core content of PRSPs, while noting that this guidance should not compromise the principle of country ownership and home-grown strategies based on individual country conditions.

D.  Identifying the Poverty Focus of Public Expenditures

40.   The capacity to track poverty related spending, including that financed by debt relief, has been identified as a key element of an effective poverty reduction strategy. The JIC has made it one of its early priorities to increase support for this effort, taking a two-handed approach. Over the longer term, efforts will focus on strengthening country capacity by improving budgetary and accounting systems, in collaboration with other donors. In the shorter term, while these systems are being developed, the priority will be to identify and strengthen existing mechanisms to track spending on poverty reduction in a way that does not detract from longer term capacity building. Such measures might include implementing expenditure tracking surveys, monitoring budgetary allocations, and evaluating the outturns of selected programs and projects that have a poverty focus. New guidelines will require Bank and Fund staff to discuss in JSAs country initiatives to increase transparency and accountability in the public sector and to tackle corruption. The JIC has so far focused on issues of expenditure monitoring in five HIPCs approaching their decision points—Mali, Cameroon, Malawi, Zambia, and Rwanda. The next step will be to develop action plans for improving tracking systems in all HIPCs which have reached or are expected to reach decision points in the current calendar year. (See paragraphs 22-23 of the accompanying HIPC report.)

E.  Streamlining and Aligning Conditionality to the PRSP

41.   The PRSP approach envisions that Fund and Bank operations should focus on key measures to support the priorities identified in the PRSP, and that conditionality in Fund and Bank operations should be applied according to institutional responsibilities.⁵ Given the emphasis on country ownership and ex-ante social impact analysis of structural reforms, it is expected that there will be variation across countries in the pace and sequencing of reforms that will need to be reflected in the design of Bank and Fund lending instruments. Furthermore, it is expected that the development of a PRSP through a participatory process will improve broad country ownership for those reforms that are included in the PRSP and will bring in stakeholders (other than the Fund and the Bank) who will press for their implementation. These considerations suggest that the Fund and the Bank should not seek to reflect all of the key policy measures from a PRSP as conditionality in related lending operations.

42.   Progress in implementing this new approach has thus far been limited. Recent PRGF programs still include conditions in some areas for which the Bank is supposed to have primary responsibility, even when such conditions are not obviously critical to the successful implementation of the macroeconomic framework. In most cases, this reflects the fact that the Fund arrangements pre-date the launch of the PRSP approach. In other cases, the Bank has not had appropriate and timely lending operations which could support key structural, social and institutional reforms.

43.   Bank Directors have recently discussed the concept of a Poverty Reduction Support Credit (PRSC) in countries where there is a PRGF and/or where the Bank is providing adjustment lending.⁶ As currently envisaged, the Poverty Reduction Support Credit (PRSC) would be a series of annual programmatic structural adjustment credits to support implementation of the Poverty Reduction Strategy with clear performance benchmarks, including results indicators and policy measures within the areas of the Bank’s primary responsibility. The series of PRSCs would be intended to cover the three-year life of the PRSP, would be synchronized with the government’s budget cycle, and would be imbedded in the CAS (see below).⁷ New PRGF arrangements that follow a PRSP would limit their conditionality to areas within the Fund’s primary responsibilities.⁸

F.  Clarifying the Linkages Between PRSPs and the IDA Assistance Program

44.   Countries and their development partners are looking to the Bank in particular for leadership in developing country programs that link its operational products to poverty reduction strategies. The Joint Paper did not specify the date by which the Bank would require a PRSP as the foundation for an IDA CAS, nor did it specify how the Bank would ensure that a country-driven vision of poverty reduction priorities would lead to strategic selectivity in the choice of instruments. Bank management has recently clarified these issues.⁹ In brief, the key elements of the Bank’s country program in PRSP countries would be:

• A full PRSP would provide the country’s vision, priorities, and monitorable indicators for poverty reduction. The JSA would accompany the PRSP, evaluating its soundness as a context for the Bank’s strategy;

• A minimum set of current “due diligence” Economic and Sector Work (fiduciary assessment, public expenditure review, poverty assessment, country economic memorandum/social and structural review) would be in place to provide the underpinnings for the JSA and CAS;

• A CAS, summarizing the Bank’s diagnosis of the links between policy actions and poverty outcomes and its business program for the country, would accompany or shortly follow the presentation of the PRSP-JSA package to the Board. The CAS would set out the lending and nonlending services to be deployed in the country over the medium term, and explicitly link Bank roles and comparative advantages to the actions of other development partners; and

• An evaluation of country and Bank performance in achieving poverty reduction outcomes to gather lessons for the subsequent PRSPs and CASs.

45.   After July 1, 2002, IDA CASs presented to the Bank’s Board would normally be based on a PRSP. Subsequently, all Bank lending and nonlending activities in IDA countries will be organized under a CAS business plan responding to the PRSP. In the interim, the timing and sequencing of CASs relative to I-PRSPs and PRSPs will need to be decided on a case-by-case basis, but to the extent possible, CAS Updates and CASs will be timed to follow I-PRSPs and PRSPs.

Annex I:  Joint Bank-Fund Note on CDF-PRSP Linkages

THE COMPREHENSIVE DEVELOPMENT FRAMEWORK (CDF) AND POVERTY REDUCTION STRATEGY PAPERS (PRSP)

Joint Statement by James D. Wolfensohn and Stanley Fischer,
April 5, 2000

       The Comprehensive Development Framework (CDF) was proposed by the World Bank in early 1999 as a means by which countries can manage knowledge and resources to design and implement effective strategies for economic development and poverty reduction. It brings together many current trends in development thinking and is centered on a long-term vision—prepared by the country through a participatory national consultation process—that balances good macroeconomic and financial management with sound social, structural, and human policies. The CDF, however, is not a blueprint. It is voluntary, and each country must decide on, and own, its priorities and programs. In order to ensure the most effective use of human and financial resources, the CDF emphasizes partnerships between government (at the national, and local levels), civil society, the private sector, and external assistance agencies. It encourages coordination to improve efficiency and coherence in the use of financial flows and services, and to take advantage of synergies among development partners. In addition, as the international community has increasingly come to recognize, partnership and coordination of efforts can enhance the capacity of governments to manage foreign development assistance.

       The Poverty Reduction Strategy Paper (PRSP) is based on CDF principles. It integrates poverty reducing policies into a coherent, growth oriented macroeconomic framework. As with the CDF, national governments are responsible for the preparation of PRSPs with the participation of domestic and external partners. External partners are encouraged to assist governments in preparing PRSPs, and to link their development efforts to them. A PRSP must be broadly endorsed by the Bank and Fund Boards to provide a basis for both institutions’ programs in low income countries, and for countries to obtain debt relief under the HIPC Initiative. Thus, the PRSP is an operational vehicle—which can be a specific output of the CDF or of processes based on CDF principles—that is intended to translate a country’s poverty reduction strategy into a focused action plan. Indeed, countries using the CDF (such as Ghana, Uganda, and Bolivia) have been at the forefront of those successfully preparing PRSPs.

       The CDF and PRSP should be mutually reinforcing. The PRSP process will focus the attention of a large number of governments on CDF principles. It will also ensure more effective collaboration between the Bank and the Fund in supporting countries, as specifically requested by their major shareholders. The PRSP inevitably brings with it some challenges. First, there is the challenge of allowing the time needed for the development of a fully participatory process while not delaying the delivery of debt relief or development assistance. Second, there is the need to ensure that all development partners are also included fully and early in the process. Third, care needs to be taken to ensure that country–led and owned processes are not weakened by the need to produce PRSPs or progress reports according to an annual timetable. We are committed to working together with countries and our development partners to meet these challenges and reduce poverty.

Annex II:  Principles and Operational Guidelines for Implementing the PRSP Approach

The principles and operational guidelines for implementing the PRSP approach were described in a joint Bank-Fund paper, “Poverty Reduction Strategy Papers—Operational Issues” (R99-241 and SM/99/290: December 10, 1999). The joint paper summarized the five core principles underlying effective and sustainable poverty reduction strategies and the Poverty Reduction Strategy Papers (PRSPs) that embodied them. In line with the principles of the Comprehensive Development Framework (CDF), strategies (and PRSPs) would need to be:

• country-driven and owned, based on broad based participatory processes for formulation, implementation and outcome-based progress monitoring;
• results-oriented, focusing on outcomes that would benefit the poor;
• comprehensive in scope, recognizing the multidimensional nature of the causes of poverty and measures to attack it;
• partnership-oriented, providing a basis for the active, coordinated participation of development partners (bilateral, multilateral, and non-governmental) in supporting country strategies; and
• based on a medium- and long-term perspective for poverty reduction, recognizing that sustained poverty reduction cannot be achieved overnight.

In operational terms, the paper stressed that there could be no single blueprint for a PRSP. Rather it should reflect countries’ individual circumstances and characteristics. Nevertheless it identified some key elements of a basic commonality of approach. Thus, PRSPs should:

• build where appropriate on countries’ existing poverty strategies;
• ensure consistency between national macroeconomic, structural and social policies, and the goals of poverty reduction and social development;
• translate long-term goals into annual (or six-monthly) targets covering a three-year time horizon for intermediate indicators of progress with respect to poverty reduction outcomes; and
• address a set of core questions—what are the key obstacles to growth and poverty reduction, national objectives and targets (including intermediate indicators) against which progress might be measured, strategies and action plans for implementation, monitoring and evaluation arrangements, external assistance prospects, and participatory processes to be adopted?

It was recognized that preparation of country-owned, participatory PRSPs could take up to two years. In order not to delay progress in providing urgently needed HIPC debt relief and support from the Fund’s Poverty Reduction and Growth Facility (PRGF), it was proposed that countries could initially prepare Interim PRSPs (I-PRSPs) in connection with HIPC and PRGF implementation. I-PRSPs would have a simpler structure and content than full PRSPs, but would, at a minimum, include a statement of commitment to poverty reduction, an outline of the nature of the poverty problem and of existing government strategies to tackle it, and a timeline and process for preparing a PRSP in a participatory fashion, together with a three-year policy matrix and macroeconomic framework (of which the outer years would be tentative).

It was proposed that PRSPs or I-PRSPs, accompanied by Joint Staff Assessments (JSAs) prepared by Bank and Fund staffs, would be considered by the Executive Boards of the two institutions in connection with HIPC Decision Points and Completion Points; new PRGF arrangements or reviews of existing ones; and (not later than January 1 2001, in light of experience during calendar 2000) IDA high-case and adjustment lending (except in special circumstances such as emergency or crisis situations).

Annex III:  Bank-Fund Program Support Initiatives

1.   Initial developments with respect to Bank-Fund support for the program were noted in the April Progress Report. Since then, the Bank and Fund have pressed forward with efforts to facilitate the program in a range of areas, some of which are discussed below.

2.   Capacity building: Sourcebook. As noted in the April Progress Report, Bank and Fund staff have prepared a PRSP Sourcebook that offers guidance and useful references for countries preparing PRSPs. The Sourcebook is not intended to be a “how to” blueprint, but rather as a tool to be used selectively by countries to complement national strategies and approaches to poverty reduction. It is also a “living document” which is expected to change in light of experience and comments—for example, through improving utility by simplifying and condensing material where appropriate; through enhancing the relevance of topical coverage in line with evolving country needs; and through revision as necessary to reflect early experience, e.g., with respect to additional guidance on PRSP content (Part III.C). 700 hardback copies have already been distributed; the text is being translated into French, Portuguese, Spanish and Russian, and is expected to be distributed by field offices.

3.   Capacity Building: Learning Program. In addition to the Sourcebook, country preparation of PRSPs is being supported by a series of initiatives, prepared by Bank and Fund staff involved in the program and the IMF and World Bank Institutes. Two learning events have already been held: in Washington in April (attracting over 300 participants from PRSP countries, development partners—multilateral and bilateral agencies, and NGOs—and Bank and Fund staff), and in Yamoussoukro, Cote d’Ivoire in June (focusing on counterpart teams from eight African countries). A third event is planned in Moscow in October, focusing on six of the nine PRSP countries in Eastern Europe and Central Asia. A fourth event in Asia is tentatively scheduled for the winter.

4.   As well as formal learning events, plans are under consideration for expanding support countries’ teams preparing PRSP documentation (for example, through videoconferencing and expansion of website materials); for a set of World Bank Institute courses for country counterparts covering specific skills that are critical to the PRSP process; and for the possible establishment of a Poverty Reduction Learning Network of learning centers located in PRSP countries, designed for both policymakers and civil society participants in the process.

5.   Finally, expanded support is being provided to Bank and Fund staff working with country teams in the form of “clinics” covering the PRSP process itself and more specific topics tailored to the special needs of individual countries and of staff working to support a particular country’s PRSP. The Bank and Fund also recognize the need for internal culture change, so as to dispel perceptions of dominance of the process, or “business as usual”; internal training therefore puts special stress on the core principle of country ownership.

6.   Transparency and Information Dissemination: PRSP Websites. In order to disseminate information on the program in a transparent and easily accessible fashion, the Bank and Fund have consolidated material previously available on different sites onto dedicated PRSP sites on the institutions’ external websites. The PRSP sites currently contain core information such as an indicative timetable for preparation of country-owned interim and full PRSPs, basic policy papers on the program and related documents, and the PRSP Sourcebook (para.2 above) including a facility for commenting on it. The websites also contain selected country interim and full PRSPs. In principle, it is intended to post all such documents, along with Joint Staff Assessments (JSA) of them and summaries of the relevant Board discussions on the PRSP sites. In cases where countries wish their documents not to be posted, this decision would be noted in the JSA.

7.   The staffs are also working on the potential for a range of interactive features and the PRSP websites, including videoconferencing, public consultations on important program developments, collaborative workshops for NGOs and civil society, and material related to outreach and learning events (including video clips of past learning sessions).

8.   I-PRSP Guidelines. Since early implementation has mainly involved, and will continue to involve through the end of 2000, preparation of I-PRSPs, specific guidelines have been prepared on suggested common elements of I-PRSPs and the expected content of JSAs commenting on them. With respect to I-PRSPs, the Guidelines (given in full in Annex VI) re-emphasize the principle of country ownership, but elaborate on the suggested coverage of country documents. With respect to JSAs for I-PRSPs, the Guidelines outline a series of questions to be reviewed with respect to (1) treatment of core content and process issues; (2) promising features, and desirable areas of special focus for countries, as they develop full PRSPs; (3) potential risks; (4) important analytical gaps to be filled; (5) the realism of plans to produce full PRSPs; and (6) areas where the Bank, the Fund, and other development partners can help countries in the process.

Annex IV:  Selected Partner Guidelines and Assessments

1.   Some official bilateral and multilateral agencies and NGOs have issued their own assessments of the PRSP program (and in some cases, guidelines for working with it). This is a welcome development, indicating the strength of interest in the program. Seven examples of these assessments are summarized below.

2.   The European Commission (EC) issued “Poverty Reduction Strategy Papers: Guidance Notes” in May. This document stressed the Commission’s strong support for the program, and noted that “the future importance of PRSPs in the design and development of development assistance, including that provided by the Commission, cannot be over-emphasized.” It noted however, that the PRSP concept and approach would only work if developed in the manner intended and if the BWIs (Bank and Fund) are able to change the way in which they have operated in the past. The Notes see two roles for the Commission: playing an active part in PRSP design along a range of core program parameters, and providing assessments of country documents’ content prior to BWI Boards’ consideration of country documents. The document also emphasizes coordination of donor inputs into the design process, and the use of existing EU technical assistance to actively support governments in PRSP design and provision of new technical assistance specifically focused on PRSP requirements.

3.   EURODAD (the European Network on Debt and Development) has prepared “An Independent Guide to PRSPs” that provides a detailed overview and analysis of the program, and raises a number of issues and questions. The Guide argues that BWI dominance remains an issue (partly because it sees the program description as reflecting traditional Bank and Fund priorities, partly because country capacity limitations will constrain them to turn to the BWIs for help in strategy formulation). It asks the BWIs to be ready to accept that genuinely country-owned PRSPs “may not look like a standard [Bank] document.” EURODAD also raises a number of issues with respect to PRSP content. It suggests that the PRSP program (including the use of I-PRSPs) while welcome in principle, may be holding up HIPC debt relief. It questions the role of the Fund, notes concerns about realistic expectations for donor coordination, and shares the concern expressed by others (para. 22) about participatory processes. The Guide concludes with some thoughts about the need for change among bilateral donors and NGOs. Despite the issues raised, the report notes that “the PRSP process DOES have potential as a tool that developing countries can use to implement genuinely country-owned and participatory poverty reduction strategies.”

4.   An NGO, Oxfam, has stated that the PRSP provides an important opportunity for re-focusing development on poverty as a priority. However, Oxfam considers that, to date, change in Fund-supported programs appears to be limited. For example, IMF macro-economic conditionality for countries engaged in the PRSP process remains stringent; PRGFs are not different from previous ESAFs (for e.g., Tanzania and Honduras); and there are no references to any change in the macro-economic framework with respect to integrating poverty reduction concerns. Oxfam also notes that it remains unclear how policy design will be altered to promote the international development goals, and to incorporate consideration of equity and distributional effects of growth. It recommends that program design must analyze trade-offs around policy choices, and that re-design and/or compensatory measures must be developed for those adversely affected. In this regard, collaboration with other donors, particularly the UN agencies, is key.

5.   Oxfam, like EURODAD, proposes that HIPC should be de-linked from the PRSP. It considers that countries should gain entry into HIPC at the decision point if they can demonstrate how funds will be channeled to reducing poverty, preferably by using a Poverty Fund. Further, Oxfam argues that the I-PRSP is delaying debt relief because documents are developed in a slow and bureaucratic way, resulting in large complex documents with confused direction from the IMF and World Bank. On participation, Oxfam welcomes the explicit references in the guidelines to include civil society in the development of national targets and implementing and monitoring. However, it stresses that civil society should also be involved in key policy making in areas such as macro-economic choices, privatization, the role of markets, land reform, social sector areas, or the prioritizing of budget expenditures, governance and monitoring. Policy choices and trade-offs, with respect to poverty reduction and human development goals, should be explained to ensure that policy reform is pro-poor, as well as publicly understood and owned. Oxfam is concerned that there is a lack of analysis in this area.

6.   Another NGO, “Bread for the World,” has prepared a “Dossier” on the PRSP and PRGF programs that evaluates the former on the basis of five announced intentions for the program—(1) the centrality of poverty as an institutional goal for the BWIs; (2) country ownership/participatory processes; (3) the use of outcome indicators as a basis for access to debt relief and loan support; (4) the concept of consistency among poverty reduction strategies, structural policies, and macroeconomic objectives; and (5) donor coordination potential. While offering cautionary judgments in all these areas, the “Dossier” also notes their potentially positive aspects and offers suggestions for realizing them; the relevant chapter concludes that the program “shows the significance and seriousness of the IMF and World Bank policy reform package.....the optimistic view is that the PRSP process will contribute to changing the priorities of both institutions.” The ”Dossier” concludes with some views—mainly critical and skeptical—from developing countries about the program’s prospects. Finally, it notes that the PRSP represents a new development in Bank and Fund lending policy with some potential, but only if certain conditions are met. In particular, it notes the importance of providing civil society in developing countries with information and transparency about the new process; the need to ensure that consultation with civil society becomes a genuinely participatory process in which the recommendations of non-governmental actors can influence policy; and the need for flexibility in macroeconomic prescriptions.

7.   The Strategic Partnership with Africa (SPA) assessed the PRSP program at its June, 2000, meeting in terms of experience to date with the process, the status of the I-PRSP program, and donor policies and practices. On process, it notes improvements in civil society involvement and consultation, but warns that “the process is too fast to allow genuine participation,” that consultation is sometimes limited to central government bodies, and that bilateral donors and other partners may be insufficiently involved. The SPA suggests that in several cases the BWIs are still leading the process. Meanwhile, support for local capacity building is increasing, but many donors have as yet not received specific requests for help. With respect to I-PRSPs, SPA considers that the linkage with full PRSPs remains unclear, and that there are some doubts that I-PRSPs will lead to good PRSPs. It also notes the leadership role of the BWIs and the tension between speed, ownership, and quality. On donor policies, the SPA evaluation notes many donors’ prior commitment in principle to poverty reduction, and the view of many donors that PRSPs could help strengthen the link [between policy and action]; it also notes that for a number of donors “PRSPs will provide a basis for their support.” The analysis notes the positive new aspects of the program, but emphasizes that success will depend on true country ownership. It offers a number of specific “policy messages” mainly directed at process issues.

8.   The United Kingdom’s Department for International Development (DFID) has prepared an overview paper (“Poverty Reduction Strategy Papers: DFID Expectations”) which provides detail on what country documents might cover, in line with basic Bank-Fund documents but expanding on areas that the government considers of special importance (such as governance and environmental sustainability), and notes important areas where PRSPs can help improve existing practices (such as conditionality, donor coordination and lending modalities).

9.   DFID has also prepared a document “Interim PRSPs: Experience So Far—a Synthesis of Reports from DFID Staff,” based on early PRSP experience. The synthesis notes a number of important points. Following an initial learning period, HIPC governments in particular are strongly committed to the process, but non-HIPC IDA countries are less well prepared; awareness that PRSPs are required for high case IDA lending is apparently not widespread. The Bank and Fund get mixed reviews, basically related to failure to change behaviors (“business as usual”) in the new country-centered context of the PRSP process. The paper also offers mixed views from field staff on coordination between the Bank and Fund and other donors. It covers a number of other issues, including participation, building on existing country strategies, governance, and I-PRSP content. On participation, DFID field staff note a range of problems, including confusion about the extent of participation required for I-PRSPs and the problem of managing expectations, but concludes that overall “the process of drafting I-PRSPs has resulted in higher levels of engagement between governments and wider civil society.” With respect to building on existing strategies and processes, the paper notes that the Bank and Fund seem to have taken different approaches in different countries with respect to basing the PRS on existing strategies, and that DFID staff have called for better linkage between PRS processes and pre-existing poverty reduction coordination mechanisms. With respect to budgetary processes, the paper notes that in some cases the PRSP is “sensibly building on MTEF processes.” On governance, DFID staff felt overall that the Bank and Fund saw the process as essentially technocratic, and had in some cases not appreciated the depth of political change required to make it effective. The paper reports on staff views on the content of some of the early I-PRSPs, noting data variability, the extent to which analyses are still substantially focused on social services and on demonstrating that public expenditure will be refocused onto these areas. It concludes with a brief analysis of how far I-PRSPs provide “road-maps” to PRSPs. While most PRSPs have plans for full PRSP preparation, they are considered to be lacking in discussion of “what policy analysis is missing, or what capacity building is required and what more needs to be done to feed into the PRSP.” Consultation plans often lack detail. Also noted is “uncertainty about what the IFI Boards expect in terms of policy commitment in the I-PRSP and how much is necessary to provide the basis for a PRSP,” but the paper also makes the point that expectations will necessarily vary depending on initial conditions (whether countries are broadly “on track” or not).

10.   The Africa Group One Constituency (representing 21 African governments) prepared in July a paper dealing inter alia with PRSPs, in connection with the governors’ meeting with the Fund’s Managing Director. The paper notes the huge challenge and multidimensional nature of poverty in Africa, and welcomes the PRSP process as serving as the focus for members’ individual poverty reduction strategies, (noting that it could be “an immensely valuable exercise” for focusing on specific policies for poverty reduction and identifying short-and medium-term constraints); it also welcomes the process as a basis for multilateral and bilateral institutions’ assessments of country strategies. It welcomes the establishment of the JIC, and hopes that African countries’ views be incorporated into its work. But it also notes that the PRSP process as a whole is time-consuming, resource-intensive and costly for countries, and is being undertaken in the context of limited human and financial resources. Given capacity limitations, “governors suggested that the requirement for country preparation of fully developed PRSPs be spread over a longer period than the current three-year time frame and suggested instead a five-year period.” The paper further notes specific areas of difficulty for countries (e.g., compilation of reliable indicators for social development and establishment of fully elaborated MTEFs). It asks that the Fund both increase its own financial and technical assistance to countries preparing PRSPs, and help mobilize international donor community support for this purpose, “to enable the PRSP to become, as it had been intended, a process rather than an event.” On ownership/participatory processes, it notes that country-specific factors will mean that the extent of ownership based on participation will vary, and that while civil society participation should be as broad as possible, “the ultimate decision on the extent of participation would have to be taken by the authorities themselves.” The paper states that there is “an inherent tension” between the concept of country ownership and conditionalities. It recommends a streamlined approach, confining PRGF conditionalities to “a smaller core of conditions clearly associated with the macroeconomy.”

Annex V:  Agreements with other Agencies

1.   The PRSP process is intended to bring about greater aid coordination as donors align their support around countries’ poverty strategies. In keeping with country ownership, it is hoped that countries themselves will manage the process of coordination, and will develop their strategies in an open and inclusive manner, involving all key donors and other partners. Where the Bank and Fund are involved in PRSPs, they are determined to work collaboratively with other donors. To this end, the Bank and Fund have made formal cooperation agreements with other Multilateral Development Banks (MDBs) and the United Nations Development Programme (UNDP) covering collaboration on the PRSP program. Further, the Bank is in the process of formalizing separate agreements with the International Labor Office (ILO) and with the United Nations Children’s Fund (UNICEF). Each of these agreements is summarized below.

MDB/IMF Protocol

2.   The protocol sees effective action on poverty reduction as being increased by a joint commitment to support for the development of country-owned PRSs; to lending and other assistance to support the strategies themselves; to better coordination that will free up governments’ resources; to minimizing duplication of effort and increasing synergy with respect to policy dialogue, programs, projects, and technical assistance; and to expanding knowledge and understanding by listening to country stakeholders and each other.

3.   While the MDBs and the IMF will continue to have separate country strategies/business plans, these will be consistent with and increasingly (and in some cases completely) be based on national PRSs.¹ Country authorities will take the lead in preparing their PRSs and in coordinating the participation of MDBs/IMF. Countries may seek MDB/IMF support in strategy preparation and determine a lead or focal agency; agency contributions will be consistent with existing MDB/IMF collaboration agreements. MDB/IMF analytical work will be conducted in a coordinated manner, reflecting relevant expertise and mandates, as will assistance on policy, projects, and programs. Emphasis will be put on a partnership approach, selectivity, and different institutions’ comparative advantage.

4.   The protocol also envisages institutions working together on strategic regional and global cross-cutting issue; on collaborative implementation arrangements worked out on a country-by-country and sector-by-sector basis; on information exchange; and on reconciling any differences in points of view.

World Bank-UNDP Agreement

5.   The agreement is designed to foster greater collaboration between the World Bank and UNDP in support of country-owned poverty reduction strategies. The institutions have agreed to work more closely in a range of PRSP countries where governments have asked for their support. Countries include Bolivia, Nicaragua, Honduras, Benin, Madagascar, Ghana, and Vietnam. The agreement is intended to minimize duplication of effort, and foster greater exchange of information and analytical studies. The institutions will meet regularly to review their collaboration, identify any differences of approach and reconcile these, and share best practice.

6.   Examples of Bank-UNDP collaboration are: Guinea Bissau, where in work to support the government’s development of poverty diagnostics, the Bank is leading on quantitative aspects, and UNDP on participatory, qualitative assessments; in Mali where the UNDP and the Bank are constructively engaged in supporting the government’s poverty reduction strategy, based on the National Strategy for Poverty Alleviation, which was supported by UNDP; in Ghana, where UNDP is the focal point for bringing together donors in support of the government’s poverty reduction efforts and in advising on issues of governance.

World Bank-ILO and UNICEF Agreements

7.   The Bank is also in the process of formalizing cooperation agreements separately with the ILO and with UNICEF. The agreements will be similar to the one between the Bank and UNDP, in that the agencies will commit to work cooperatively in a specified set of countries where they are supporting country-led PRSPs, and to monitor this collaboration so that best practice can be extended to other countries and any areas of potential conflict resolved quickly. The set of countries is still to be finalized, but the provisional list in the case of ILO is Cambodia, Honduras, Mali, Nepal, and Tanzania; and in the case of UNICEF, Tanzania and Vietnam.

Annex VI:  Interim Poverty Reduction Strategy Papers (I-PRSPs): Guidance on I-PRSPs and Joint Staff Assessments of I-PRSPs

Joint Note to World Bank and IMF staff
(Approved by the Joint Implementation Committee)

1.   Since the two Boards’ approval of the Joint IMF/World Bank Paper on “Poverty Reduction Strategy Papers: Operational Issues,” a number of staff have asked for further guidance on the suggested common elements of Interim PRSPs (I-PRSPs) and on the expectedcontent of the Joint (Bank-Fund) Staff Assessments (JSA) of I-PRSPs. This note provides such guidance, recognizing that I-PRSPs are country-owned documents for which the IMF and the Bank should not specify a rigid blue-print.

      Background

2.   In a renewed effort to reduce global poverty, the World Bank and the IMF will support low-income countries to develop and implement more effective poverty reduction strategies.¹ These country-owned poverty reduction strategies would be described in a Poverty Reduction Strategy Paper (PRSP). This PRSP will provide the basis for debt relief and concessional lending by the Bank and the Fund.²

3.   A PRSP, I-PRSP or PRSP progress report supported³ by both Boards within the preceding 12 months will be a condition for:

• HIPCs to reach a decision or completion point;

• approval of PRGF-supported arrangements or reviews thereunder⁴; and

• high-case IDA lending and IDA adjustment lending, except in special circumstances such as emergency or crisis situations.⁵ It should also be noted that a PRSP or I-PRSP, when available, will provide the country context for the Country Assistance Strategy (CAS). After July 1, 2002, all IDA CASs presented to the Bank’s Board would need to be based on a PRSP. In the interim, the timing and sequencing of CASs relative to I-PRSPs and PRSPs will need to be decided on a case-by-case basis, but to the extent possible, CAS Updates and CASs will be timed to follow I-PRSPs and PRSPs.

4.   Recognizing that for many low-income countries it will take up to two years to develop a fully elaborated poverty reduction strategy in a participatory manner,⁶ the Boards of the Bank and the Fund were concerned that this process should not delay on-going Bank and Fund concessional assistance or HIPC debt relief to the countries concerned. An I-PRSP could therefore be produced as a means of avoiding delays in the transition period to a full PRSP. The objectives of producing an I-PRSP are to summarize the current knowledge and analysis of the poverty situation, describe the existing poverty reduction strategy, and, perhaps most importantly, lay out the process for producing a fully developed PRSP in a participatory fashion. In line with the expectation that a PRSP could be produced within two years, countries would normally submit only one I-PRSP before moving to a PRSP a year or so later.

       Interim PRSPs

5.   I-PRSPs must be produced by governments, i.e., the document should be owned and written by the government (or their designated representatives) and should not be written by any donor staff, including Bank and Fund staff. Since these are government documents, the following text provides “guidance” only in terms of the expectations of the international community and the lessons from early country experience. Each government will need to draw on this guidance in ways that suit the specific situation of that country. The intention is that I-PRSPs should be short and relatively easy to produce. They should draw as much as possible on existing work and processes. Because individual countries start from different levels and traditions of participation and need to prepare the I-PRSP under different time constraints, there will be no minimum threshold expected for consultation on an I-PRSP. Nevertheless, governments are encouraged to begin the participatory process as early as possible. In the earliest stages, consultation might be focused on the question of the structure and timing of the participatory process for the full PRSP. Some countries have found it useful to include elected and civil society representatives¾ especially representatives of the poor and groups with a track record of serving the poor¾in the country teams preparing the I-PRSP.

6.   When the I-PRSP content was discussed at the Bank and Fund Boards, it was felt that, at a minimum, the I-PRSP should include the following key elements:

(1)   a statement of the government’s commitment to poverty reduction. It would be desirable if the government could indicate its commitment to progress towards the International Development Goals (IDG);⁷

(2)    a description of the existing extent and patterns of poverty. Although collection of new data is not likely to be possible within the time-frame of an I-PRSP, countries should be encouraged to exploit existing data sources to provide the fullest possible description of the current poverty situation;

(3)   the main elements of its existing poverty reduction strategy—to the extent that it has already been developed and is being implemented—including a description of any participatory processes already undertaken. This could include: (a) a discussion of policy measures necessary to promote sustained, rapid growth (including macroeconomic stability) and to ensure that the poor participate in that growth; and (b) a summary of public programs designed to assist the poor. It would also be desirable for the I-PRSP to clarify the government’s near-term priorities within the existing strategy, its available mechanisms for monitoring and evaluating its strategy, the effectiveness of existing policies and programs in reducing poverty, and the current institutional arrangements for ensuring transparency and accountability in the use of public resources;⁸

(4)   a three-year macro-economic framework and three-year policy matrix.⁹ The presentation of the macro-economic framework may be limited to one or two summary tables but could be more extensive if the authorities so desire. The policy matrix should provide a summary presentation of the specific elements of the existing strategy as described in (3) above, indicating to the extent possible the time-frame for on-going policy initiatives. I-PRSPs should note that these policy commitments and targets for the outer years are tentative and will need to be revised when the I-PRSP is replaced by a PRSP; and

(5)   a time-line and consultative process by which the (full) PRSP will be developed and the assistance requested from the Bank, Fund, other multilateral and bilateral agencies, and other partners in the preparation of the PRSP. Since substantive work to prepare the poverty reduction strategy should begin as soon as possible, this section of the I-PRSP should include in as much detail as possible:

       (a) an identification of the gaps in poverty data and analysis, the program of work designed to fill these gaps (including technical assistance and financing from development partners), and milestones for assessing progress in this work; and

       (b) a description of the participatory process that the government will follow for consulting with elected representatives (e.g., Parliaments), key domestic stakeholders, and external development partners on: (i) the poverty reduction goals for society; (ii) the priority public actions to achieve those goals; and (iii) setting up a participatory system for monitoring the implementation of the poverty reduction strategy, once developed. It would be desirable to include: (i) a listing of principal stakeholders to be consulted—the most important of which are membership organizations of the poor (in particular of women) and those with an established track record regarding programs to assist the poor; and (ii) country-specific milestones that give an indication of progress in the participatory process.

       Joint Staff Assessment (JSA) of the Interim PRSP

7.   The purpose of the JSA (of Bank and Fund staff) is to assist the Boards in reaching a judgment about whether or not the I-PRSP provides a sound basis on which to proceed. It should also indicate clearly to the government the staffs’ views on the key issues/questions to address in the preparation of the PRSP. Thus, it should primarily be a forward-looking document. For these purposes, the JSA (which need not be more than 3-4 pages long) should candidly address the following questions:

• How appropriate/adequate is the government’s assessment of the country’s poverty situation and its current strategy and policies to reduce poverty, described in Sections (2), (3), and (4) above (i.e., is the “storyline” realistic, given staff knowledge on the country)? What are the features of the strategy that are, in the judgment of the staff, most promising? What are the features that are of concern? What are the main risks (e.g., possible external and internal macro-economic shocks, implementation constraints, weak accountability and poor public budgeting and financial management systems, weak capacity for monitoring and evaluation, etc.) that the government faces in implementing its strategy? What are the key questions, trade-offs, and/or gaps on which the government should focus in developing the PRSP? What are the priority public actions to reduce poverty that the government should pursue during the period of preparation of the PRSP? How well are the poverty reduction strategy and the macro-economic framework integrated? How much more needs to be done to reflect adequately the costs of existing poverty reduction measures in the fiscal framework? To the extent that the preparation of the I-PRSP has led to changes in the content, monitoring, and ownership of the country’s policies and programs, it would be useful to flag these in the JSA.

• How realistic is the government’s plan (described in Section (5) above) to produce a PRSP? Has the government adequately identified the gaps in poverty data and analysis and made a realistic plan to fill those gaps? Is the timetable realistic, taking into consideration the participation plan? Is the proposed participatory process built on previous participation experiences? Have major stakeholders—including key donor agencies—been informed of the contents of the I-PRSP and the process for developing the PRSP; if not, when is this intended?

• What kind of assistance will the Bank, Fund and other development partners offer to help the government improve their information base, undertake the analysis, support the participatory process, improve systems for financial accountability, and estimate the costs the priority public actions?

8.   Assuming that the staffs support the proposed I-PRSP, the concluding paragraph of the JSA should present a joint staff recommendation as follows: “The staffs of the World Bank and IMF consider that this I-PRSP provides a sound basis for the development of a fully participatory PRSP, [for reaching the decision point under the HIPC Initiative], and for Bank and Fund concessional assistance. The staffs recommend that the respective Executive Directors of the World Bank and the IMF reach the same conclusion.” This recommendation would be relevant during the period for which this I-PRSP is in effect. Finally, the JSA should attach a table of key Bank/Fund events over the coming year—including Board discussion of the CAS, major Bank loans, PERs, PRGF, PRSP and HIPC Initiative (if relevant).

       Publication

9.   Consistent with the participatory nature of PRSPs, it is expected that all I-PRSPs and JSAs will be published, including on the Bank and Fund web-sites (together with a summary of the discussion by the Boards). Bank and Fund staff should request that the government convey its I-PRSP to the institutions with a cover letter that explicitly confirms its no objection to such publication. If the government confirms its no objection, the I-PRSPs would be posted immediately following circulation to the two Boards, and the JSA, together with a summary of the discussion by the Boards, would be posted simultaneously on the Bank and Fund web-sites shortly after the second of the two Board meetings.¹⁰ If the authorities decide not to publish their I-PRSP, this should be noted in the JSA, together with a statement of staff concerns about the lack of transparency and participation evidenced by this decision. In the event, the JSA would also not be published.

Annex Table I

Possible Country Timelines for Poverty Reduction Strategy Paper (PRSP), Interim PRSP, Country Assistance Strategies (CAS), Poverty Reduction and Growth Facility (PRGF), and HIPC Decision and Completion Points through June 2001¹