Since the Poverty Reduction Strategy Paper (PRSP) process was introduced, participant countries have made progress in producing and implementing papers. However, their experiences also highlight problems that still need to be addressed. This report for the International Monetary Fund (IMF) and the International Development Association (the World Bank) assesses both ongoing and new challenges, and reviews what could be done to tackle them.
Countries that have completed PRSPs have made substantial achievements. Recent documents have built on the efforts of earlier PRSPs, and countries that are more advanced in the process are successfully adapting and implementing their strategies. However, PRSPs must deal with multiple objectives and constraints, many of which produce tensions. Thus, they represent compromises. The practices and results of the growing number of countries following the approach offer insight into what can reasonably be expected. They also highlight the importance of maintaining the momentum of poverty reduction efforts while addressing the weaknesses that hinder progress.
The PRSP approach should contribute significantly to improving economic outcomes and alleviating poverty in low-income countries. Good practices have developed regarding ownership and participation, and there is a strengthened focus on growth and results. But major areas of concern remain:
- Government commitment beyond the team directly responsible is sometimes weak, underlining the need for more cohesion between the PRSP and other planning documents.
- Participation in PRSP formulation has tended to be wide but limited. This makes it less effective and can result in too many unrealistic proposals.
- In setting PRSP targets, countries struggle to strike a balance between ambition and realism.
- Weak management of public spending and the difficulty of linking PRSPs to the budget strain administrative capacities.
- Lack of prioritisation can lead to poor focus, reducing the value of the documents for national authorities and donors.
- Donors are still not making sufficient efforts to align and harmonise their interventions around national strategies.
Proposals to address these issues are directed at different actors in the PRSP process, including national governments, the IMF, the World Bank and other donors. Key recommendations are that:
- Governments should create institutional mechanisms to ensure effective communication with, and feedback from, civil society. Its role should be clearly defined.
- Governments should aim to strike a balance between optimism and realism in their annual budgets. Donors can help them reconcile short-term needs with medium-term objectives and the Millennium Development Goals.
- Governments should provide a forum for macroeconomic dialogue in the context of the PRSP process, which should include but not be led by the IMF.
- The Fund and the Bank should work with governments on developing their budgetary processes, macroeconomic frameworks, monitoring practices and analytical tools.
- Country reporting on PRSP implementation should be streamlined.
- Donor-country partnerships should focus on the PRSP framework, and where possible the PRSP should be used to co-ordinate donor assistance. National systems to manage aid need to be strengthened with help from donors.
