In 1999, the World Bank (WB), together with the International Monetary Fund (IMF), introduced its Poverty Reduction Strategy Papers (PRSPs). PRSPs aim to focus development efforts on poverty alleviation. Yet, what is new about PRSPs and can they really make a difference?
This paper from the Panos Institute tackles the above question, drawing on examples from low-income countries in Africa, and particularly from Uganda, Lesotho and Ethiopia. It explores the issues of what poverty reduction is and how PRSPs will help reduce poverty. A PRSP begins with a diagnosis of poverty, and then identifies the poverty reduction outcomes a country wishes to achieve and the key public actions needed. Once a country’s PRSP has been completed and approved by the WB and IMF, the country qualifies for debt relief and concessional lending. PRSPs are supposed to be driven by the countries themselves and they are meant to be ‘participatory’. The process of developing PRSPs has generated a new focus on poverty by governments, and a greater awareness of the nature of poverty and understanding of its causes.
The most important outcome of a PRSP is that debt relief will release funds for social spending. The PRSP approach requires governments to focus available funds on sectors that help the poor create and benefit from economic growth – such as education, health, and rural infrastructure. Yet, critics of PRSPs argue that they have not so far highlighted pro-poor growth as a goal, but have remained neutral on this issue. Other findings of the paper are that:
- The minimum that PRSPs are expected to achieve is the establishment of policies that better reflect and address the realities of poverty, and systems for holding governments accountable for implementing these
- DFID insists that growth is essential for poverty reduction. It depends on having market-based policies. Yet, national strategies for poverty reduction must be based on sound analysis, widely debated by the poor people themselves
- According to the WB and IMF, the necessary macroeconomic conditions for growth are stability, good governance and efficient service provision, and liberalisation. PRSPs share the commitment to liberalisation
- One of the innovations of PRSPs is the requirement that governments draw them up with the participation of a wide range of stakeholders, including civil society
- The approaches to poverty reduction include sustainable livelihoods (interventions to reduce the vulnerability and protect the livelihoods of the poor); resource distribution of physical and social assets; empowerment; and a redistribution of political power
- PRSPs are based on predictions of growth that may not be attainable.
It is too early to say whether the PRSP process is assisting the reduction of poverty. It is important to improve the understanding of the links between policies and outcomes. Actions are needed to achieve pro-poor growth. Other suggestions of the paper are that:
- PRSP goals need to be integrated with other policy goals and a multi-sectoral approach needs to be taken
- There is a need to augment the capacity of governments and other stakeholders, so that they can engage in policy dialogue
- There needs to be a closer link between budget and actual outcomes
- Development support needs to be consolidated and the role of other donors integrated with PRSPs
- The media needs to be integrated into the PRSP process at both government and NGO level
- As monitoring is just as important as participation in policy-making, there is a need for impact evaluation of the policy package agreed and for indicators of success at all levels.
