Do Poverty Reduction Strategy Papers (PRSPs) enhance aid effectiveness? This paper examines the formulation and implementation of PRSPs in Bolivia, Honduras and Nicaragua, and finds that the results are disappointing. By emphasising rational planning and ignoring politics, the PRSP approach has unintended and sometimes harmful consequences. A change of approach is required.
Since 1999, poor countries that want to qualify for concessionary International Monetary Fund (IMF) loans and debt relief must elaborate and implement Poverty Reduction Strategy Papers. The PRSP approach should embody five principles. It should be: i) country-driven, involving broad based ownership; ii) comprehensive, in recognition that poverty is a multidimensional phenomenon; iii) results-oriented, with emphasis on concrete results for the poor; iv) partnership-oriented, leading to better donor co-ordination under government leadership; and v) based on a long-term perspective. The first and fourth of these principles are particularly important for the hypothesis of enhanced aid effectiveness.
Aid can only be effective if donors are serious about enhancing ownership and promoting partnership. The PRSP approach and the accompanying drive towards budget support can be seen as a desperate push on the part of donor agencies to achieve these aims. However, the results are disappointing:
- PRSPs are written because donors want them to be written, and domestic ownership of the strategies is limited. Participation processes are held because the donors want them to be held, but the elected Parliaments are barely involved.
- Donors, in particular the World Bank, engage in ‘business as usual’ in their programme loans, implying that they attach many detailed policy conditions to budget support, making a fool of the ownership idea.
- Donors are creating virtual realities in which planning via PRSPs is dominant, but which bear little resemblance to the actual realities whereby politics dominates. Recipient governments know how to play the game in order to receive donor money, but alongside these donor-induced processes, the real domestic political processes continue.
- This interference of a kind of virtual reality has unintended and often undesired consequences, such as a reduced legitimacy of formal laws, a weakening of the domestic accountability of government actions, and (in Bolivia) increased political instability.
What, then, can donors do to improve aid effectiveness and to avoid the negative consequences of aid interventions? At the minimum, three lessons can be drawn from the above analysis:
- Donors should take domestic political processes seriously and should not ignore them. This means, among other things, that if governments have elaborated their strategies or plans to win elections, no other poverty reduction strategy should be required from them. These existing plans can be assessed instead, along with other indicators of commitment to poverty reduction and of actual implementation of poverty reduction policies.
- To the extent that donors need some plans as the basis for aid delivery, they should search for less comprehensiveness and less long-term ones, for example (sub) sectoral plans for a limited number of years, or local and regional plans.
- Donor agencies and also the Parliaments in donor countries should accept that the results of aid are uncertain. The current pressure from donor headquarters for planning and results of aid efforts is exaggerating the possibilities of rational planning and can have harmful political consequences in recipient countries.
