Factsheets List

Poverty Reduction Strategy Papers (PRSPs) are prepared by low-income member countries through a participatory process involving domestic stakeholders as well as external development partners, including the World Bank and International Monetary Fund. A PRSP describes a country's macroeconomic, structural and social policies and programs over a three year or longer horizon to promote broad-based growth and reduce poverty, as well as associated external financing needs and major sources of financing. National PRSPs are available on the World Bank and IMF websites by agreement with the member country.

The world economy has grown steadily in recent decades, bringing widespread prosperity and lifting many millions out of poverty, especially in Asia. Nevertheless, in the next 25 years, the world's population is projected to grow by about 2 billion people, most of whom will be born in developing and emerging market economies. Without a concerted effort from countries to help themselves through sound policies and from the development community to increase its support of countries' own efforts, many of these people will be doomed to poverty.

While the limited progress in reducing poverty has many causes, it is clear that action is needed to strengthen domestic policies and institutions and to enhance external assistance. In September 1999, the World Bank Group and the IMF approved an approach that recognized that nationally-owned participatory poverty reduction strategies were the most promising means of securing more effective policymaking and better partnerships between countries and donors. To ensure that assistance is well used for poverty reduction, Poverty Reduction Strategy Papers (PRSPs) would henceforth be the basis of all their concessional lending, and for debt relief under the enhanced Heavily Indebted Poor Country (HIPC) Initiative.

Core Principles

Five core principles underlie the PRSP approach. Poverty reduction strategies should be:

• country-driven, promoting national ownership of strategies by involving broad-based participation by civil society;

• result-oriented, and focused on outcomes that would benefit the poor;

• comprehensive in recognizing the multidimensional nature of poverty;

• partnership-oriented, involving coordinated participation of development partners (government, domestic stakeholders, and external donors); and

• based on a long-term perspective for poverty reduction.

Steps in the PRSP Process

There is no blueprint for building a country's poverty reduction strategy. Rather, the process should reflect a country's individual circumstances and characteristics. Nevertheless, there are three key steps typical of effective poverty reduction strategies, which should be taken in line with the five principles.

• Develop a comprehensive understanding of poverty and its causes.

• Choose the public actions that have the highest impact on poverty reduction.

• Set poverty reduction goals and monitor progress towards them to assess the effectiveness of the policies chosen.

It has been clear from the beginning of this new approach that it would take time for countries to fully develop a PRSP. In order to prevent delays for countries seeking debt relief under the HIPC Initiative or low-interest loans from the IMF or World Bank, an Interim PRSP (I-PRSP) can be formulated. This outlines a country's existing poverty reduction strategy and provides a road map for the development of a full PRSP, which would then follow in due course.

Experience to Date with PRSPs

There has been widespread acceptance of the PRSP approach. Today, these processes are taking hold in some 60 low-income countries, and are helping promote a more open and inclusive national dialogue on the most effective policies and public actions for poverty reduction. And the approach has increasingly been embraced by countries' external development partners. Because it is based on the two pillars of country self-help and support from the international community, the PRSP approach promises to make development assistance more effective. Nevertheless, the process is continually being refined, including through a 2001/2002 review that identified good practices in the PRSP approach, for countries and their partners alike.

The review showed that there is room for improvement. Further actions are required to make participation processes more open and to develop and promptly implement policies that accelerate economic growth. And donors must better align their assistance with PRSPs, simplify and harmonize their procedures, and work for more predictable aid flows.