Poverty Reduction Strategy Papers (PRSPs) were introduced in 1999 by the World Bank and the IMF as a new framework to enhance domestic accountability for poverty reduction reform efforts; a means to enhance the coordination of development assistance between governments and development partners; and a precondition or access to debt relief and concessional financing from both institutions' HIPC Initiative.
A PRSP sets out a country’s macroeconomic, structural, and social policies and programs to promote growth and reduce poverty, as well as associated external financing needs. Countries will typically prepare a PRSP every three to five years in a participatory process involving a broad range of stakeholders. The core principles underlying the PRSP approach suggest that PRSPs would be expected to include:
A description of the participatory process that was used — A PRSP will describe the format, frequency, and location of consultations; a summary of the main issues raised and the views of participants; an account of the impact of the consultations on the design of the strategy; and a discussion of the role of civil society in future monitoring and implementation.
Comprehensive poverty diagnostics — A good understanding of the poor and where they live allows the PRSP to analyze the macroeconomic, social, structural and institutional constraints to faster growth and poverty reduction.
Clearly presented and costed priorities for macroeconomic, structural, and social policies — In light of a deeper understanding of poverty and its causes, the PRSP sets out the macroeconomic, structural, and social policies that together comprise a comprehensive strategy for achieving poverty reducing outcomes. It is important that policies are costed and prioritized as far as possible so that they do not become a "wish list."
Appropriate targets, indicators, and systems for monitoring and evaluating progress — A PRSP will define medium and long-term goals for poverty reduction outcomes (monetary and non-monetary), establish indicators of progress, and set annual and medium-term targets. The indicators and targets should be consistent with the assessment of poverty and the institutional capacity to monitor, and the policy choices in the strategy.
For IDA-eligible countries, the PRSP provides the framework for developing the results-based Country Assistance Strategy (CAS), which in turn shapes the support the Bank will be providing to the country during the CAS period. In 2001, the Bank introduced poverty reduction support operations (poverty reduction support credits or grants) as one of IDA's main vehicles to support low-income countries in implementing their PRSPs.The PRSP is also considered in the provision of debt relief under the enhanced HIPC Initiative.
To avoid delays in the timing of IFI’s concessional assistance, Interim Poverty Reduction Strategy Paper (I-PRSP) can be prepared, a document that sets out a preliminary poverty reduction strategy as a precursor to a full PRSP. An I-PRSP will need to include a description of the nature of the poverty problem and existing government strategies to tackle it, along with a timeline and process for preparing a full PRSP in a participatory fashion, and a three-year policy matrix and macroeconomic framework (of which the outer years would be tentative).
If a country requires more than a year between its I-PRSP and the full PRSP, PRSP Preparation Status Report is needed to report on the updates to the preliminary poverty reduction strategy set out in an I-PRSP in anticipation of a PRSP.
The Annual Progress Report (APR) is prepared as an update on PRS implementation, ideally every 12-18 month but definitively before a subsequent PRSP is launched.
The Joint Staff Advisory Note (JSAN) is prepared by IDA and IMF staffs as feedback to the country and to the Executive Boards of both institutions on priority areas for strengthening the poverty reduction strategy and its implementation. JSAN’s are no longer required for APRs, except in the context of the enhanced HIPC Initiative. Instead, IDA and IMF staff rely on a regular annual feedback process to review progress and challenges in PRS implementation that would normally evaluate performance relative to PRS benchmarks and monitoring indicators; review the linkages between the PRS and national systems and processes (e.g., budget, monitoring, and planning); and review the coming year’s policy intentions, particularly as reflected in the budget. The annual feedback process will draw, to the extent possible, on existing in-country mechanisms.
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