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Poverty and Social Impact Analysis

Poverty and Social Impact Analysis (PSIA) is the analysis of the distributional impact of policy reforms on the welfare of different stakeholder groups, with a particular focus on the poor and vulnerable. PSIA has an important role in the elaboration and implementation of poverty reduction strategies in developing countries, promoting evidence-based policy choices and fostering debate on policy reform options.

PSIA is a systematic analytic approach rather than a separate product, starting with the ex-ante analysis of expected poverty
and social impacts of policy reforms and monitoring results
during implementation. PSIA helps to:

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  1. Analyze the link between policy reforms and their poverty and social impacts;
  2. Consider trade-offs among reforms on the basis of their distributional impacts;
  3. Enhance the positive impacts of reforms and minimize their adverse impacts;
  4. Design mitigating measures and risk management systems;
  5. Build country ownership and capacity for analysis.

Social Development Department (SDV) and the Poverty Reduction & Economic Management unit (PREM) host the Bank’s central website on Poverty and Social Impact Analysis.

New Multi-Donor Trust Fund to Support PSIA

In February 2010, the Social Development Department (SDV), jointly with the PREM Poverty Reduction Group (PRMPR) and Operations Policy and Country Services (OPCS), have launched a US$ 16 million Multi-Donor Trust Fund (MDTF) to support PSIA at the World Bank and in partner countries. The trust fund will operate over a period of three years and is supported by the following country donors: GTZ (Germany), the Netherlands, Norway, and DFID (the United Kingdom).

The goal of the MDTF is to encourage the use of poverty, social and distributional analysis to inform key policy reforms and operational activities by the World Bank and partner governments.

The Multi-Donor Trust Fund supports:

  • The effective use of poverty, social and distributional analysis in guiding policy dialogue and program lending.
  • Capacity development in the area of poverty, social and distributional analysis for a wide range of actors (parliaments, central and local governments, civil society, research institutes, media and the private sector) to inform national policies.
  • In particular, the application of lessons learned from recent reviews on the implementation of PSIA in the Bank and partner countries.

Activities to be funded under the new trust fund include, but are not limited to:

  • Implementation, communication and dissemination of poverty, social and distributional impact analysis by country teams and/or partner country stakeholders and promotion of the demand for more routine use of such analysis in national policy formulation.
  • Establishing a community of practice around poverty, social and distributional impact analysis within the Bank and among partner country stakeholders and relevant development partners at country or regional level and promoting a flexible, policy-relevant and demand-driven approach to implementation of poverty, social and distributional analysis.
  • Monitoring of how poverty and social impacts are addressed in DPL Program Documents, CAS and other relevant Bank documents.
  • The production and dissemination of PSIA knowledge management and learning products, including the provision of training for World Bank staff and national stakeholders, to help establish a knowledge base and strengthen staff and client country capacity.

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