Successful plans to fight poverty require country ownership and broad based support from the public in order to succeed. A PRSP contains an assessment of poverty and describes the macroeconomic, structural, and social policies and programs that a country will pursue over several years to promote growth and reduce poverty, as well as external financing needs and the associated sources of financing. They are prepared by governments in low-income countries through a participatory process involving domestic stakeholders and external development partners, including the IMF and the World Bank.
Country leadership in setting priorities key to reducing poverty
The PRSP approach, initiated by the IMF and the World Bank in 1999, results in a comprehensive country-based strategy for poverty reduction. The introduction of PRSPs was a recognition by the IMF and the World Bank of the importance of ownership as well as the need for a greater focus on poverty reduction. PRSPs aim to provide the crucial link between national public actions, donor support, and the development outcomes needed to meet the United Nations’ Millennium Development Goals (MDGs), which are centered on halving poverty between 1990 and 2015. PRSPs help guide policies associated with IMF and World Bank concessional lending as well as debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. They are made available on the IMF and World Bank websites by agreement with the member country.
Core principles of the PRSP approach
Five core principles underlie the PRSP approach. Poverty reduction strategies should be:
- Country-driven, promoting national ownership of strategies through broad-based participation of civil society;
- Result-oriented and focused on outcomes that will 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.
Donors support design of realistic plans and governance reforms
The PRSP approach is well established in a substantial number of countries and has been associated with notable advances in country ownership, making poverty reduction more prominent in policy debates, and facilitating more open dialogue. As of end-June 2014, 130 full PRSPs have been circulated to the IMF’s Executive Board, as well as 59 preliminary, or “interim”, PRSPs. With PRSPs now in place in a large share of low-income countries, the focus in recent years has been on effective implementation.
IMF and World Bank staffs provide candid feedback to countries on the PRSP through the Joint Staff Advisory Note. Both institutions also work to link more explicitly their lending operations to country-owned strategies and priorities for reducing poverty.
Streamlining the PRS documentation in IMF programs
Following the 2009 reform of the IMF's low-income country facilities, while country-owned PRSPs remain the basis of sustained program relationships with the IMF under the Extended Credit Facility and Policy Support Instrument, some additional flexibility has been provided on documentation and timing requirements. In addition, programs supported by the IMF’s concessional lending facilities will, wherever possible, include specific quantitative targets to safeguard social and other priority spending, consistent with the priorities in national poverty-reduction strategies. In order to further improve the effectiveness of the PRSP process, the Fund will continue to
The future of PRSPs
With the Heavily Indebted Poor Countries Initiative almost completed and growing national recourse to alternative documentation of country development strategies, the World Bank has delinked its concessional financial support to IDA countries from the PRSP process. The IMF is also reviewing its approach to PRS documentation for its support under the Poverty Reduction and Growth Trust (PRGT) and the Policy Support Instrument (PSI). The reform is expected to be completed in 2015.