Poverty Reduction Strategy Paper (PRSP)

The stated aim of the PRSP is to present a coherent strategy that helps poor countries to
experience faster sustainable growth and achieve a substantial reduction in poverty. If
successful, PRSPs could provide improved national coordination and higher levels of
resources for comprehensive poverty reduction activities. As PRSPs prioritize spending that
reduces poverty, the health sector is expected to benefit.
PRSPs describe macroeconomic, structural, and social policies and programmes to promote
economic growth and reduce poverty, as well as associated external financing needs and major
sources of financing. The process of developing a PRSP starts with a country-based diagnosis of
poverty. It then defines the poverty reduction outcomes a country wishes to achieve and the key
public actions needed. The PRSPs should be conceived and authored by the government, which
will outline its own development priorities and the strategies needed to achieve them. The
process shows a greater emphasis on ownership, transparency and participation than previous
approaches.
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 countrys 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 nonmonetary), 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
The heavily indebted poor countries (HIPC) are a group of 39 developing countries with high
levels of poverty and debt overhang which are eligible for special assistance from the
International Monetary Fund (IMF) and the World Bank.
The joint IMFWorld Bank comprehensive approach to debt reduction is designed to ensure that
no poor country faces a debt burden it cannot manage. To date, debt reduction packages under
the HIPC Initiative have been approved for 36 countries, 30 of them in Africa, providing $75

billion in debt-service relief over time. Three additional countries are eligible for HIPC Initiative
assistance.
The HIPC Initiative was launched in 1996 by the IMF and World Bank, with the aim of ensuring
that no poor country faces a debt burden it cannot manage. Since then, the international
financial community, including multilateral organizations and governments have worked together
to reduce to sustainable levels the external debt burdens of the most heavily indebted poor
countries.
In 1999, a comprehensive review of the Initiative allowed the Fund to provide faster, deeper, and
broader debt relief and strengthened the links between debt relief, poverty reduction, and social
policies.
In 2005, to help accelerate progress toward the United Nations Millennium Development Goals
(MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI).
The MDRI allows for 100 percent relief on eligible debts by three multilateral institutionsthe
IMF, the World Bank, and the African Development Fund (AfDF)for countries completing the
HIPC Initiative process. In 2007, the Inter-American Development Bank (IaDB) also decided to
provide additional (beyond HIPC) debt relief to the five HIPCs in the Western Hemisphere.