PRSPs – relevance, progress & private sector participation.

EBRD/DFID Learning Event 9/9/03

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Origins of the PRSP Idea

Mixed record on poverty reduction in 1980s &

1990s

(SSA, Transition Economies, post-1997

Asia)

Findings on aid effectiveness

Pro-poor policy reforms failing because of lack of real country commitment

Donors often part of the problem

Multilateral funding for debt relief

E-HIPC needed a ‘vehicle’ to link debt relief, poverty reduction & delivery of

MDGs

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Key Elements

• Country leadership of the policy process

• Opening-up to new forms of participation

• Comprehensive national development strategy linked to macro & fiscal framework

• Making links between policy commitments & results

• New incentives for monitoring & evaluation

• New partnership possibilities & new forms of aid delivery

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Where’s the value added?

Increased Government accountability for progress towards pro-poor goals (this includes growth & PSD)

Less focus on external accountability towards donors & more focus on building robust national systems for policy formulation, execution, monitoring & evaluation

By permitting stakeholders to see and think through the implications of a set of policies, there is the prospect of a more informed national dialogue on trade-offs and policy choices for both growth & poverty reduction

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Facts & Figures

• PRSP initiative now three & half years old

• 65 low income countries are engaged

• Vast majority of PRSP countries are in SSA; 12 are in former Soviet Union/Eastern bloc

• 28 have produced ‘full’ PRSPs (with JSA’s endorsed by WB-IMF Boards)

• 37 are in the process of producing a full PRSP or in a few cases an i-PRSP

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Experience to date

• Poverty analysis informing PRS priorities

• Improved prioritisation of key public actions

• Links with other reform processes beginning e.g. PEM/MTEF/CSR

• New donor arrangements are emerging

• Policy detail still has limited pro-poor focus

• Prioritisation & costing still work in progress

• Rhetoric still ahead of reality in many cases

• Integration of PRSPs into MTEFs & annual budget has a way to go

• Participation is leading to greater openness

• Participation tends to be broad rather than deep

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Consultative Processes

Latest WB progress report notes increased participation of private sector in PRSP formulation – but quality highly uneven & coordination of inputs freq. absent.

Formal private sector organisations & associations more likely to be engaged than informal sector groups

Participation varies from informal engagement in consultation meetings to formal mechanisms such as regular sector or thematic working groups & public-private dialogue groups

A key criticism from stakeholders has been that some policy areas are not sufficiently open to public debate – the macroeconomic framework in particular.

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Content of Policy Frameworks

Growth/PSD

• All PRSPs emphasise primacy of accelerating growth for poverty reduction, most stress PSD

• Treatment of trade symptomatic of weak links between strategic goals & priority public actions

• Increased number draw attention to sources of growth, microeconomic constraints & risks

• But choice of priority actions still not derived from identified growth sources & risks

Key Public Actions • Improving the investment climate – regulatory environment, financial sector & infrastructure

• Increasing the assets of the poor – productivity, service delivery, legal fws & anti-corruption

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Improving the Investment Climate

Improving macro stability 91

Supporting SMEs 76

Infrastructure 76

Governance & Corruption 71

Regulatory environment 67

FDI 67

Trade Policy 67

Finance 62

Legal System 62

Percentage of PRSPs identifying as a priority area

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Increasing Assets of the Poor

Agricultural research & extension

Rural infrastructure /irrigation/electrification

Land tenure reforms in rural & urban areas

Financial services – micro-finance etc.

Judicial reforms

But, bulk of policy measures still emphasise improved social services as key route to increasing the assets of the poor

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PEM & Monitoring Issues

PEM

• Connections between spending priorities & annual budget/MTEF process still evolving

• Weaknesses in costing public actions have repercussions for prioritisation

• Recent study by WB in ECA found significant weaknesses in PEM systems, especially in budget formulation

Indicators

• Coverage of indicators & baseline data is improving, selectivity now critical

• Range of PSD indicators, although good practice less evident in this area

• All PRSPs identify PEM reforms as critical

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What are Donors Doing?

Increased evidence that PRSPs are a key point of departure for many donor strategies

Much talk of alignment of donor instruments & processes with PRSP ‘cycle’ & related national budget cycle (SPA, OECD/DAC, WB & Fund )

Tangible shift towards general budget support amongst some donors in SSA – although still a relatively small % of total ODA.

Much emphasis on lining up capacity building/TA support, diagnostic & analytical work with PRSP agenda (CFAAs, CPARs, PSIA, etc)

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Building more effective public-private dialogue – why?

• Improved decision-making grounded in better understanding of real business needs & appropriate scope of public action

• Increased transparency – provides a boost to Govt. credibility with domestic & foreign investors

• Context for promoting public-private partnerships in priority areas – infrastructure (economic & social), agriculture etc.

• Shared ownership of reform strategies – better prospects for effective implementation

• Increased private sector awareness of policy context, poverty issues & corporate social responsibility?

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Getting the Conditions Right

• Important to reach a common understanding of the appropriate role of the public & private sectors

• Ensure realistic objectives from the start given the economic & political context – be clear about expectations

• Encourage private sector bodies to consider the ‘wider policy context’

• Build on existing consultative frameworks, BUT ensure participants represent all sizes of enterprise, including entrepreneurs from disadvantaged areas or groups

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Areas for Dev. Partner Support Sector wide analyses of constraints to PSD

through seminars & workshops timed to feed into national strategy formulation

Studies of investment climate, firm-level surveys, micro-finance sector strategies to support the work of sector or thematic working groups

Support for public-private consultation bodies, incl. strengthening analytical capacity.

Support private sector participation in PRSP Technical Committees/Working Groups/PER processes e.g. Kenya