The Poverty Reduction Strategy Process in the CIS-7 Emerging Experience and Future Prospects February 21, 2002 D. Gressani, World Bank

Brief History of the PRSP Process New approach to the challenge of poverty in low-income countries, introduced in December 1999, motivated by the realization that: Progress in poverty reduction has been slow, and aid has not been effective in reducing poverty; Conditionality imposed from outside cannot substitute for domestic commitment to reform; Domestic commitment to reform need to be grounded in broad-based debate on policy alternatives; and Poverty reduction objectives need to be placed at the core of policy making and aid coordination.

Core Principles of the PRSP Approach The approach is based on country-owned strategy that serves as framework for development assistance. Underlying principles are: Country-driven Result-oriented Prioritized Comprehensive Based on domestic and external partnerships, and Long-term focused

Trends in Poverty in Europe and Central Asia Poverty and inequality increased dramatically during the last decade. The transition process has been accompanied by a rise in economic insecurity, as a result of uncertain employment and unpredictable social benefits. Past achievement in health and education are being undermined by cutbacks in basic services and widespread under-the-counter payments. The decline in the participation of the poor in informal networks, and the increase in social tensions resulting from rising inequality have led to a decline in social cohesion.

Emerging Lessons of Experience While there are important differences in experience of the CIS countries with the PRSP process, there are some positive common results: 1. Improved communication within government, especially between core and sectoral agencies; 2. Improved communication between government and civil society organizations;

Emerging Lessons of Experience cont’d Stronger emphasis on understanding the causes of poverty as a foundation for choosing policies with the greatest impact on poverty; Strong consensus that good governance and transparency are key to implementation and monitoring of poverty reduction strategy; and Improved coordination among donors, and greater alignment of aid to country-driven priorities.

Consolidating These Early Results Experience from other countries on these five issues indicates that the following actions are important: Sharing information on the PRSP process, on poverty diagnostics, and on the budget for key programs; Establishing mechanisms for feedback to local participants in the PRSP process and for reporting to key stakeholders;

Consolidating These Early Results (cont’d) Developing local capacity and institutions for policy monitoring and analysis, both in government and civil society; Building consensus around key measures to improve governance and fight corruption; and Involving donors in the PRSP process early and systematically.

Challenges Ahead Three challenges are especially critical for impact on the lives of the poor in the CIS countries: Putting poverty reduction at the center of policy making; Prioritizing policy actions to have the greatest impact on poverty; and Improving capacity to implement the strategy.