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Stefan Leiderer et al. Part I: Conceptual Framework and Case Selection 2 Conceptual Framework: PRSPs, Decentralisation, and PFM International development cooperation has never been short of new concepts and trends. However, the 1990s were particularly rich in creating presumably new ones. Although decentralisation and PFM are both not genuine development cooperation concepts, their relevance for development and poverty reduction were soon recognised and both were quickly taken up in the international development debate in the 1990s for a number of reasons. This chapter introduces each of the three concepts that are relevant for this study. The chapter starts with introducing both the PRSP approach and decentralisation as developmental concepts, highlighting the relevance of good PFM for the success of both approaches. Section 2.2 continues to look at the concept of sound PFM in the sense of Good Financial Governance and pays particular attention to common weaknesses of PFM in developing countries. 2.1 Two prominent approaches in the current debate on development cooperation: PRSP and decentralisation 2.1.1 The PRSP approach Poverty Reduction Strategy Papers (PRSPs), which were originally developed as a pre-requisite for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative have become widely accepted as comprehensive strategic frameworks for efforts made by developing countries to reach the Millennium Development Goals by 2015. With the Structural Adjustment Programmes (SAP) having fallen short of expectations with regard to economic development and poverty reduction, PRSPs are meant to describe in a comprehensive manner a country's macroeconomic, structural and social policies and programmes to promote growth and reduce poverty as well as associated external financing needs (World Bank 2005). However, the final responsibility for developing such a strategy should be with the respective country’s government in order to ensure ownership for the process. For the first time, this initiative explicitly linked debt relief with poverty reduction goals. The principles according to which the PRSPs are to be produced and implemented 22 German Development Institute
Public Financial Management for PRSP Implementation in Malawi largely incorporated the elements of the Comprehensive Development Framework (CDF) proposed by the World Bank in 2001. These principles are: — Country driven; — Results-oriented; — Comprehensive; — Partnership-oriented; and — medium and long-term oriented (World Bank 2006b). The principles of country ownership and civil society participation received particular attention as they – at least rhetorically – put an end to the long criticised externally defined conditionalities. By June 2006, fifty countries had developed a full PRSP and an additional 13 an interim PRSP, with sub- Saharan African countries accounting for 25 full and seven interim-PRSPs respectively (World Bank 2006a). First developed as an instrument to effectively direct resources freed up by debt relief to pro-poor purposes, PRSPs quickly assumed much broader importance evolving into key reference documents for donor agencies’ support strategies for developing countries. Perhaps most prominently, the IMF replaced its Enhanced Structural Adjustment Facility (ESAF) with a Poverty Reduction Growth Facility (PRGF) and the World Bank introduced the Poverty Reduction Support Credit (PRSC) scheme. But also bi-lateral donors readily endorsed the PRSP approach as a vehicle to shift their support from a project-based approach to programme-based approaches (PBAs) and budget support operations. The PRSP thus became the ‘master plan’ for development and poverty reduction in many developing countries. However, to carry out these strategic plans they have to be translated into medium-term policies and programmes, which in turn have to be implemented through annual budgets. Successful PRSP implementation thus hinges on a country’s administrative and managerial capacity to effectively translate strategic priorities into annual budgets and execute them accordingly, in other words, on the quality of the country’s PFM system. However, a number of assessments and evaluations of the PRSP approach (e.g. World Bank 2004b; IMF/IEO 2004; Booth 2003) clearly show that most developing countries lack the required systems and capacities to implement their strategy papers effectively. All studies conclude that important improvements in domestic policy processes were made in cases where German Development Institute 23
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Discussion Paper 16/2007 Schirm, St
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