Social Development DepartmentThe World Bank

Poverty and Social Impact Analysis:

Is it Working in the World Bank?

February 8, 2008United Nations Commission

for Social Development

Caroline Kende-RobbSector Manager

Social Development

Social Development Department

What is PSIA

PSIA is the analysis of the distributional impacts of policy interventions on the well-being of different social groups, with a particular focus on the poor and vulnerable

Results from PSIAs inform design of Bank operations (particularly for Development Policy Loans) the policy dialogue in country

PSIA can be conducted at an early stage to help policy-makers identify the various reform options and

policy trade-offs during the implementation of a reform to fine-tune an existing reform design and

to establish baseline data for monitoring and evaluation after a reform to inform subsequent reforms

Social Development Department

PSIA Analysis

Using quantitative and qualitative approaches, PSIA analyzes Positive and negative impacts, and if possible long-term and

short term effects Income and non-income dimensions Impacts on different socio-economic groups

The analysis focuses on Stakeholders Channels through which impacts are transmitted (macro-micro

links) Institutions affecting or affected by the reforms Risks to the reform

Social Development Department

Objectives of PSIA

Provide empirical evidence on trade-offs of a range of policy reforms Identify political economy and implementation risks Contribute to more inclusive and transparent policy debate by

promoting citizen engagement in policy formulation, tracking and evaluation

Inform national policy dialogue Enhance country ownership for the policy reform and its

implementation Ultimately, increase the effectiveness of policy reforms to reduce

poverty

Social Development Department

How does PSIA relate to PRSs?

PRSs put poverty reduction and country ownerships at the center of policy making

PRSs have increased the demand for prior understanding of impacts of policy reforms on different groups

PSIAs can support country ownership of PSRs by informing a public debate on the most appropriate policy combination for growth and poverty reduction and the trade-offs between policy choices

PSIA should therefore be part of the PRS process

Social Development Department

Progress in the World Bank

The World Bank has conducted 150 PSIAs in 72 countries over the last 5 years on sectoral, structural and macro-economic policies

PSIA are required in the preparation of policy based lending (OP 8.60)

System exists to follow up on compliance and quality via internal quality assurance mechanisms

PSIA have benefited from an incremental Bank fund and donor support via trust fund resources

Knowledge resources developed and training provided to facilitate continuous capacity building and learning

Some country teams in Africa schedule PSIA routinely (Kenya, Tanzania, Malawi, Rwanda, Ghana)

Social Development Department

Progress at the Country Level

PSIA is adapting to client needs in delivering policy advice on poverty and social impacts in a timely manner.

Growing awareness that different reform types demand different approaches (e.g. fuel price increase versus decentralization reform)

Some PSIAs have influenced policy and contributed towards a public debate on trade-offs

Increased awareness and understanding of PSIA in a number of countries

Social Development Department

Challenges for PSIA in the World Bank

Need for more evidence how PSIA results influence design of Bank operations, lead to the development of policy options, and promote a debate in countries about policy trade-offs

Mixed methods are not yet routinely utilized PSIA reports need to be disclosed to inform public debate in country PSIA activity decreasing after the depletion of the World Bank incremental

PSIA fund ($5.83 million from 2003 - 2006) Preparation cycle of DPLs is short – difficult to conduct research to inform

their design. Need to commission analytical work early (e.g. as part of the CAS process), and develop faster and cheaper PSIAs

Macroeconomic policies are still under analyzed Institutional and incentive constraints exist

Social Development Department

Challenges in moving towards country led PSIA

PSIA are still not country driven Many are viewed as donor initiatives In country capacity needs to be strengthened PSIAs need to be part of national policy making processes (three

pilots in Honduras, Tanzania and Malawi) and linked to monitoring and evaluation systems

Reaching the poorest and most excluded is challenging PSIAs can raised citizen expectations, the depth of citizen

involvement may be superficial and may involve a small group of elite NGOs

PSIA can be perceived as risky

Social Development Department

Addressing the Challenges

Up-dating the Good Practice Note on PSIA Stocktaking exercise to get a better understanding on upcoming PSIA

work Internal and external evaluation of PSIA’s effectiveness scheduled for

this year (IEG report expected in 12 months time) Capacity building program in Malawi, Tanzania and Honduras Move towards more public disclosure – dissemination is evaluated by

the Quality Assurance Group

Social Development Department

Moving Forward

Greater support from development partners is required to increase country capacity to commission and conduct PSIA independently

There is a need to promote multidisciplinary approaches The analysis of the poverty and social impacts of

macroeconomic reforms is weak – more work is required in this area

Development partners need to understand better how their policy advice affects the poor – and hence conduct PSIA more routinely

In the Bank there is scope to move the PSIA approach beyond policy lending to investment lending