What is PSIA

1. Poverty and Social Impact Analysis:Is it Working in the World Bank?February 8, 2008United Nations Commission for Social DevelopmentCaroline Kende-RobbSector Manager Social Development Social Development Department The World Bank

2. 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

3. 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

4. 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

5. 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

6. 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)

7. 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

8. Challenges for PSIA in the World Bank • Need for more evidencehow 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

9. 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

10. 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

11. 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