Poverty Reduction Support Loan

The Poverty Reduction Support Loan (PRSL I) Project, worth UA 34.58 million, is the Bank’s first direct budget support loan to the Government of Ghana. Preceding the approval of this first Poverty Reduction Strategy Loan (PRSL I) in November 2003, the Bank Group supported the implementation of macroeconomic and structural reforms in Ghana with four successive policy-based operations. The decision to provide direct budget support was taken in response to a request from the GoG and after extensive discussion with a number of Ghana’s Development Partners (DP). PRSL was formulated and negotiated under the Multi-donor budget support (MDBS) Framework Memorandum, which nine participating DPs (namely, ADB, Canada, Denmark, European Union, Germany, Netherlands, Switzerland, the United Kingdom, and the World Bank) and GoG signed in March 2003. Drawing on lessons from previous policy-based operations, the objectives of MDBS are to harmonize DPs’ policies and procedures in order to minimize transaction costs for the GoG. This includes agreeing to common benchmarks against which performance is assessed; improving dialogue between DPs and the GoG; and basing funding commitments and disbursements on the achievement of agreed targets. This form of direct budget support represents a shift from a sectoral, project-driven approach to development assistance and from balance of payment support operations like Economic Reforms Support Operation (ERSO I) and ERSO II.