WASHINGTON, October 10, 2013 – The Government of Lao PDR and the World Bank signed today a financing agreement of US$ 20 million for Ninth Poverty Reduction Support Operation (PRSO 9). The agreement was signed by H.E. Mr. Phouphet Khamphounvong, Minister of Finance of the Lao PDR and Mr. Ulrich Zachau, Country Director for the World Bank to Southeast Asia. The signing took place at the World Bank Group office in Washington DC, where a high level Lao delegation travelled to participate in the 2013 Annual Meetings of the World Bank Group and International Monetary Fund.
PRSO 9 supports policies and institutional reforms that will enable more sustainable management of increasing revenues from the natural resource sectors to deliver improved public services in Lao PDR. This objective supports the Government’s priorities outlined in the 7th National Socio-Economic Development Plan.
“Our program, which PRSO supports, focuses on policy areas critical for Lao PDR’s development. The program will foster economic growth and reduce poverty" said H.E. Mr.Phouphet Khamphounvong.
PRSO 9 aims to strengthen macroeconomic policy coordination and sustainable revenue management, particularly in the mining and hydropower sectors. The program also supports reforms to improve the investment and trade climate, and targets improvements in public service delivery to ensure that the proceeds of natural resource development lead to better health and education outcomes for the people of Lao PDR. In particular, PRSO support has helped implement more transparent rules for trade and investment, develop a stronger framework for the regulation and taxation of natural resources, strengthen public revenue management, and improve sector planning in the health and education sectors.
The Government's program aims to manage rising earnings from the natural resource sectors in a sustainable and inclusive manner. The World Bank is pleased to support the program, which we expect will help increase resources for the effective delivery of public services and improve the lives of the people in Lao PDR.", said Mr. Ulrich Zachau, World Bank Country Director for Southeast Asia.
PRSO 9 is an important part of the World Bank Group's Lao PDR Country Partnership Strategy 2012-2016, endorsed by its Board of Executive Directors in March 2012. This partnership strategy aims to enhance competitiveness and connectivity, sustainable natural resource management and foster more inclusive development by strengthening public sector management.
The Government of Lao PDR and the World Bank jointly prepared the PRSO9 operation in collaboration with the European Union and the Japan International Cooperation Agency, which are planning to provide parallel budget support financing.
What is PRSO?
The Poverty Reduction Support Operation (PRSO) is budget support operation which encourages performance based approach to economic management. It aligns development partner strategies with the Government 7th National Socio-economic development plan (NSEDP7) reform priorities. It improves the visibility of Government initiatives to reform the economic policy and institutional environment across sectors.
PRSO is critical for the development of Lao PDR as it supports Government-led medium-term policy and institutional reform initiatives complementary to investment and technical assistance projects. PRSO disburses against reform progress assessed jointly by Government and development partners. PRSO money is directly disbursed into the Government budget to support Government prioritized expenditures under the NSEDP, thereby strengthening systems from within and building long term capacity. It follows the same mechanisms of any other Government domestic resources through the budget cycle.
PRSO is developed as a programmatic series of single-tranche annual operations with ex-post disbursement. The first operation was delivered in 2005. Since then, the PRSO operations have matured and now focus on a broad range of policy and institutional reforms. In September 2011 the preparation of the 3rd PRSO series 2011-2015 began, in alignment with the Government NSEDP7 2011-2015. PRSO 9, the second annual operation of the 3rd series (and the 9th from the beginning)). Since 2004, eight annual PRSOs – with total disbursements of US$ 108 million – have already helped the Government’s reform efforts to foster economic growth, reduce poverty, and address challenges in human development and vulnerabilities.
PRSO is an open initiative which much values and welcomes new partnerships. PRSO benefits from strong ownership of the Government of Lao PDR. It provides a platform of reform dialogue between 10+ Government Agencies, represented in the PRSO Steering Committee, spearheaded by the Ministry of Finance.
PRSO is a Government-led initiative in full partnership with World Bank, The European Union and the Government of Japan, which contribute expertise to the operation. Parallel financing offers a flexible approach to partnership, allowing alignment behind a unique reform matrix with Government, while retaining different procedures for disbursements. PRSO is prepared jointly by Government and Development partner teams in fields as various as economic policy and planning, private sector and trade development, public financial management, civil service, state auditing, health and education, natural resource management, macroeconomic and fiscal management, statistics, and more.
PRSO provides the Government a solid platform for coordination and cooperation between Government agencies and between Government and Development Partners. It translates into alignment of development partners behind the same Government reform objectives. Every year Government and Development Partners sit together to discuss progress towards common goals for reform and the stability of the macroeconomic policy framework, a prerequisite for budget-support operations. PRSO is disbursed after implementation of agreed reforms. It is aligned with the Government budget cycle, and predictable. It is a tool both for Government and for Development Partners for alignment and monitoring of performance. It brings together analytical, technical assistance and investment projects, with its strength being its ability to take the dialogue to the next level and tackle difficult cross-sectoral issues.
And… so what?
PRSO has helped significant policy and institutional changes, has put in place the building blocks of sound public financial management to deliver public services, to improve investment, trade, and the overall business environment and to contribute to sustainable natural resource management policies and institutions. By supporting lasting policies and institutional changes from within Government, PRSO contributes to sustainable and inclusive economic growth.