A review of approaches to costing in 10 full PRSPs and 4 Progress Reports reveals that:
All the PRSs provide some estimate of the cost of implementing PRS objectives and the size of the subsequent financing gap. In most cases costings cover priority actions and core sectors for a 3 to 5 year period. Costing exercises focus mainly on the cost of achieving intermediate indicators rather than final outcome targets.
A few PRSs attempt a comprehensive costing of priority actions (Malawi, Rwanda) but a number also only cost the ‘additional’ activities to be financed by HIPC funds and include only HIPC resources in funding estimates (Burkina Faso). Some provide a breakdown of recurrent and capital costs (Uganda, Malawi, Rwanda); others give basic unit cost information (Uganda. Mozambique).
Most costing is carried out ‘bottom-up’ using activity-based unit cost estimates. Problems in coming up with credible estimates stem from generally weak prioritisation, limited unit cost data, inadequate links between programmes and indicators/targets (including in sector programmes) and over-ambitious medium term targets.
Credible costing depends on clear links between individual programmes and intermediate indicators/targets, realistic medium term targets based on past performance rather than politically determined aspirations and a closer integration of PRS objectives with an MTEF (or similar forward budgeting framework).
Some confusion exists over whether the role of costing is to work within financial constraints imposed by the available resource envelope (as in the MTEF) or to estimate the full extent of the fiscal gap between a country’s poverty reduction needs set out in the PRS and available resources.