Political and economic reforms in developing countries have many and varied objectives. Against the backdrop of widespread and prevailing poverty in many developing countries, one primary objective should be to combat poverty.  In some cases, reforms may actually worsen the situation of the poor. This happens if insufficient account is taken of the economic and social impact of reforms on different groups.

To address this problem, the World Bank, in collaboration with other organisations, has developed a method for assessing the distributional impact of reforms. Known as Poverty and Social Impact Analysis (PSIA), it combines multidisciplinary analysis with policy dialogue. Qualitative and quantitative studies help to identify and eliminate potential adverse impacts in advance and to enhance positive impacts. An appropriate level of stakeholder participation helps to ensure that the reforms are effectively implemented.

GTZ is one of the organisations involved in developing and testing PSIA. For example, GTZ assisted Armenia in carrying out an analysis in the social sector. Apart from the analysis, the focus was placed on facilitating the stakeholder dialogue. In this way it was possible to gradually adapt the reform strategy during the discussion process.

GTZ also manages a trust fund set up at the World Bank by the Federal Ministry for Economic Cooperation and Development (BMZ) to support implementation of poverty and social impact analyses in developing countries.