This Background Note reviews the empirical evidence of public expenditure effectiveness, focusing on the Heavily Indebted Poor Country (HIPC) Initiative, which links debt relief explicitly to a reallocation of resources to poverty-reducing expenditure in low-income countries. 

It outlines the conceptual frameworks that have shaped the poverty reduction agenda, then discusses the various ways in which development agencies have implemented this agenda, before considering how the World Bank and IMF-promoted Poverty Reduction Strategy Papers (PRSPs) sought to bring together the theoretical justifications for poverty-reducing expenditure with a political process that would ensure greater accountability between the state and its citizens. 

It concludes with a brief discussion of approaches to the evaluation of the pro-poor expenditure agenda and a call to reinvigorate expenditure policy research to enrich the many remaining unresolved debates about public expenditure and development.