This article considers the policy context within which a Poverty Reduction Strategy is being prepared in Nicaragua as part of the conditions for entry onto the HIPC initiative. It then goes onto consider some recent\nofficial evidence on the magnitude, distribution and change in the depth of poverty in Nicaragua over the period 1993 to 1998. Section three considers macroeconomic approaches to growth, aid and poverty reduction, and some obstacles which these approaches have begun to identify, but have largely been unable to surmount. It further considers some local and regional development approaches. Sections four and five look at some other important considerations for poverty reduction strategies in the context of vulnerability, social exclusion and social capital. Section six considers the extent to which these wider poverty issues are considered in the present I-PRSP (interim poverty reduction strategy paper) of the government. The article concludes with a\ndiscussion of the increasingly important role attributed to civil society organisations in strengthening and pushing institutional and policy changes necessary for more local participatory and workable poverty reduction and development strategies, which for many years before these initiatives has been the basis for their work.\n