Jubilee 2000: Policy: Bread for the World June 2000

The Poverty Reduction Strategy Papers: An Initial NGO Assessment
by Sara Grusky, Ph.D.

Table of Contents

I. Introduction:

II. What is the new IMF/World Bank reform package?

Alphabet soup: PRSP replaces PFP and PRGF replaces ESAF
Just some new acronyms or substantive change in policy?

III. Background Information:

What led to the IMF/Bank reform?
Critiques of the IMF's ESAF
Jubilee 2000 critiques of the IMF/World Bank
Critiques of IMF policy advice during the Asian crisis

IV. The Reality of Poverty and Debt:

Southern CSO responses to the PRSP

Bread for the World Institute seeks justice for hungry people by engaging in research and education on policies related to hunger and development. Bread for the World, a U.S. Christian movement, seeks justice for hungry people by lobbying our nation's decision makers.

Bread for the World is a member of the international Jubilee 2000 movement, which calls for the cancellation of the crushing burden of developing country debt by the year 2000.

Editor: Elena McCollim Debt and Development Project Bread for the World Institute 1100 Wayne Ave
Suite 1000 Silver Spring MD 20910 Phone: (301) 608-2400 Fax: (301) 608-2401

Email: emccollim@bread.org
Internet: http://www.bread.org

Sara Grusky is Co-Director of the Globalization Challenge Initiative

Last fall, the IMF and World Bank proposed a new approach designed to focus loan operations on poverty reduction. This potentially significant change took place in a context of growing public scrutiny of those institutions in the aftermath of the global financial crisis, continued debate about the merits of the IMF's enhanced structural adjustment facility (ESAF), and the international Jubilee 2000 movement's call for debt cancellation.

Some welcomed the announcement as an overdue move to put poverty reduction goals at the center of macroeconomic policymaking. Yet this ambitious undertaking faces multiple challenges, e.g. justifiable skepticism among civil societies both North and South; a need for unprecedentedly close coordination between the Bank and the Fund; and the difficulties of promoting a participatory process that will lead to national plans for poverty reduction.

Moreover, poverty reduction strategies will require flexibility in macroeconomic policy (for example, in targets for inflation or budget reduction). If a country comes up with a poverty reduction program whose macroeconomic policy targets are different from what the Bank and Fund recommend, will the Bank and Fund be flexible, in the name of supporting a program over which that country has a strong sense of ownership? It remains an open question.

This issue of the Dossier will examine the new approach, as it is to be carried out via the Poverty Reduction Strategy Papers (PRSP) and the Poverty Reduction and Growth Facility (PRGF). Will this new approach bring substantive change to the IMF and World Bank? Does it address core concerns voiced by critics? What are some initial assessments from developing country civil society organizations?

IMF and World Bank loans to governments are linked to packages of policy conditions often known as structural adjustment conditions. ^[1] The package of policy conditions linked to IMF loans was previously contained in the Policy Framework Paper (PFP); for the World Bank it was contained in the Country Assistance Strategy (CAS). The Poverty Reduction Strategy Paper (PRSP) will now replace the PFP. This document governs the country's relationship with the IMF and the World Bank. Any loan operations that the institutions negotiate are to conform to the goals and policies outlined in the PRSP.

The institutions assert that, contrary to practice with the PFP, the PRSP will not be a document drafted by IMF or World Bank officials or consultants. The PRSP is to be formulated by the borrowing government following substantial consultation with diverse sectors of civil society. The PRSP will then need to be approved by the Executive Boards of the Bank and the Fund for a country to be eligible for loan assistance.

The World Bank will continue to produce a CAS for each country, but the CAS will be subordinated to the overall strategy laid out in the PRSP. (The IMF is considered the lead organization in proposing the macroeconomic framework for adjustment; even with the old alphabet soup the CAS was subordinated to the PFP). Continuing with the new alphabet soup, the IMF's controversial Enhanced Structural Adjustment Facility (ESAF) will now be called the Poverty Reduction and Growth Facility (PRGF).

ESAF was created in 1987 to provide concessional finance to poor countries when it became clear that IMF finance on its usual terms was too expensive for many countries to repay. The structural adjustment programs of ESAF have been controversial due to their emphasis on fiscal austerity rather than poverty reduction (see Part III).

In December 8, 1999, the IMF chose to approve a new loan for Honduras under the PRGF without reference to a PRSP. (See Box 1) Honduras' previous three-year ESAF loan had come up for renewal at that time, and Honduras couldn't have developed a Poverty Reduction Strategy so soon after the World Bank and IMF adopted these new processes. It would have been better to either postpone renewal of the loan until such time as a PRSP was drawn up, and only then call it a PRGF loan, or else call the loan an ESAF loan rather than a PRGF loan.

The IMF and World Bank have impressive intentions for their reform package. Let us examine some of these stated intentions below.

1. Henceforth poverty reduction will be the overarching goal of both institutions.

The World Bank's focus on poverty reduction has ebbed and flowed for decades. During the 1960s the Bank saw economic growth as the key and poverty reduction as an outcome of growth. During the 1970s this perspective was challenged. Rhetoric and, to a lesser extent, practice shifted to growth with a specific emphasis on poverty reduction. Structural adjustment lending overshadowed poverty reduction during most of the 1980s, but the decade ended with a new declaration from then-president Lewis T. Preston that poverty reduction would be the overarching objective of the Bank. Another ten years has passed and another declaration about the Bank's poverty focus has now been made. Recent studies show that in 1999 sixty-three percent of Bank lending was structural adjustment loans. An internal Bank study of all structural adjustment loans in 1998 and 1999 had this to say:

The majority of loans do not address poverty directly, the likely impact of proposed operations on the poor, or ways to mitigate negative effects of reform. ^[2]

The PRSP faces the challenging task of overturning the lack of poverty focus in the Bank's current structural adjustment lending portfolio.

In contrast to the World Bank history, the IMF's assertion that its overarching objective will be poverty reduction is not a claim that has featured prominently in the institution's public pronouncements until recently. Many IMF critics link the Fund's new poverty reduction focus to the institution's desire to save its embattled ESAF – now PRGF.

When the two Bretton Woods institutions were created in 1944, the World Bank was to be a development institution while the IMF was charged with ensuring a stable international monetary system that would promote trade. The Fund was to provide resources quickly to countries experiencing short-term balance of payments emergencies. It was the World Bank's role to provide longer-term loan resources for development.

One of the many criticisms of ESAF has been that it overlaps with World Bank functions. It has also been argued that the Fund's expertise is in international monetary stability and it is not appropriate for the institution to meddle in long-term development issues. These concerns make it difficult for NGOs to assess the IMF's new poverty reduction objective. Will it extend the Fund's mandate and increase the reach of its controversial policy advice? Or, does it reflect a new willingness on the part of the IMF to revise its rigid macroeconomic and structural adjustment policy advice to protect vulnerable groups and promote the reduction of poverty?

Box 1

Just a New Name?

IMF Approves Loan for Honduras under the new Poverty Reduction and Growth Facility

The IMF says that loans under the new Poverty Reduction and Growth Facility will take place in the context of strategy developed by borrowing governments engaged in a broad consultation with civil society. IMF critics argue that the name change is simply a public relations move and that practice will remain the same.

Recent practice gives cause for concern. On December 8, 1999, the IMF approved a new loan for Honduras under the PRGF without reference to a PRSP. There has been no discussion by the Honduran government with members of civil society to prepare a poverty reduction strategy. The content of the PRGF loan appears no different than past ESAF loans. The standard macroeconomic targets and structural adjustment conditions make no reference to poverty reduction needs.

2. The PRSP will be formulated by borrowing governments with substantial consultation and participation by civil society actors.

The World Bank and IMF want borrowing governments to feel a sense of ownership over the goals and conditions formulated in the PRSP. Yet the power these two institutions wield over access to external financial resources has tended to undermine national ownership. The development of the Policy Framework Paper (PFP), the document that preceded the PRSP, was also to be led by governments with assistance from the Bank and Fund. In practice, it was usually IMF-led. We hope that the PRSP does not have a similar outcome.

The World Bank and IMF require borrowing governments to consult with civil society organizations (CSOs) to formulate the PRSP. (See Section IV for comments from other southern CSOs.) The category, “civil society organizations,” goes beyond NGOs to encompass other entities as well – such as unions, grassroots-membership groups, mass movements, religious organizations, and professional organizations. From the perspective of many borrowing governments, this is yet another condition added to a long list of conditions required by external donors and creditors. If governments view the consultation process as yet another hoop to jump through to satisfy external actors, the process is unlikely to be meaningful.

Extensive civil society experience with World Bank consultations regarding the Country Assistance Strategy (CAS), the Comprehensive Development Framework (CDF), and the Heavily Indebted Poor Country Initiative (HIPC) have yielded some ideas about minimum requirements for a meaningful consultation process. Below are some key aspects.

It is unlikely that civil society organizations in developing countries will be satisfied with consultation processes that do not conform to at least some of these minimum requirements. It is also unlikely that the Bank and the Fund will use their leverage to ensure that consultation process is satisfactory unless civil society advocates push the Executive Directors to do so. ^[3] (See Part IV for initial assessments by civil society organizations in Bolivia, Zambia, Nicaragua and Mozambique.)

3. The PRSP will identify targets for poverty reduction outcome indicators. These indicators will then become IMF and World Bank “monitorable” conditions assessed to determine the country's access to debt relief and loan support.

The Bank and the Fund state that the PRSP should include (1) poverty diagnostics; (2) targets for selected intermediate outcome indicators; (3) priority public policies to reduce poverty; (4) monitoring and evaluation systems; and (5) a participatory process. What remains unclear is the relationship between the poverty reduction strategy elaborated in the five points above and the macroeconomic and structural adjustment policies that have traditionally been elaborated in the PFP.

What is most likely in the short term is that the poverty-related outcome indicators identified in the PRSP will be added on to a standard array of macroeconomic and structural adjustment policy conditions. Social conditionality is not new to Bank/Fund loans for balance of payments support. Many loans include health and education spending targets as a percentage of GDP, spending targets on educational materials, medical supplies, or primary health care services. But, these social conditions have rarely been binding, while non-compliance with macroeconomic and structural adjustment conditions has often resulted in the interruption in access to IMF or World Bank monies. One hopes that structural adjustment conditions will be modified, as necessary, to serve the stated goal of poverty reduction.

4. Poverty reduction strategies, macroeconomic objectives and structural policies will be designed through an iterative process to be consistent with each other and mutually reinforcing.

This statement needs some translation. Some important key words are iterative process and consistent.

There have been two decades of debate, popular protest, and resistance to some aspects of Bank/Fund macroeconomic objectives and structural adjustment policies because they are often perceived as inconsistent with poverty reduction. They are perceived as undermining government subsidies and social safety nets; and as privileging export industries over domestic production, the private sector over the public sector, large farmers over small farmers, foreign debt servicing over domestic citizen needs, and economic growth over employment generation. ^[4] Some of the policies privileged by the Bank and the Fund may be the appropriate ones in certain contexts. But this is by no means true of all contexts. Thus an assessment of the poverty impact of those policies is all the more essential.

Therefore, making macroeconomic objectives and structural policies consistent with poverty reduction strategies is a very significant undertaking. What might this mean in practice? Many NGOs have suggested undertaking social and environmental impact assessments of macroeconomic and structural adjustment policies in cases where there are significant concerns about potential adverse social consequences. Significant adverse social consequences should cause the institutions to reconsider such policies, and to take proactive steps to prevent negative consequences. It is not sufficient to design social safety net programs to alleviate adverse social consequences after the fact.

There are currently few indications that the institutions are planning to make social impact assessments mandatory across the board for all structural adjustment or sectoral lending; or that they are planning to undertake a major reassessment of current macroeconomic and structural adjustment policies. What might the institutions mean, then, by making poverty reduction strategies, and macroeconomic and structural policies consistent with each other?

The IMF may be willing to reconsider how tightly it cinches what many critics have called the “fiscal straitjacket” – the fiscal and monetary targets that form binding conditions of IMF loans. One possible scenario is that the World Bank would assign budgetary costs to achieving the goals identified in the poverty reduction strategy and then these costs would be factored into new and less stringent IMF fiscal revenue and expenditure targets. However, to what extent the IMF would relax its timeframe for balancing the budget, or to what extent the country would need to continue to defer overwhelming social needs remains unclear.

The other important key words are iterative process. This refers primarily to collaboration between the Bank and the Fund and tensions related to the division of labor between the two institutions. The Fund will continue to take the lead on macroeconomic issues, while the World Bank will lead on structural and social issues. The iterative process is the back-and-forth necessary to forge agreement and consistency in the three areas. Historically the Fund has been able to take the lead, setting monetary and fiscal policy. In contrast, the World Bank's work on structural and social issues was confined within those pre-determined macroeconomic parameters. However, an iterative process implies that the the poverty reduction goals expressed through the PRSP should be taken into fuller consideration in setting the macroeconomic framework. It is hoped this iterative process will yield greater flexibility in terms of the Fund's monetary and fiscal targets.

5. PRSPs provide the context for joint work among borrowing governments, the Bank, the Fund, the United Nations, regional development banks, and other multilateral and bilateral assistance agencies, NGOs, academia, think tanks and private sector organizations.

This stated goal should provide new opportunities for civil society groups, U.N. agencies and others to influence the policies which the World Bank and IMF support. The risk is that the PRSP process could place the IMF and the World Bank in an overall development policy coordinating role – a role which the World Bank proposed with the launching of the Comprehensive Development Framework (CDF). ^[5] It is questionable whether this is an appropriate role for these institutions. Again, the central mandate and technical expertise of the IMF is in international financial stability, not development finance. In addition, the IMF already plays a highly influential role by issuing its “seal of approval” which often influences a borrowing government's access to other sources of commercial, bilateral and multilateral credit.

Coordination, partnership, intra-agency communication, and holistic approaches should be commended. However, the IMF, even in partnership with its sister organization the World Bank, is not the proper agency to coordinate social development policy. Instead, there are a number of international and regional organizations (not to mention local NGOs, academics, and government agencies within a given country) that have a long track record of work on poverty reduction strategies. Many countries have prepared poverty reduction strategies under the auspices of UNDP or UNICEF. The World Summit for Social Development has also worked with countries to prepare poverty reduction strategies.

Ideally each country will take the lead in developing its own economic and social policies. A democratic and effective government should broker the concerns of different groups in society. The World Bank, IMF, and other external agencies should be in the position of assisting and, as appropriate, supporting what each country itself decides.

The UNDP previously played an important role in social development and donor coordination, but initiatives like the PRSP and the CDF could contribute to a weakening of the U.N. role. The Bank/Fund announcement of the PRSP process could be perceived as contributing to the longer-term trend whereby United Nations agencies have been increasingly sidelined from major development policy decision-making as the World Bank (and more recently the IMF) seek to become lead social development agencies.

The five claims discussed above reveal the significance and seriousness of the IMF and World Bank poverty reform package. It is a high-profile effort. While it will undoubtedly fall short of the collective hopes and desires of NGOs, the optimistic view is that the PRSP process will contribute to changing the priorities of both institutions. NGOs around the world will be continuing our advocacy efforts and carefully monitoring the PRSP process to assess whether the institutions are successful in carrying out the ambitious new directions their member governments have mandated.

The International Monetary Fund has been especially embattled over the last few years. Serious criticism of the Fund's handling of the global financial crisis originating in Asia, combined with pressures from the international Jubilee 2000 movement calling for the cancellation of developing country debt, and attacks on the Fund's Enhanced Structural Adjustment Facility (ESAF – now called the Poverty Reduction and Growth Facility, PRGF) have left the institution's international credibility seriously impaired. The Fund's credibility in the U.S. Congress has been especially damaged, resulting in contentious congressional battles over any IMF initiatives for new funding. (As this Dossier went to press, the report of the congressional Meltzer commission had been recently released, recommending sweeping changes to the IMF and World Bank). In this embattled context, the IMF has chosen closer collaboration with its Bretton Woods sister, the World Bank. Thus the PRSP reform package is a joint IMF/World Bank initiative.

This section will examine three streams of critique of Bank/Fund practices that have placed international public pressure on the institutions: (1) NGO criticisms of ESAF, (2) Jubilee 2000 criticisms of the joint Bank/Fund debt relief program, and (3) criticisms of the Fund's handling of the global financial crisis. In the following section of this paper (Section IV) we will examine the response of southern civil society organizations to the Poverty Reduction Strategy Papers (PRSPs).

The IMF's structural adjustment facility (SAF) was established in 1986 and re-named the Enhanced Structural Adjustment Facility (ESAF) in 1987. The policies and practices of SAF and ESAF have been controversial since their inception. In 1996, the Fund commissioned a team of independent experts to review ESAF practice. This was followed by an internal evaluation report published in 1997. There has been little follow-through on the concerns and recommendations made in these two reports. The External Review included the following:

2. Some critics claim the social cost of stabilization and adjustment is just too high

NGOs acknowledge that economic reforms are necessary to address balance of payments problems. However, a major criticism of ESAF programs is that they have imposed short-term contractionary policies on the domestic economy rather than focusing on longer-term goals of increasing production (for the domestic economy as well as for export) and investment. These are some aspects of ESAF programs:

The international Jubilee 2000 movement is a broad and loose collection of organizations around the world that have mobilized to bring public attention to the tragedy of debt in developing countries. In many developing countries more of the national budget is spent on servicing the international debt than on basic social services. ^[9] Organizations involved in the Jubilee 2000 movement have criticized the inadequacies of the World Bank and IMF debt relief program, HIPC, only a few of which are outlined here. These critical perspectives influenced the World Bank/IMF formulation of the Poverty Reduction Strategy Papers (PRSPs).

1. Compliance with ESAF programs should not form the eligibility criteria for HIPC debt relief. The “carrot” of debt relief should not be used as additional leverage to impose ESAF's economic reforms – reforms that have never been subjected to broad or transparent processes of national consultation.

2. IMF/WB definitions of “sustainable debt” prioritize accounting principles over human development needs. Debt-to-export ratios are not adequate indicators of “sustainable debt.” A more appropriate indicator would determine “sustainable debt” based on the real social impact of debt on national budgets. As a result of this criticism, the World Bank and IMF have added the fiscal indicator to the list of criteria for debt relief. However, the fiscal indicator is set in such a way that only 3 out of 40 HIPC countries have qualified.

3. Debt relief should be linked to poverty reduction: For many Jubilee 2000 organizations it is important that conditions for this linkage are generated by dialogue between governments and their domestic civil society actors, not imposed by the international financial institutions.

NGOs and international agencies have proposed integrating the goals set by the World Summit for Social Development and the OECD Development Action Committee into the development frameworks of donors, creditors and national governments.

Many NGOs propose a variety of trust funds or counterpart funds that would be used to help ensure that savings from debt relief are directed toward poverty reduction. The funds would have oversight bodies made up of government and civil society organizations and be accountable to national anti-poverty plans developed through broad consultation processes.

The IMF has suffered from extensive academic and NGO criticism regarding its handling of the global financial crisis. Joseph Stiglitz, the recently resigned World Bank Chief Economist, was one of the most outspoken critics. Others, like Harvard University's Jeffrey Sachs, have joined the fray. Much of the criticism centers around the three points summarized below.

BOX 2

Reforms Achieved

U.S. Debt Relief Legislation of 1999

NGO campaigners across the G-7 countries managed to convince the G-7 governments on some of above points, though not all. The G-7 governments in turn, mandated a number of reforms in the international financial institutions. In particular, Jubilee 2000/USA convinced the U.S. Congress to pass legislation on debt relief that addresses the above three points in the following ways.

While debt relief remained conditional on economic reforms, those
reforms are now expected to be subjected to broad and transparent processes of national consultation.
While debt-to-export ratios will still be used as indicators of sustainable

debt, they are to be substantially lowered. Whereas previously a country would be considered to have lowered its debt to a “sustainable” level if its debt-to-export ratio was (typically) in the range of 200 to 250 percent, the new legislation lowered that ratio to 150 percent.

3. Perhaps most significant, the legislation puts poverty reduction at the center of economic policy-making and repeatedly emphasizes the need for debt relief-eligible countries to pursue poverty reduction through a series of measures. The measures include economic growth; improvements in education, health and nutrition; environmental protection; a strong private sector; transparent policy-making and budget procedures; good governance; and public participation in the fight against poverty.

There are also key policy recommendations relating to speed of implementation, and the need for adequate evaluation of IMF operations. The legislation urged the IMF and World Bank to complete a debt sustainability analysis by December 31, 1999, for as many of the HIPC-eligible countries as possible. Furthermore, these institutions were urged to ensure that an external assessment of the modified HIPC initiative, including the reformed ESAF, takes place by December 31, 2001. The legislation also urges the U.S. Executive Director to the IMF to press for the establishment of a standing evaluation unit at the IMF, similar to the Operations Evaluation Department at the World Bank, to undertake periodic reviews of IMF operations, including those of the reformed ESAF.

“Moral hazard” is caused by IMF bailouts that benefit foreign investors and commercial banks. If international investors are spared the risks of a market economy, then irresponsible lending and investment practices will continue. Public institutions should not transfer the cost of the financial crisis from the private sector to the public sector.

Below we share initial responses of selected southern civil society organizations (CSOs) to the IMF and World Bank's new poverty reduction strategy (PRSP). The Debt and Development Project developed a short written survey (see Box 3). The survey was sent to a selection of CSOs in countries where the PRSP process was being rapidly advanced in order to enable access to HIPC debt relief: Bolivia, Mozambique, Zambia, Nicaragua, and Burkina Faso. In these five countries the survey document was sent to all organizations included in the project's database due to their activity and interest in debt and multilateral bank issues. Comments from organizations in Tanzania and Uganda are also included even though they were not sent the initial survey.

The response to the written survey was low (5 responded out of 49 contacted) so the survey was followed up by telephone interviews. The initial lack of southern CSO interest in the PRSP could be attributed to numerous causes including skepticism about yet another new Bank initiative, overwork, consultation fatigue, apathy, lack of knowledge about the PRSP, and the feeling that it is marginal to their key concerns and issues.

There continues to be a knowledge gap between northern and southern CSOs concerned about reform of the international financial institutions. Bread for the World Institute, as well as many other NGOs, seeks to fill in that gap by providing public education on international financial institution reform.

But the knowledge gap reflects the organizational structure of the Bank and the Fund, which in turn reflects the real-world balance of power. Thus, CSOs in the G-7 countries are able to exercise more political pressure over the institutions than governments and CSOs in low-income countries where the projects and policies are actually implemented and the effects felt. This fundamental imbalance distorts every Bank and Fund undertaking, the PRSP notwithstanding.

The following sections of this paper will summarize the responses of southern CSOs to the PRSP survey. The responses are grouped into two categories: (1) concern about the PRSP process and content, and (2) skepticism. As often as possible, direct quotes from southern CSO documents, surveys, and telephone interviews are used.

Any consultation with civil society should consider their participation in the design of the methodology, in the definition of the content, in the agenda, and in monitoring and evaluation. The new structural adjustment program (ESAF or PRGF) in January determined the framework, terms and conditions for the struggle against poverty. If indeed the IMF supports the implementation of the PRSP, it has not yet been determined how much this will influence the structural adjustment program. Without these clarifications, the PRSP will appear only as an annex. (Translated from Spanish)

Despite the macroeconomic “progress” frequently celebrated in this country . . . poverty in Bolivia really has seen next to no improvement [despite the funds released from the HIPC I debt relief program]. This is all the worse in light of the National Dialogue produced by the Bolivian government in 1997..

The main aim of the external conditions . . . is that funds released from the HIPC II agreement reach those that most need them. To achieve this the Bolivian government must produce a detailed Poverty Reduction Strategy Paper that indicates . . . exactly how, where and why the released funds will be spent.

Recognizing the importance of an efficient and authentic Poverty Reduction Strategy Paper, and aware that the government is . . . unlikely to develop it, Jubilee 2000 has launched forums in the nine Departments of the country. Using the wide and credible network of church contacts that exist in every corner of the country, Jubilee 2000 intends to achieve a clear expression from every social sector. [Each department will have] four principal roundtables that address the questions of Human Rights, Macroeconomics, and Urban and Rural realities (mainly health, education, land and employment).

The government is designing its Plan of Action against Poverty and will try to validate it by calling national negotiations on poverty. Unfortunately, experience of past negotiations of this type reveals that they display many formalities but few concrete promises. We sense there is no real proposal to seek citizens' involvement ...People have little faith in political sectors, and even less in those who run the government. This skeptical atmosphere might lead to the absence of representation when the government calls the negotiations. (Translated from Spanish)

Observations on the Bolivia Government's Interim PRSP document, forwarded by Irene Tokarski, Director, Jubilee 2000-Bolivia.

The struggle against poverty is framed by the structural adjustment program and as such its results depend upon . . . the currently enforced model. According to the perspectives indicated in the [IPRSP] the macroeconomic indicators are very good (average growth of 5 percent, rate of investment 21.7 percent of GDP, fiscal deficit reduction, reactivation of the mining sector, etc.). Nevertheless, after fifteen years of structural adjustment . . . poverty has not decreased.

The follow-up and evaluation of the PRSP will be the responsibility of INE [National Statistics Institute] and UDAPE [Social and Economic Policy Analysis Unit]. These two institutions should present their report to the National Council for Social Policy and the National Dialogue . . . However the report will only be informative rather than participatory . . .

Finally, the IPRSP indicates that the first [National Dialogue on Poverty, 1997] was highly participatory and that the organizations approved by consensus the four pillars of the government plan. This was not evident and even the pertinent documents were not distributed sufficiently beforehand. (Translated from Spanish)

In Uganda, the preparation of the PRSP coincided with the revision of the Poverty Eradication Action Plan (PEAP) first published in 1997. The Government, the IMF and the World Bank agreed that the revised PEAP would also serve as the PRSP to be presented to IMF and World Bank Boards. Therefore, any references to PEAP should be taken to refer equally to PRSP.

[The Ugandan] Government wishes to retain leadership and ownership of its development agenda, as well as leadership of the . . . dialogue with development partners, including the Bank and the Fund as well as the bilateral donors. As the Permanent Secretary/Secretary to the Treasury put it . . .“Once common objectives have been established through open, consultative process, donors must accept government's leadership and adjust their own strategies to the government strategy. There should no longer be a need to develop 'parallel programs with bilateral or multilateral donors . . . ”

It is [up to] the government to . . . include others in the dialogue. Technicians must [realize] that people know what is good for them and be strong enough to go out and ask them their views, even if what they get differs from textbook prescriptions.

It is the right of all citizens to participate, directly and through their elected representatives, in all matters affecting their lives . . . Civil society needs to be aware that, to some extent, participation in developing national plans jointly with government curtails their autonomy. It becomes that much harder to criticize what you have helped to create. The rules of engagement will most likely require consensus and collective responsibility. We have to be prepared to account, not only for resources we receive, but also the power and influence such consultations/participation is perceived to bring.

In December 1999 a number of Tanzanian NGOs received letters from the government regarding the PRSP and the government's intention to involve NGOs. The government had already formed two committees to manage the PRSP process, a ministerial committee and a technical committee. However civil society organizations had not been invited to be members of either of these committees.

The perspective of Tanzanian NGOs, following presentations from the government, the World Bank and the IMF regarding the PRSP was that Tanzanian CSO involvement in the preparation of the PRSP will be consultative but not participatory. One of the deficiencies of a consultative approach is that it does not give those being consulted fair time and adequate resources and space for presenting their views. And, too often issues and concerns voiced during the consultation have little impact. A participatory approach, on the other hand, would involve CSOs in each and every step leading to the development of the poverty reduction strategy.

It is vital that civil society provides necessary inputs to the government process of the review of the PEAP, and the development of the PRSP. For civil society this is a major opportunity to influence the government to further improve national policy in pro-poor ways. The purpose of [this] workshop is threefold.

1. Process: To analyze the proposed participatory process for civil society engagement in the review of the PEAP and the development of the PRSP. To develop suggestions for improvement and provide these to government and other interested actors.

2. Strategy: To develop an NGO strategy for fully engaging in this process over the next six months and beyond. To form an NGO Task Force . . .that can undertake consistent and high quality work during this period, engaging and providing inputs to government, donors, and others.

As regards the . . .proposal for the PRGF, we feel the most significant point to be followed is the call for participation of civil society in an approach that is purported to focus on poverty reduction. But we need to ask questions about whether the design of the PRSP will in fact impose another layer of conditionalities to HIPC qualification.

The meeting at which the decision was taken [about the new poverty reduction framework] was held in September, but the Zambian government only learnt of the new policy direction this month when an IMF team came to review the country's economic performance. IMF resident Representative Kenneth Myers may not have sounded forthright when he announced the new policy to a hushed audience during an Economic Association of Zambia meeting last week but he did, in so many words, hint at the failure of ESAF. And this is the song that Father Pete Henriot of the Jesuit Center for Theological Reflection (JCTR) and his lot had been singing for the last seven years. “>From an analytical perception the previous ESAF was not, in fact, working. It was a failure in both human and economic terms,” Fr. Henriot summed up after hearing the news.

Fr. Henriot's reaction is understandable. It will be difficult for the civil society to be excited about its inclusion in policy formulation when their input is still subject to IMF approval. For him the Jubilee 2000 campaign continues and will watch the progression of PRGF with caution.

Summary of Comments by the Mozambique Debt Group, translated by Jose Negrao, Mozambique

The Mozambique Debt Group, speaking with regard to both the World Bank's Country Assistance Strategy (CAS) and the PRSP, thinks that there is a strong need to involve other partners, such as the United Nations agencies. The Government of Mozambique and the UNDP have already shown interest in working with the Mozambique Debt Group (MDG) on the PRSP. The MDG finds problematic the differences between the way in which the World Bank and the United Nations define development and growth. The World Bank is celebrating ten-percent economic growth this year in Mozambique, but the effects of this growth are yet to be felt by the majority of Mozambicans.

Comments from Cirilo Otero, Grupo Propositivo de Cabildeo e Incidencia en Nicaragua.

At this time the PRSP is . . . unknown . . . in Nicaragua. There is no information except among a few academics and specialists that have partial knowledge about what is happening with the PRSP.

The World Bank and IMF still maintain the same mode of operation, which is silence . . . They have not said anything about this issue in Nicaragua. At this time, there has been no effort to coordinate anything participatory regarding the PRSP. And the government does not have even a minimal idea about how to develop a strategy to alleviate poverty. In general, I will tell you, this idea came from the G-7 meeting in Cologne, Germany, but in the poor countries we don't know anything about it. There is currently an IMF mission in the country, headed by Mr. Jorge Guzmán, and they have only met with the government and the FSLN, supposedly the opposition party.

[A]bout environmental impact, I can tell you that the same World Bank and IMF [consider] that in Nicaragua the only thing worth selling is the natural resources, because the country is not creditworthy. Currently Nicaragua can only obtain concessional loans and that is stipulated in the agreements signed by the government with the Fund and the Bank. (Translated from Spanish)

The PRSP represents a new development in Bank and Fund lending policy with some potential, but only to the extent that certain conditions are met. First of all, civil society in the borrowing countries needs information and transparency about the new process. Not surprisingly, this condition is met more easily in some countries than in others, as we have seen above. Secondly, consultation with civil society must go beyond information dissemination, to a genuinely participatory process in which the recommendations of non-governmental actors can influence policy.

This takes us beyond process to content. The World Bank and IMF have been directed by their member governments to work in new and promising ways. How much change actually takes place remains to be seen and will depend, in large part, on activists, civil society organizations, and government policy-makers around the world. The World Bank and IMF documents describing PRSP show some evidence – albeit very slender – of willingness to be flexible in making macroeconomic prescriptions. But the question, “how flexible?” will be answered as the process unfolds country by country. Social and environmental impact assessments should be made mandatory for all macroeconomic and structural adjustment loans, so that it will at least be possible to answer empirically the question whether a given PRSP would actually reduce poverty, or not.

BOX 3

Bread for the World Institute - Survey Instrument

The IMF and World Bank Poverty Reduction Strategy: What does it mean?

1. Breadth of civil society representation- Who was consulted during the process of drawing up the PRSP or Interim PRSP? Over what period of time?

2. Coordination with existing anti-poverty efforts – To what extent has the development of the PRSP or Interim PRSP built upon: domestic anti-poverty strategies; or the prior work of UN agencies, regional organizations, local NGOs/CSOs, academics, and think tanks?

3. Logistics of consultation – Please comment on the logistics of the consultation process: breadth of distribution of relevant documents; time allotted for review and comment; languages used, and any other criteria you would like to add.

4. Links to other IMF/WB operational mechanisms, and policies – Were the following discussed: performance criteria, structural benchmarks, CAS triggers or other macroeconomic and structural adjustment policies linked to IMF and WB loan instruments and debt relief?

5. Social and environmental impact assessments – Did the IMF and WB undertake social and environmental impact assessments of all macroeconomic and structural adjustment policies linked to loan instruments?

6. Consideration of alternatives – Were specific recommendations made by civil society organizations during the consultation process? What was the response of the IMF and WB to these recommendations?

7. Other – What other comments do you have about the PRSP/Interim PRSP process in your country?

Thank you for your collaboration. We look forward to reading your comments.

Footnotes

^[1] Common examples of structural adjustment conditions imposed on borrowing governments by the Bank and the Fund include trade and investment liberalization, privatization, fiscal deficit reduction, and public sector, banking sector and labor reform programs.

^[2] “Social and Environmental Aspects: A Desk Review if SECALs and SALs Approved During FY98 and FY99,” World Bank, Environmental and Socially Sustainable Development, Washington, D.C., May 24, 1999, p. 8.

^[3] “Poverty Reduction Strategy Papers: Internal Guidance Note,” op.cit. This document notes that the Joint Bank-Fund Staff Assessment of the PRSP will not assess the quality of the participatory process, leaving this judgement to the Executive Directors.

^[4] There were a total of 146 demonstrations and protests related to structural adjustment policies in 39 countries between 1976 and 1992. See Walton, John and David Seddon. Free Markets and Food Riots: The Politics of Global Adjustment, Blackwell Press, 1994.

^[5] The CDF provides a holistic approach for looking at macroeconomic, structural and sectoral interventions and their relationship to poverty reduction in an integrated framework. This approach is reflected in the CDF matrix, which facilitates the definition of sectoral priorities, identification of gaps and selectivity in the support from the country's development partners, and opportunities for donor coordination.

^[6] Wood, Angela. The International Monetary Fund's Enhanced Structural Adjustment Facility –– What Role for Development? Bretton Woods Project, London, September 1997.

^[7] U.S. General Accounting Office. Status of the Heavily Indebted Poor Countries Debt Relief Initiative, September 1998, pp. 3-4.

^[8] The Development GAP. Conditioning Debt Relief on Adjustment: Creating the Conditions for More Indebtedness. Washington, D.C., April 1999, p. 2.

^[9] A UNICEF-UNDP study shows that 6 HIPC countries spent more than one third of the national budget on debt servicing but on average less than 10 percent on basic social services, ranging from 4 to 11 percent. In Burkina Faso, Mozambique, Niger and Tanzania twice as much is spent on debt servicing as on primary health care. In Zambia debt servicing claims more of the national budget than health and education combined.