Important changes to the IMF‘s remit in the poorest countries were announced at the IMF–WB Annual Meetings in September. The Fund will now focus on poverty reduction rather than stabilisation and growth. Its Enhanced Structural Adjustment Facility (ESAF) is to be renamed the Poverty Reduction and Growth Facility (PRGF) and the joint IMF and World Bank Policy Framework Papers will become the Poverty Reduction Strategy Papers (PRSP).
The new IMF emphasis on poverty reduction is largely attributable to NGO campaigning to link debt relief to poverty objectives. An important feature of the PRSP process is that it should be led by governments with civil society participation. Once countries produce poverty strategy papers, the Boards of the Bank and Fund will be required to endorse them as a basis for their funding. They will, however, consider the quality of the participatory process which produced the strategies. In effect this means that governments now need to comply with process as well as policy conditions. The Bank and Fund will set policy conditions based on the PRSP, based on government priorities in cases where detailed strategies have been produced.
The IMF intends to replace its ESAF programmes with poverty-focused ones immediately. Interim PRSPs will be funded whilst fully-fledged PRSPs are being produced. The Interim PRSPs will build on government programmes and initiatives already developed and will include a policy matrix of macro-economic and structural reforms. The degree of participation at this stage will be limited. The first few countries will set precedents for future practice.
Some NGOs are concerned that the pressure to develop PRSPs in order to reach decision and completion points for the HIPC debt Initiative could force them to be developed too quickly, with limited civil society discussion. Some NGOs are also calling for HIPC relief to be delinked from PRSP implementation and challenging the IMF to reassess all of its policies in the light of poverty reduction objectives. The Fund cannot just allow governments to expand budget deficits and spend more on social sectors.
NGOs are also asking that:
- formal mechanisms are developed to allow permanent civil society involvement in such processes;
- the World Bank becomes more effective at analysing and addressing poverty issues at the programme level;
- the Bank and Fund remain accountable, not pushing the burden of accountability solely onto governments;
- the PRSP process builds on initiatives already in place in countries;
- there will be a transparent arbitration process if the Boards reject a PRSP;
- resources are made available to help civil society participate in the process and monitor programmes.
Other groups have rejected the new process and IMF poverty mandate altogether because of concerns that it will extend the Fund’s reach ever deeper into countries’ domestic affairs. They argue that the IMF should not lend to the poorest countries and should be “decommissioned”. Bernadino Mandlate, from the Mozamibique Debt Group, cautioned that “we are sceptical about them talking our language.”
The Fund and Bank are drawing up guidelines for staff outlining the features PRSPs should contain, to be discussed by the Boards on 14 December. IMF staff have indicated that their core macroeconomic policies are not negotiable. Hugh Bredenkamp commented that “there is consensus that IMF core policies are correct. Some NGOs are lagging behind the consensus”.
Several Executive Directors (EDs) and ministers have acknowledged that pressure must be kept on the IMF to ensure that it demonstrates more flexibility in its macroeconomic programmes but does not extend itself beyond its mandate. A joint ED committee is being formed to help monitor progress at both institutions.
A substantial amount of discussion is going on in Washington about how to operationalise the PRSP. However, as yet there appears to have been little effort to engage developing country governments in these talks.
The IMF and Bank Board papers should be available on the IMF and Bank websites after the Boards have discussed them: www.imf.org; www.worldbank.org. The Bank and Fund intend to set up a website to solicit outside comments on the new process.
Eurodad is collecting papers and briefing documents on pro-poor policy approaches which will be available on the Eurodad website www.oneworld.org/eurodad. Send papers with a short synopsis to Anna Collins at email@example.com.
Bretton Woods Project has produced a briefing paper outlining how the multilateral institutions, donors and NGOs might participate in the new process. For a copy email firstname.lastname@example.org.