Conditionality

News

Country ownership of PRSPs is restricted to “officialdom”

21 September 2004


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The IMF’s Independent Evaluation Office (IEO) recent review of the poverty reduction strategy paper (PRSP) concedes to shortcomings in the design of the initiative and points out that “actual achievements fall considerably short of potential”. Focusing on the alignment of the Fund’s low income countries lending tool-the poverty reduction and growth facility (PRGF)-to the PRSP process, the review also explored the Fund’s role in low income countries.

Calling for greater country policy ownership, the report notes that PRSP processes are not well embedded within national processes. Country ownership is restricted to “officialdom”. Although PRSP processes are perceived to be more participatory than previous IFI strategies “participatory processes were typically not designed to strengthen existing domestic institutional processes for policy formulation and accountability such as through the involvement of parliaments”. The report is not categorical on whether Fund conditionality has been reduced following streamlining efforts. The report highlights a general failure to explore alternative macro-economic policy options and notes that little influence is exerted on policy outcomes.

The review acknowledges that Poverty and Social Impact Analysis has not been mainstreamed in programme design. Neither have improved poverty diagnostics informed intervention strategies.

The report notes donors’ need for an IMF signal on the quality of the macro-economic environment, but questions whether this signal necessarily has to involve the provision of financing and conditionality. Clarity in identifying what roles the IMF is being asked to fulfil is needed. The review recommends:

  • Greater flexibility in the implementation of the PRS approach to better fit the needs of countries;
  • Monitoring progress against an explicit set of country-determined benchmarks. Greater results-orientation is suggested.
  • Making criteria and benchmarks used in Joint Staff Assessments more explicit.

IEO to evaluate financial surveillance

Responding to the financial crises of the late 1990s, the IMF’s Financial Sector Assessment Program (FSAP) was designed to strengthen surveillance of member countries through early detection of financial sector vulnerabilities and development needs. A diagnostic and policy advice tool, the FSAP was designed to offer confidential advice to country authorities. Launched in May 1999, over 80 country assessments have been completed or are underway.

The IEO evaluation will concentrate on whether use of the tool has contributed to financial sector stability. A parallel evaluation by the Bank’s Operations Evaluation Department (OED) will assess the Bank’s role in the initiative. The paper will be presented to the Board in 2005. Field visits for country case studies begin in late 2004 into the first quarter of 2005. The draft has been posted on the IEO website and comments are invited by September 30.