A new anti-poverty remedy for Africa?
At the end of the 1990s, the World Bank and the International Monetary Fund announced a shift in the focus of their lending policies in Africa towards poverty reduction and invited public consultations to help define the strategy. Some hailed this as an innovative departure from the controversial macroeconomic policies the two institutions had previously emphasized in Africa.
"We welcome many, many of the changes they have brought about," UN Conference on Trade and Development (UNCTAD) Secretary-General Rubens Ricupero noted in September, at the launch of an UNCTAD study of the new Bank/IMF policies in Africa. "We think it is good to centre their attention on poverty reduction." The shift in focus also has received considerable support from the donor community. Aid agencies are increasingly channelling their assistance through Poverty Reduction Strategy Papers (PRSPs), the policy documents that seek to translate the approach into country programmes and projects.
But, notes Mr. Ricupero, close examination of PRSPs shows that the new approach has "not changed substantially" from the structural adjustment policies promoted in Africa by the Bank and the Fund since the 1980s.
The two institutions themselves have conceded that both governments and non-governmental organizations believe that PRSPs are not a major departure from the past. A joint study they released in March, A Review of the PRSP Approach, acknowledges a view common among critics: that even though national governments prepare the papers, they contain elements that national officials know the international financial institutions want anyway. NGOs "argue that PRSPs incorporate structural adjustment policies that ... have consistently failed," notes the Bank/IMF review, "... and this reflects the pressures on governments to conform to the policy expectations of the Bank and Fund."
Unemployed line up for jobs in Tanzania: Not many PRSPs explicitly address job creation.
Photo: ©UN / Betty Press
In theory, a PRSP is locally generated and "owned." A government, together with civil society organizations, prepares the document under World Bank and IMF supervision. The PRSP analyzes the causes, nature and incidence of poverty and defines how the country intends to reduce it, largely by increasing public spending on primary health care and basic education. Those programmes are mainly funded through savings on debt repayments under the enhanced Heavily Indebted Poor Countries (HIPC) initiative, but they also depend on financing from other sectors of national budgets and from donors.
This new focus on poverty alleviation follows two decades of adjustment policies in Africa that saw greater economic growth in some countries, but also rising poverty. According to World Bank figures, the number of people earning less than a dollar a day rose from 217 million in 1987 to 291 million by 1998.
Adjustment remains the focus
Largely in response to criticism of its policies, the IMF in 1999 announced its shift, symbolized by renaming its Enhanced Structural Adjustment Facility (ESAF) as the Poverty Reduction and Growth Facility (PRGF). Around the same time, the World Bank introduced PRSPs, initially as the basis on which poor countries would receive debt relief under HIPC. Subsequently, the PRSP approach was extended to other low-income countries, and was turned into a condition to receive financial support from the Washington-based institutions. So far, 42 countries have completed either a full or an interim PRSP.
UNCTAD's study of African PRSPs, entitled From Adjustment to Poverty Reduction: What Is New?, concludes that not much has changed under the new approach. The two institutions have mainly built on conventional structural adjustment polices by adding two new elements:
- Paying more attention to the need for public spending on education and health, reversing the tendency of early adjustment policies to reduce such spending.
- Introducing "safety nets" and targeted spending programmes to mitigate the adverse impact of adjustment policies on the poor in education, health and rural infrastructure.
Although UNCTAD notes that the Washington institutions now realize that economic growth may not automatically trickle down to the poorest sectors of society, they are not recommending alternative macro-economic reforms. The Bank and the Fund still hold that structural adjustment policies are the necessary basis for sustained and rapid economic growth, the UNCTAD study argues. "What has not changed are the macro-economic policies," notes Mr Ricupero.
Mozambique's poverty reduction paper states that continued liberalization of foreign trade is a government priority in order to support rapid economic growth. In their PRSPs, Mauritania and Uganda intend to promote greater private sector participation in public services, which may jeopardize government subsidies for the provision of such services to poor communities. Mauritania indicates that it will privatize electricity and telecommunications.
While some of the policies recommended in PRSPs might by themselves alleviate poverty, in many countries they are being implemented alongside other, sometimes conflicting, policies. The London-based Panos Institute argues that the likely impact of Uganda's PRSP will not be large, since the country has 20 other loans worth about $1 bn; these loans come with their own sets of conditions over which the PRSP has no influence. Those conditions, reports Panos, "are likely to undermine the achievement of the PRSP goals." One such loan stipulates water privatization, which could undermine PRSP health goals by placing access to water out of reach of those who cannot pay market rates.
Pro-poor economic growth
Since many countries followed similar policy prescriptions before the advent of PRSPs -- with little evident success -- there is much debate about the wisdom of emphasizing economic growth through liberalization and rapid integration into the global economy.
In its PRSP review, UNCTAD argues that without massive, sustained capital injections into sub-Saharan Africa, high economic growth is not achievable. The agency notes that incomes in poor countries are too low to generate rapid economic growth and that many of these countries have no hope of attracting private capital unless they have mineral resources. Therefore, accelerating economic growth in sub-Saharan Africa would require a deliberate injection of at least an additional $10 bn annually for a decade.
And once economic growth is initiated, interventions to direct that growth towards poorer sections of African society would also be needed. "The key is the nature of growth," notes the African Learning Group on PRSPs, a forum of policymakers and experts organized by the UN Economic Commission for Africa. Above all, the group says, the benefits of growth must be shared equitably, through strategies that are explicitly pro-poor. Since the majority of Africa's poor live in rural areas, the group argues, efforts to improve their conditions should emphasize rural development, enhanced agricultural productivity and job creation.
School girls in Uganda: Improving education and health are central to poverty reduction.
Photo: ©UNICEF / HQ99-0121 / Pirozzi
Significantly, many PRSPs do not contain explicit pro-poor growth strategies. The Save the Children organization found that out of 22 PRSPs it surveyed, only around a quarter stated that growth strategies should be pro-poor. Another non-governmental organization, World Vision, has argued that for growth to be pro-poor, deliberate measures to redistribute wealth are needed. One such measure, land reform, is "almost studiously avoided within most PRSPs." In some PRSPs, policies inherited from structural adjustment programmes, such as user fees for basic social services, are still being promoted despite their adverse impact on the poor.
The Bank and IMF, however, expect that the conditions of poor people will improve through increased government spending on sectors such as education, health and rural infrastructure, traditionally regarded as important for poverty reduction. According to an IMF study, average spending on poverty reduction was estimated to increase from 7.7 per cent of GDP to 10.2 per cent between 1999 and 2002 in a sample of seven countries that completed their PRSPs.
Another aspect missing in many PRSPs is the need for strategies to deal with the growing social and economic threat posed by HIV/AIDS. In at least 10 low-income countries, one-third of all adults carry the HIV virus. The Bank/IMF PRSP review notes that a number of early PRSPs "were not fully successful in capturing the seriousness of the threat, or the link between poverty and AIDS."
African governments acknowledge the shortcoming. A 19-20 October African ministers conference in Johannesburg, South Africa, declared that given the prominence of AIDS, malaria and other infectious diseases as threats to African development, combating them must be part of the PRSP process.
The Bank and the Fund maintain that opening up the process to public debate and scrutiny is one of the major strengths of the PRSP approach. World Bank President James Wolfensohn says that while the process has not always worked perfectly, "there is strong evidence that it has created space for previously excluded voices."
Mr. Zie Gariyo of the Uganda Debt Network agrees that such consultations are a significant aspect of PRSPs. "The prescription of partnership between government and civil society is novel," he notes. "The majority of states have never regarded civil society as a stakeholder."
The Uganda Debt Network was the leading agency for civil society participation in the country's PRSP, which is often hailed by the Bank as a model. Uganda has an advantage over many other African countries, Mr. Gariyo believes, because the government had previously developed its own Poverty Eradication Action Plan through dialogue with civil society groups. That plan was then reformulated as a PRSP. A Civil Society Task Force, already set up under the earlier plan, consulted citizens, organized workshops, seminars, radio and television programmes and distributed policy briefs through the print media. Later, community representatives met to discuss the draft PRSP and make further recommendations.
"The significant point to note is that civil society inputs were sometimes wholly incorporated into the draft," says Mr. Gariyo. One such input was the call for greater emphasis on employment creation, which was missing in the initial draft version of the document -- a common absence in many African PRSPs. Thanks to the dialogue in Uganda, explicit measures for job creation were included in the agreed document.
Mr. Gariyo notes that the government provided considerable information and did not try to dictate the agenda of the civil society consultations. A Poverty Action Fund has been set up to channel debt savings and donor funds into programmes identified in the PRSP. Civil society groups will monitor the fund.
In Uganda, civil society groups also supported the government in opposing the traditional donor practice of directly funding projects in sectors of their choice. Development planners said this directed too much funding into certain areas at the expense of others. Together, the government and civil society groups prevailed on the donors to place their money into a general government budget for allocation to deserving under-funded areas.
However, Mr. Gariyo notes that this close cooperation did not extend to the preparation of the final version of the PRSP that the government presented to the Bank and IMF for approval. Civil society groups felt excluded from that stage.
Much more needs to be done
In many other African countries, the consultation process is only beginning or is fraught with greater difficulties. The PRSP Monitoring and Synthesis Project of the UK's Department for International Development notes that PRSPs often equate decentralization of government with greater and better participation. Yet in many countries, the institutional framework to allow local participation is lacking and there are no explicit links with local government.
Although parliament is theoretically the highest policy-making organ, the contribution of members of parliament in the development of Kenya's PRSP was disappointing, according to the non-governmental Action Aid. More than 60,000 Kenyans attended countrywide workshops and seminars during the formulation of the PRSP. But the big majority of MPs claimed to have other engagements even when the consultations were taking place in their own constituencies.
Ensuring that the PRSP process always includes civil society is difficult, especially in countries where the authorities perceive NGOs as being anti-government and put up barriers to their participation. In other cases, grassroots movements do not regard some civil society organizations as their genuine representatives, since they are either urban-based or driven by non-governmental groups from abroad.
In some countries, NGOs are frustrated because they do not view the PRSP as an opportunity to debate the underlying macro-economic framework. The call for participation implies debate at both macro- and micro-economic levels, but the Panos Institute notes that the Bank and IMF "appear for whatever reasons, not to be open to debate on the macro-economic issues."
In many cases, charges Ghanaian economist and activist Mr. Charles Abugre, participation of civil society in economic policy-making is strictly limited, and at times is used to endorse Bank and IMF policies and create an impression that NGOs support them.
"Sometimes the IMF and World Bank make all the important lending decisions for a government before a PRSP is finalized," says Mr. Abugre. A case in point is Tanzania. Its PRSP was submitted to the two institutions in November 2000, months after the country's lending programme already had been approved. "We wonder what purpose the full PRSP will serve in Tanzania," notes Mr Abugre.
Listening to the poor?
In 1999, World Bank researchers conducted interviews with 20,000 poor people in 23 countries to seek their views on poverty and learn about their problems and priorities. The Bank hoped that the study, Voices of the Poor: Crying Out for Change, would assist it to gain a deeper understanding of poverty and to refocus its policies on the needs of the poor.
UNCTAD's comparison between the demands of poor people in that report and some of the policy objectives in PRSPs show significant differences. Poor people told the Bank that they needed all school expenses lowered, but PRSPs typically call for reducing or eliminating primary school fees only, while recommending user fees at higher levels. The poor tend to oppose massive privatizations and challenge some of the practices of big business, while PRSPs endorse private sector-led development. The poor generally support land redistribution, lowering land rents and subsidizing basic inputs; they often oppose dismantling government-run cooperatives. But PRSPs push for the development of land markets and the elimination of marketing boards and subsidies. UNCTAD notes that in such areas, the preferences of the international financial institutions and national governments tend to prevail over those of the poor.
Despite the criticisms, PRSPs have generated a "welcome focus by policymakers" on the needs of the poor, says UN Development Programme Administrator Mark Malloch Brown. He adds, however, that the "overall process was in most cases overly concentrated on narrow economic issues."
The Bank and Fund emphasize that PRSPs are still in the early stages of implementation and that there is room for countries to improve both their content and their consultation mechanisms. "This is a long-term process," they note. "Quality will gradually have to improve over time."
PRSPs in funding dilemma
Faced with declining aid and unfavourable trade terms that erode the earning power of major African exports, many countries are expected to encounter financing shortfalls for poverty reduction. This creates problems in planning PRSP targets, making it difficult to predict the availability of financial resources. In their recent review of PRSPs, the Bank and IMF were critical of the first completed PRSPs, noting that none of them included contingencies in the event of financing shortfalls. "The presentation of a set of priority actions that are not yet fully financed and without contingency plans is a risk to the achievement of poverty reduction objectives," notes the Bank/IMF review.
Some observers charge that the amount of debt payments that will be saved under the Heavily Indebted Poor Countries initiative will be smaller than predicted, hampering spending for poverty alleviation. The level of these savings are determined on the basis of uncertain projections about economic growth and export earnings, especially since world prices have been falling for primary commodities, which account for the bulk of sub-Saharan African exports.
Even though most PRSPs depend on money saved from debt repayments, they also draw money from the general government budget. Financing problems are exacerbated when these budgets are highly dependent on external sources of funding, notes the African Learning Group on PRSPs, reporting that in Uganda's case, about 53 per cent of the budget comes from external loans and grants. Because such high levels of donor financing are often not sustained, governments are obliged to constantly revise their PRSP targets.