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2.1 POVERTY AND INEQUALITY: HIGH GROWTH, BUT NOT FOR ALL

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Critical voices on the world bank and IMF

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The Project receives core funding from the C. Mott Foundation and annual contributions from UK network members. Since then 28 countries have completed a full Poverty Reduction Strategy document another 45 countries have produced an interim document. The aim of this short briefing is to provide information to a non-specialist audience on some key aspects of PRSP s. It does not cover all areas or provide detailed strategic insights.

The Bank and Fund invented the PRSP to ensure that debt relief money would go to poverty reduction, and to respond to evident weaknesses in relations between poor countries and the Bretton Woods Institutions — in particular, lack of poverty focus, and no country ownership of reforms.

There are five core principles underlying the development of poverty reduction strategies, namely:.

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PRSP s should build on existing national plans when possible. While some countries such as Uganda and Mozambique have succeeded in re-presenting their existing plans as a PRSP , these have often been overlooked in the new process. PRSP s are intended to be the basis for all foreign aid to poor countries.

In addition, a number of countries which receive a blend of concessional and non-concessional lending-like Pakistan, Albania and Indonesia are preparing PRSP s as a basis for their assistance programmes. The IMF and the Bank have renamed their lending facilities for poorer countries. The interest rate and repayment conditions are the same. To address the issue of the tension between qualifying for debt relief and allowing time to develop a good PRSP , countries have been allowed to develop Interim PRSP s. Many other donors have adopted PRSP s as the framework to channel their aid, therefore building coordination around plans that are still heavily influenced by the Fund and the Bank in terms of growth assumptions and poverty reduction approaches.

The government is responsible for writing the PRSP and for commissioning and organising technical and donor input into it.

While there have been examples of innovation in some areas, the macroeconomic framework has remained largely unchanged. Many NGO s are concerned that this contradiction means that governments opt for programmes that they know will be accepted even if this conflicts with priorities identified through consultative processes.

ENB+ Report | 11th CCAC High Level Assembly | 22 Sep | NYC

The Bank and IMF staff have argued that a government can present whatever plan it wants. Without a positive JSA and Board concurrence in this assessment, the government will not get Bank or IMF funding and will be unlikely to get bilateral funding. Thus it is ultimately questionable to what extent a programme can be truly government or nationally owned.

It is more honest to say that the process is government-led.


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Even a government-owned programme would not be country-owned without broad participation that translates into objectives. Each loan supports a specific programme of reforms which form the basis of a policy matrix negotiated between the Bank and the borrower. This matrix spells out the specific priority actions conditionality considered critical to the success of the program. However most of the time PRSP s build on loan agreements rather than vice versa.

Loan negotiations are still conducted behind closed doors within Ministries of Finance and Central Banks, and lack disclosure, public involvement and oversight. PRSP s have been introduced as an official recognition that there is no single blueprint for development. However most actors, including the Bank and the Fund, have acknowledged that while PRSP s have improved diagnostics on the various dimensions of poverty and allocation of related social spending, they have not differed much from previous adjustment programmes as far as the core economic policies are concerned.

In addition to requiring a coherent policy strategy for poverty reduction i. On the participatory process the Bretton Woods Institutions recognised at the outset that there will be substantial variation with regard to the nature and extent of participation across PRSP s.

As such there is not uniform threshold; rather a commitment to openness and transparency is considered important. However, numerous concerns expressed by civil society organisations about the participation process in their country appeared to have been overlooked by the Boards, as in the case of Bolivia or Cambodia for example.

This is done through JSA s. This would suggest that the Bank should have the final say on whether a framework is acceptable or not currently the IMF has the ultimate authority to judge the macro policy content. Apparently no institution has the final word; instead there is now a clear dispute resolution procedure, which means that any differences between the two institutions are ironed out. The World Bank and the IMF , under pressure from NGO s and some governments, have agreed to introduce more systematic analysis of the likely poverty impact of policies proposed in their loans. While social impact analysis was part of the PRSP logic from the start, progress has been very slow and it will still take time before it is mainstreamed.