The Papers Are New; Poverty Isn't

The Papers Are New; Poverty Isn't

The Reporter (Addis Ababa) , March 15, 2000

By Emrakeb Assefa

Addis Ababa - The most influential and overbearing financial institutions announced last week that they have decided to replace the "Enhanced Structural Adjustment Facility" (ESAF) initiative with "Poverty Reduction Strategy Papers" (PRSPs).


This way, they believe, the past history of bad economy and increasing poverty would be reduced in developing countries. The IMF and the World Bank were admitting, or in their own words, "collectively recognizing" that, instead of alleviating the position of the poor, they have worsened it. Fifteen percent more people are living in poverty in developing nations than 10 years ago, at a time when the two institutions have "ordered conditionalities" tied to lending.


"There is a collective recognition that we have failed," Masood Ahmed, vice-president of the Poverty Reduction and Economic Management in the World Bank, said. He was speaking to journalists, following a two-day (9-10 March 2000) workshop where senior policy-makers from 15 African countries discussed the enhanced framework for poverty reduction, and clarified its links to IMF and World Bank lending operations.


We were told, therefore, that the Enhanced Structural Adjustment Facility (ESAF) was replaced as of 26 September 1999 by the new Poverty Reduction and Growth Facility (PRGF), which aims at making poverty reduction efforts among low-income members a key and more explicit element of a renewed growth-oriented economic strategy. The purpose of the new facility is "to support programs to strengthen substantially and in a sustainable manner [qualifying low-income members] balance of payment's position and to foster durable growth leading to higher living standards and a reduction in poverty."


Now owning up to past mistakes, they are passing the buck to the developing countries. Papers or proposals apparently would not be a "Washington-paper," G. Russell Kincaid, assistant director of the Policy Development and Review Department at IMF, said. Masood Ahmed of the World Bank said the need for this new approach was now urgent when one looks at the facts. "In many developing countries, the development results were not to our expectations. Poverty is higher than some 15 years ago."


The other reason was that the international community had agreed to reduce poverty by half in 2015. Developing countries thus have access to more lending and a chance to "sharpen their goals for development, and that the benefits of development go to poverty reduction."


However, he said that focus on poverty reduction does not mean forgetting industrialization and infrastructure. "It does neither mean taking away from one poor to give it to another, nor redistribution of wealth. It means increasing the size of the pie, and reducing the incidence of poverty today and tomorrow."


Over the next generation (25 years), two billion people would be born, 80% of them in developing countries, and they would not find potable water, schools or roads. Six million children not yet born are going to live in poverty, he pointed out.


IMF's Kincaid, meanwhile, said that African countries need faster rates of growth, a market-friendly environment and a vibrant private sector in order to reduce poverty.


However, "growth alone cannot reduce poverty," he said, and that understanding the diagnosis of what causes poverty, who are the poor and why they are poor, could be helpful.


Kincaid said the new paper would enhance participation of civil societies. It would also "deepen the ownership" as the proposals would be "country-led and country-driven."


IMF's new facility has now the explicit mandate to initiate not only growth and changes in HIPC initiatives, but is also designed to free additional resources to combat poverty, he explained.


Kincaid said the country has to have the strategy and the paper's endorsement by IMF would provide donors with information on financial and technical assistance.


The focus being much more on the objective of poverty eradication and participatory approach, this replacement would make "life more complicated" than it was before, Ahmed admitted. It would be a common strategy for both the World Bank and the IMF, he added


He said they are already familiar with 90% of the poor countries. The fault at earlier estimations was that over the past 10 years, poverty was measured quantitatively. In the last few years, however, a "collective realization" has happened for the need

to supplement that with qualitative assessment. It is not about how many people are below the poverty line, but why they are so, and the kind of social benefits health, education, etc.) that could alleviate their situations, he said.


In a recent survey entitled, "Voices of the Poor," Ahmed said some 60,000 poor people from 60 countries in the world spoke of poverty factors that affect and constrain their ability to get out of poverty. The two single most oft- cited reasons were health crisis and government agencies not being responsive and useful to their base-line survival.


Meanwhile, the actors at the other side of the table, the poor countries, also spoke to the journalists. Three African countries - Uganda, Tanzania and Zambia talked about country experiences, and of "unresolved issues that surfaced up front."


Uganda has its debt of 3.6 billion US dollars canceled while Tanzania and Zambia are the next on the list for HIPC initiatives. Tanzania would soon have a 9 billion-dollar debt cancellation and Zambia a 6.5-billion-dollar cancellation.


The Zambian government representative said that they were being "asked to be less of activists and more of facilitators, which is not easy." It was about building a strong civil society where the direct beneficiaries are the "main actors" and not "just recipients." He said they were told that one of the reasons why "development has failed" was that the stake-holders were not engaged in decision-making.


"Internal consistency" between social and economic policies was required of governments. The focus should be on the marcoeconomic policies as well as the social aspect of poverty, he added.


Generally, discussions promoted a "shared understanding" of the content of country-owned poverty reduction strategies, the process through which they are formulated, and the role of external partners, including the Bretton Woods institutions.