www.imf.org
Heavily Indebted Poor Countries Initiative (HIPC): The HIPC Initiative is a comprehensive approach to debt reduction for heavily indebted poor countries pursuing IMF- and World Bank-supported adjustment and reform programs.
www.imf.org
Structural Adjustment Programmes: “A policy package, prompted by balance of payment crisis, inflation and the disarray of state finances, associated with the two multilateral regulatory institutions of contemporary capitalism: the International Monetary Fund (IMF) and the World Bank (WB)”
Johnston (et al) (2005) ‘The Dictionary of Human Geography,’ (Blackwell), p792
Enhanced Structural Adjustment Facility (ESAF): ‘a development of the SAF (Structural Adjustment Facility)’
www.imf.com
The Poverty Reduction and Growth Facility (PRGF): ‘is the IMF's low-interest lending facility for low-income countries. PRGF-supported programs are underpinned by comprehensive country-owned poverty reduction strategies.’
www.imf.com
Wider Context
Since the middle of the 1960’s neoliberalism has gained support, until in the late 1970’s it became the accepted policy of the International Institutions (World Bank, International Monetary Fund and since 1995 the World Trade Organisation). This put an end to state led development schemes that were perceived to no longer represent the best discourse. These neoliberal policies meant changes in the global south, through the restructuring project they were coerced into undertaking by the IMF. The south were required to show a willingness to commit their economies to a neoliberal development policy in order to gain essential loans and funding. The financial institutions approach is that development is a linear progression from developing to developed, however this hypothesis fails to recognise the differing natures of western countries development. For example there is a large difference between how the USA (colonised, fought for independence in the 18th Century) and how France developed (Not colonised, reverted from a monarchy to a republic and back again). This development is different again from Germany who were not colonised but weren’t unified until 1780, suffered fascist rule in the 20th century, were a main player in 2 world wars. Although these are historical differences they do create a national identity (Slater, 2004), this means contradictory characteristics for different western countries. It is also true to say, that on the whole countries that underwent colonialism have developed more slowly, which may suggest that colonialism didn’t advance countries as the west would have us believe. The 3rd
world’s most advanced countries tend to be in Latin America, who incidentally were given their independence 1st Brazil 1825 (onwar.com,www), Argentina 1810 (gosouthamerica.about.com,www), Chile 1826 (emayzine.com,www)). The area that is least incorporated into the global markets is Africa whose resources were pillaged (the slave trade, minerals and gold to name a few) by Britain, Portugal and Spain and reallocated mostly to the Americas. They were also given their dependence later (Congo
1960 (africawithin.com,www), Morocco 1956 (brainyhistory.com,www), Algeria
1962 (onwar.com,www)).
So is it fair to say that neoliberalism is to blame for countries of the south’s problems today? It is difficult to dispute the evidence that the actions of previous generations have shaped the world in a similar form that it now finds itself in. However there are a couple of pieces of compelling evidence that would support the hypothesis that neoliberalismhas been detrimental to Southern countries. The greatest development in recent times has occurred in the ‘Asian Tiger’ countries (Singapore, Hong Kong, South Korea and Malaysia), these areas although the IMF insist represent successes of neoliberalism, received substantial government funding to aid their rapid industrialisation (Role of the state is supposed to be minimised in the neoliberal approach) (K Kim & DM Leipziger, 1993). Africa does have desired natural resources such as huge Diamond reserves in Sierra Leone, oil reserves across North Africa and Uranium in the Congo (infoplease.com,www). So why is Africa not more developed? The corruption within governments is well documented and no doubt has an effect. However it also seems clear that exploitation of the west and the economic structure which the country is asked to operate within must also be called into question.
The most compelling argument about neoliberal reforms success is the IMF and World Bank’s decision to introduce the PRSP programme. This policy being introduced despite Neo-Classical economic theory stating that countries that undertook a neoliberal agenda would alleviate poverty (web.inter.nl.net,www) it appears that inequality has been worsened. For example “The developing world now spends $13 on debt repayment for every $1 it receives in grants” (globalissues.org,www) The criticisms of the World Bank and the IMF have mainly been about their political agenda, when originally they were created to be impartial organisations. But how can there be a political agenda when the
organisations are not formed by a country? The leader of the World Bank is not democratically elected, he is appointed by the US president also it is generally accepted by the international community that the president of the IMF is also an American. This may explain why the International Institutions have continued to push forward their neoliberal agenda even under fierce criticism from many spectators.
It benefits the US and Europe to open up the world and increase the possibilities for global consumption. The IMF has also received criticism for its support of military dictatorships that benefit US corporations (J.R Vreeland, 2006). Also important is the voting by quota (allocated, which is dominated by the US and Western Europe. The World Bank needs an 85% concession from all countries to pass a reform, the US controls 15% and therefore effectively there is a veto situation, where the US can amend or discard any policies they do not approve of. The IMF is controlled by the US and Europe with the rest of world not having enough power to change policies.
The US are supported by other key Western countries such as the UK, Germany
and France. This leads to developing nations being moulded in a Euro-Americanist view. A criticism is that these institutions promote westernisation rather than globalization (Slater, 2004). The idea of elitism of the West is apparent when reading through the IMF and the World Banks websites, they use words such as ‘donor countries’, ‘more prosperous’ and ‘modern’ It has also been argued by Slater that the West only exposes
itself to Western writers ideas of development and the south’s writings have been largely ignored. The Economic Commission of Latin America was set up because the Central American countries felt they were powerless to stop the west’s dominance (Slater, 2004).
Allied to these criticisms there is constant talk of corruption within the organisations, the sacking of Paul Wolfowiz (news.bbc.co.uk,www) although unrelated to 3rd world policy was damaging to the institution and to George.W.Bush who elected him. It also called into question the election criteria for these high profile jobs.
To understand the reasons and the circumstances as to why the World Bank and the IMF decided on their Millennium Development Goals and PRSPs it appears important to appreciate the circumstances that have made these policies necessary. In many cases the global position of countries was pre-determined by colonialism a long time before the Bretton Woods Institutions were formed. Therefore these international establishments are fighting against historical inequality and prejudice. The arguments against the World Bank and the IMF however are many in number, the most relevant and important ones being possible political motivation behind 3rd World Initiatives. The need for PRSPs is an indicator that world policies towards tackling global inequality have been disappointing at best and ineffectual at worst.
Literature Analysis
Having studied a wide range of literature focusing on new anti-poverty agendas, a number of the key themes and alternative viewpoints relating to the topic can be identified.
The failings of the Structural adjustment programs (SAPs) prior to the Poverty reduction strategy papers (PRSP) approach are well documented, for example Christiansen and Hovland (2003) of the Overseas Development Institution (ODI) talk of Policy Framework papers (PFPs), part of the ‘old’ SAPs, which instead of being ‘country-driven’, a key goal of the new agenda, provided governments with very little ownership. Other commentators look at how SAPs have reflected the liberalization of policies, markets and trade and how this process resulted in the adoption of ‘one-size-fits-all’ economic policies, which don’t consider a country’s specific needs, and which didn’t make poverty reduction a priority. (Cheru, 2006)
Contrastingly, the IMF state that they believe the PRSP approach does address country-specific constraints to development (imf.org, www, 2005). Perhaps on of the most damning critique, is again from an ODI paper, where it is argued that there was an increase in poverty incidence in some countries; however it is not stated over what temporal or spatial scope or in what context. (Cling et al., 2002)
The criticisms of the old SAPs in the Enhanced Structural Adjustment Facility (ESAF) reviews, which later led to the formulation of the new agendas, are summarized somewhat differently by the Bretton Woods Project (BWP) (2003), an organisation which works to "scrutinize and influence" the IFI’s, and the IMF itself.
The BWP (2003) calls for more flexibility, and identifies that those countries that are not involved in market activities would suffer long term decline, alternatively the IMF Chairman of the Executive Board in his summary talks more of the positives of ESAF, such as the improved prospects for sustained implementation and the growth it brought. (imf.org, www, 2004).
It is also suggested that Bretton Woods Institutions (BWIs) blame the failure of the structural adjustment on the developing countries failure to implement them rather than their content. However it is stated that the adoption of the new PRS implicitly recognises the failure of the previous policies. (Cling et al., 2002) The new PRSP approach was supposed to represent a major departure from previous strategies, with the key goals laid out by the IMF, where strategies should be, country-driven, result-oriented, comprehensive, partnership-oriented and based on a long-term perspective for poverty reduction (Cheru, 2006). The intended innovations brought by the PRSPs are highlighted in Appendix 1. (Cling et al., 2002) Ownership is one of the focal points of the new approach. However, even though conditionality is not as prominent, it is still clearly present, despite the fact that it is internalized somewhat. It is subsequently pointed out that the principles of ownership, and conditionality may be somewhat antithetic, where a country can never own or control the process fully, as conditions placed upon them by IFIs restrict this. (Cling et al., 2002) Many NGOs are concerned that this contradiction means that governments opt for programs that they know will be accepted even if this creates conflicts with priorities identified through consultative processes. (50years.org,www, 2004) The Bank and IMF staff argued in opposition, stating that a government can present whatever plan it wants. (imf.org,www, 2005). The ’50 years is enough’ organisational network is strongly critical of the current and past implementation of SAPs, and critiques the neo-liberal development model somewhat also. It identifies that the institutions are correct in stating that the plans are agreed by the governments, but the government officials involved are usually limited to northern-educated, and wealthy members of the government and those most likely to agree with IMF economics and benefit from the policies (50 years.org,www, 2004). Both BOND (British Overseas NGOs for Development) commentator Fraser (2003) and Booth (2005) follow up this point by describing PRSPs as technocratic, where decision makers selection is based upon how highly skilled and qualified they are. Possibly the most important point to take from the network however, is the view that PRSPs are simply SAPs "renamed", in attempt by the IMF to lose its negative perception. (50years.org,www, 2004) Fraser (2003) goes on to state that participation can be manipulated to achieve the outcomes facilitators want, and can "increase and legitimate their influence over Southern governments and populations." It is also highlighted that for many civil society organisations they lack the funding, capacity and experience to engage effectively in government policy debates. (Piron, 2004). NGOs are also often unrepresentative of poor people and their interests, and in some countries there are very few organisations which exist independently of government. It is stated that the participation consultation focuses on public expenditure options and other ‘technical’ issues rather than talking for example, in Benin, about issues of family-law reform and land distribution, which were effectively ignored in Benin’s PRSP consultations (Driscoll and Christiansen, 2004). Chandrasekha (2000) also makes the point that the neoliberal idea of ‘protectionist walls’ did not exist, making developing nations dependent on aid. However, as not to focus overly on the negatives, David Booth also looks at some successes of PRSPs, stating that there has been some genuine learning and innovation in some countries, notably about the form of public consultation that supports critical policy thinking. He calls it a ‘bold venture’, saying PRSPs have been associated with some worthwhile improvements in policy processes, especially in countries that were already moving in the direction of greater results’ orientation and accountability, though he concludes that these improvements are modest in character even in the best case (Booth and Lucas, 2004) From studying a quantity of the vast literature available on this topic, it can be seen that the people and organisations involved have a number of similar and contrasting views. The ODI, which is an independent organisation, and thus it may be assumed has little ‘ulterior motives’, other than the reduction of poverty, therefore the criticisms from authors of the ODI, such as Booth, Christiansen, Hovland, and Driscoll, could be seen as unbiased and a valid insight into the PRSP approach. The same may not be said of the IMF and World Bank, who as the producers of the new and old SAPs are not so keen to identify the weaknesses others find, and appear to view the programs through ‘rose tinted glasses’. Obviously the fact that some authors may also be fundamentally biased against SAPs and PRSPs, who ignore the benefits that they may bring, must not be overlooked, for example the 50 years network is so strongly against the IFIs, it may fail to recognize the positives SAPs bring.
Interpretation of relevant Case Study Material
In order to develop a greater understanding of the potential for PRSPs it is of significant importance to analyse case study examples, in order to get appropriate quantitative and qualitative evidence, which can be used to either support or criticise the notion that PRSPs are contributing to “a new start” or “more of the same.” However it is important to consider the context and source of information, compensating for any bias that may accumulate in PRSP reports, particularly those from the international financial institutions themselves, as these are likely to concentrate on the positives outcomes, rather than dwelling on negative impacts. Although there have been countless reports written about PRSPs “because of their short history it is only possible to analyse the process and content of the PRSPs, not their impact when implemented.” (Stewart & Wang, 2003) In this section we will focus on an array of case studies such as Zambia, and Ethiopia focusing mainly on the macro-economic, social and structural aspects of PRSP implementation. Research suggests that the shift from structural adjustment programmes to PRSPs was essential with Afrodad claiming that Zambia experienced an overall increase in poverty, with an increase from 69.7 percent to 72.9 percent between 1991 and 1998.
In the context of Zambia, there is great debate as to the extent that PRSPs will provoke a beneficiary impact. It has been reported that Zambia is unlikely to achieve its Millennium Development Goal of halving poverty by 2015. One reason for this is Zambia’s reliance on the commodity of copper which on the basis of current trends is likely to decline as an economic resource over the coming decade. (Lofgren et al, 2004, p68). Furthermore, Lofgren’s analysis is also geared around the belief that if Zambia is to achieve widespread national poverty reduction, then a far more pro-poor approach to economic growth must be applied. Without this alteration in focus, the impact of debt relief on poverty reduction is likely to be modest. (Lofgren et al, 2004, p71). On the other hand Lofgren et al suggest that Zambia does have some potential for economic development and illustrates this through a series of future predictions based around manipulations of its PRSP policy. It is concluded that various measures, concentrating specifically around education, infrastructure development and improved productivity in export orientated agriculture can all contribute to a declination of headcount poverty by 2-3 percentage points by 2015, suggesting that PRSPs do possess some potential for prosperity. (Lofgren et al, 2004, p73)
Many PRSPs are heavily criticised, with their failures being linked to poor implementation and lack of sufficient funding and governmental support, despite PRSPs stressing the importance of adequate funding and budgeting. Zambia’s PRSP states that the annual budget will be the main instrument through which poverty reduction expenditure will be affected. Therefore stressing the importance of effective financial backing and management if poverty is to be tackled through the measures suggested in the PRSP. However “the Zambian government’s lack of political will to implement the PRSP has been confirmed by the failure of the 2003 national budget to address the Poverty Reduction Strategy Paper (PRSP) as a national priority.” (Afrodad, 2003, p3) Afrodad then continues to suggest that the national budget reports of Zambia reveal that the amount of money allocated to poverty reduction programmes was cut by 6.5 percent from K450 billion in the 2002 national budget to K420.7 billion in 2003. However this is significantly higher when considered in real terms due to the 26.7 per cent inflation that occurred by the end of 2002. However, the Second PRSP Implementation Progress Report (2004) which analyzes the ongoing success of the Zambian PRSP suggests that there was a significant improvement in funding allocated to poverty reducing programmes from K140 billion in the period January 2002 - June 2003 to K430 billion in the period July 2003 to June 2004.
By studying the PRSP for Ethiopia, “Ethiopia: Sustainable Development and Poverty Reduction Programme (SDPRP)” (Bijlmakers, 2003) a wide array of criticisms emerge. In his critique, Bijlmakers suggests that Ethiopia’s main determining factors are beyond the control of mankind, or at least of the Ethiopian people. This bold statement intensifies the belief that in some situations, a PRSP is insufficient in combating ever increasing global poverty. On the contrary those in favour of PRSPs would argue that it is in fact the application and utilisation of PRSP policies in Ethiopia that have contributed most significantly to the countries downfall. This idea is intensified through the statement, ‘low aid utilisation has been seen as a major detriment to PRSP implementation in Ethiopia.’ (Bhattacharya, 2005, p18)
Whilst there are many sources which solely highlight the negative aspects of PRSPs, it is important to find sources which see PRSPs as beneficial to a country’s economy and a successful and effective way to combat poverty. The Second PRSP Implementation Progress Report (2004) suggests that the PRSP in place in Zambia is seeing success. With their economic performance seeing marked improvements between 2002 and 2003, with a real GDP (Gross Domestic Product) growth increase from 3.3 percent to 5.1 percent. Which is not only a significant increase in itself, but it surpassed the PRSP target of 4 percent. This in turn led to an increase in real per capita income of 2.6 percent in 2003, from 2.2 percent in 2002. These statistics are evidence that Zambia experienced economic growth during the period which the PRSP was implemented; suggesting the growth experienced was as a direct consequence of policy efficiency..
In order to conclude this section it is imperative to understand that PRSPs are dynamic; in the way that different countries are affected in different ways and indeed that they provoke great impetus for debate. It also seems apparent that despite the criticisms, there is a great deal of evidence to suggest that if PRSP implementation is well managed, then there is great potential for economic and social development.
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Appendix 1.
(Cling et al., 2002)
