Why the Poverty Reduction Strategy Papers failed
to reduce poverty and what lessons to learn for the future
Abstract
Instead of helping poor countries to develop, the Structural Adjustment Politics (SAP) of the
International Monetary Fund (IMF) contributed to further increase poverty and inequality,
notably in Latin America. “Free-market” politics transformed formerly sustainable production
processes into monocultures and extreme exploitation of natural resources. Formerly selfsufficient countries now need to import food.
In order to fight these problems, the Poverty Reduction Strategy Papers (PRSP) were invented
consisting of five core principles to assure the effectiveness of politics. Poverty reduction
strategies should hence involve the society (country-driven) and development partners
(partnership-orientated), focus on the outcomes that benefit the poor (result-oriented), take
into account the multidimensional nature of poverty and have a long-term perspective.
But once again, the effectiveness is low and negative consequences are the standard, not the
exception. This is mainly because the core principles exist on paper but not in reality. With
the exception of increasing bureaucracy not that much has changed.
Partly, this is due to the political unwillingness of rich countries to treat the poor ones equally
and on a fair base which would imply to stop subsidies and home market protection in the
European Union and the United States of America.
Thus our present (economic) system cannot eliminate the roots of poverty. An integrative
system giving equal rights and duties to everybody and searching for global, long-term
solutions in a framework of international interdependency may work better.
Anna Katharina Pikos
111228202939470
1
Table of content
Abstract ............................................................................................................................................... 1
1.
Introduction ................................................................................................................................. 3
2.
Core principles and novelties of the PRPS approach .................................................................. 4
3.
A critical view............................................................................................................................... 5
3.1
Broad-based participation of “the poor” ................................................................................ 6
3.2
National ownership ................................................................................................................. 8
3.3
Analyzing the contents ............................................................................................................ 9
4.
Conclusion ................................................................................................................................. 10
5.
References ................................................................................................................................. 13
2
1.
Introduction
Poverty Reductions Strategy Papers (PRSPs) were introduced in 1999 as an attempt to
overcome the legitimacy crisis faced by the International Monetary Fund (IMF) and the
World Bank (WB). Criticism and demonstrations all over the world showed the growing
discontentment with the politics adopted by the International Financial Institutions (IFI).
Instead of contributing to strong economic growth and welfare, the Structural Adjustment
Politics (SAP) entailed an increase in poverty and inequality as well as a deterioration of
living conditions. Especially Latin America was thrown into a deep crisis.
The introduction of PRSP was seen as some kind of recognition of the IMF and the WB in
what concerns the importance of country ownership of reform programs and a greater focus
on poverty reduction. Another interpretation is that of an inevitable need in the face of
demonstrations by NGOs and individuals against their politics at that time.
The major problems were assessed by the IMF and WB’s think tanks and incorporated into a
new strategy for poverty reduction. In order to achieve the main goals the following
requirements were identified. Macroeconomic and structural policies need to support
sustainable growth developing appropriate sectoral policies and programs. Governance and
the financial management of the public sector have to be improved, costing has to be realistic
and funding appropriate.
Another important aspect is how to evaluate if progress is made. Transparent and systematic
monitoring are essential issues that have been implemented in the obligatory annual progress
report. It has to develop an evaluation strategy of impacts, improve budgetary management
and should assess the critical role of participatory approaches. Equally important is the
dissemination of results.
Thus a PRSP is a timetable for technical policy-related work, combines diagnostics and
analyses and consists of three dimensions: Not only does it include priority public actions but
also a public expenditure management system and the corresponding monitoring and
evaluation systems.
3
2.
Core principles and novelties of the PRPS approach
The five guiding principles of a PRSP1 arose from the criticism concerning SAPs seeking for
a sense of partnership with the borrowers and ownership of the strategy which should endorse
the adaptation and implementation by increased commitment. On the other hand the
credibility of the IFIs’ politics was to be restored. A key advantage towards a more
comprehensive approach was seen in a widespread use of local knowledge2.
The idea was that homegrown strategies (country-driven and country-owned) would have
better chances to be developed and implemented in a way that shows impacts (resultoriented)3. The focus on long term results and assessing poverty through a multidimensional
concept go hand in hand with international long term goals like the Millennium Development
Goals (MDGs). Furthermore, stronger cooperation and better coordination as well between
poor countries and all their external partners as between the donors (partnership-oriented)
should contribute to a better allocation and bundling of resources resulting in clear impacts.
While these principles themselves are not new, the PRSP process is considered as one of the
largest-scale and highest profile attempts to institutionalize them on national as well as
international level4.
Countries are now supposed to write their own three – year national development plans
encompassing macroeconomic politics, spending targets and social development plans. The
common procedure is to first draft an Interim PRSP (I-PRSP) that is handed to the IMF for
approval and will be changed according to their proposals.
Assessing poverty and identifying its key determinants are the first of the basic elements a
PRSP includes5. Furthermore, targets and priorities of public actions for poverty reduction are
set. In order to evaluate the impact of government programs and policies a systematic
monitoring of poverty trends is established and the main aspects of the participatory process
are described.
1
2
3
4
5
Klugman (2002) and IMF (2011)
Fraser (2005)
Seshamani (2005)
Marcus and others (2002)
Klugman (2002)
4
The main novelty is a multidimensional concept of the characteristics of poverty which
encompasses human rights and dignity as well as lack of access to safe water, education,
sanitation and health etc. This allows a more differentiated approach in addressing the causes
which now include the lack of opportunity, low capabilities, a low level of security and
empowerment – a completely new issue never raised before6. Approaches to poverty thus
contain so-called pro-poor growth and good governance as well as security and social safety
nets7. A similar example for the degree of novelty is the recognition of high inequalities as a
main obstacle to growth and poverty reduction. Understanding the multiple linkages between
these factors marks a qualitative change promising better results.
As for the contextual characteristics of a PRSP, the consistency between a country’s
macroeconomic, structural and social policies is as essential as transparency and broad-based
participation8. The importance of PRSP is multiplied by the fact that it serves as a basis for
further WB and IMF lending operations as for instance the debt relief for Highly Indebted
Poor Countries (HIPC).
3.
A critical view
When trying to evaluate the success of PRSPs so far, one has to keep in mind that they
address long term goals. It is thus too early to decide whether they have succeeded or failed.
Nevertheless, the direction of their impacts can already be seen and the concepts concerning
development and implementation can be investigated upon.
Expectations have been high. It seems that in practice, however, PRSP are just business as
usual. Although time may be early and further investigation is needed, there is no evidence for
the expected higher levels of commitment. Misapplications and abuses of the fund continue.
Several institutional changes that may improve efficiency have been performed, e.g. planning
units have been set up within the Ministry of Finance, civil society has organized itself and
donors try to better coordinate their activities. Until now, however, most changes appear more
cosmetic than anything else.
6
7
8
Klugman (2002)
Craig and Porter (2003)
Kamruzzaman (2009)
5
The worst is that there is little evidence of any important impact on poverty reduction.
Information flow deficits and coordination problems still persist.
3.1
Broad-based participation of “the poor”
Participation has been a key word marking the essential change in politics of the IMF and the
WB. On the one hand it was meant to ensure deeper understanding of poverty facets and to
include local differences, on the other commitment was expected to be higher.
Reality, however, has proved rather disappointing. Instead of broad-based participation from
“the poor” – a clearly heterogeneous group – in the sense of issue raising, discussion,
stimulation and integrating opinions and results in the whole process of developing a PRSP,
participation has been neglected in most cases and reduced to a few meetings with the
character of mere information sharing and some consultation.
In Bangladesh, for instance, participation was little and in spite of the theory a top-down
bureaucratic process was implemented
9
. 21 consultation meetings appear fairly
unrepresentative for a country of 140 million people. Moreover, the process was done hastily
to prevent embarrassment in front of the donors. The parliament did not participate.
The reason for this lies in narrow agendas, limited time and pre-determined strategies.
Moreover, where consultation has been held, the participants were dominated by professional,
urban groups. Almost everyone involved in formulating the PRSP proved to be a middle-class
technocrat. Another problem is the employment of a highly technical language common
people cannot understand. Even more shocking, however, is the failure to translate documents
into local languages.
The critics concerning the poor involvement of “the poor” face a severe problem of
implementation because even if the cities’ poor are comparatively easy to reach, this does not
hold for those living in remote rural areas. Direct costs like transportation to the side where
consultation is held or information that is needed prior to the meeting in order to be prepared
to raise issues and pose arguments are a serious difficulty. Furthermore, there are considerable
opportunity costs for poor people joining a consultation meeting for they cannot work during
9
Kamruzzaman (2009)
6
the time of preparation and meeting. They need to have at least heard of what is to be
discussed before, because otherwise they will be simply overrun by an amount of information
without time to think of it and make their positions clear.
In a democracy, when it comes to decision making the problems of time, resources,
information and feasibility are solved by an elected institution whom precisely this task is
ascribed: Parliament. In the process of developing a PRSP, however, parliaments only entered
at the end. Their contribution is limited to an approval of the document when it has already
been formulated. This is a serious danger for young and still not strongly consolidated
democracies which are undermined in their core function and weakened in their influence not
to speak of the impact of this on their perception from society. In the context of the focus
which today is laid on building up and shaping democracies where there were autocratic
systems before this is obviously incoherent and counterproductive.
Some authors even argue that participation has proved to be a use- and powerful tool to
discipline national political economies and individual participants. As a social technology of
control it not only constrains local social forces but secures the existing power relations which
put in danger sovereignty, self-determination and hopes for substantive democracy, especially
in Africa10. The major beneficiaries have hence been mostly donors and IFIs11.
Generally, the PRSP stand for consistency with the previously adopted strategies and do
therefore not lead to changes in macro-economic policy conditions. A positive feature is an
increased budget allocation towards “pro-poor” spending.
Taking into account the above mentioned obstacles, the performance of governments has
nevertheless been truly poor. Bolivia’s government for instance had the scope to dilute the
impact of civil society involvement and thus not deal with the political system’s performance
problems while in Uganda and Vietnam the governments selected the parties they would
consult.
On the other hand they cannot be blamed that easily without being unfair. As participation has
been declared a major issue of PRSP by the IMF, they did not choose themselves, but had to
accept it as a necessary condition for developing their PRSP. One might argue that nobody
10
11
Fraser (2005)
Lazarus (2008)
7
forced them to do so and they could disengage of if they prefer, but only while forgetting that
a PRSP meant the door for further bilateral and international aid. It is itself the condition.
Once a country is dependent on external aid, its decisions are limited to an extent of affecting
sovereignty. This is why the vast majority of poor countries do not have a choice and why the
commitment of government leaves much to be desired. Aid dependent and poor countries thus
had no real choice but to adopt a PRSP under whatever conditions.
3.2
National ownership
These conditions do not originate in the poor countries, they have been developed by the IFIs’
think tanks and not in the countries they are now implemented in. Hence a major problem to
the PRSP approach is that it is an inheritor of the SAP conserving the same ideology of neoliberalism meaning for instance privatization, monetary and fiscal discipline12.
Even if the PRSP should be country – driven and –owned, the initiative of the process lay
with the IFIs which is why poor countries still have to obey to their rules. In this sense, the
ownership is more one of the IFIs. Taking into account the poor involvement of the people
and parliament, one may speak of government or Ministry of Finance ownership. Some even
proposed to characterize it donor ownership but this contradicts the perception of many
donors that were frustrated by their now less involvement. Even they felt dominated by the
WB and the IMF who claimed only to give the framework, the conditions for the process, but
not to determine its outcome.
It is evident, however, that the IMF and the WB did not fail to ensure the strengthening of
their own influence and power in the process: In the end there is the same final authority
deciding whether to approve the PRSP or not. The dimension of this gate-keeping role is the
wider as other sources of bilateral aid e.g. the unconditional debt relief under the HIPC
initiative, are closely linked to the PRSP of a country. Since there are enormous risks of
testing the IFIs’ tolerance it is no surprise that neo-liberal policies continue to dominate.
The extreme interpretation says that PRSPs have been the cover-up for the IFIs to tighten debt
and lending relationships with poor countries. Neither participation nor ownership were a true
12
Seshamani (2005)
8
objective; they were nothing more than necessary components of a so denominated “new”
strategy that allowed to continue the debt relationships between poor countries and the IMF
and the WB thereby legitimating the hegemony of both13.
3.3
Analyzing the contents
After taking a closer look on how PRSP processes work and how they were implemented, the
content cannot be left out. Local ideas and expertise were to influence the development of
clearly defined and feasible poverty reduction programs.
In reality, however, the order of priorities has remained untouched: The most important thing
for international actors is global economic integration followed by good governance which is
sensed to lead automatically to poverty reduction 14 . In this setting, poverty reduction and
social inclusion policy represent nothing more than a refinement of the liberal political
project, some kind of “inclusive” liberalism that aims at including the poor and their countries
in a disciplined way. Poverty is framed in a naïvely technical way but by no means neutral.
Moreover, instead of being country-shaped, most PRSPs follow a donors’ one size fits all
approach which fits into international norms of best practice at the cost of a serious
undermining of the core principles. Most PRSPs are more concerned with fulfilling donor
criteria than with representing the actual situation of poverty15.
In Uganda most stakeholders were generally confused and bewildered by the diversity of
instruments 16 . While the country experienced an unprecedented joining-up of poverty
eradication, the costs have been equally unprecedented. The essential mistake is that many
simple things can be done in Uganda to alleviate poverty but the focus of its PRSP is nearly
entirely elsewhere. What will be decisive for the future is not macro-stability alone; in the end
everything will depend upon the local and thus more specific dimensions of politics, society
and economy.
13
14
15
16
Craig and Porter (2003) and Kamruzzaman (2009)
Craig and Porter (2003)
Kamruzzaman (2009)
Craig and Porter (2003)
9
Marcus and others quantified some of the main problems in 2002 investigating 23 PRSPs and
I-PRSPs: None stated a convincing set of commitments to the poorest groups. Only two
admitted that impacts of economic policies like for instance privatization can be different and
have negative effects and that growth does not necessarily reduce poverty. Not more than
three discussed transitory or compensatory social security measures and none long-term
implications of childhood and youth poverty. Important obvious links as between food
security and nutritional goals were not explicitly stated. The multiple dimensions of poverty
were not sufficiently taken into account, an example being child trafficking, sexual
exploitation and forced recruitment to arms when dealing with child poverty. Child labor was
mentioned, but only by five countries of which two draw a link to actions. The roots to these
omissions lay in the marginalization from consultation processes of children and young
adults. PRSPs were found likely to benefit poor people but haphazardly.
4.
Conclusion
Although time may be early – cost structures of governments cannot be adjusted easily in the
short term planning horizon – and further investigation is needed, the PRSP strategy has been
widely interpreted as a public relations exercise from the IFIs as a response to growing public
demonstrations against their politics and an accompanied loss of legitimacy in the public
opinion17.
Participation was and to a certain part remains the reason of hope: It can be the key to a
transformation of the relations between recipients and donors and the way towards better
assessing and combating poverty. To date, however, participation came down to poorly
conceived, rushed, exclusive and badly organized consultation procedures. On the other hand
poor countries do not have a lot of experience in organizing such large scale events that are
difficult to put into practice.
Rather inexistent national ownership explains why transition of policy targets into real action
at grassroots level is slow and policies departing from broad policy consensus are not
proposed. Instead of local solutions and ideas, IMF agendas have been internalized.
17
Fraser (2005)
10
The question of whom to blame for the failure of most PRSPs is not easy to answer, too. Civil
society disappointed the hopes of articulating well-thought positions but evidence suggests it
is not their fault. National governments surely can be blamed for having gone the shortest way
and for contouring already existing institutions like parliament. Nevertheless, the root of the
problem lies within the consequences of an externally imposed condition and the still gatekeeping role of IMF and WB. That is why the whole PRSP process often came down to mere
document creating.
A major problem is the timeline set for most PRSPs. The need to receive external aid, loans
and debt release did of course not permit to investigate deeply into the roots of poverty and
actions that can be taken against. This should have been included in the process of change
towards the PRSP. First creating I-PRSPs does not serve for more than for the WB and the
IMF supervision; it does not give additional time to countries.
There is a crucial need for allowing countries to investigate soundly which means that they
need the resources and maybe even external advice if they wish. This would of course slow
down the whole process and thus not combat poverty right now, but a thoroughly planned
strategy and its implementation, measures etc. promise a greater success in the long term. And
it is precisely the long term that matters. Parliament as the most important institution of
democracy should be involved considerably deeper in the process.
PRSPs promise a lot in theory but their reality is rather disappointing due to unrealistic
framework and plans that have proved not only to contain conditions difficult to meet, but
they are also difficult to implement. Furthermore, they remain difficult to measure when it
comes to the fulfillment of abstract concepts like participation and good governance.
While there is still space and time left for hope or even optimism, the reality of PRSP until
today poses once again the question whether our economic system is capable of eliminating
the roots of poverty. In the end, capitalism is based on inequalities difficult or impossible to
eliminate without touching the present system. PRSPs seem more like another attempt of the
IMF and the WB to address poverty in poor countries without at the same time changing
anything in power relations. Poor countries became aid dependent as a consequence of
international politics and this is precisely why they cannot disengage from this vicious circle.
Nor does this seem to be an objective from the side of donors or IFIs because only by keeping
11
the status quo they keep their influence, too. Globalization has good consequences for some
and bad ones for the others – the latter making up the majority. PRSPs were meant to alleviate
the bad consciousness (“guilt conscience”18) of the former but they are far from solving the
world’s poverty problem.
A way out may consist in an integrative system which imposes the same rules for rich as for
poor countries, e.g. a true and complete opening up of markets in the EU and also the USA,
and gives equal rights and duties in whatever international institution, be it the WB, the IMF
or the UN. The main problem of this would of course be decision taking structures and
coordination. Without dependencies and different power statuses there is a need for consensus
without underlying pressures.
Maybe a change like this is impossible. But taking into account the world’s situation today –
high inequalities between and across countries and persisting poverty – it should be worth a
try. At best everybody would understand that only together humans are able to address their
problems and the search for long-term and global solutions would lead to an overall and
integrative combat of the roots, not of the symptoms. If it does not work, frankly, can it be
worse than today?
Of course, considerable progress has been made19. Poverty is declining all in many countries.
In the East and the South – East of Asia the first MDG – halving the proportion of people
whose income is less than $1 a day between 1990 and 2015 – has already been reached.
Sub-Saharan Africa, Southern Africa, Southern Asia (including India), the Caribbean, Latin
America and Northern Africa will fail. In the Caucasus, Western and Central Asia poverty
even increased.
About 1.8 billion people continue to live on less than $ 1.25 per day. The difference is that by
now we are better off and not willing to give up our position.
3,827words
18
19
Seshamani (2005)
United Nations (2011)
12
5.
References
Craig, David and Porter, Doug (2003): Poverty Reduction Strategy Papers: A New
Convergence, World Development Vol. 31, No. 1, 53-69
Fraser, Alastair (2005): Poverty Reduction Strategy Papers: Now Who Calls the Shots?,
Review of African Political Economy, Nos. 104-105, 317-340
International Monetary Fund Factsheet (2011): Poverty Reduction Strategy Papers (PRSP),
last viewed on 22nd of March 2012: http://www.imf.org/external/np/exr/facts/prsp.htm
Kamruzzaman, Palash (2009): Poverty Reduction Strategy Papers and the rhetoric of
participation, Development in Practice, Vol. 19, No. 1, 61-71
Klugman, Jeni (2002): A sourcebook for poverty reduction strategy: core techniques and
cross-cutting issues, Vol. 1, The World Bank
Lazarus, J. (2008): Participation in Poverty Reduction Strategy Papers: reviewing the past,
assessing the present and predicting the future, Third World Quarterly, Vol. 29, No. 6, 12051221
Marcus, R., Wilkinson, J. and Marshall, J. (2002): Poverty reduction strategy papers (PRPS) –
fulfilling their potential for children in poverty?, Journal of International Development, No.
14, 1117-1128
Seshamani, V. (2005): The same old wine in the same old bottle? Content, process and donor
conditionalities of the PRSP, conference “Political Dimensions of Poverty Reduction – the
Case of Zambia”, Lusaka
United Nations (2011): The Millennium Development Goals Report 2011, New York
13