PRSPs: Poverty reduction or poverty reinforcement?

Under pressure from world public opinion, especially from the Jubilee 2000 movement for debt cancellation, the World Bank and International Monetary Fund (IMF) proposed the Heavily Indebted Poor Countries (HIPC) Initiative in 1996. In 1999, the Initiative was revised to include more countries that were left out in its first phase.

But another important characteristic of the “enhanced” Initiative was the addition of a new conditionality, called Poverty Reduction Strategy Papers (PRSPs), which all eligible countries were required to submit in exchange for “debt relief”. The PRSP requirement was an implicit recognition on the part of the two institutions of the utter failure of structural adjustment policies (SAPs), which, for more than two decades, had been imposed on developing countries, in exchange for loans.

The PRSPs, we are told, represent a “major departure” from SAPs, in that they are “nationally-owned” and aim at “reducing poverty”, according to the two institutions. But what is the reality behind the rhetoric?

The myth of “national ownership”

If we are to believe the IMF and the World Bank, the PRSPs are “country-driven” and reflect the priorities of each country in its fight against poverty. Accordingly, the PRSPs are drafted after a large “participatory process”, involving the government, civil society organisations (CSOs) and even the private sector. But in reality, “national ownership” is more theoretical than real.

For one thing, the PRSPs should follow a framework proposed by the International Financial Institutions. That framework, spelled out in a voluminous document called the PRSP Sourcebook published by the IMF (Ames et al., 2001) proposes “sound macroeconomic policies” to HIPC countries in drafting their PRSP. It is consistent with the conditionalities attached to the IMF Poverty Reduction and Growth Facility (PRGF), the new name of the Enhanced Structural Adjustment Facility (ESAF).

The compliance with PRGF conditionalities makes the basic macroeconomic framework non negotiable: fiscal austerity; trade and investment liberalization; deregulation of labour and goods markets; emphasis on export-led growth; privatisation of utilities and State-owned enterprises are at the heart of PRSPs.

So, African governments and civil society organisations (CSOs) are left with only one option: identify areas where safety nets are most needed to “alleviate poverty”. For this reason, African governments tend to put in their PRSPs what the IMF and the World Bank would like to see in those documents, rather than what their development priorities are.

On the other hand, CSOs have been frustrated by the PRSP process. They found out that they were used more as alibi than considered as true partners whose opinions are valued and taken seriously. In several countries, including Uganda, Mauritania, Senegal, Tanzania and Mali, CSOs have found themselves as the “guinea pigs” of the PRSP process.

Moreover, democratically-elected bodies, such as National Parliaments, have been ignored by the Bretton Woods Institutions (BWIs). Finally, we know that the final say belongs to the Boards of the two institutions, which should give their seal of approval to any PRSP before its implementation. Under these circumstances, talking about 'national ownership' is a bit disingenuous, to say the least.

The myth of “pro-poor” policies

It is even more disingenuous on the part of the BWIs to claim that PRSPs contain “pro-poor policies”. As indicated above, the basic macroeconomic framework is the same as the one that underpinned the failed and discredited SAPS. For this reason, there is a big gap between policies that are in the interests of the poor and most of the recommendations contained in the PRSPs. For instance, low-income and poor groups call for cheaper and more affordable prices of staple goods and for free access to basic services. This is in contradiction with the delivery of such services by the market, as recommended by the BWIs.

The privatisation of essential services, like water and electricity and the deterioration or privatisation of public services, such as health and education, have never been in the interests of the poor. For instance, the imposition of user fees on health care or education has led to a sharp drop of hospital attendance and school enrolment from poor or low-income families and increased the gender gap, since girls and women are the main victims of those policies.

In Senegal, where water is privatised, poor and low-income groups in urban areas pay three to four times more than rich groups. Still in Senegal, the liberalization of the groundnut sector, imposed by the IMF and the World Bank against the will of the government, cost at least 400 jobs following the dissolution of one State-owned enterprise and led millions of peasants and their families to the brink of famine. The Government had to draw up an Emergency Relief Plan worth more than $23 million to avoid a national catastrophe.

On the other hand, price deregulation and the elimination of subsidies have led to the collapse of the purchasing power of average citizens, in particular of low-income groups. This explains, inter alia, why in Senegal more than 64 % of people surveyed in the PRSP document said that their situation has worsened between 1995 and 2002, a period of so-called “high growth rates”.

Still in Senegal, the liberalization of the groundnut sector, evoked above, led to a sharp fall in agricultural production in 2002. This, in turn, resulted in a more than 50 percent decline in economic growth, from 5.6 % in 2001 to 2.4 % in 2002, according to early estimates. The difference is an annual income loss of roughly $200 million for a country where two out of three citizens live under the poverty line.

How, in the world, can the IMF and the World Bank claim that such policies aim at “reducing poverty” and are “pro-poor”?

Another example is Zambia, where in less than 10 years, the textile industry was wiped out as a result of sweeping trade liberalization undertaken under the Chiluba regime. The Zambian textile industry fell from 140 units to 8, shedding in the process more than 90 % of the workforce. In several other countries, local industries have been destroyed by cheap imports of poor quality, in the name of “free trade” imposed by the IMF and the World Bank.

But it is widely documented that trade liberalization is one of the main causes of the widespread poverty experienced in the world as well as the widening gap between the rich and the poor. The latest UNICEF Report, the State of the World's Children, indicates that in some developing countries more than 90 percent of children under 5 are in absolute poverty. Trade liberalization, deregulation and privatisation are among the factors behind that catastrophic situation, according to the Report, which was released in October.

Trade liberalization has worsened Africa's terms of trade. A study by the United Nations Conference on Trade and Development (UNCTAD) in 2001 indicates that if Africa's terms of trade had remained at their 1980 level:
- the continent’s share in world trade would have been double its current share;
- average per capita income would have been 50 percent higher;
- annual economic growth would have been 1.4 percent higher than.

In light of this, it is clear that trade liberalization has been costly to Africa. It has led to the collapse of the continent's commodity prices, increased its external dependency and destroyed many local industries. The same UNCTAD study has indicated that Africa's de-industrialization has accelerated since the 1980s.

Still according to that study, capital flight has worsened as a result of financial liberalization. This flight, combined with debt service, has resulted in net financial outflows from Africa to developed countries over the last 20 years. In other words, the poorest continent is financing the richest countries. This is one of the most glaring achievements of the IMF and the World Bank.

Indeed, more trade and investment liberalization, more deregulation, more privatisation and a further weakening of the State are more likely to generate more poverty than promote economic and social well-being. No wonder in Sub-Saharan Africa (SSA) about 500 million live on less than $2 a day, according to the World Bank. This number is projected to rise to more than 600 million in 2015, despite all the fuss about the Millennium Development Goals (MDGs).

Therefore, so long as the PRSPs, like the now discredited and failed SAPs, are within the framework of the neolberal model, they will generate more poverty than “reduce” it. And like SAPs, the PRSPs will ultimately fail.

Conclusion

After spreading poverty at an unprecedented scale in Sub-Saharan Africa and in other developing countries, the IMF and the World Bank are trying to mislead world opinion, especially in the North. They make people believe that they are really committed to “reducing poverty.” But the truth is that this has never been their intention. Their real mission is to promote the interests of global capitalism, by opening Africa's economies to multinational corporations and financial speculators and by transforming them into markets for Northern countries' goods and services.

The true mission of the BWIs in Africa and elsewhere should have been clear to everyone, especially to NGOs familiar with their philosophy and policies. Yet, some African NGOs, which have been among the leading critics of SAPs and in the forefront of the struggle for debt cancellation, have been misled by the BWIs' rhetoric on PRSPs. These NGOs have found some “merits” to the PRSPs and think that with the emphasis on more spending for social sectors, like education, health and nutrition, the PRSPs could help “alleviate poverty”.

This is a big mistake. One cannot trust the BWIs to reduce poverty in Africa or elsewhere. So long as they avoid challenging the unequal power relations that define the unfair rules of the international financial and trading system, these institutions will never be in a position to “help” Africa or other developing countries. In reality, what the IMF and World Bank try to achieve with the PRSPs is to:
- create the illusion of “poverty reduction” while pursuing the same failed and discredited policies, with even more conditionalities;
- promote a superficial “national consensus” on short-term “poverty reduction” programs at the expense of a serious and deep reflection on long-term development policies;
- drive a wedge between “reasonable” and “radical” civil society organisations in Africa;
- shift the blame to HIPC countries' governments and citizens for the inevitable failure of the PRSPs.

* Demba Moussa Dembele is Director of the Forum for African Alternatives. Click on the link below for references to this article.

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