Select Committee on Treasury Memoranda


Memorandum submitted by World Vision

  1.  This memorandum constitutes the written comments/evidence of World Vision in response to the announcement that the Treasury Committee will hold a hearing with Mr Horst Ko­hler, Managing Director, International Monetary Fund (Press Notice No 32). World Vision does not intend to give oral evidence.

  2.  World Vision is a Christian relief, development and advocacy partnership that serves more than 70 million people in nearly 90 countries. World Vision works directly with communities through its area development programmes, often large-scale interventions benefiting many thousands of people. World Vision believes in enabling the poor to take control of their own development through participatory methodologies and also lays emphasis on southern leadership.

  3.  The principal issue in this submission relates to the role of the International Monetary Fund (IMF) as one of the principal architects of the Poverty Reduction Strategy Papers (PRSPs). The launch of PRSPs represented a significant movement for the IMF, with the Fund for the first time explicitly adopting, with Board approval, poverty reduction as a formal objective of its activities. The prospect of comprehensive, country-owned, plans for poverty reduction, which enables improved donor co-ordination, is extremely attractive to all those who work alongside the poor. World Vision has concerns, based on field-level experiences, which indicate that the legacy of the past seems to have pushed the Fund, and indeed the World Bank, towards actions that sacrifice effectiveness for the sake of their organisational interests.

  4.  World Vision, from the inception of the PRSP initiatives, has sought to engage constructively with the development of this new approach to social conditionality. The experience of World Vision in relation to PRSPs within four of our programmatic regions (Asia, East Africa, Latin America and West Africa) is documented in a recent publication Masters of their own development?—PRSPs and the Prospects for the Poor, copies of which have been submitted as part of this evidence. This submission draws on this report, as well as utilising information from a wider cross-section of World Vision national entities currently participating in PRSP processes. This allows World Vision to speak from experience of contexts in which full PRSPs have been completed as well as those in which the process is still in its relatively early stages. The studies undertaken by World Vision point to a diversity of perceptions of PRSPs including very real grassroots frustrations with the process and to more deep seated problems in the management approach taken, particularly by the IMF, towards PRSPs. These problems are suggestive not so much of teething troubles in a new process, but rather a basic mismatch between the IMF's underlying organisational aims and externally stated objectives.

  5.  World Vision has identified concerns regarding the PRSP approach, grouped around the areas of process, content and resources.


6.   Participation

  The four case studies point very firmly to the wider truth that World Vision has not yet encountered what might be termed a satisfactory participatory process. In several contexts the process has been limited to a select group of NGOs who received invitations to events at which the intentions of a government was outlined for their agreement. Elsewhere, World Vision has witnessed poor dissemination of documentation and information and inadequate explanations of the processes for the constituencies whose views were being sought. Timing was also clearly a factor that affected participation, with some countries attempting processes in a limited timeframe (as in Ethiopia with 100 districts being targeted over three days). In Senegal, there was limited inclusion of traditional groups and village level participation and parliamentarians were only included in the final PRSP ratification. Civil Society groups have frequently complained that there has been a tendency for governments to call them together for meetings to provide an endorsement of an already formulated approach. Ultimately, lack of participation will erode public commitment and weaken the quality of information. For national governments there is an inherent tension between the encouragement given to use existing sectoral plans as the basis for the PRSPs and the requirement for participation. The Bank and Fund must do more to address this dilemma directly by encouraging governments to revisit those sectoral plans in a more fundamental way—in many cases at present even the original national sectoral line ministries are not included in the conversation. These criticisms amount to an abrogation of responsibility on the part of the IMF and Bank.

  Recommendation: Capacity building for participation by both governments and civil society group must be provided by the IMF and Bank if levels of participation are to increase in the implementation of PRSPs, especially relating to budgets, public expenditure management, and monitoring and evaluation.

7.   Timing

  It has been argued consistently that the rapid development of comprehensive national plans for poverty reduction mitigates against quality, a dilemma that has surfaced in relation to both Senegal and Latin America. HIPC conditionality has created considerable pressure to speed up the transition to a full PRSP.

  Recommendation: De-link PRSPs from the HIPC process, placing greater reliance on Poverty Reduction Strategy-linked ODA funding and further debt relief as incentives for the development of the strategies.

8.   Ownership (government commitment)

  World Vision's experience is that much work remains to be done to create an atmosphere of ownership rather than conditionality. In-country discussions with many stakeholders highlight the lack of consistency in this regard. Information from Cambodia illustrates some of the unnecessary pressures that have been placed on governments and that can only serve to reduce ownership.

9.   Language

  Our research in Latin America and Cambodia both provided startling illustrations of one of the most frustrating aspects of the PRSP experience to date. In both instances key documents have only been available to civil society groups (including local NGOs) in English. In Cambodia, for example, key documents had to run through six versions before they were finally made available in Khmer. The concept of a participatory process in which essential materials appear only in a foreign language is nonsensical.

  Recommendation: Ensure that essential documents are at least available in the major languages of the countries involved.


10.   Data

  Overall data has played an inadequate role with only limited attempts at poverty mapping or thorough research prior to the completion of the strategy. This problem has been common to almost all of the countries in which World Vision has been actively involved in the PRSP process. One of the earliest full PRSPs to be given the official seal of approval by the World Bank and IMF was that of Tanzania. The data used for much of the planning within the document was, however, based on a 10 year old household survey.

  Recommendation: The quality of data gathering and poverty mapping must be dramatically improved.

11.   Social Impact Assessments and Monitoring

  World Vision has been unhappy with the limited and late planning for social impact monitoring in relation to implementation of PRSPs. Processes for assessments and monitoring must be incorporated during the planning stage of poverty reduction initiatives if they are to give an accurate picture of results. This has clearly not happened as a general rule within PRSP design processes. One DFID funded study was particularly scathing, stating that:

    "a blind eye is being turned to well-known facts about the unreliability of the official reporting systems and administrative data on which implementation monitoring depends. This is not picked up even in JSAs (Joint Staff Assessments—by the Bank and Fund). The potential for using known shortcut techniques, such as participatory beneficiary assessments and facilitated staff self-assessments, to provide quick feedback on critical implementation issues is not being explored creatively enough. [12]

  Recommendation: Priority must be given by the Fund and Bank to conducting social impact assessments on all proposals in PRSPs that have wide-ranging implications for the poor.

12.   A Rights-based Approach

  Throughout its short history, the PRSP initiative has lacked an explicit commitment to the principles of rights-based development. The identification of areas for intervention is intimately connected to the fulfilment of key instruments, not least the Convention on the Rights of the Child. The fulfillment of basic rights is therefore both an obligation on the parts of donors, lenders and states and also an effective tool in the formation of policy itself. A related problem is the relative absence of the issue of human rights from those sections of PRSPs dealing specifically with governance, judicial and law enforcement reform. World Vision welcomes the inclusion of issues relating to the rule of law within PRSPs but is disappointed that this seems to be primarily orientated towards creating an improved climate for investment.

  Recommendation: PRSPs should be rights based. As a step towards this goal, all PRSPs must recognize the role of rights within governance and institution building. Reform of legal processes should also include improved ability for the poor to have recourse to the law, particularly on issues such as land title. In addition, law enforcement agencies should be the focus for human rights training, including education in dealing with issues relating to the legal protection of children.

13.   Macro-economic content

  Attaining higher rates of growth for many of the countries involved depends upon the success of the advice they are receiving from the Fund and the Bank. Yet the track record of IMF macroeconomic advice in promoting growth is not impressive and the results of World Vision's research in Latin America indicates that many of the problems have frequently been seen as rooted in conditionality applied by the Fund. The basic ingredients of PRSP macroeconomic packages seem to be the traditional structural adjustment approach with little substantive innovation or learning from elsewhere, as found in Senegal. Although market led growth and trade liberalisation are important in reducing poverty, the evidence is missed, as to whether IMF advice helps to achieve these goals.

  Recommendation: The IMF should move to a target-based approach to conditionality based on medium-term policy rather than short-term attempts to direct the main instruments of economic policy. The IMF should also expand the range of policy options considered and available to developing states in the construction of national macroeconomic frameworks.

14.   Economics and a Safer World for Children

  Building a safer world for children means taking deliberate steps to address issues of violence against children, child abuse and child exploitation. Yet outside the realms of education and health care, PRSPs often discuss children without policy prescriptions being defined. Previous experience has shown that safety nets for families must be built during times of economic growth to avoid problems during crises, and investments must be made in social provision, law enforcement, participation by children and awareness-raising among children.

  Recommendation: PRSPs should include specific policy prescriptions to ensure resources are allocated to the area of child protection. Children should be included in participatory monitoring and evaluation of PRSP implementation.


15.   Government capacity

  An issue that has affected the PRSP process in every country and will ultimately have a determining effect on successful strategy implementation is government capacity. The impact of structural adjustment programmes was to erode and shrink state sectors. Often this shrinkage was felt keenly in the social policy arena. [13]Not surprisingly government capacity has been a key factor in producing problematical design processes (poor participation, inadequate data etc). Other countries, including Cambodia, have been emerging from long periods of conflict and political instability that have also eroded capacity. The same capacity issues could have a more damaging effect as governments seek to expand educational, health or other provision based on weak departmental infrastructures. Capacity problems may also still exist within essential parts of the central financial administrative system. [14]One area that has clearly concerned the Bank and Fund is budget tracking and Public Expenditure Management (PEM), something the two institutions have identified as an urgent area for strengthening.

  Recommendation: The IMF and Bank should be more active in building the capacity of key parts of state structures, especially those responsible for public expenditure management systems and participatory monitoring and evaluation.

16.   NGO Capacity

  The gradual progression towards new initiatives such as participatory budget setting highlighted a substantial capacity problem among NGOs. This is an issue highlighted with World Vision research in Cambodia, Ethiopia and Senegal. The Bank and Fund has tried to help to address these concerns with some capacity-building initiatives.

  Recommendation: As more PRSPs move into their implementation phase, the IMF and Bank should increase NGO capacity building initiatives, particularly with regard to participatory monitoring and evaluation.

17.   Resource siphoning

  The focus during the development of PRSPs has very strongly been on two specific areas of social policy: health and education. Governments may feel pressured to divert funding from lower profile areas of social policy into the health and education sectors. This problem is likely to challenge countries such as Honduras and Nicaragua that already devote high levels of government budget to other social sectors.

  Recommendation: Public expenditure reviews will ultimately enable governments to identify unproductive expenditures, thereby reducing the threat of siphoning funds from pro-poor areas. Improved public expenditure reviews should mean that budget savings might go some way to bridging the funding gap.

18.   Paying for the PRSPs

  The Bank and Fund were clear at the start of the PRSP initiative that new funding would also be required particularly from OECD donors. Although some donors have agreed to organise their existing aid flows around the PRSP concept, few have actually committed substantially increased volumes of aid. Should Tanzania continue to increase expenditure on key social sectors by 25 per cent per annum, it will only be able to fund 80 per cent of the cost of its PRSP. This issue has been encountered by World Vision in Latin America and many other contexts. Another major assumption within the PRSP initiative is that HIPC2 will reduce developing country debt to sustainable and manageable levels, but this too may be problematic for some countries. Ultimately the quality of PRSPs may prove to be academic if sufficient resources are not available to allow them to be fully implemented.

  Recommendation: The IMF and Bank must greatly increase their advocacy for increased development resources from the north. Continued calls for northern trade liberalisation are also important. The World Bank and IMF should also make clear the insufficiency of HIPC and the need for substantial increases in the level and extent of debt relief. Debt relief should be substantially increased based on a realistic analysis of in-country economic conditions.

19.   Poverty Reduction and Growth Facility (PRGF)

  The PRGF is supposed to make up one part of the funding for poverty reduction, but it has proved to be problematic. It has remained primarily a means to support monetary policy and fiscal reform. In Latin American and Senegalese experiences there has been a divorcing of the PRSP and IMF lending from the PRSP process. This has created parallel processes in which conditionality surrounding the PRGF has superseded and over-ridden the policy-making process of the PRSP.

  Recommendation: Early signs are that action is needed to make the PRGF concessional, more appropriate for development, better linked to PRSPs and less focused on stabilisation.

20.   Are the Fund and Bank Learning the Lessons?

  In the past World Vision has been impressed by the open and constructive approach taken by the Fund and Bank to dialogue on the issue of PRSPs. However, there were serious problems, especially at regional level, with the openness and limited level of participation in the PRSP Comprehensive Review. The original terms of reference for the review were limiting and they were not extensively shared with participating civil society in the south. Most disturbing, however, was the experience of the review process in relation to the regional consultation seminars, organised by the IMF Institutes and World Bank. In Asia World Vision staff were informed that development workers were specifically not wanted at the regional consultation event. Those NGOs who did manage to gain admittance to the Hanoi meeting found the event organised around governmental input, with no real opportunity for civil society comment. The Latin American event was similarly problematic. World Vision did have a registered participant for the Bolivia meeting and was therefore surprised to find that the process for civil society representation was structured so that actual participation was almost impossible (including failure to give details of location, timing or registration).

  Recommendation: The IMF and Bank must give greater priority to increased accountability and transparency in order to foster public confidence in their commitment to participatory processes and country ownership.

  World Vision is committed to try to help make PRSPs work in all the contexts in which we are operational. Yet it is concerned that without substantial change, and a willingness on the part of the Bank and the Fund to prioritise the original aim of poverty reduction over other organisational pressures, then PRSPs may be written off as a good idea badly implemented.

12   David Booth, Henry Lucas, Desk Study of Good Practice in the Development of PRSP Indicators and Monitoring Systems, Initial Review of PRSP Documentation, commissioned by DFID for the SPA, ODI London May 2001 p. vi. Back

13   David Booth, "Overview of PRSP processes and Monitoring", in PRSP institutionalisation study: Final Report, ODI report prepared for the Strategic Partnership with Africa (15 October 2001). Back

14   Ibid, p. ix. Back

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Prepared 12 December 2002