International Monetary Fund
Toward Faster Poverty Reduction
Mr. Carlos Elbirt and Mr. Hassan Al-Atrash
World Bank and International Monetary Fund Representatives in Moldova
In recent years the international community has shown
itself increasingly determined to tackle the scourge of poverty, one of the
greatest challenges facing the world today. The rapid deceleration of world
economic growth last year, coupled with the far-reaching impact of the September 11
terrorist attacks on the United States, have increased the urgency of
international cooperation to attack poverty and promote durable economic growth
that benefits the poor.
For our part, the International Monetary Fund (IMF)
and World Bank are keenly aware of the major role we can play in fighting
poverty. Our membership is global—183 countries, nearly half of which have
average per capita incomes of less than $1,000 per year. Both institutions
continue to provide substantial assistance to the poor countries through policy
advice, on-site technical expertise, and virtually interest-free loans.
While some countries have made tremendous strides
toward reducing poverty after decades of such assistance, it is clear that
poverty has not been reduced fast enough in many others. And in some countries
it is increasing. One problem is that many of the poorest countries have been
burdened by external debt that they were incapable of servicing. That is now
being addressed through the heavily indebted poor countries initiative, which,
together with other debt relief programs, is expected to eliminate $35 billion
of debt in net present value terms. That is equivalent to about two-thirds of
the total debt of the 24 countries, mainly in Africa, that already have
benefited. The resources released are now available to attack poverty.
But very important also, it has become evident that
poor people themselves often have been excluded from vital decisions about
policies affecting their own future. That is why, in late 1999, the World
Bank and IMF, deepening their partnership, introduced a new approach to helping
countries in their poverty reduction efforts.
The new approach to assistance for poor countries has
a number of novel features:
First, it is specifically targeted at reducing
extreme poverty, especially improving the lot of those struggling to live on
less than one dollar a day.
Second, it is designed to build in each country a
national consensus on how best to tackle the problems of poverty and gain
domestic support for reforms. Low-income countries applying for debt relief or
new low-interest loans from the IMF and World Bank need to develop their own
Poverty Reduction Strategy Papers (PRSPs) based on broad consultation within
each society—including the poor themselves. This will help to ensure that the
problems are understood and the remedies, as far as possible, agreed upon. Those
remedies ideally will involve new priorities in government spending aimed at
redirecting scarce resources to poverty reduction.
Third, the new approach embraces a new concept of
partnership between low-income countries and their external partners. The PRSPs
offer the basis for a coordinated approach by external donors, and give
countries a way to channel donors’ help where it is most needed. The
expectation has been that the PRSP approach will help to improve the quality of
the programs supported by the Fund and Bank, and to increase support for those
programs within the countries.
Moldova’s Interim Poverty Reduction Strategy Paper was finalized and
approved by the Government in November 2000.
At that time, it was envisaged that the full PRSP would be completed
towards the end of 2001. However, the preparation of the full PRSP was overtaken
by political events. While reducing
poverty in Moldova was stated as a principal objective of the new government, it
was not until August 2001 before the government
restarted the preparation of the full PRSP.
The new government has prepared an updated I-PRSP which focuses on
alleviation of poverty through growth, improved social service delivery and
social protection of the poor. According
to the revised schedule, the full PRSP should be in place by year-end 2002.
focus moving forward will be on the quality of the process.
Sustained and meaningful public consultation in formulating, implementing
and monitoring the PRSP is essential. Toward this end, the government developed an organizational
framework which clarifies roles and responsibilities for (a) poverty measurement
and monitoring, (b) development of poverty focused sectoral strategies, and (c)
participation of key stakeholders in the formulation of the PRSP.
We believe that the current I-PRSP presents a special opportunity to
build real ownership of the strategy through participation.
The Fund and Bank have worked hard with our members
to make this approach fully operational, although not always with complete
success. It is perfectly understandable that this new process will experience
growing pains, so there is much to learn for officials from both the poor
countries and the Fund and Bank. We are now taking a close look at how we have
done, inviting the public to help us better understand what has worked and what
has not, and to see how the approach can work better.
To that end, both institutions will, for four days in
mid-January 2002, bring together in Washington officials from poor
countries, administrators from donor agencies, and representatives from civil
society groups, both North and South, to learn from each other.
shall hear the views of those who have participated in the formulation of the
PRSPs. Indeed, certain themes have already emerged from a series of
consultations around the world over the past few months. When the Executive
Boards of the two Bretton Woods institutions finally convene in March to
consider changes to the PRSP process, there are a number of key questions they
will need to address. For example, have the participatory processes established
by national governments met their objectives? Is the new approach to poverty
reduction moving in the right direction? Will it really change the way
the poor countries and the donor community—including the Bank and the
Fund—do business with each other?
Ultimately, each poor country must take the lead in
the design and implementation of its poverty reduction strategy. Good policies
begin at home, including a serious effort to address governance issues. But
country strategies are only one part of the global effort.
Thus, the January conference will demonstrate to the
rich countries how much more they need to do. There is a growing campaign,
supported by both World Bank President James Wolfensohn and IMF Managing
Director Horst Köhler, to press the industrial countries to open their markets
to exports from poor countries and increase their foreign aid far above current
levels. The poverty reduction effort must be central to all policies.
It is only through international cooperation that we
will be able to deal with this crucial issue. Without a bright future for the
poor, the future will be dim for the rest of the world.
17 January 2002