Moldova & IMF IMF Activities Publications Press Releases

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International Monetary Fund -- World Bank

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.

The 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. 

We 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