The Independent Evaluation Office (IEO) of the International Monetary Fund (IMF) today released the report Evaluation of the Poverty Reduction Strategy Papers (PRSPs) and the Poverty Reduction and Growth Facility (PRGF).
In 1999, the International Monetary Fund (IMF) and the World Bank (WB) adopted a new approach to supporting low-income countries to strengthen country ownership, enhance the poverty focus of programs, and provide for stronger collaboration between the BWIs and among development partners. Both institutions were to base their lending and debt relief efforts on Poverty Reduction Strategy Papers (PRSPs) prepared by the countries themselves.1 The new approach was accompanied by the transformation of the Enhanced Structural Adjustment Facility (ESAF)the IMF's concessional lending windowinto the Poverty Reduction and Growth Facility (PRGF), with a view to giving a more central role to pro-poor growth in the design of IMF-supported programs in low-income countries.2
The report draws on detailed cross-section analyses, reviews of internal IMF documents, stakeholders surveys and country background studies for Guinea, Vietnam, Nicaragua, Mozambique, Tajikistan, and Tanzania, the last four of which were joint with the Operations Evaluation Department (OED) of the World Bank.3
The PRS approach has significant potential but achievements to date have fallen short of potential, particularly in the areas of relevance to the IMF.
Most PRSPs have fallen short of providing a strategic roadmap for policy making, especially in the area of macroeconomic and related structural policies. Much of this derives from a failure to address controversial policy issues as well as the absence of clear benchmarks against which to monitor progress toward intermediate country-defined objectives and a failure to better integrate country-specific analysis (e.g., of micro-macro linkages) into policy frameworks.
While participation in the formulation of PRSPs was generally more broad-based than in previous indigenous development strategies, the new approach has had limited impact in generating meaningful discussion and ownership of macroeconomic and related policies outside narrow official circles. Results have been better where the approach has been integrated into domestic institutional structures and processes. The PRSP approach has alsofor the most partnot fulfilled it promise of improving donor coordination.
The IMF's contribution has varied greatly across countries and issues but has generally fallen short of the ambitious expectations set out in the original policy documents
Some widening of policy space has occurred, at least in cases where macro-stability is not a pressing concern. But the IMF's support for broadening participation in macroeconomic policy formulation has been limited and its contribution to filling country-specific knowledge gaps about micro-macro linkages has been small. Meeting these expectations would require greater changes in the IMF's "way of doing business" than have occurred so far. At the same time, these expectations probably over promised what the IMF could deliver given existing resource constraints and its comparative advantage.
There have been improvements to IMF-supported programs in low-income countries under the PRGF along the lines envisaged4 but programs are a long way from being fully embedded in a country-owned growth and poverty reduction strategy.
On the other hand:
Lessons and recommendations
Experience with the PRS approach suggests the need to better align incentives with intermediate objectives. Current incentives have resulted in too much emphasis on documents and BWI-driven processes, insufficient scope to treat different countries differently, too few benchmarks to monitor progress (and a consequent lack of clarity about criteria for financing decisions) and too little clarity on what the BWIs themselves are expected to deliver. IEO therefore calls for:
The initiative lacks clarity on what the IMF should deliver, contributing to a lack of consistency between its commitments under the PRS approach and the availability of staff resources. The Report makes several recommendations on how the Fund can adapt its "way of doing business" to achieving the objectives of the PRS approach, including.
At its July 21, 2004 meeting, IMF Executive Directors welcomed the report, noting its constructive recommendations. The indicated that careful follow-up and implementation would be needed, including in the context of the management-led Committee on Low-Income Country Work.
The full text of the report, including the detailed case studies, and Summing Up of the Executive Board discussion are available on the IEO's website at www.imf.org/ieo.
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1 For more on the PRSP initiative, see http://www.imf.org/external/np/exr/facts/prsp.htm
2 For more on the PRGF, see http://www.imf.org/external/np/exr/facts/prgf.htm
4 These are described in "Key Features of IMF Poverty Reduction and Growth Facility (PRGF) Supported Programs," http://www.imf.org/external/np/prgf/2000/eng/key.htm.
IMF EXTERNAL RELATIONS DEPARTMENT