UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: Human Rights and Debt Relief Conditions Date distributed (ymd): 010326 Document reposted by APIC
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Region: Continent-wide Issue Areas: +economy/development+
This posting contains excerpts from a report to the UN Commission on Human Rights on the human rights implications of the Poverty Reduction Strategy Papers (PRSP) required for countries to gain access to debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative. Independent expert Fantu Cheru is also a professor at American University in Washington and a member of the Board of Directors of Africa Action. His full report, including footnotes and annexes, is available on the web site of the UN Commission on Human Rights (see URL and instructions below). In the report, Dr. Cheru notes a 'disconnect' between the macroeconomic objectives and proverty reduction goals, and proposes de-linking debt relief and the poverty reduction strategy papers.
Distr. GENERAL E/CN.4/2001/56
18 January 2001
COMMISSION ON HUMAN RIGHTS
The Heavily Indebted Poor Countries (HIPC) Initiative: a human rights assessment of the Poverty Reduction Strategy Papers (PRSP)
Report submitted by Mr. Fantu Cheru, independent expert on the effects of structural adjustment policies and foreign debt on the full enjoyment of all human rights, particularly economic, social and cultural rights
[excerpts only: full text on web site of UN Commission on Human Rights - http://www.unhchr.ch - search in charter-based bodies database under document number E/CN.4/2001/56]
Although the author recognizes good intentions behind the HIPC initiative, he points out that there remain a number of problems, the most critical problem being the financing of this initiative. The lack of sufficient resources to fund the initiative has become a growing concern to the World Bank and the International Monetary Fund (IMF), the two institutions that preside over the HIPC process, and to regional development banks and other relatively unknown and smaller multilateral institutions. ...
With regard to the PRSPs, the author indicates that, in preparing the PRSP, Governments are expected to show clearly the links between macroeconomic policies and agreed international social development goals to be reached by 2015. Examination of the annexed eight I-PRSPs (Benin, Chad, Ghana, Kenya, Mozambique, Senegal, Tanzania and Zambia) and one full PRSP (Uganda) reveals great differences in their quality. Further, it shows that the broad macroeconomic objectives of the majority of the countries studied are inconsistent with the poverty reduction goals. One of the reasons for this inconsistency is the tension between the desire to provide debt relief quickly and the lack of a proper poverty reduction framework. Another reason for this disconnection is to be found in the unequal power relations between indebted countries and the Bretton Woods institutions that manage the HIPC process. Given the fact that the G-7 countries set the agenda of these institutions to a considerable degree, the G-7 Governments are as much to blame for continuing to prescribe faulty diagnosis to indebted countries as the World Bank and the IMF. Also with regard to the PRSPs, the independent expert points out that Governments of HIPC countries try to please the World Bank and the IMF. Therefore, they put too much emphasis on macroeconomic considerations, fiscal reform and privatization measures, without thinking about the impact of these policies on poverty reduction nor about the context. He stresses that all the PRSPs reviewed emphasize the need for restructuring, downsizing, cost-recovery and paying teachers less, and questions whether this will eliminate poverty.
The author criticizes the fact that the use of the I-PRSP process as a transitional measure does not take into account the difficulty of producing an authentic, consensus-based national poverty strategy with the consent of all stakeholders. The IMF-supported programmes remain stringent, inflexible and in some instances very punitive, where countries have very little room to manoeuvre. The Poverty Reduction and Growth Facility (PRGF) (previously the Enhanced Structural Adjustment Facility (ESAF)) remain firmly focused on macroeconomic and financial concerns. Although the PRSPs are supposed to be country- driven, prepared and developed transparently with a broad participation of the civil society, the independent expert states that, in the majority of the countries examined, the participatory and transparency elements in the elaboration of PRSPs have not been respected. As a result, the PRSPs in these countries lack credibility for the population.
Despite these criticisms, however, the independent expert believes that the PRSP process does provide a potential tool that developing countries can use to implement genuinely country-owned and participatory poverty reduction strategies. The role of the World Bank and the IMF can be important in this process, but will depend on their approach to conditionality and macroeconomic reforms. Finally, the independent expert recommends that creditor Governments and institutions 'revisit the whole issue once again'. His other recommendations address the issue of how to expedite the process of providing immediate relief to eligible HIPC countries. His main recommendations are that the HIPC debt relief be delinked from the PRSP process, that the only condition imposed on countries receiving debt relief be that they establish an independent entity to channel freed resources towards social development, that the World Bank and IMF not have the exclusive role as overseers of poverty reduction programmes but that other United Nations agencies be included as well, that new rounds of talks aimed at finding a solution to the debt burden of many poor countries be organized, that the PRGF be abolished, and that a serious dialogue be undertaken on how to integrate macroeconomic policy issues with broader social development goals.
4. This report examines the steps which have been taken since 1999 in granting debt relief to qualifying countries. On the basis of an analysis of 9 of the 19 Interim Poverty Reduction Strategy Papers (I- PRSP), it critically examines the PRSP process.
5. In the mid-1980s, under the guidance of the IMF and the World Bank, structural adjustment programmes (SAPs) were introduced which had the stated aim of developing growth and capacity. The liberalization of markets called for by stabilization policies often resulted in delays in growth. In order to reduce the negative impacts of these delays, the IMF introduced in September 1987 an Enhanced Structural Adjustment Facility (ESAF) for poor countries which enabled them to received assistance over a period of up to 3 years with reimbursement stretched out over a period of 10 years (in contrast to its regular credits, which were to be repaid within one to two years). In November 1999 the Poverty Reduction and Growth Facility (PRGF) replaced the ESAF. The aim of the PRGF is to support programmes to strengthen substantially and in a sustainable manner balance of payments positions and to foster durable growth.
6. At the same time, the Poverty Reduction Strategy Papers (PRSPs) replaced the Policy Framework Papers (PFP) which underpinned ESAFs. National programmes for poverty reduction are the foundation for IMF and World Bank lending programmes and for HIPC debt relief. Essential features are that PRSPs (a) are developed in a participatory way, (b) are nationally owned and (c) lay out a policy framework and agenda for tackling poverty.
7. HIPC and ESAF countries are required to produce a PRSP before they can seek new programme support from the IMF or the World Bank. ...
II. A. The policy disconnect: poverty and macroeconomic goals
24. In the majority of countries examined, the broad macroeconomic objectives are inconsistent with the poverty reduction goals. The same conclusion was reached in a recent report by the United States General Accounting Office, which pointed out that there is tension between the desire to deliver debt relief quickly and the need to ensure that a proper poverty reduction framework is in place. 5 Only the Uganda PRSP is firmly anchored in the Government's comprehensive Poverty Eradication Action Plan first developed in 1997 and revised to take into account new poverty data, detailed sector plans and direct consultation with the poor. But this process took more than two and half years to complete. Civil society is at present involved in monitoring its implementation.
25. What explains this disconnect between macroeconomic components of the interim PRSPs and the poverty reduction goals? The answer is to be found in the unequal power relations between indebted countries and the institutions that manage the HIPC process, namely, the IMF and the World Bank. What is obvious from our analysis is that countries have tried to read too much into the minds of the IMF and the World Bank. The Governments of HIPC try to make their PRSP meet the lending criteria of the Fund and the Bank, and have thus put too much emphasis on macroeconomic considerations, fiscal reform and privatization measures to placate these powerful institutions, without thinking through how such policies impact on poverty reduction and in what context. At the end of the day, what matters the most to these Governments is that they get the badly needed cash flow from these institutions. As one finance minister interviewed for this report succinctly put it, 'We do not want to second-guess the Fund. We prefer to pre-empt them by giving them what they want before they start lecturing us about this and that. By so doing, we send a clear message that we know what we are doing - i. e. we believe in structural adjustment.'
26. The decision by debtors to 'placate' the IMF is both political and financial, since eligibility for debt relief under HIPC-II is conditioned upon 'good performance' in the implementation of IMF and World Bank policies. While countries should be encouraged and supported to adopt sensible policies that make good economic and political sense, IMF-supported programmes remain stringent, inflexible and in some instances very punitive, 6 leaving very little room for countries to manoeuvre. The ESAF programmes in their reincarnated form (now renamed Poverty Reduction and Growth Facility) remain firmly focused on macroeconomic and financial concerns. There is no indication of how the PRSPs complement the macroeconomic emphasis of the PRGF.
27. What the architects of the HIPC initiative failed to realize is that it was the failure of two decades of structural adjustment programmes (SAPs) to help countries 'export their way out of the crisis', and their inability to service their debts and the social erosion that followed that gave the impetus for the establishment of the HIPC initiative. Increasing malnutrition, falling school enrolments and rising unemployment have been attributed to the policies of structural adjustment. Yet these same institutions continue to prescribe the same medicine as a condition for debt relief, dismissing the overwhelming evidence that SAPs have increased poverty.
28. ... The use of the I-PRSP process as a transitional measure, while addressing the immediate cash-flow problem, does not take into account the difficulty of producing an authentic, consensus-based national poverty strategy with the consent of all stakeholders. ...
II. B. Citizens' participation
31. The PRSPs are supposed to be country-driven, prepared and developed transparently with the broad participation of civil society. Yet the 'template' for preparing the PRSP, i. e., what it should contain, is designed by donors, which says very little about the authenticity of national ownership.
32. Citizen participation in the preparation of the I-PRSPs has not been transparent in several of the countries reviewed - although the independent expert notes the exception of Uganda's full PRSP. While civil society groups have been invited to participate extensively in discussions on the social policy-planning component of the I-PRSP, they have effectively been excluded when it comes to discussions on the content of macroeconomic policy choices. In Ghana, Tanzania and Kenya, for example, the contents of the policy matrix that is part of the I- PRSP were never made public during the national consultations. In a few other countries, consultations took place only with concerned line ministries, although the policy documents state that such consultation shall take place in the course of the preparation of the full PRSP.
33. In Tanzania, civil society organizations were demanding more active participation throughout the PRSP process. However, they were brought into the process in a superficial and half-hearted manner. 9 The Government developed the I- PRSP internally, while civil society groups were involved in a separate process, convened by the Tanzania Coalition for Debt and Development (TCDD). Key macroeconomic and structural adjustment issues were addressed in secret negotiations, occurring in parallel to the PRSP consultations. At a later stage, the civil society working groups managed to participate in the sharing sessions on the documents already prepared by the Government. ... The consultations were all undertaken in a rushed manner, not allowing for true dialogue, discussion and debate. ...
35. Despite the criticisms raised above, the PRSP process does have potential as a tool that developing countries can use to implement genuinely country-owned and participatory poverty reduction strategies. The Bank and Fund can play an important role in this process, but only if they are able to change their approach to conditionality and macroeconomic reform. ...
44. Better yet, there is a need to delink debt relief from the whole PRSP process so that countries take the necessary time to prepare a consensus-based national poverty reduction plan without the pressure of having to please the IMF and the World Bank in order to access interim relief. Both creditors and debtors should pay serious attention to the urgent need to link macroeconomic policies to social development objectives. As practised now, the disconnect between the two is too wide to lead to the desired outcome. ...
IV. RECOMMENDATIONS: THE WAY FORWARD
46. The under-funding of the HIPC initiative, the unnecessary delay in granting immediate relief, because countries encounter difficulty preparing a PRSP that meets all the conditions, and the inadequate and superficial participation strategy for inclusion of civil society groups, provide sufficient reason for creditor Governments and institutions to revisit the whole issue once again.
47. At the same time, the need to grant immediate relief to eligible HIPC countries should not be understated, given their precarious economic and political situations at the present moment. But to expedite the process, the following measures are recommended:
(a) De-link HIPC debt relief from the PRSP process. Real national ownership of poverty reduction frameworks can only happen if the threat of 'conditionality' is removed by the IMF and the World Bank from the backs of vulnerable Governments. Linking debt relief to the preparation of the PRSP removes the 'autonomy' of countries to come up with a framework that clearly makes an explicit connection between macroeconomic policies and poverty reduction goals. This requires time, research and exhaustive consultation with broad sectors of their populations. The only condition should be that countries receiving debt relief establish an independent entity, like Uganda's Poverty Reduction Action Plan, to channel freed resources towards social development. Such an entity - preferably an independent non-governmental body - will manage the fund. This entity must follow important rules governing financial control, performance monitoring and evaluation systems to ensure that the Government will not be able to draw funds from the debt relief fund for other unproductive purposes. A steering committee composed of representatives of the NGOs, the Government and the donor community shall oversee the management of the independent entity to ensure financial and programmatic accountability; 19
(b) The World Bank and IMF should not be given the exclusive role as overseers of poverty reduction programmes in poor countries. Other United Nations agencies, such as UNDP, UNICEF, UNCTAD and ILO should be brought into the process;
(c) Recalling the report of the Secretary-General on the subject, efforts must be made to initiate new rounds of talks in order to come up with a lasting solution to the crushing debt burden of many poor countries, including the HIPC countries. The new rounds of talks should start with a clear commitment that all debts owed by the HIPC countries will be written off, with no conditions; and that the list of eligible countries should be expanded to include countries that previously failed to enter the HIPC process because they failed to submit to IMF conditions on time;
(d) Abolish the IMF Poverty Reduction and Growth Facility (formerly ESAF) since this is merely a financing facility paid for by bilateral donors to clear up the debts owed by HIPC Governments to the IMF. The Fund can clear debts owed to it through gold sales (revaluation process) rather than through voluntary contributions from bilateral donors. Bilateral resources going to the PRGF should instead go to: fund additional bilateral debt relief, increase bilateral aid or directly fund a targeted programme, such as in the area of HIV/AIDS, girls' education or post-conflict reconstruction and rehabilitation in HIPC countries;
(e) Finally, it is important for third world debtor Governments, the multilateral financial institutions and social movements working on global economic justice issues to undertake serious dialogue on how to integrate macroeconomic policy issues with broader social development goals. The starting point of this dialogue should be an agreement to discuss and debate the research results on the economic and social impact of structural adjustment gathered from 10 country case studies, most of which were carried out jointly with the World Bank under an initiative known as the Structural Adjustment Participatory Review International Network (SAPRIN). Such a dialogue, if managed constructively, would benefit each of these actors in the formulation and implementation of alternative structural adjustment policies that are more transformative and non-regressive.
Message-Id: <200103270123.UAA28484@server.africapolicy.org> From: "APIC" <firstname.lastname@example.org> Date: Mon, 26 Mar 2001 20:20:53 -0500 Subject: Africa: Human Rights and Debt Relief Conditions
Editor: Ali B. Ali-Dinar
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