Ghana: Poverty, Democracy and the World Bank, 10/19/00

Ghana: Poverty, Democracy and the World Bank, 10/19/00

Ghana: Poverty, Democracy and the World Bank Date distributed (ymd): 001019 Document reposted by APIC

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Region: West Africa Issue Areas: +political/rights+ +economy/development+ Summary Contents: This posting contains excerpts from an interview with Charles Abugre of the Integrated Social Development Centre (ISODEC) in Ghana, which appeared in the Fall issue of News & Notices. The interview provides a devastating critique of the new Poverty Reduction Strategy initiative for its further erosion of democracy in countries subjected to it. For the full interview and additional related articles, go to: or contact the editors at the addresses indicated below.

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Who Governs Low-income Countries?

An Interview with Charles Abugre on the Poverty Reduction Strategy Initiative

Charles Abugre heads up the Integrated Social Development Centre (ISODEC) in Ghana ( ISODEC was founded in 1984 to work for sustainable human development through the empowerment of the poor, women and other marginalized groups. This mission is realized through research and advocacy as well as through empowerment and capacity-building activities.

---------------------------------------------------------------- Excerpted from:

News & Notices for IMF and World Bank Watchers (Volume 2, Number 3 Fall 2000)

This issue of News & Notices is prepared collaboratively by Nancy Alexander of Globalization Challenge Initiative, the World Development Movement, and the Center of Concern's Rethinking Bretton Woods Project. Substantive comments about News & Notices may be sent to: <>.

If you would like to receive "News & Notices" electronically, please send a blank email message to <>. Subscription change requests can be sent to <>.

The full text of this interview and other News & Notices articles can be found at <>.


In this interview, Charles Abugre recounts his experience and perspectives relative to the Poverty Reduction Strategy (PRS) initiative. The initiative, which was launched by the IMF and World Bank a year ago, requires that each low-income borrowing government work with its citizens (and a range of donors and creditors) to shape a Poverty Reduction Strategy Paper (PRSP). The PRSP is a three-year national development strategy. Endorsement of a government's PRSP by the Executive Boards of the IMF and World Bank qualifies the government to receive foreign loans, grants and debt relief. ...

NEWS & NOTICES (N&N): Many civil society groups welcomed the launch of the Poverty Reduction Strategy (PRS) initiative last year. ... What's your position on the PRS initiative?

ABUGRE: We feel partially responsible for it. We campaigned for debt relief and for improving the poverty reduction outcomes of IMF and World Bank operations. These campaigns pressured the IMF and World Bank to create something like the PRS initiative. ...

The initiative builds on earlier initiatives that seek to overthrow a development assistance system driven by donor and creditor interests and replace it with a system driven by the interests of borrowing countries. However, the PRS initiative is not uprooting the old system. In some ways, it reinforces the old donor-driven system.

N&N: Are the flaws in the concept of the PRS initiative or its application in the field?

ABUGRE: Both. With respect to the concept, it's important to realize that, through the initiative, the IMF and World Bank assume new powers over low-income countries. It is unprecedented for the IMF and World Bank to endorse a national strategy, such as the PRSP, that has been developed by a government together with its citizens and approved by its parliament. These creditor institutions only underwrite a small, almost insignificant, part of the costs of national strategies, yet they have the final say over national strategies. That is wrong. ... It would be different if the Bank and IMF were judge and jury for only those portions of the national strategy that they intended to finance. That would make sense.

N&N: So, you see the institutions undergoing "mission creep"?

ABUGRE: "Mission creep" is an understatement. The PRSP process shifts considerable power from the governments of low-income countries to the IMF and World Bank. Once, the IMF had influence over certain macroeconomic variables. Now, it can endorse an entire country strategy, including its social and political dimensions. Once, the World Bank's Articles of Agreement were interpreted in ways that protected the sovereignty of borrowers. Now, the Articles are subject to the loosest interpretation imaginable. ......

N&N: Tell us about Ghana's PRSP process?

ABUGRE: Ghana is preparing a full, participatory PRSP over the next several months. But, in August, the Government submitted an "Interim PRSP" (I-PRSP) to the Boards of the IMF and World Bank. The I-PRSP is intended as a "road map" ... [which] paved the way for approval ... of a loan to our government.

Each Board of Executive Directors endorsed Ghana's I-PRSP, which consists of an innocuous policy statement and a "policy matrix" loaded with political "dynamite."

N&N: Tell us about the political dynamite in the I-PRSP.

ABUGRE: The PRSP process and content are politically explosive. First the process. Supposedly, the narrative part of the I-PRSP was public, but no one knew about it. Reporters from Public Agenda, our newspaper, called a range of actors including a Deputy Finance Minister, the Minister of Agriculture, the Ghanaian Association of Private Voluntary Organizations in Development (GAPVOD). No one knew the first thing about an I-PRSP. This text is an innocuous policy statement written by our Ministry of Finance and the World Bank, which describes the nature of poverty in Ghana and approaches to dealing with it. In fact, a senior Bank official said that the document was terrible, but that it didn't really matter. The other part of the I-PRSP, the policy matrix was secret. The policy matrix is basically a list of policy conditions. External financing - at least financing by the IMF and World Bank - is contingent upon our Government's compliance with these policy conditions. The policy matrix was leaked to us just days before the I-PRSP went to the Boards of the IMF and World Bank. No one in Ghana had seen this document.

N&N: Did the parliament have the policy matrix?

ABUGRE: No, it didn't. Nor did the members of the Comprehensive Development Framework (CDF) sub-committees that have begun work on the full PRSP. They were working in the dark.

The content of the I-PRSP was also dynamite. People were astonished that when they saw that the Government commitments reflected in the policy matrix effectively reversed commitments made to the people of Ghana just months prior to its presidential election.

N&N: What government commitments did the I-PRSP reverse?

ABUGRE: In the run-up to the Presidential campaign, our government made certain promises to the small and medium-scale businesses and industries in Ghana. They are facing tough times. As a result of the decline in world market prices for cocoa and increases in petroleum prices, the country will lose about $500 million in foreign exchange this year. To make things worse, bilateral donors have been withholding assistance to various sectors. ... This has created an impossible situation for many businesses.

N&N: Did the Government of the Ghana come to the rescue of small and medium-sized businesses?

ABUGRE: Yes. ... The Government agreed to implement modest export subsidies and tariff measures that provided temporary protection for textiles, processed agricultural goods and some household staples, such as toothpaste and soap.

These measures need to be understood in context. Ghana has low tariffs by any measure. Cheap goods from abroad are flooding into the country and squeezing out these industries. The Government's stop-gap measures were important to Ghana and the policy matrix effectively reversed them just months before the elections.

Whether the policy measures were good or bad is not the issue. The issue is that, behind closed doors, the institutions imposed these policies on a government "on its knees" and desperate for foreign exchange. ...

N&N: What is the problem with the timing of PRSPs?

ABUGRE: Sometimes the IMF and World Bank make all the important lending decisions for a government just BEFORE a PRSP is finalized. Then, there is almost nothing left for the PRSP to influence. It is a "dead letter." For instance, Tanzania's full PRSP comes to the Board in November 2000, yet before that (from April through June 2000), the IMF and World Bank approved their lending frameworks and programs for the country. We wonder what purpose the full PRSP will serve in Tanzania.

N&N: You've told us that the I-PRSP policy matrix was kept secret. Are there other problems related to information disclosure?

ABUGRE: First, it's important to realize that failure to disclose critical information didn't only impair the I-PRSP process. ... In fact, the credibility problem of the IMF and World Bank is rooted in the "information parity" problem. ...

In the PRSP context, this means that all the documentation relating to PRSP should be on the table, including policy matrices, the Country Assistance Strategy and triggers, HIPC conditions, and analytical work. ...

The IMF, World Bank and their borrowers release only one of the three structural adjustment documents. This makes it impossible to compare the policy aspirations of the PRSP with the programs that the institutions actually finance. When you think about it, it is really incredible that governments - together with the IMF and World Bank - invite parliaments and citizen's groups to engage in designing macroeconomic policies in ways that can reduce poverty. Then, they refuse to disclose information about their adjustment-related activities.

N&N: "Information parity" is essential if citizens' groups are to participate meaningfully in designing macroeconomic and structural policies. What else is necessary?

ABUGRE: Several things. First, the overall PRSP process must be transparent. In Kenya's I-PRSP process, there was extensive participation and citizen's groups hammered out their recommendations. At the end of the I-PRSP process, citizen's groups were appalled to learn that there had been an exclusive, parallel process addressing macroeconomic and structural concerns. They had no voice in shaping these policies. The same was true in Uganda's full PRSP process. Citizens had no involvement in macroeconomic policy choices.

Second, the institutions must sit back while country constituencies outline economic options and choices. Traditionally, the institutions have been in the business of marketing and promoting certain economic reform policies. Advocacy by the institutions has undermined the accountability of borrowing governments to their citizens. In many low-income countries, external donors and creditors supply half of the national budget. In such cases, how can a borrowing government listen to the cry of citizens when the external actors are whispering in its "ear?" External actors have little history of self-discipline in this regard.

We would like to see the institutions support a process wherein borrowing country governments and citizen's groups develop a set of macroeconomic policy options (along with the expected impacts of each option). As it is, the IMF and/or World Bank present one set of recommendations without any assessment of their potential impacts. ...

N&N: Can the IMF provide leadership by, for instance, renouncing its practice of imposing rigid policy prescriptions?

ABUGRE: We asked the IMF that question. Maybe it was like asking a leopard if it could change its spots. A senior IMF official replied very emphatically, saying that he is suspicious of people who want flexible approaches to policies. ... It seemed as though he saw civil society getting in the way of governments governing and the Fund doing its work.

However, the IMF's public relations staff and its publications paint a rosy picture.

N&N: Is the IMF taking any positive steps?

ABUGRE: The IMF is endorsing assessments of the distributive impact of proposed structural adjustment policies. This is important and long overdue, but it is only a beginning. And a problematic beginning at that. ...

Citizens' groups generally see adjustment policies as a principal cause of the widening gap between rich and poor in our countries. We also see how some adjustment measures promote production and distribution patterns that contribute to poverty creation and environmental problems. Yet, the IMF and World Bank almost never conduct social or environmental assessments of adjustment loans. When they design adjustment loans, the institutions increasingly include damage mitigation programs, such as social safety nets. But these programs offer too little assistance too late to poor and vulnerable people. Besides, as public institutions, the IMF and World Bank should be providing benefits to the poor, women, and other marginalized groups. It is unacceptable to set a standard that says, "we will limit the damage we do to vulnerable groups."

The IMF and World Bank do place a much higher priority on the protection of social sector budgets than they did years ago. Still, these budgets are often squeezed by efforts to reduce fiscal deficits and dampen inflation. IMF and World Bank programs still support efforts by governments to impose and maintain "user fees" for services, including primary health care and basic education. This is devastating to our countries.

N&N: Is the World Bank more flexible than the IMF in its approach to policy-making?

ABUGRE: There is flexibility at the margin of social policy-making. Macroeconomic and structural policies are another story. The problem is illustrated by the annual report card that the Bank issues for each of its low-income borrowing countries. ...

The report card raises many questions about the scope and depth of World Bank involvement in low-income countries and their qualifications to sit as judge and jury over virtually all aspects of a government's business. However, I would stress two points here. First, why should people participate in the formulation of national policies if the World Bank has predetermined what constitutes "good policies"? The IMF and World Bank see a good government as one that does their bidding. The Burkina Faso PRSP illustrates that nicely.

Many governments are so dependent on external resource flows, they are forced to try to conform with the Bank's concept of "good policies" in order to survive. Why bother with the views of citizens if the meaning of "citizenship" has been hollowed out?

Second, the report card shows that "A" students, like Ghana, are micro-managed, just like "C" students. Ghana might borrow more than a "C" student...a dubious benefit. But, Ghana's loan instruments are as heavily laden with policy conditions and directives as a poorly performing government. The PRSPs of star performers contain over 100 policy conditions. Take a look at Ghana's policy matrix.

N&N: What are other factors that undermine democratic processes in your country?

ABUGRE: The manner in which the PRSP and related processes hijack national, sector-wide and budget planning processes. In Ghana, there is a vision statement, Ghana 2020, and in addition, there is a constitutional requirement to develop a medium-term strategy every five years. ... The problem with the PRSP is that it conflates two things: the need for a donor coordination system and the need for a country-owned plan.

This process violates the intent of the constitution, namely that the government and people of Ghana fashion a 5-year strategy. The constitution does not invite external donors and creditors into this process. Citizens' groups are out-gunned by the collusion between donor interests and government dependency. They are disadvantaged in other ways, as well. First, their input to policy choices is handicapped by the fact that they do not have access to many of the key analytical or planning documents from which the other actors are working. Second, representatives of civil society - trade unions, NGOs, religious organizations -- are often hand-picked in such a way that they do not bring a common position to the table. ...

N&N: What is your advice to the IMF and World Bank?

ABUGRE: Three things. First, de-link the debt reduction process from the PRSP process. If the Bank and Fund want to provide debt relief, they can do so without an I-PRSP or PRSP. All they need is a simple framework by which special accounts for debt service can be managed and monitored in a transparent way. Acceptable performance by a borrowing government can trigger debt relief.

Second, don't conflate a country's national strategy with a document to coordinate donor and creditor involvement in the country. These should be two separate processes. A country will never "own" a process, such as the PRSP process, in which donors and creditors play a significant role. Furthermore, IMF and World Bank endorsement of a national strategy is inappropriate. It sets a bad precedent.

Finally, the institutions need to be clear... are they asking constituencies in borrowing countries to formulate macroeconomic and structural policies? Are they agreeing that the litmus test of macroeconomic and structural policies relate to the capacity of these policies to reduce poverty? We hope that official actors understand that citizens' groups have a legitimate role in discussing a wide range of macroeconomic and structural policies. These policies should not be left to the economic priesthood. ...

Recently, donor governments and creditors gathered to discuss the lessons of the PRSP process to date. The donor governments complained about the IMF and World Bank dominating PRSP processes and said that they wanted to bigger piece of the action. Donors and creditors are trying to "have their cake and eat it too." They want borrowing countries in the "driver's seat," but they won't give up control. ...


Message-Id: <> From: "APIC" <> Date: Thu, 19 Oct 2000 21:09:58 -0500 Subject: Ghana: Poverty, Democracy and the World Bank

Editor: Ali B. Ali-Dinar

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