|
Report
of the Utstein Group Mission to the World Bank and IMF, January 2001, to
Consider Poverty Reduction Strategy Papers
View
PDF
Practice
and procedures in the Bank and Fund
Ownership,
politics and governance
Analysis,
surveillance and monitoring
Involvement
of bilateral and other multilateral agencies
Conclusion
Annex
1
Annex
2
A mission from the Utstein
group of countries (Germany, The Netherlands, Norway and the United Kingdom)
visited the Bank and Fund from January 22 to 26, 2001. (See annex 1 for the
composition of the mission.) The purpose of the mission was to take stock of
the progress that the Bank and Fund have made in adapting to the challenges
of implementing the new paradigm of development co-operation associated with
country-owned and country-driven Poverty Reduction Strategy Papers (PRSPs).
Our governments strongly support this paradigm shift, but are well aware – both
from our own bilateral activities and from reports on the activities of other
agencies, including the Bank and Fund – that there are still many problems to
overcome and much learning to be done.
Our objective was thus to
exchange experiences and to discuss progress and problems with Bank and Fund
staff, to supplement the formal representation of our governments in Board meetings.
In this endeavour, we were given the opportunity to meet a large number of staff
at all levels in both organisations. (See annex 2 for the programme and list
of persons met.) We were most impressed by, and are most grateful for, the amount
of their time they gave us, as well as for the full, well-informed and frank
nature of their responses to our many questions.
In brief summary, our main
conclusions are the following:
The Bank and Fund have
made good progress in putting poverty reduction at the centre of their operations,
in re-focusing their work on the PRSP process and in strengthening their relationships
with each other and with their partner countries. In the first phase of PRSPs,
the emphasis was on speed and process, but the focus now needs to shift to quality
and content. Moreover, the two institutions need to put pro-poor growth more
at the centre of their PRSP analyses and strategies, along with important development
issues such as gender and the environment. In further implementation of the
PRSP agenda, the Bank and Fund also need to develop closer working relationships
with bilateral donors and other international organisations.
Practice
and procedures in the Bank and Fund
In most respects, both the
Bank and the Fund are making good progress towards putting PRSPs at the centre
of their operational activities. There is a clear and widely shared intention
to base Bank country assistance strategies and the Fund’s Poverty Reduction
Growth Facility (PRGF) on the PRSPs of the countries concerned, although progress
towards this objective is currently limited by the interim nature of most PRSPs.
The Bank has been developing the Poverty Reduction Support Credit (PRSC) as
a major programmatic lending instrument to support country budgets. Approval
of the first PRSC is imminent and the Bank expects PRSCs, within a few years,
to account for a large share of IDA activity. The Fund has introduced more flexibility
into its country programming, particularly by taking the need to finance basic
public expenditures and other poverty reduction priorities as the starting point
of any fiscal framework and taking fuller account of the contribution of aid
flows to co-financing public expenditures. Co-ordination and co-operation between
the Bank and the Fund have increased impressively.
In our judgement, the speed
at which the new approach is now being introduced into both institutions is
about right. The rapid rate at which interim PRSPs were prepared during the
past year has given a valuable impetus to the process, but has also had some
costs in terms of quality and left some gaps. The link with the HIPC process
will become less pressing as countries reach decision point, taking away the
urgency that undermines the quality. It is also bound to take time for the necessary
changes in the attitudes and behaviour of staff to be universalised. At present,
the situation varies widely within both institutions, but particularly within
the Bank, which operates in a more decentralised way than the Fund. It will
also take time to improve the quality of poverty reduction strategies and the
process of preparing them, especially in countries with little or no prior experience
of this sort of planning and with limited statistical and analytical capacity.
Moreover, the introduction of PRSCs will be constrained in many countries by
the need to improve public expenditure accounting.
Staff at all levels in both
the Bank and the Fund stressed that the PRSP approach was a better way of doing
business, to which they are strongly committed. However, they also expressed
concerns about the dangers of setting unrealistic targets and raising excessive
expectations about what could or should be expected from the new approach. We
share their concerns. Enthusiasm and efforts to implement the PRSP process need
to be balanced by modesty in setting goals and clear awareness of difficulties
and uncertainties in attaining them. Of particular importance is the readiness
of donors to accept the process nature of Poverty Reduction Strategy efforts,
and to be flexible in evaluating progress towards targets.
In the Bank, more effort
is needed to bring a wider range of important issues into the consideration
of PRSPs – in its dialogue with countries formulating PRSPs, and in Joint Staff
Assessments. This applies not only to issues such as environment and gender,
but also – and more surprisingly – to some standard economic issues, particularly
trade, private sector development and the rural economy (although we were assured
that steps are now being taken to raise the profile of these issues). A number
of possible explanations for the present omissions were suggested to us, including
variation in the attitudes and interests of country directors, unclear priorities
set by management, the internal market mechanism for allocating staff resources,
budget constraints, lack of appropriate incentives, and shortages of staff with
relevant skills. A more general reason is perhaps that adapting to the ‘process’
agenda inherent in PRSPs is a major challenge for an organisation that has hitherto
been predominantly ‘task’ oriented. It was clear to the team that delaying the
mainstreaming of these issues will adversely affect the quality of both analysis
and implementation and, ultimately, the sustainability of poverty reduction.
The Bank and Fund are encouraged to give further attention to these problems,
so as to enhance their multidimensional approach to poverty reduction.
Ownership,
politics and governance
There is a potential tension
– or, as some people more bluntly put it, contradiction – between country ownership
of PRSPs and donor concerns about the omission from PRSPs of important cross-cutting
issues such as HIV/AIDS or gender. Fortunately, this tension is widely recognised
and understood by Bank and Fund staff – and by Executive Directors representing
PRSP countries. However, views about how best to manage it vary somewhat from
country to country and issue to issue.
For example, lack of interest
on the part of countries is another possible reason why some important cross-cutting
issues are neglected in the consideration of PRSPs. At one extreme, to try to
force such issues into a country’s PRSP would violate the principle of ownership,
but at the other extreme to ignore them would be contrary to poverty reduction
goals and best practices of development which have been endorsed by the international
community in United Nations conferences. The consensus approach that seems to
be evolving in the Bank, which we support, is to pursue a continuing dialogue
on issues of this kind, supported by technical assistance and analysis, even
where major financial support for related activities could not be provided by
the Bank and the Fund because the issues were not given priority in a country’s
PRSP. The Joint Staff Assessment has a role in identifying these issues as an
essential part of the analysis underpinning the poverty reduction strategy and
putting them on the operational agendas of the Bank and the Fund.
We also attach importance,
a view widely shared in the Bank and the Fund, to the role of normal democratic
institutions, such as parliaments, in participatory consultations about PRSPs
within countries. Involvement of NGOs and civil society is valuable even in
well-developed democracies and can lead to increased demand for attention to
important development issues, such as gender and environment. Encouraging civil
society engagement with the PRSP process, however, has to be done in a way which
complements rather than conflicts with existing democratic processes and with
efforts to extend such processes. A clear understanding is needed between governments,
donors, civil society organisations, and special interest groups about their
respective roles in the process, consistent with each country’s constitutional
structure. For this reason, we welcome the emphasis on empowerment of the poor
in the recent World Development Report. Promotion of the report’s three pillars
– opportunity, empowerment and security – will enrich PRSPs. We also recognise
that some aspects of empowerment, as well as of governance, lie beyond the mandates
of the Bank and the Fund, and thus require bilateral donors or other multilateral
institutions to play a leading role.
Analysis,
surveillance and monitoring
Although there is consensus
on some broad elements of policies to promote poverty-reducing growth, and despite
much research, there remain large gaps in basic data and strategies on poverty
and in knowledge and understanding of more detailed growth-promoting policies,
particularly in specific countries. That these analytical gaps need to be filled
if PRSPs are to be effectively formulated and implemented is well-recognised
in both the Bank and the Fund, as is the need for much of the additional analysis
to be done externally and particularly within the countries concerned. Bilateral
donors should play an important part in contributing to and financing the development
of analytical capacity. Part of this work will involve the improved formulation
of country-specific indicators of progress in poverty reduction, which can then
be monitored over time.
One specific area in which
the Bank is committed to undertaking additional analysis is the poverty impact
of policy measures supported by the Fund’s PRGFs. So far, this has not been
done, but work is now actively in progress to develop over the next few months
suitable methodologies, which would then be applied by country departments as
well as by the countries concerned.
Effective planning and management
of public expenditure is agreed to be vital to success in the design and implementation
of PRSPs: ex-ante budgets should be linked to ex-post outcomes. It is also a
precondition for providing budgetary support for their implementation through
PRSCs and similar instruments. In its broadest sense, conditionality cannot
be given up, and even though its form will change from ex-ante contracts to
mutual commitments based on performance, the new form of conditionality will
in some respects be more intrusive than the old form. Bank and Fund staff have
recently produced a paper on the ‘Tracking of poverty-reducing public spending
in heavily indebted poor countries’, which provides a thorough and realistic
assessment of problems and possibilities in this area. One of its main conclusions,
which we support, is the need for bilateral and other donors to provide support
for expanded technical assistance to upgrade public expenditure management systems
in poor countries.
Involvement
of bilateral and other multilateral agencies
The important role of bilateral
and other donors in supporting and financing various sorts of capacity-building
for the PRSP process has already been mentioned. Consideration should be given
to ways of improving the alignment of trust funds with this objective.
Fuller and better co-ordinated
involvement of bilateral and other multilateral agencies in other aspects of
the PRSP process is also needed. Although the responsibility for co-ordination
of contributions to the preparation of PRSPs lies ultimately with the country
itself, all parties involved, including the Bank and the Fund, must contribute
to this objective in a constructive and transparent manner, including by the
sharing of information – which has recently much improved.
There can and should be
consultations with bilateral and other multilateral agencies, civil society
and the UN system by Bank and Fund staff on evolving drafts of PRSPs. The Joint
Staff Assessment (JSA) should note these views. The endorsement of a PRSP, taking
account of the JSA, is the responsibility of the Boards of the Bank and the
Fund, so bilateral donors can contribute to this formal process through their
representatives.
Conclusion
The team found that the
Bank and the Fund had made good progress in adapting to the paradigm shift implied
by a country-driven and country-owned PRS process, but that there remain various
issues to resolve. We hope that our report will be a useful contribution to
the Bank’s and Fund’s own reflections on what needs to be done.
The Bank’s President suggested
that substantial further progress will be made over the next 18 months, and
the Joint Implementation Committee suggested a follow up mission in about a
year. We agree that such a mission would be useful, and look forward to assessing
further progress with the staff of the Bank and the Fund.
7 February,
2001
|
