Abstract

In late 1999 the IMF established the Poverty Reduction and Growth Facility (PRGF) to integrate the objectives of poverty reduction and growth more fully into its operations for the poorest countries, and to base these operations on national poverty reduction strategies prepared by the country with broad participation of key stakeholders. A review of the program would be conducted two years later. This paper synthesizes two papers prepared by IMF staff: Review of the Poverty Reduction and Growth Facility: Issues and Options, and Review of the Key Features of the Poverty Reduction and Growth Facility: Staff Analyses. The paper draws on a broad range of internal and external views gathered between July 2001 and February 2002, including discussions at regional forums, meetings with donor government officials and representatives of civil society organizations, and comments of key officials in member countries with PRGF arrangements.

© 2002 International Monetary Fund

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Cataloging-in-Publication Data

Is the PRGF living up to expectations?: an assessment of program design/Sanjeev Gupta . . . [et al.]—Washington, D.C.: International Monetary Fund, 2002.

  • p. cm.—(Occasional paper); 216

  • ISBN 1-58906-112-8

1. International Monetary Fund—Developing countries. 2. Developing countries—Economic policy. I. Gupta, Sanjeev. II. International Monetary Fund. Ill, Occasional paper (International Monetary Fund); no. 216

HC60.18 2002

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Contents

  • Preface

  • List of Abbreviations

  • I Introduction; The Key Features of the PRGF

  • II Overview of the Study Sample and Methodology

  • III Key Features I and 2: Broad Ownership and Participation and Embedding the PRGF in the Overall Strategy for Growth and Poverty Reduction

    • Draw Main Elements from a Country’s PRSP

    • Highlight Flexibility in Accepting Country Choices

    • Focus on Areas of IMF Expertise and Responsibility

  • IV Key Feature 3: Budgets That Are More Pro-Poor and Pro-Growth

    • Reorient Government Spending Toward Activities That Benefit the Poor

    • Improve the Efficiency and Targeting of Spending in Key Sectors

    • Implement Tax Policies That Simultaneously Improve Efficiency and Equity

  • V Key Feature 4: Ensuring Appropriate Flexibility in Fiscal Targets

    • Fiscal Targets Under PRGF-Supported Programs

    • Flexibility in Accommodating Changes in Financing or Revenues

  • VI Key Feature 5: More Selective Structural Conditionality

    • Limit Conditionality to Key Measures

    • Confine Conditionality to Measures in the IMF’s Domain

  • VII Key Feature 6: Measures to Improve Public Resource Management and Accountability

  • VIII Key Feature 7: Social Impact Analysis of Major Macroeconomic Adjustments and Structural Reforms

  • IX The Potential Role of Capacity Building in Strengthening Program Design

    • Technical Assistance

    • Analytical Support

  • X Conclusion

  • Appendices

  • I PRGF-Supported Program Fiscal Data

  • II Assessment of Key Features by Authorities in Countries with PRGF Arrangements

  • III Summary of Key Features of PRGF-Supported Programs

  • IV PRGF and ESAF Staff Reports and Other Documents for the Review

  • Boxes

  • I 1. Evolution from the ESAF to the PRGF

    • 2. Key Features of PRGF-Supported Programs

  • III 3. Publication of PRSP and PRGF-Related Documents

  • VI 4. Structural Conditionality and Areas of IMF Expertise

    • 5. Structural Conditionality Boxes—What Story Do They Tell?

  • Figures

  • IV 1. Education and Health Spending in PRGF-Supported Programs, by GDP: Pre-PRGF Year to 2001–02

    • 2. Education and Health Spending in PRGF-Supported Programs, by Total Government Spending: Pre-PRGF Year to 2001–02

    • 3. Annual Change in Real Per Capita Education and Health Spending in PRGF-Supported Programs

    • 4. Poverty-Reducing Spending in PRGF-Supported Programs: Pre-PRGF Year to 2001–02

    • 5. Measures for Improving the Efficiency and Targeting of Public Spending in PRGF-Supported Programs

    • 6. Tax Policy Measures in PRGF-Supported Programs by Type of Tax

    • 7. Tax Policy Measures in PRGF-Supported Programs by Type of Reform

    • 8. Tax Administration Measures in PRGF-Supported Programs

  • VI 9. Streamlining Conditionality in PRGF-Supported Programs

    • 10. Composition of Structural Conditionality in PRGF-Supported Programs

  • VII 11. PEM Measures in PRGF-Supported Programs

  • VIII 12. Poverty and Social Impact Analysis (PSIA) in PRGF-Supported Programs and Countervailing Measures

  • Tables

  • II 1. Stages of PRGF-Supported Arrangements and Stages of PRSPs

  • III 2. Are the Broad Macroeconomic and Macro-Relevant Goals of PRGF-Supported Programs Drawn from l-PRSPs/PRSPs?

    • 3. Median Economic Assumptions in PRGF- and ESAF-Supported Programs

  • V 4. Fiscal Targets in PRGF- and ESAF-Supported Programs

  • VI 5. Streamlining Structural Conditionality

  • Appendix Tables

  • I A.1. Revenues and Expenditures Under PRGF-Supported Programs

    • A.2. Fiscal Targets in Post-Stabilization and Other Countries

    • A.3. Fiscal Targets: Decision Point HIPCs and Other Countries Under PRGF-and ESAF-Supported Programs

  • II A.4. Authorities’ Responses to Questionnaire on Key Aspects of PRGF-Supported Programs

    • A.5. Sample of PRGF Arrangements Approved or Reviewed from July 1, 2000 through September 30, 2001

The following symbols have been used throughout this paper:

  • …to indicate that data are not available;

  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • – between years or months (e.g., 2001–02 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

  • / between years (e.g., 2001/02) to indicate a fiscal (financial) year.

“n.a.” means not applicable.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

Preface

The September 1999 Annual Meetings resulted in a clear mandate for the International Monetary Fund to integrate the objectives of poverty reduction and growth more fully into its operations for the poorest countries and to base these operations on national poverty reduction strategies prepared by the country with broad participation of key stakeholders. Reflecting this new approach, the IMF established the Poverty Reduction and Growth Facility (PRGF) to replace its previous concessional assistance instrument, the Enhanced Structural Adjustment Facility.

At the time the PRGF was established, the Executive Board also called for a review after two years of the initial experience with the new facility. This review was to include feedback and input from officials and others engaged in this work in the field as well as analyses by IMF staff. The review was to take place in conjunction with a parallel joint World Bank-IMF review of the initial experience with the overall Poverty Reduction Strategy Paper (PRSP) approach. This paper synthesizes two papers prepared by IMF staff—Review of the Poverty Reduction and Growth Facility: Issues and Options (February 14. 2002) and Review of the Key Features of the Poverty Reduction and Growth Facility: Staff Analyses (March 15, 2002)—that focus on PRGF-supported programs and their links to, or relationship with, the broader poverty reduction strategies set out in the PRSPs and Interim PRSPs.

This paper draws on a broad range of internal and external views gathered during the period from July 2001 to February 2002. These include discussions at various regional forums on the PRSP approach during 2001, in which a majority of PRGF countries participated; meetings held with donor government officials and representatives of civil society organizations, including representatives of the donor governments at the Organization for Economic Cooperation and Development’s Development Assistance Committee; and the deliberations at the three main sessions on the PRGF at the recently concluded World Bank—IMF International Conference on Poverty Reduction Strategies (January 2002). In addition, this paper takes into account the expressed views of key officials—in member countries with PRGF arrangements covered by the review—in response to a questionnaire structured around the key features of the PRGF (see Appendix II).

A number of IMF staff contributed to the reviews on which this paper is based. Within the Fiscal Affairs Department (FAD), Shamit Chakravarti, Hamid Davoodi, Stefano Fassina, Kevin Fletcher, Eva Jenkner, Hong-Sang Jung, Ali Mansoor, and Erwin Tiongson provided contributions to the paper. Within the Policy Development and Review Department (PDR), contributions were made by Pierre Beynet, Sonia Brunschwig, Andrew Gilmour, Hans Peter Lankes, Lucas Moers, Luzmaria Monasi, Lynge Nielsen, and Laure Redifer. Helen Chin of the External Relations Department (EXR) edited the manuscript and coordinated its production and publication.

List of Abbreviations

CSO

Civil Society Organization

ESAF

Enhanced Structural Adjustment Facility

GFS

Government Finance Statistics

HIPC

Heavily Indebted Poor Country

I-PRSP

Interim Poverty Reduction Strategy Paper

JSA

Joint Staff Assessment

LOI

Letter of Intent

MEFP

Memoranda of Economic and Financial Policies

NGO

Nongovernmental Organization

PEM

Public Expenditure Management

PRGF

Poverty Reduction and Growth Facility

PRSP

Poverty Reduction Strategy Paper

PSIA

Poverty and Social Impact Analysis

ROSC

Report on the Observance of Standards and Codes

TA

Technical Assistance

VAT

Value-Added Tax