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Mr. Benedict J. Clements, Ms. Gabriela Inchauste, Ms. Nita Thacker, Mr. Thomas William Dorsey, Mr. Shamsuddin Tareq, Mr. Emanuele Baldacci, Mr. Sanjeev Gupta, and Mr. Mark W. Plant

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.

International Monetary Fund

Abstract

Fiscal policy affects sustainable development through its effects on growth, the environment, and resource development. What are the relationships between fiscal policy and sustainable development, and how does the IMF seek to promote sustainable development in its policy advice? What lessons have been learned so far, and how can governments, the international community, and international financial institutions more fully support sustainable development?

International Monetary Fund

Abstract

Economic growth is essential for sustainable development and improving social outcomes.4 Growth usually—but not always—benefits the poor; in about 90 percent of the cases in which countries have experienced per capita GDP growth of at least 2 percent per year over a five-year period, the poor also experienced rising real incomes. While, in general, there is no pro-rich bias in growth,5 appropriate development of the poor’s income-earning potential can help ensure that they also share in the fruits of an expanding economy (see the section on “Fiscal Policy, Human Development, and the MDGs”). Not surprisingly, there is also a strong link between economic growth and improvements in non-income dimensions of poverty. For example, a 10 percent increase in GDP per capita typically results in a 3–5 percent decrease in infant and child mortality rates.6 Similarly, disparities between male and female literacy rates fall markedly as GDP increases.7 In this light, fiscal policy can play a pivotal role in achieving the MDGs by fostering robust economic growth.

International Monetary Fund

Abstract

In both developed and developing countries, fiscal policy has an important role to play in assuring sustainable use of natural resources and safeguarding the environment. This applies to both the tax and spending sides of the government’s budget. On the former,

International Monetary Fund

Abstract

Government expenditure policy will have a key role in determining whether countries meet the MDGs. In many countries, the government will have a central role in ensuring that its citizens, especially the poor, have access to education and health services by either providing these services itself or financing private sector provision. As such, it is critical to understand the link between government spending on these programs and performance on indicators that measure the health and education status of the population. Of special interest is how government spending affects the achievement of the 48 social and human development indicators that have been selected to monitor progress toward the achievement of the MDGs.

International Monetary Fund

Abstract

Poor governance poses a number of obstacles to human development.52 Corruption results in the allocation of budgetary resources for unproductive programs and inefficiencies in public spending, which reduces the effectiveness of outlays on social and poverty-reducing programs in fostering social development. Poor governance results in budgetary allocations tilted in favor of less-productive investment projects and defense-related spending and against nonwage operations and maintenance expenditures, which reduces the quality and productivity of existing infrastructure. Corruption also reduces revenue and therefore the ability of the government to mobilize the resources needed to finance critical poverty-reducing programs. Corruption results in the poor capturing a smaller share of the benefits from public spending and, more generally, in higher poverty and income inequality.

Mr. Benedict J. Clements, Ms. Gabriela Inchauste, Ms. Nita Thacker, Mr. Thomas William Dorsey, Mr. Shamsuddin Tareq, Mr. Emanuele Baldacci, Mr. Sanjeev Gupta, and Mr. Mark W. Plant

Abstract

The creation of the Poverty Reduction and Growth Facility (PRGF) in late 1999 represented the culmination of more than two years of internal and external reviews and IMF policy discussions on the assessment and transformation of the Enhanced Structural Adjustment Facility (ESAF) (Box 1). At the time the PRGF was instituted, it was envisaged that there would be some far-reaching changes in the way the IMF worked to support low-income member countries. First, there would be a change in the content of IMF-supported programs in these countries—the programs would be more pro-poor and pro-growth. Second, there would be an increased emphasis on country ownership of PRGF-supported programs. And third, there would be a better definition of the IMF’s role and relationship with other agencies supporting the development efforts of low-income countries. Although much of the structure for the anticipated changes was embedded in the Poverty Reduction Strategy Paper (PRSP) process, specific expectations for PRGF-supported programs were laid out in the Key Features of Poverty Reduction and Growth Facility (PRGF)-Supported Programs document (Box 2), which was issued in August 2000 after extensive internal and external consultation.

Mr. Benedict J. Clements, Ms. Gabriela Inchauste, Ms. Nita Thacker, Mr. Thomas William Dorsey, Mr. Shamsuddin Tareq, Mr. Emanuele Baldacci, Mr. Sanjeev Gupta, and Mr. Mark W. Plant

Abstract

In reviewing the implementation of the key features, the analysis focuses on the extent to which program design in PRGF-supported programs has been consistent with these goals. Because of the early stage of the transformation from the ESAF, it is not yet possible to consider questions about how the PRGF has affected poverty and growth. The process of transformation from the ESAF to the PRGF is ongoing, and in many respects it is still at an early stage—a large majority of PRGF-supported programs in place are either new PRGF-supported arrangements that have not yet reached their first review or ESAF-supported arrangements that have been transformed into PRGF-supported arrangements in midstream.1 Nevertheless, an attempt has been made to evaluate outcomes in relation to objectives wherever data were available (mostly in the fiscal area).

Mr. Benedict J. Clements, Ms. Gabriela Inchauste, Ms. Nita Thacker, Mr. Thomas William Dorsey, Mr. Shamsuddin Tareq, Mr. Emanuele Baldacci, Mr. Sanjeev Gupta, and Mr. Mark W. Plant

Abstract

The interrelated key features 1 and 2 set out several aspects of the expected relationship between the PRGF-supported program and the PRSP. Specifically. PRGF-supported programs should be consistent with, and drawn from, the PRSP in a manner that takes into account national priorities. Further, PRGF-supported programs should concentrate on those parts of the poverty reduction strategy that are within the IMF’s areas of expertise while remaining cognizant of and consistent with those parts of the strategy that are outside the IMF’s areas of expertise.