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© 2004 International Monetary Fund
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Evaluation of the IMF’s role in Poverty Reduction Strategy Papers and Poverty Reduction and Growth Facility / [prepared by a team headed by David Goldsbrough] — [Washington, D.C.] : International Monetary Fund, Independent Evaluation Office, 2004.
p. cm. — (Evaluation report)
Includes bibliographical references.
ISBN 9781589063679
1. International Monetary Fund — Evaluation. 2. Developing countries — Economic policy. 3. Poverty. I. Goldsbrough, David John. II. Evaluation report (International Monetary Fund. Independent Evaluation Office).
HG3881. 5.I58E93 2004
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Contents
Foreword
Abbreviations and Acronyms
Evaluation of the IMF’s Role in Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility
Summary of Major Findings, Lessons, and Recommendations
1 Introduction: Origin and Objectives of the PRSP and the PRGF and Scope of the Evaluation
Origin and Objectives of the PRS Approach and the PRGF
Initial Experience with the New Approach
The Links Between Policies, Growth, and Poverty Reduction
Scope and Methodology of the Evaluation
2 Implementation of the PRS Approach in Areas Relevant to the IMF Mandate
Tensions Underlying the PRS Approach
The PRS Process
Contents of PRSPs in Macro-Relevant Areas
3 Joint Staff Assessments
Contents of JSAs
Value Added of the JSA
4 PRGF-Supported Program Design
Alignment with the PRSP
Fiscal Flexibility and Fiscal Adjustment
Strengthening Public Expenditure Management
Pro-Poor and Pro-Growth Budgets
Poverty and Social Impact Analysis
Is Structural Conditionality More Selective?
Some Program Design Issues
Has Program Implementation Improved?
5 The IMF’s Way of Doing Business>
What Was Expected of the IMF Under the New Initiative?
Have the IMF’s Policy-Formulation Processes and Advice Changed Under the PRSP/PRGF?
The IMF’s Contribution on the Ground: Evidence from Case Studies
IMF Contributions to the Broader Partnership Framework
Role of IMF Resident Representatives
Role of Surveillance
Obstacles to Further Progress in Adapting the IMF’s Role
6 Is the New Approach Making a Difference?
Changes in Nature of Domestic Policy Processes in Macroeconomic and Related Areas
Evidence on What Has Happened to Actual Policies and Final Outcomes
Boxes
1.1. Underlying Principles of the PRSP Process
1.2. Defining Characteristics of Poverty Reduction Strategy Papers
1.3. Some Common External Criticisms of the IMF’s Role in the PRS
2.1. Change of Government and Modification of PRSP Strategy: The Case of Nicaragua
2.2. A Case of Observing PRS Principles Without Achieving Its Objectives: The Guinean PRSP
2.3. Too Much Paperwork?
2.4. Was Macroeconomic Policy Discussed in the Participatory Process? Insights from Case Studies
2.5. Why Is It Proving So Difficult for the PRS Approach to Provide an Effective Operational Road Map on Macroeconomic Policy?
3.1. Key Findings of the Review of JSAs by the World Bank’s OED
3.2. Interactions with Local Stakeholders in the Preparation of JSAs
4.1. Key Features of PRGF-Supported Programs
4.2. Tanzania: Alignment, Fiscal Flexibility, and Program Design
4.3. Experiences with Setting the Medium-Term External Resource Envelope
4.4. IMF–World Bank Benchmarking Exercise on Public Expenditure Management
4.5. IMF Technical Assistance Support for Strengthening Public Expenditure Management
4.6. PSIA in “Real Policy Time”
4.7. Do PRGF-Supported Programs Have an Excessive Disinflation Bias?
5.1. Internal Guidance to IMF Staff on the Implementation of the PRS Approach
5.2. Views of NGOs: What Is the Nature of Their Policy Differences with the IMF?
Figures
1.1. Logical Framework of the PRSP Approach and IEO Evaluation of PRSPs and PRGF
4.1. Which Came First, the Chicken or the Egg? Sequencing of PRSPs and PRGF-Supported Programs
4.2. Relationship Between Initial Fiscal Balance at T–1 and the Targeted Fiscal Adjustment over a Two-Year Period (T–1 to T +1)
4.3. Assessment Results on Adequacy of Public Expenditure Management, 2001
4.4. Poverty-Reducing Expenditures
6.1. Average Net ODA Flows to Groups of Low-Income Countries
6.2. Growth and Change in Terms of Trade
Tables
1.1. Status of PRSPs and PRGF by Region, March 2004
1.2. Country Case Studies for Evaluation
2.1. Possible Categories of Participation and Their Objectives
4.1. Alignment Between PRGF Structural Conditionality and the PRSP
4.2. Targeted Fiscal Adjustment in ESAF- and PRGF-Supported Programs, 1995–2003
4.3. Targeted Fiscal Adjustment in PRGF-Supported Programs, 2000–03
4.4. Actual Fiscal Adjustment Under ESAF- and PRGF-Supported Programs, 1995–2003
4.5. Changes in Poverty-Reducing Expenditures, 1999–2002, and Projected Changes, 2002–05
4.6. Number of Structural Conditions
6.1. Assessment of Progress in the Country Cases Against Two Possible Intermediate Objectives
6.2. CPIA Ratings for PRSP and Non-PRSP Groups of Low-Income Countries
6.3. Selected Policy and Outcome Indicators for PRGF-Eligible Countries
6.4. Progress Toward the Income Poverty Goal
6.5. Progress Toward Meeting the Millennium Development Goals in 12 Mature PRSP Countries
Annexes
1 Survey of PRSP Stakeholders
2 Results from Survey of IMF Staff
3 PRSP Sourcebook: Does It Provide Adequate Space for Policy Flexibility, and Is It Based on Strong Empirical Evidence?
4 Assessment of the Adaptation of the IMF’s Internal Policy Process
5 Modalities of Participatory Processes: How Broad-Based Has Participation Been?
6 Qualitative Appraisal of Joint Staff Assessments
7 Determinants of Targeted and Actual Fiscal Adjustment
8 Composition of Targeted Changes in Expenditures and External Financing in IMF-Supported Programs
9 Changes in Domestic Policy Processes and Institutions: Evidence from Case Studies
Annex Figures
A2.1 IMF Staff Responses on the Impact of the Key Features of PRGF-Supported Programs on Their Conduct of Fund Business
A8.1 Distribution of Programs According to the Targeted Change in Expenditures
A8.2 Distribution of Projected Changes in the Availability of Grants and Concessional Loans in ESAF- and PRGF-Supported Programs
Bibliography
Statement by the Managing Director, IMF Staff Response, IEO Comments, and Summing Up of IMF Executive Board Discussion by Acting Chair
Statement by the Managing Director
IMF Staff Response
IEO Comments on Management/Staff Responses
Summing Up of IMF Executive Board Discussion by Acting Chair
The following symbols have been used throughout this report:
– between years or months (e.g. 2003–04 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g. 2003/04) to indicate a fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
Some of the documents cited and referenced in this report were not available to the public at the time of publication of this report. Under the current policy on public access to the IMF’s archives, some of these documents will become available five years after their issuance. They may be referenced as EBS/YY/NN and SM/YY/NN, where EBS and SM indicate the series and YY indicates the year of issue. Certain other documents are to become available ten or twenty years after their issuance depending on the series.
Foreword
The role of the IMF in supporting economic reform in low-income member countries has been the subject of considerable scrutiny and criticism over the years. At the end of 1999, the IMF and World Bank adopted a new framework for their support to low-income countries. This framework comprised two key elements: first, country-authored Poverty Reduction Strategy Papers (PRSPs), expected to draw on broad-based consultations with key stakeholder groups; and, second, a vehicle for the provision of IMF concessional lending, the Poverty Reduction and Growth Facility (PRGF), which replaced the Enhanced Structural Adjustment Facility (ESAF). Programs supported by the PRGF were to be derived from a country’s PRSP to ensure that reforms supported by the IMF were country owned and clearly oriented to achieving the joint objectives of poverty reduction and economic growth.
Although it is still too early to assess the success of the new framework in achieving these objectives, it is time to take stock of progress to date and identify shortcomings that may require course corrections in the design and implementation of the initiative. This is the purpose of this new IEO evaluation, which seeks to strike a balance between measuring progress against initial expectations and against final objectives. In this endeavor, we met two difficulties. First, it appeared that initial expectations about what could be delivered in the short term—by the IMF and by low-income countries alike—were extremely ambitious. Second, yardsticks and benchmarks to assess intermediate progress toward the final objectives appeared to be insufficient, especially with regard to what was expected in terms of country-specific changes in policy processes.
This evaluation adds to an already extensive body of reviews of the PRSP initiative undertaken internally by IMF and World Bank staff, as well as by donor agencies and nongovernmental organizations, by drawing on the comparative advantage of the IEO, which combines an independent perspective with full access to internal IMF documents, staff, and key decision makers. The evaluation, undertaken in parallel with a similar exercise by the Operations Evaluation Department (OED) of the World Bank (www.worldbank.org/oed/prsp) is based on extensive cross-section analysis of data for countries that had completed full PRSPs as of the end of 2002 and is further informed by a series of in-depth country case studies and surveys of stakeholders in low-income countries.
Following standard practice, this volume includes, alongside the evaluation report itself, the response of IMF management and staff to the evaluation, as well as the Summing Up of the Executive Board discussion of this report. Executive summaries of the case studies undertaken as background to this evaluation will be published in a separate volume and the full case study reports can be found on our website at www.imf.org/ieo.
David Goldsbrough
Acting Director
Independent Evaluation Office
Evaluation of the IMF’s Role in Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility
This report was prepared by a team headed by David Goldsbrough and includes Jeffrey Allen Chelsky, Martin Kaufman, Steve Kayizzi-Mugerwa, Isabelle Mateos y Lago, Alex Segura-Ubiergo, Daouda Sem-bene, and Tsidi Tsikata. Research assistance was provided by Patricia Yang-Yang Chen and Mowafa Taib, and administrative support by Annette Canizares, Arun Bhatnagar, and Maria S. Gutierrez. Important contributions were also received from Professor Arne Bigsten, Soren Jensen, David Peretz, and Kerfalla Yansane. The report was approved by Montek S. Ahluwalia, then Director of the Independent Evaluation Office (IEO). The evaluation team also benefited considerably from its collaboration with the World Bank’s Operations Evaluation Department team, led by William Battaile, which conducted a parallel evaluation of the World Bank’s role in the Poverty Reduction Strategy Paper process. Final judgments expressed in this report are the responsibility of the IEO alone.
The assistance of the Economic Commission for Africa in hosting a workshop for stakeholders in January 2004 in Addis Ababa to discuss the preliminary results emerging from the evaluation, and the financial support of the Commonwealth Secretariat, which allowed a number of the participants to attend that workshop, are gratefully acknowledged.
Abbreviations and Acronyms
| AFR | African Department (IMF) |
| APR | Annual performance report |
| AsDB | Asian Development Bank |
| BWI | Bretton Woods institution |
| CAS | Country Assistance Strategy (World Bank) |
| CDF | Comprehensive Development Framework (World Bank) |
| CG | Consultative Group |
| CGE | Computable General Equilibrium |
| CPIA | Country Policy and Institutional Assessment (World Bank) |
| CSO | Civil society organization |
| DAC | Development Assistance Committee (OECD) |
| DFID | Department for International Development (U.K.) |
| EC | European Commission |
| ESAF | Enhanced Structural Adjustment Facility (IMF) |
| FAD | Fiscal Affairs Department (IMF) |
| FAO | Food and Agriculture Organization (UN) |
| GDP | Gross domestic product |
| HIPC | Heavily Indebted Poor Country |
| IDA | International Development Association |
| IEO | Independent Evaluation Office (IMF) |
| IFI | International financial institution |
| IMF | International Monetary Fund |
| IMG | Independent Monitoring Group |
| I-NGO | International nongovernmental organization |
| I-PRSP | Interim Poverty Reduction Strategy Paper |
| JPR | Joint Partner Review |
| JSA | Joint Staff Assessment |
| LIC | Low-income country |
| LOI | Letter of Intent (IMF) |
| MCD | Middle East and Central Asia Department (IMF) |
| MDGs | Millennium Development Goals |
| MEFP | Memorandum of Economic and Financial Policy (IMF) |
| MFD | Monetary and Financial Systems Department (IMF) |
| MONA | Monitoring of Arrangements (IMF) |
| MTEF | Medium-term expenditure framework |
| NEPAD | New Partnership for Africa’s Development |
| NGO | Nongovernmental organization |
| ODA | Official development assistance |
| OED | Operations Evaluation Department (World Bank) |
| PAF | Performance Assessment Framework |
| PDR | Policy Development and Review Department (IMF) |
| PEM | Public expenditure management |
| PER | Public Expenditure Review (World Bank) |
| PFP | Policy Framework Paper |
| PRE | Poverty-reducing expenditure |
| PRGF | Poverty Reduction and Growth Facility (IMF) |
| PRS | Poverty Reduction Strategy |
| PRSC | Poverty Reduction Support Credit (IDA) |
| PRSP | Poverty Reduction Strategy Paper |
| PRSP-PR | PRSP Progress Report |
| PSIA | Poverty and Social Impact Analysis |
| RES | Research Department (IMF) |
| ROSC | Report on Standards and Codes |
| SOE | State-owned enterprise |
| TA | Technical assistance |
| TOR | Terms of reference |
| UN | United Nations |
| UNDP | United Nations Development Program |
| VAT | Value-added tax |
| WEO | World Economic Outlook (IMF) |
| WHD | Western Hemisphere Department (IMF) |