- Benedict Clements, Gabriela Inchauste, Nita Thacker, Thomas Dorsey, Shamsuddin Tareq, Emanuele Baldacci, Sanjeev Gupta, and Mark Plant
- Published Date:
- September 2002
While a good start has been made in incorporating the key features of the PRGF into program design, there is scope for deeper implementation. The broad goals and quantitative macroeconomic frameworks of PRGF-supported programs are generally consistent with those of the supporting PRSPs. But the following points apply:
- In cases where I-PRSPs/PRSPs have been formulated in only very general terms, the PRGF-supported program, while consistent with the I-PRSP/PRSP, is necessarily linked to these documents only at that general level. To the extent that this is a transitional phenomenon reflecting the early stage of the PRSP process, tighter links between PRGF-supported programs and PRSPs can be expected to emerge as more countries gain experience with the PRSP process.
- In cases where the looseness of linkages between the I-PRSP/PRSP and the PRGF-supported program relates to slow changes in work practices or to capacity constraints (both have been suggested by some NGOs, donors, and authorities), there may be a role for greater technical assistance by the IMF and for more proactive outreach efforts by mission teams, resident representatives, and country authorities.
Streamlining of structural conditionality has proceeded very much in line with the intentions set out for the PRGF. Both in terms of concentrating conditionality in the IMF’s core areas of expertise and reducing the total number of conditions, the initiative seems to have been implemented successfully thus far. On the other hand, some NGOs and donors have raised concerns that streamlining may have gone too far and that structural conditionality outside the IMF’s core areas is no longer sufficiently covered. Therefore, staff also need to ensure that measures that are critical to the achievement of a program’s macroeconomic objectives are included as conditionality. At the same time, there remains room for improvement in justifying non-core measures as critical to the program and in explaining the role of measures supported by the World Bank or other institutions’ policy advice.
The composition of public spending is shifting toward pro-poor activities under PRGF-supported programs, and higher public spending is accommodated under these programs. The amount by which public spending has been targeted to increase has been determined in the context of the program’s macroeconomic targets, which themselves are also important for growth and poverty reduction. Because of more generous grants, a lower interest burden, and higher revenues, countries have been able to afford larger levels of poverty-reducing spending than was possible under the ESAF-supported programs. Supported by the PRSP process, PRGF-supported programs are addressing in more detail the specific reforms needed to improve the efficiency and targeting of public expenditure, and to ensure that the poor are protected from the adverse effects of reforms in the short run.
The results of this review also suggest that progress has been uneven in other areas relevant to fiscal policy. In particular, improved reporting of poverty-reducing spending (in conjunction with a strengthening of PEM systems), greater emphasis on the efficiency and targeting of public spending, more widespread identification of contingent expenditures, systematic poverty and social impact analysis, and (where appropriate) continued emphasis on bolstering the revenue efforts in HIPCs would strengthen PRGF-supported programs. Several NGOs also indicated that systematic reporting of the dialogue between country authorities and IMF staff on fiscal policy choices would help to increase the transparency and ownership of the PRGF-supported program. Additional work is also required on monitoring outcomes and changes in social indicators.
There is scope for further improvement. In particular, there is still a perceived need to encourage deeper and broader discussion and analysis of the macroeconomic framework and the policies in PRGF-supported programs, as well as on various alternative policy paths and the trade-offs involved. Of particular importance is increasing the focus on the sources of growth in PRGF-supported programs. The documentation for these programs should be assessed with a view to laying out more clearly the program’s role in the context of the overall poverty reduction strategy, the policy options that were considered, and the commitments that were made by authorities in the context of the program. Finally, the early experience with PRGF-supported programs has also highlighted the urgency of strengthening analytical and technical capacity at the national level. Progress in this regard will have a key bearing on areas such as the development of alternative policy scenarios or the preparation of poverty and social impact analysis. This finding highlights the need for a stronger focus by the international community on institutional capacity building in PRGF countries.