See Review of the Key Features of the Poverty Reduction and Growth Facility: Issues and Options, SM/02/51, February 14, 2002; and Review of the PRSP Approach: Main Findings, SM/02/53, March 15, 2002.
To the extent that experience in applying some of the proposed options (eventually) provides evidence that an adaptation of policies or instruments would be required to achieve the objectives of the alignment, staff will indicate this formally to the Board and seek approval for the necessary changes.
See Review of the Poverty Reduction Strategy Paper Approach—Main Findings, SM/02/53 Revision 1, March 15, 2002; Review of the Poverty Reduction and Growth Facility: Issues and Options, SM/02/52, February 15, 2002; and Poverty Reduction Strategy Papers— Progress in Implementation, SM/02/250, August 6, 2002.
Evaluation of Prolonged Use of Fund Resources, IMF Independent Evaluation Office, EBM/02/100, September 23, 2002.
The World Bank has well-developed instruments for the analysis of growth policies and the identification of priorities, the results of which are presented in the Development Policy Reviews (DPRs), Country Economic Memoranda (CEMs), and associated analyses.
For example, through more formal sensitivity analyses of the likely impact of deviations in key assumptions regarding commodity prices, foreign aid flows, drought, and other key macroeconomic parameters.
As noted above, even these more conservative assumptions have sometimes been overly optimistic.
For example, the PRSP could usefully indicate how unanticipated additional resources would be used (i.e., priority poverty spending, build-up of reserves to further buffer against shocks, etc.) while maintaining growth and macroeconomic stability, or what corrective spending and/or revenue measures would be undertaken in the case of resource shortfalls.
These higher aid flows are expected to include additional bilateral development assistance; debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative and other debt relief initiatives; special global initiatives, such as the Education for All Fast Track Initiative, and the Global Fund to Fight AIDS, Tuberculosis, and Malaria; and other international support for poverty reduction, including from private philanthropic organizations.
Fund staff will also be prepared to re-examine the appropriate levels of Fund financial assistance to the country, in light of the relative degree of concessionality of PRGF resources vis-à-vis support from other agencies. This issue will be considered in the forward-looking paper on the Fund’s role in low-income countries over the medium term.
More analytical and empirical work is needed to strengthen the Fund staff’s capacity to estimate the economy-wide implications of additional poverty-reducing spending on external competitiveness, real domestic interest rates, and inflation. This is a priority area of the work program of the Fund’s Research Department.
The case for using donor assistance to build-up reserves or pay down domestic debt should ideally be presented in the PRSP as part of the country’s overall strategy. It is worth noting that, in a number of countries, government recourse to domestic financial markets has contributed to keeping real interest rates at high levels, with adverse consequences for private investment.
This would help preclude situations such as that which occurred in Uganda in late 2002, where the Finance Ministry was initially reluctant to accept a substantial grant from the GFATM unless it could be used to replace already budgeted health spending, owing to concerns about the macroeconomic effects of overshooting existing expenditure ceilings. Similar issues have arisen in Tanzania and Mozambique.
The Development Committee in September 2002 called on the IMF and the World Bank to scale up and intensify their efforts in assisting countries to mobilize domestic resources and improve the quality of public expenditure. See “Joint Ministerial Committee of the Board of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries, Development Committee Communiqué, Washington, D.C., September 28, 2002.
See Bank/Fund Collaboration on Public Expenditure Issues, SM/03/73, February 19, 2003.
The average PRGF-supported program contains 10 measures in the area of fiscal adjustment and public sector reform, with an emphasis on improving public expenditure management.
Relatively more of the available resources for technical assistance by FAD were allocated to UFR work in FY 2001-02, (particularly in HIPCs), reflecting a joint effort with the Bank in 2001-02 to assess public expenditure systems in HIPCs and their capacity to track poverty-reducing expenditures. Most of the TA activities were in support of capacity building and HIPC-related work, which has a clear poverty reduction focus. See Actions to Strengthen the Tracking of Poverty-Reducing Spending in Heavily Indebted Poor Countries (HIPCs), SM/02/30, January 30, 2002 and Supplement 1; and Review of Technical Assistance Policy and Experience, SM/02/180, June 13, 2002, paragraphs 18-21.
See Poverty Reduction Strategy Papers—Progress in Implementation, SM/01/268, September 14, 2001.
At the March 2002 PRGF Review, Directors called for systematic treatment of these issues in PRGF documentation.
Staff is preparing and will widely disseminate a pamphlet summarizing the research being undertaken at the IMF, and are developing a web page on the IMF’s external web site which highlights both past and ongoing internal research on these issues.
The Fund is carrying out research on the impact of exogenous shocks on growth, as well as on the development of an appropriate set of policies to reduce vulnerability to such shocks. Findings from this research effort will be presented in a paper on exogenous shocks to be considered by Executive Directors in mid-2003.
A full mapping of the PRSP into a medium-term fiscal framework would require aligning the budgetary functional/program classification with the PRSP’s definitions of sectors and programs.
This includes the work of both the OECD-DAC and the Strategic Partnership with Africa (SPA) over the past two years. Donor alignment is the centerpiece of the SPA agenda for the SPA-6 period, covering 2003-05.
The staffs presented a joint concept note as a background piece for the High-Level Forum on Harmonization in Rome in late February 2003. The proposed coordination framework builds on existing and established good practices, and was discussed in detail with the co-chairs of the SPA Technical Group (the European Commission and the UK’s Department for International Development - DFID) to ensure its consistency with the results of the action learning missions the group conducted in Ethiopia, Rwanda, and Senegal (Box 5). The framework was then presented informally in January 2003 at the SPA Plenary meeting, where participants broadly endorsed it, and encouraged the Bank and the Fund to proceed with the planned test of the concept in a few African countries.
This is one of the OECD-DAC Guiding Principles on Providing Coordinated Aid. See Harmonizing Donor Practices for Effective Aid Delivery: A DAC Reference Document, OECD, DCD/DAC/TFDP(2002)12, December 6, 2002.
More generally, two critical questions would need to be addressed in the coordination framework: first, how to deal withissues such as progress in improving governance or human rights, which are critically important to some donors, but for which objective, measurable criteria and benchmarks are often difficult to define; and second, what steps can be taken to avoid the total suspension of coordinated aid in the event of isolated slippages.
For example, in Tanzania, nine bilateral donors and the EU have adopted a common performance assessment framework for the portion of their aid provided in the form of budget support; and the government has prepared a draft action plan on the harmonization of procedures for effectiveness in aid delivery, including channeling project aid through the Exchequer system to ensure predictability and integrate external finance into government budgeting and reporting. In Ghana, the government and a number of bilateral and multilateral donors have signed a memorandum of understanding for a joint approach to budgetary and balance of payments support that will require harmonization of disbursements based on joint monitoring of performance.
Of twenty full PRSPs discussed by the Executive Board through end-January 2003, only Albania, The Gambia, Guyana, and Tajikistan have had new PRGF arrangements discussed with new, full PRSPs. In two of those cases (Albania and Guyana), the PRSP had been finalized several months before Board discussion and required a supplement to update its macroeconomic framework. The PRSP-supported program did not coincide with the budget cycle in any of the four countries.
This may not always be needed and sometimes may not be feasible. For example, the staff proposal implicitly assumes a three-year PRSP cycle, but longer cycles (e.g. actual timing of countries’ PRSPs vary from 3-5 years) are possible.
The AFRITAC work program is drawn from the issues identified in the PRSPs of the participating countries, and the work program matrix includes explicit references to how the individual technical assistance outputs fit within each country’s PRSP. Particular care was taken to coordinate the technical assistance provided through the AFRITAC with the activities of other providers in order to avoid overlaps and ensure that such coordination is systematic.
There was a marked increase in technical assistance associated with the HIPC initiative in FY 2002, as well as follow-up to FSAPs and standards and codes work, and statistical improvements related to participation in the GDDS. Much of the assistance provided was in areas that are considered as capacity building and are directly linked to poverty reduction. See Review of Technical Assistance Policy and Experience, SM/02/180, June 13, 2002 (para. 15-16).
Recent topics have included poverty and social impact analysis; the implications of the recently concluded biennial review of surveillance; macroeconomic issues related to aligning the PRGF with the PRSP approach; Fund/Bank collaboration in program design and conditionality; and statistical dimensions of the PRSP/PRGF.
See Summing Up by the Acting Chair Review of the Poverty Reduction and Growth Facility, BUFF/02/40, 03/15/2002.
See Poverty Reduction and Growth Facility – Operational Issues, SM/99/293, 12/13/1999, paragraph 31.
When PSIA is directly relevant to program design choices, its impact would be described in the staff report.