APPENDIX 4
Memorandum submitted by Christian Aid
INTRODUCTION
1. Christian Aid is the official development
agency of over 40 British churches and works for social justice
and poverty reduction with local organisations in 57 countries.
It has campaigned for debt relief to the world's most highly indebted
and poor countries for over 10 years, and since 1999 has critically
engaged with Poverty Reduction Strategy processes[14].
It is an on-going priority for Christian Aid to monitor the activities
of the World Bank and IMF.
2. Two Christian Aid representatives attended
the September 2002 World Bank and IMF Annual Meetings. Prior to
the meetings Christian Aid met with the Secretary of State and
DFID representatives to share respective agendas, and with other
NGOs to co-ordinate activities. Christian Aid's objective in attending
the meetings was to monitor discussions and outcomes, and to lobby
specifically around debt and PRSP issues. We outline below our
main concerns and the position of the UK government on these issues.
DEBT RELIEF
Joint submission for the World Bank and IMF Annual
Meetings on Debt Sustainability
3. Christian Aid co-authored a report[15]
to take to the World Bank and IMF Annual Meetings that argued
debt relief should be calculated according to the resources each
country needs to meet internationally agreed targets for reducing
poverty—the Millennium Development Goals (MDGs). Debt relief
under the HIPC Initiative is currently calculated using arbitrary
and over-optimistic projections on growth and exports in indebted
countries.
4. Where debt relief has been delivered,
it is helping many low-income countries to invest through "pro-poor"
expenditure, and make progress towards the MDGs. However, these
gains are not universal, and are limited and precarious where
they do exist.
5. The Monterrey Consensus[16]
recognised that most low-income countries would need to supplement
domestic resources with support from donors. The G8 Africa Action
Plan went one step further, stating, "no country genuinely
committed to poverty reduction, good governance and economic reform
will be denied the chance to achieve the MDGs through lack of
finance". Yet despite the international commitment to support
developing countries in achieving the MDGs, donors have not pledged
the sufficient additional resources needed to meet these goals[17].
6. In this context, debt relief is an important
additional form of finance. Moreover, as our paper argued, it
is potentially the most efficient and effective form of resource
transfer for the poorest countries—more so than many types
of aid with its corresponding conditions and transaction costs.
7. The reliance of the World Bank and IMF
on using debt-to-export ratios to calculate debt relief packages
is fundamentally flawed, especially given the downturn in the
global economy and the dependence of many countries on one or
two vulnerable commodities. As a result, not only are some countries
spending more on debt payments after they receive debt relief,
some are overshooting the World Bank and IMF's own definitions
of debt sustainability.
8. All the agencies involved in preparing
the joint report believe that the over-arching objective of debt
relief must be to help mobilise the finances needed to achieve
the MDGs. Our aim is to see a debt relief mechanism centred on
human development that provides support to low-income countries
in achieving these goals. At the Annual Meetings we asked the
World Bank, the IMF, and their shareholders to make this aim a
reality.
The response of the UK, the World Bank and IMF
9. In the margins of the Annual Meetings
we met with a number of Executive Directors of the World Bank
and IMF[18],
and attended meetings with IFI staff, to discuss debt relief and
the HIPC initiative.
10. Based on our meetings with UK civil
servants in the run-up to the meetings, and with Mr. Tom Scholar,
Executive Director for the UK, in Washington, we understand the
position of the UK Government to be as follows:
— They are supportive of motivating
for finance to help poor countries to reach the MDGs;
— They believe that some improvements
can be made to current HIPC framework (such as the inclusion of
post cut-off date debt, and looking at the tendency to use overoptimistic
growth and export projections);
— These improvements—together
with securing full funding of the Initiative—are their current
priorities;
— While they recognise that debt relief
acts as de facto financing for poverty reduction (in that
it funds priorities in a country's own poverty reduction plan),
they believe debt relief under HIPC should not primarily be seen
in this light, nor should it be seen as the main or most effective
way of financing poverty reduction;
— Rather, the aim of the HIPC Initiative
is to help countries reach "sustainable" levels of debt,
while poverty reduction can be financed through additional aid
flows.
11. At their 2002 Spring meetings, the World
Bank and IMF agreed to "discuss the issue of debt sustainability
and, consequently, financing and policy implications, at the next
[Annual] meeting"[19].
This followed on from a commitment under the Monterrey Consensus
that "Future reviews of debt sustainability should also
bear in mind the impact of debt relief on progress towards the
achievement of the development goals contained in the Millennium
Declaration". The staff of the IFI therefore prepared a paper[20]
for the September 2002 meeting of the Development Committee which
effectively argued that the proposals for reforming HIPC—to
make it more responsive to underlying poverty needs—were
unrealistic because they were too expensive (p31). They also argued
that new flows, including aid, could be better tailored as finance
to meet the MDGs in poor countries.
12. Christian Aid believes that HIPC is
not meeting it's own goal of achieving sustainable levels of debt
in low-income countries. Nor is aid necessarily the most effective
or efficient way of transferring resources to meet poverty needs.
13. Our joint submission argued that, as
aid often carries significant transaction costs for countries,
debt relief can often act as a better means of transferring resources.
This is because it effectively acts as direct budget support to
a country's own identified priorities. More importantly, our agencies
would not accept that the argument for a desirable and necessary
action is undermined because "additional costs (would) call
into question their feasibility".
POVERTY REDUCTION
STRATEGIES
Quality Participation in Poverty Reduction Strategy
Papers (PRSPs)
14. PRSPs are prepared by the governments
of developing countries, supposedly with full participation of
different interest groups in each country, to map out a strategy
as to what policies or actions need to be undertaken to reduce
poverty. Christian Aid has undertaken three case studies in Malawi,
Rwanda and Bolivia that investigate the quality of people's participation
in PRSP processes in each country. The conclusions of each case
study have been drawn together into a Christian Aid report, "Quality
participation in Poverty Reduction Strategies",
which was widely distributed and discussed with IFI officials
at the Annual Meetings. It was intended to contribute to learning
on PRSPs and to improve future processes.
15. The report argued that:
— Despite efforts to increase participation,
PRS processes so far have largely been characterised by "exclusion";
— PRS processes do not seem to have
been informed by previous experiences of participatory policy
making;
— Processes have been rushed due to
the connection with debt relief—HIPC debt relief is given
on the condition that a PRSP has been prepared;
— Information from the government and
the IFIs has often not been available in appropriate languages
and formats;
— Participation has been least in policy-making,
particularly on macro economic issues.
The response of the UK, the World Bank and IMF
16. The points raised in Christian Aid's
report were discussed with World Bank and IMF officials in Washington
during their sessions with NGOs on PRSPs. The staffs of the World
Bank and IMF appear to be more optimistic than some of our partner
organisations about levels of participation and the breadth of
policy choices within PRSP and PRGF processes. The Development
Committee's Progress Report on PRSPs, published just prior to
the Annual meetings claims that significant progress has been
made in the level and quality of people's and parliamentary participation.
[21]
17. While we acknowledge that some progress
has been made, we believe the Progress Report overemphasises this
and does not acknowledge the minimal involvement of groups representing
poor people in Poverty Reduction Strategies. It also fails to
distinguish between the degree of participation in social policy
and participation in economic policy, involvement in the latter
being much weaker. Christian Aid's partner organisations in PRSP
countries are extremely concerned about the lack of opportunity
for civil society actors to contribute to economic policy debates.
18. Christian Aid has had an on-going dialogue
with DFID on these issues through (a) its regular policy meetings
with the IFI Department and (b) BOAG Directors' meetings with
the Secretary of State. Generally, DFID has been receptive to
Christian Aid's concerns about participation in PRSPs, acknowledging
that processes have thus far been weak in involving poor stakeholders.
Christian Aid calls on DFID to seek to influence the IFIs to generate
more support for genuinely open debate on macro-economic policies,
and to permit CSOs to contribute to economic and structural policies,
rather than simply being confined to social sectors.
Poverty and Social Impact Analysis (PSIA)
19. Poverty and Social Impact Analysis is
a set of approaches that can be used to assess the likely impact
on different poor and vulnerable groups of choosing certain policies
over others. Two years ago the World Bank and IMF made a commitment
to integrate PSIA systematically into their own programmes, as
well as supporting the capacity of governments to implement PSIAs.
This commitment was reiterated in January 2002, by the World Bank's
President, who said that PSIA would be mainstreamed within all
Bank programmes "within six months"[22].
These commitments are extremely important and Christian Aid welcomes
the efforts that have been made by DFID and the World Bank to
take them forward through pilot studies. We recognise that PSIA
is an area within which all actors are learning and that there
is no set blueprint for undertaking them.
20. However, there has still been very slow
progress in mainstreaming support to PSIA within donor institutions.
Key reforms—which have enormous effects on the lives of
poor people—continue to be implemented with little analysis
of their potential impact, or discussion of alternatives. The
pilot studies currently being undertaken by the World Bank and
DFID are a welcome attempt to get things moving faster, but Christian
Aid still has concerns about the degree to which these studies
are "owned" nationally, the limited level of consultation
and inclusion of broader stakeholders, and the restriction of
analysis to a single policy option, rather than to a range of
options in order to select the most appropriate for poverty reduction.
21. Christian Aid believes that PSIA should:
— be mandatory for all conditions attached
to World Bank and IMF grants and loans—including on PRSCs,
Letters of Intent and Memoranda of Understanding;
— be led by a multi-stakeholder working
group that identifies policies of highest priority beyond these
conditionalities, and makes requests for external support where
appropriate;
— be conducted on a range of different
policy options, so that the best policy for poverty reduction
can be selected;
— involve national civil society actors
throughout—from the conceptual stage, setting the terms
of reference, identifying priority areas for analysis, discussing
policy options, ensuring that outcomes of analysis affect policy
decisions and monitoring implementation.
The response of the UK, the World Bank and IMF
22. At the 2002 Annual Meetings, the Development
Committee did reaffirm the need to "intensify efforts to
help countries undertake poverty and social impact analyses on
a more systematic basis"[23].
The PRSP Progress Report also reiterates that PSIA is a high priority
for the World Bank. During our meetings in Washington, World Bank
and IMF officials acknowledged the need for opening-up policy
dialogue through PSIA processes, even on macro-economic issues.
23. However, our concern is that although
this looks good on the surface, the IFIs are in practice less
flexible about the types of policies they will support with grants
or loans. The danger of PSIAs is that they will only be focused
on single policies and therefore will not become a creative means
of broadening debate and identifying possibly better-suited alternatives.
24. Furthermore, the language of the World
Bank's draft Users Guide on PSIA suggests that participation will
be used as a means through which to simply legitimise pre-determined
policies. Christian Aid sees PSIA as a potential tool for broadening
democratic debate and awareness within society of policy options.
25. DFID is one of the leading advocates
for PSIA in official donor circles and has taken the initiative
by leading with pilot studies. It has been very receptive to Christian
Aid's proposals and provided positive feedback on our publication
"Proving the Impact"[24].
We consider DFID's partnerships with national governments on the
PSIA pilots to be a very positive move. However, this first set
of PSIA pilots are still confined to single policies and do not
seem to have been well rooted in national debate. Initial surveys
suggest that civil society actors in these pilot countries have
a very low level of knowledge on these studies, if they know of
them at all.
RECOMMENDATIONS
26. On the issue of debt relief, we do not
believe that the response of the World Bank and IMF in their Status
Report is sufficient to address the concerns of many shareholders
and external stakeholders about the effectiveness of the HIPC
Initiative.
— We would therefore urge the UK to
press the IFIs to look in more depth at the issue of formally
linking debt relief with the resources needed to reach the MDGs.
— We also urge the UK government to
be more progressive in its support for a debt relief mechanism—whether
HIPC or its successor—to make an explicit link between debt
relief and poverty reduction goals.
27. On Poverty Reduction Strategy Papers:
— The UK Government should continue
to engage significantly with the World Bank and IMF while retaining
a critical distance.
— On Poverty and Social Impact Assessment
specifically, we believe that PSIA should be mandatory for all
conditions attached to World Bank and IMF grants and loans. These
should be independent and conducted on a range of different policy
options.
Paul Ladd and Jennie Richmond
Global Advocacy and Policy Division
Christian Aid
October 2002
This submission had four annexes attached which
have not been printed.
Annex 1: "Joint Submission to the
World Bank and IMF Review of HIPC and Debt Sustainability",
CAFOD, Oxfam GB, Christian Aid and EURODAD, August 2002—is
available at http://www.Christian-aid.org.uk/indepth/0209debt/debt.htm
Annex 2: "Quality Participation
in Poverty Reduction Strategies", Genevieve Painter, Christian
Aid, April 2002, is available at http://www.Christianaid.org.uk/indepth/0208qual/quality.htm
Copies of the following annexes have been placed
in the Library:
Annex 3: "Proving the Impact: Christian
Aid Comment: A User's Guide to Poverty and Social Impact Analysis",
Jennie Richmond and Paul Ladd, Christian Aid, August 2002.
Annex 4: Letter to World Bank and IMF
staff regarding PSIA pilot studies, from Christian Aid, World
Vision, EURODAD, Oxfam GB, Save the Children and CAFOD.
14 In 1999, the World Bank formalised its approach
to poverty and participation through the introduction of a new
instrument-Poverty Reduction Strategy Papers (PRSPs). These are
intended to place poverty reduction at the heart of their national
programmes-and debt relief efforts-for the world's poorest countries. Back
15
A Joint Submission to the World Bank and IMF Review of HIPC
and Debt Sustainability, CAFOD, Christian Aid, Oxfam and Eurodad,
August 2002, <au0>http://www.Christianaid-org.uk/indepth/0209debt/debt.htm<xu Back
16
Declaration arising from the UN Financing for Development Conference
held in Monterrey in March 2002 Back
17
The UN and World Bank estimate that an additional US$30-50bn is
needed annually in additional aid resources to enable developing
countries to meet the MDGs. Back
18
Executive Directors for the UK, France, Germany, "Anglophone"
Africa, and Canada / Ireland Back
19
Development Committee communique« April 2002 Back
20
Heavily Indebted Poor Countries (HIPC) Initiative: Status of Implementation,
World Bank and IMF, September 2002 Back
21
Poverty Reduction Strategies (PRSPs)-Progress in Implementation,
World Bank and IMF Development Committee, DC2002-0016, September
13 2002 Back
22
This commitment was made at his meeting with Civil Society during
the PRSP Review in January 2002. Back
23
Development Committee Communique« Back
24
"Proving the Impact: Christian Aid Comment: A User's Guide
to Poverty and Social Impact Analysis (Draft), World Bank",
Jennie Richmond and Paul Ladd, Christian Aid, August 2002 Back
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