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Date: Mon, 26 Mar 2001 20:20:53 -0500
From: APIC <[log in to unmask]>
To: [log in to unmask]
Subject: Africa: Human Rights and Debt Relief Conditions
Africa: Human Rights and Debt Relief Conditions
Date distributed (ymd): 010326
Document reposted by APIC
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+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-wide
Issue Areas: +economy/development+
SUMMARY CONTENTS:
This posting contains excerpts from a report to the UN Commission
on Human Rights on the human rights implications of the Poverty
Reduction Strategy Papers (PRSP) required for countries to gain
access to debt reduction under the Heavily Indebted Poor Countries
(HIPC) initiative. Independent expert Fantu Cheru is also a
professor at American University in Washington and a member of the
Board of Directors of Africa Action. His full report, including
footnotes and annexes, is available on the web site of the UN
Commission on Human Rights (see URL and instructions below).
In the report, Dr. Cheru notes a 'disconnect' between the macroeconomic
objectives and proverty reduction goals, and proposes de-linking debt relief
and the poverty reduction strategy papers.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Distr. GENERAL E/CN.4/2001/56
18 January 2001
COMMISSION ON HUMAN RIGHTS
The Heavily Indebted Poor Countries (HIPC) Initiative: a human
rights assessment of the Poverty Reduction Strategy Papers (PRSP)
Report submitted by Mr. Fantu Cheru, independent expert on the
effects of structural adjustment policies and foreign debt on the
full enjoyment of all human rights, particularly economic, social
and cultural rights
[excerpts only: full text on web site of UN Commission on Human
Rights - http://www.unhchr.ch - search in charter-based bodies
database under document number E/CN.4/2001/56]
Executive summary
Although the author recognizes good intentions behind the HIPC
initiative, he points out that there remain a number of problems,
the most critical problem being the financing of this initiative.
The lack of sufficient resources to fund the initiative has become
a growing concern to the World Bank and the International Monetary
Fund (IMF), the two institutions that preside over the HIPC
process, and to regional development banks and other relatively
unknown and smaller multilateral institutions. ...
With regard to the PRSPs, the author indicates that, in preparing
the PRSP, Governments are expected to show clearly the links
between macroeconomic policies and agreed international social
development goals to be reached by 2015. Examination of the annexed
eight I-PRSPs (Benin, Chad, Ghana, Kenya, Mozambique, Senegal,
Tanzania and Zambia) and one full PRSP (Uganda) reveals great
differences in their quality. Further, it shows that the broad
macroeconomic objectives of the majority of the countries studied
are inconsistent with the poverty reduction goals. One of the
reasons for this inconsistency is the tension between the desire to
provide debt relief quickly and the lack of a proper poverty
reduction framework. Another reason for this disconnection is to be
found in the unequal power relations between indebted countries and
the Bretton Woods institutions that manage the HIPC process. Given
the fact that the G-7 countries set the agenda of these
institutions to a considerable degree, the G-7 Governments are as
much to blame for continuing to prescribe faulty diagnosis to
indebted countries as the World Bank and the IMF. Also with regard
to the PRSPs, the independent expert points out that Governments of
HIPC countries try to please the World Bank and the IMF. Therefore,
they put too much emphasis on macroeconomic considerations, fiscal
reform and privatization measures, without thinking about the
impact of these policies on poverty reduction nor about the
context. He stresses that all the PRSPs reviewed emphasize the need
for restructuring, downsizing, cost-recovery and paying teachers
less, and questions whether this will eliminate poverty.
The author criticizes the fact that the use of the I-PRSP process
as a transitional measure does not take into account the difficulty
of producing an authentic, consensus-based national poverty
strategy with the consent of all stakeholders. The IMF-supported
programmes remain stringent, inflexible and in some instances very
punitive, where countries have very little room to manoeuvre. The
Poverty Reduction and Growth Facility (PRGF) (previously the
Enhanced Structural Adjustment Facility (ESAF)) remain firmly
focused on macroeconomic and financial concerns. Although the PRSPs
are supposed to be country- driven, prepared and developed
transparently with a broad participation of the civil society, the
independent expert states that, in the majority of the countries
examined, the participatory and transparency elements in the
elaboration of PRSPs have not been respected. As a result, the
PRSPs in these countries lack credibility for the population.
Despite these criticisms, however, the independent expert believes
that the PRSP process does provide a potential tool that developing
countries can use to implement genuinely country-owned and
participatory poverty reduction strategies. The role of the World
Bank and the IMF can be important in this process, but will depend
on their approach to conditionality and macroeconomic reforms.
Finally, the independent expert recommends that creditor
Governments and institutions 'revisit the whole issue once again'.
His other recommendations address the issue of how to expedite the
process of providing immediate relief to eligible HIPC countries.
His main recommendations are that the HIPC debt relief be delinked
from the PRSP process, that the only condition imposed on countries
receiving debt relief be that they establish an independent entity
to channel freed resources towards social development, that the
World Bank and IMF not have the exclusive role as overseers of
poverty reduction programmes but that other United Nations agencies
be included as well, that new rounds of talks aimed at finding a
solution to the debt burden of many poor countries be organized,
that the PRGF be abolished, and that a serious dialogue be
undertaken on how to integrate macroeconomic policy issues with
broader social development goals.
Background
...
4. This report examines the steps which have been taken since 1999
in granting debt relief to qualifying countries. On the basis of an
analysis of 9 of the 19 Interim Poverty Reduction Strategy Papers
(I- PRSP), it critically examines the PRSP process.
5. In the mid-1980s, under the guidance of the IMF and the World
Bank, structural adjustment programmes (SAPs) were introduced which
had the stated aim of developing growth and capacity. The
liberalization of markets called for by stabilization policies
often resulted in delays in growth. In order to reduce the negative
impacts of these delays, the IMF introduced in September 1987 an
Enhanced Structural Adjustment Facility (ESAF) for poor countries
which enabled them to received assistance over a period of up to 3
years with reimbursement stretched out over a period of 10 years
(in contrast to its regular credits, which were to be repaid within
one to two years). In November 1999 the Poverty Reduction and
Growth Facility (PRGF) replaced the ESAF. The aim of the PRGF is to
support programmes to strengthen substantially and in a sustainable
manner balance of payments positions and to foster durable growth.
6. At the same time, the Poverty Reduction Strategy Papers (PRSPs)
replaced the Policy Framework Papers (PFP) which underpinned ESAFs.
National programmes for poverty reduction are the foundation for
IMF and World Bank lending programmes and for HIPC debt relief.
Essential features are that PRSPs (a) are developed in a
participatory way, (b) are nationally owned and (c) lay out a
policy framework and agenda for tackling poverty.
7. HIPC and ESAF countries are required to produce a PRSP before
they can seek new programme support from the IMF or the World Bank.
...
II. A. The policy disconnect: poverty and macroeconomic goals
24. In the majority of countries examined, the broad macroeconomic
objectives are inconsistent with the poverty reduction goals. The
same conclusion was reached in a recent report by the United States
General Accounting Office, which pointed out that there is tension
between the desire to deliver debt relief quickly and the need to
ensure that a proper poverty reduction framework is in place. 5
Only the Uganda PRSP is firmly anchored in the Government's
comprehensive Poverty Eradication Action Plan first developed in
1997 and revised to take into account new poverty data, detailed
sector plans and direct consultation with the poor. But this
process took more than two and half years to complete. Civil
society is at present involved in monitoring its implementation.
25. What explains this disconnect between macroeconomic components
of the interim PRSPs and the poverty reduction goals? The answer is
to be found in the unequal power relations between indebted
countries and the institutions that manage the HIPC process,
namely, the IMF and the World Bank. What is obvious from our
analysis is that countries have tried to read too much into the
minds of the IMF and the World Bank. The Governments of HIPC try to
make their PRSP meet the lending criteria of the Fund and the Bank,
and have thus put too much emphasis on macroeconomic
considerations, fiscal reform and privatization measures to placate
these powerful institutions, without thinking through how such
policies impact on poverty reduction and in what context. At the
end of the day, what matters the most to these Governments is that
they get the badly needed cash flow from these institutions. As one
finance minister interviewed for this report succinctly put it, 'We
do not want to second-guess the Fund. We prefer to pre-empt them by
giving them what they want before they start lecturing us about
this and that. By so doing, we send a clear message that we know
what we are doing - i. e. we believe in structural adjustment.'
26. The decision by debtors to 'placate' the IMF is both political
and financial, since eligibility for debt relief under HIPC-II is
conditioned upon 'good performance' in the implementation of IMF
and World Bank policies. While countries should be encouraged and
supported to adopt sensible policies that make good economic and
political sense, IMF-supported programmes remain stringent,
inflexible and in some instances very punitive, 6 leaving very
little room for countries to manoeuvre. The ESAF programmes in
their reincarnated form (now renamed Poverty Reduction and Growth
Facility) remain firmly focused on macroeconomic and financial
concerns. There is no indication of how the PRSPs complement the
macroeconomic emphasis of the PRGF.
27. What the architects of the HIPC initiative failed to realize is
that it was the failure of two decades of structural adjustment
programmes (SAPs) to help countries 'export their way out of the
crisis', and their inability to service their debts and the social
erosion that followed that gave the impetus for the establishment
of the HIPC initiative. Increasing malnutrition, falling school
enrolments and rising unemployment have been attributed to the
policies of structural adjustment. Yet these same institutions
continue to prescribe the same medicine as a condition for debt
relief, dismissing the overwhelming evidence that SAPs have
increased poverty.
28. ... The use of the I-PRSP process as a transitional measure,
while addressing the immediate cash-flow problem, does not take
into account the difficulty of producing an authentic,
consensus-based national poverty strategy with the consent of all
stakeholders. ...
II. B. Citizens' participation
31. The PRSPs are supposed to be country-driven, prepared and
developed transparently with the broad participation of civil
society. Yet the 'template' for preparing the PRSP, i. e., what it
should contain, is designed by donors, which says very little about
the authenticity of national ownership.
32. Citizen participation in the preparation of the I-PRSPs has not
been transparent in several of the countries reviewed - although
the independent expert notes the exception of Uganda's full PRSP.
While civil society groups have been invited to participate
extensively in discussions on the social policy-planning component
of the I-PRSP, they have effectively been excluded when it comes to
discussions on the content of macroeconomic policy choices. In
Ghana, Tanzania and Kenya, for example, the contents of the policy
matrix that is part of the I- PRSP were never made public during
the national consultations. In a few other countries, consultations
took place only with concerned line ministries, although the policy
documents state that such consultation shall take place in the
course of the preparation of the full PRSP.
33. In Tanzania, civil society organizations were demanding more
active participation throughout the PRSP process. However, they
were brought into the process in a superficial and half-hearted
manner. 9 The Government developed the I- PRSP internally, while
civil society groups were involved in a separate process, convened
by the Tanzania Coalition for Debt and Development (TCDD). Key
macroeconomic and structural adjustment issues were addressed in
secret negotiations, occurring in parallel to the PRSP
consultations. At a later stage, the civil society working groups
managed to participate in the sharing sessions on the documents
already prepared by the Government. ... The consultations were all
undertaken in a rushed manner, not allowing for true dialogue,
discussion and debate. ...
35. Despite the criticisms raised above, the PRSP process does have
potential as a tool that developing countries can use to implement
genuinely country-owned and participatory poverty reduction
strategies. The Bank and Fund can play an important role in this
process, but only if they are able to change their approach to
conditionality and macroeconomic reform. ...
44. Better yet, there is a need to delink debt relief from the
whole PRSP process so that countries take the necessary time to
prepare a consensus-based national poverty reduction plan without
the pressure of having to please the IMF and the World Bank in
order to access interim relief. Both creditors and debtors should
pay serious attention to the urgent need to link macroeconomic
policies to social development objectives. As practised now, the
disconnect between the two is too wide to lead to the desired
outcome. ...
IV. RECOMMENDATIONS: THE WAY FORWARD
46. The under-funding of the HIPC initiative, the unnecessary delay
in granting immediate relief, because countries encounter
difficulty preparing a PRSP that meets all the conditions, and the
inadequate and superficial participation strategy for inclusion of
civil society groups, provide sufficient reason for creditor
Governments and institutions to revisit the whole issue once again.
47. At the same time, the need to grant immediate relief to
eligible HIPC countries should not be understated, given their
precarious economic and political situations at the present moment.
But to expedite the process, the following measures are
recommended:
(a) De-link HIPC debt relief from the PRSP process. Real national
ownership of poverty reduction frameworks can only happen if the
threat of 'conditionality' is removed by the IMF and the World Bank
from the backs of vulnerable Governments. Linking debt relief to
the preparation of the PRSP removes the 'autonomy' of countries to
come up with a framework that clearly makes an explicit connection
between macroeconomic policies and poverty reduction goals. This
requires time, research and exhaustive consultation with broad
sectors of their populations. The only condition should be that
countries receiving debt relief establish an independent entity,
like Uganda's Poverty Reduction Action Plan, to channel freed
resources towards social development. Such an entity - preferably
an independent non-governmental body - will manage the fund. This
entity must follow important rules governing financial control,
performance monitoring and evaluation systems to ensure that the
Government will not be able to draw funds from the debt relief fund
for other unproductive purposes. A steering committee composed of
representatives of the NGOs, the Government and the donor community
shall oversee the management of the independent entity to ensure
financial and programmatic accountability; 19
(b) The World Bank and IMF should not be given the exclusive role
as overseers of poverty reduction programmes in poor countries.
Other United Nations agencies, such as UNDP, UNICEF, UNCTAD and ILO
should be brought into the process;
(c) Recalling the report of the Secretary-General on the subject,
efforts must be made to initiate new rounds of talks in order to
come up with a lasting solution to the crushing debt burden of many
poor countries, including the HIPC countries. The new rounds of
talks should start with a clear commitment that all debts owed by
the HIPC countries will be written off, with no conditions; and
that the list of eligible countries should be expanded to include
countries that previously failed to enter the HIPC process because
they failed to submit to IMF conditions on time;
(d) Abolish the IMF Poverty Reduction and Growth Facility (formerly
ESAF) since this is merely a financing facility paid for by
bilateral donors to clear up the debts owed by HIPC Governments to
the IMF. The Fund can clear debts owed to it through gold sales
(revaluation process) rather than through voluntary contributions
from bilateral donors. Bilateral resources going to the PRGF should
instead go to: fund additional bilateral debt relief, increase
bilateral aid or directly fund a targeted programme, such as in the
area of HIV/AIDS, girls' education or post-conflict reconstruction
and rehabilitation in HIPC countries;
(e) Finally, it is important for third world debtor Governments,
the multilateral financial institutions and social movements
working on global economic justice issues to undertake serious
dialogue on how to integrate macroeconomic policy issues with
broader social development goals. The starting point of this
dialogue should be an agreement to discuss and debate the research
results on the economic and social impact of structural adjustment
gathered from 10 country case studies, most of which were carried
out jointly with the World Bank under an initiative known as the
Structural Adjustment Participatory Review International Network
(SAPRIN). Such a dialogue, if managed constructively, would benefit
each of these actors in the formulation and implementation of
alternative structural adjustment policies that are more
transformative and non-regressive.
************************************************************
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