Structural Adjustment in the Name of the Poor: The PRSP Experience in the Lao PDR, Cambodia and Vietnam

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This paper provides an overall critique of the [Poverty Reduction Strategy Papers] PRSPframework, process and content. The paper drawsfrom experiences in the Lao PDR, Cambodiaand Vietnam, a review of relevant documents andother studies of World Bank-IMF lending programmes.

The World Bank and the International MonetaryFund (IMF) declare that the Poverty ReductionStrategy Paper (PRSP) approach and process aredifferent from their former lending frameworks forcountries under the economic jurisdiction of theWorld Bank's International Development Agency(IDA). The PRSP has replaced the old tripartitePolicy Framework Paper (PFP) drawn up betweenthe IMF, World Bank and a country government for"soft" (concessional) loans. Originally conceived inthe context of the Heavily Indebted Poor Country(HIPC) debt relief initiative, PRSPs are nowenvisaged as the centrepiece for policy dialogue andnegotiations in all countries that receive concessionalfinancing from the World Bank Group and theIMF.

In theory, a PRSP is intended to be a documentprepared by a country government (under thesupervision of Bank-Fund teams) that identifies theincidence and causes of poverty, who the poor are,and strategies for overcoming poverty, includingpolicy and expenditure targets. It is supposed to be"locally generated and owned" and developedthrough "wide participatory dialogue" focused atboth the micro and macro policy-making levels.Further, the PRSP process is supposed to "encourageaccountability of governments to their own peopleand domestic constituencies rather than to externalfunders" where "the poor become active participants."

In reality, however, country governments have hadlittle control over the policy prescriptions laid out inthese documents, thus making a mockery of Bank-Fundclaims of national ownership, public accountabilityand broad based participation. Despite the rhetoricof "nationally driven" development, the PRSP-PRGFframeworks continue to conflict with local and nationaldevelopment priorities of reducing poverty, ensuringequity, and promoting popular participation in thedesign of development policies. Over 70 countrieshave been identified by the World Bank and the IMFas "eligible" for this initiative and all of them arerequired to develop PRSPs to qualify for externalassistance. Countries that urgently require WorldBank-IMF credits or debt relief under the HIPCframework can submit an Interim PRSP (I-PRSP) forconsideration by the Bank-Fund Board, with thecondition that these countries commit to the preparationof a full PRSP within a timeline agreeable to Bank-Fundstaff.

Both the IMF and the World Bank are expected toalign their respective lending programmes to acountry's PRSP. In the case of the IMF, the PovertyReduction Growth Facility (PRGF) - the oldEnhanced Structural Adjustment Facility (ESAF) - and the Financial Programming Framework areexpected to derive from the PRSP. In the case of theWorld Bank, the Country Assistance Strategy (CAS)and all loans and grants must be based on the PRSP.PRSPs have a leveraging role beyond debt relief andconcessional credits, and have grave implications forthe economic sovereignty of developing countries,low income countries and countries in a state ofpermanent economic crises. They have become thekey policy instruments in the relations between thesecountries and the wider donor community. TheUnited States (US), European Union (EU) and otherOECD members have fully endorsed the PRSPapproach and have agreed to base their respective aidprogrammes in low-income countries on the resultsof the PRSP process. Many have also agreed to co-financepoverty reduction credits, grants and technicalassistance in conjunction with the PRGF facility.Without a PRSP that is accepted and approved bythe Boards of the IMF and the World Bank, a low-incomecountry can be virtually cut off from internationalaid, trade and finance.