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Reducing Poverty - Is the World Bank’s strategy working?

Copyright The Panos Institute 2002 (
This article has been posted with kind permission from the Panos Institute.

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Executive Summary

For many, the 1980s and 1990s were decades of increasing wealth. The world’s total economy grew, benefiting from new technology, liberalisation and growth of trade. But at the same time, the gap between rich and poor was growing wider, and the actual numbers of people living in poverty increased. By 1998, 1.2 billion people still lived on less than a dollar a day, and 2.8 billion on less than two.

What could be done? The United Nations had adopted any number of declarations to alleviate or eradicate poverty – the latest being in 2000, when the aim was to halve the numbers of those who go to bed hungry by the year 2015. The World Bank (WB) and the International Monetary Fund (IMF), those international institutions charged with promoting the health of the world economy, had also devised a number of strategies to help the poorer countries of the developing world join the global party. The most well-known perhaps were the IMF’s structural adjustment policies, or SAPs, which were meant to stabilise national finances and open economies to international trade. But SAPs did not succeed in helping the poorest to climb out of their poverty – partly because the recipe often included cuts in education, health and welfare, that hit the poorest hardest. New methods were clearly needed.

In 1996, the World Bank and IMF launched the HIPC (Highly Indebted Poor Countries) Initiative, which aimed to reduce the amount of debt that the poorest countries had to repay. And in 1999, the World Bank, together with the IMF, introduced its Poverty Reduction Strategy Papers – better known as PRSPs. PRSPs aim to focus development efforts on poverty alleviation. They are relevant to over 70 low-income countries. A PRSP starts with a diagnosis of poverty, and then identifies the poverty reduction outcomes a country wishes to achieve and the key public actions needed. Once a country’s PRSP has been completed and approved by the World Bank and IMF, the country qualifies for debt relief and concessional lending.

So what is new about PRSPs? What will make them work where other strategies have failed? Are they really nationally owned or just a formality for governments to get the funds that they need – a new form of conditionality for the poorest countries?

The two aspects that have been most discussed and scrutinised are that PRSPs are supposed to be driven by the countries themselves, and that they are meant to be ‘participatory’. ‘Too many capacity building efforts have floundered in the past because they have not been rooted in local ownership,’ said World Bank President James Wolfensohn in 1999.*

It is too early to say whether PRSPs will succeed in their goal of reducing poverty, but the experience so far has initiated some important changes as well as raising some important questions, both about the process and about the philosophy behind it. Questions such as: what is meant by participation? Do PRSPs exclude proper analysis of the impacts of globalisation on the poor, because they assume that economic growth is the principal goal? Are they doing what is needed to ensure that the poor benefit from economic growth? How will PRSPs be affected if poor countries’ position in global trading worsens?

On the positive side, the process of developing PRSPs has generated a new focus on poverty by governments, and a greater awareness of the nature of poverty and understanding of its causes. In many countries, relations between government and civil society have improved as both sides responded to the challenge of ‘participation’. Governments are opening up their budgeting processes and spending to public scrutiny, and non-governmental organisations (NGOs) have had to come together in what has been for many a new way of working. The media too is beginning to examine its role in helping the public understand and get involved in the development and monitoring of PRSPs.

The second half of this report consists of reports commissioned from NGOs in three countries; Uganda, Lesotho and Ethiopia. Each report examines the role of government, parliament, civil society and the media in the process of developing the PRSP. Has the potential role of women in poverty reduction been taken on board? Were the voices of the grassroots really listened to? At present, as the three country studies show, many people still do not know what a PRSP is. ‘PR – is that post-referendum?’ asked one journalist in Uganda. If PRSPs are to work, it will entail greater understanding from a wide range of people in each of the countries concerned, from the grassroots through to government. Can PRSPs make a difference? It is too early to say. But for the sake of the millions still living on a dollar a day, it is important to be clear about what remains to be done.


* Coalitions for Change, Address to the Board of Governors, Sept 28 1999.


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