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Ghana: Poverty, Democracy and the World Bank
Ghana: Poverty, Democracy and the World Bank
Date distributed (ymd): 001019
Document reposted by APIC
Region: West Africa
Issue Areas: +political/rights+ +economy/development+
This posting contains excerpts from an interview with Charles
Abugre of the Integrated Social Development Centre (ISODEC) in
Ghana, which appeared in the Fall issue of News & Notices. The
interview provides a devastating critique of the new Poverty
Reduction Strategy initiative for its further erosion of democracy
in countries subjected to it. For the full interview and
additional related articles, go to:
http://attac.org/fra/toil/doc/gci3.htm or contact the editors at
the addresses indicated below.
Who Governs Low-income Countries?
An Interview with Charles Abugre on the Poverty Reduction Strategy
Charles Abugre heads up the Integrated Social Development Centre
(ISODEC) in Ghana (firstname.lastname@example.org). ISODEC was founded in 1984
to work for sustainable human development through the empowerment
of the poor, women and other marginalized groups. This mission is
realized through research and advocacy as well as through
empowerment and capacity-building activities.
News & Notices for IMF and World Bank Watchers
(Volume 2, Number 3 Fall 2000)
This issue of News & Notices is prepared collaboratively by Nancy
Alexander of Globalization Challenge Initiative, the World
Development Movement, and the Center of Concern's Rethinking
Bretton Woods Project. Substantive comments about News & Notices
may be sent to: <email@example.com>.
If you would like to receive "News & Notices" electronically,
please send a blank email message to
<IMF-WBWatchersfirstname.lastname@example.org>. Subscription change requests
can be sent to <email@example.com>.
The full text of this interview and other News & Notices articles
can be found at <http://attac.org/fra/toil/doc/gci3.htm>.
In this interview, Charles Abugre recounts his experience and
perspectives relative to the Poverty Reduction Strategy (PRS)
initiative. The initiative, which was launched by the IMF and World
Bank a year ago, requires that each low-income borrowing government
work with its citizens (and a range of donors and creditors) to
shape a Poverty Reduction Strategy Paper (PRSP). The PRSP is a
three-year national development strategy. Endorsement of a
government's PRSP by the Executive Boards of the IMF and World Bank
qualifies the government to receive foreign loans, grants and debt
NEWS & NOTICES (N&N): Many civil society groups welcomed the launch
of the Poverty Reduction Strategy (PRS) initiative last year. ...
What's your position on the PRS initiative?
ABUGRE: We feel partially responsible for it. We campaigned for
debt relief and for improving the poverty reduction outcomes of IMF
and World Bank operations. These campaigns pressured the IMF and
World Bank to create something like the PRS initiative. ...
The initiative builds on earlier initiatives that seek to
overthrow a development assistance system driven by donor and
creditor interests and replace it with a system driven by the
interests of borrowing countries. However, the PRS initiative is
not uprooting the old system. In some ways, it reinforces the old
N&N: Are the flaws in the concept of the PRS initiative or its
application in the field?
ABUGRE: Both. With respect to the concept, it's important to
realize that, through the initiative, the IMF and World Bank assume
new powers over low-income countries. It is unprecedented for the
IMF and World Bank to endorse a national strategy, such as the
PRSP, that has been developed by a government together with its
citizens and approved by its parliament. These creditor
institutions only underwrite a small, almost insignificant, part of
the costs of national strategies, yet they have the final say over
national strategies. That is wrong. ... It would be different if
the Bank and IMF were judge and jury for only those portions of the
national strategy that they intended to finance. That would make
N&N: So, you see the institutions undergoing "mission creep"?
ABUGRE: "Mission creep" is an understatement. The PRSP process
shifts considerable power from the governments of low-income
countries to the IMF and World Bank. Once, the IMF had influence
over certain macroeconomic variables. Now, it can endorse an
entire country strategy, including its social and political
dimensions. Once, the World Bank's Articles of Agreement were
interpreted in ways that protected the sovereignty of borrowers.
Now, the Articles are subject to the loosest interpretation
N&N: Tell us about Ghana's PRSP process?
ABUGRE: Ghana is preparing a full, participatory PRSP over the
next several months. But, in August, the Government submitted an
"Interim PRSP" (I-PRSP) to the Boards of the IMF and World Bank.
The I-PRSP is intended as a "road map" ... [which] paved the way
for approval ... of a loan to our government.
Each Board of Executive Directors endorsed Ghana's I-PRSP, which
consists of an innocuous policy statement and a "policy matrix"
loaded with political "dynamite."
N&N: Tell us about the political dynamite in the I-PRSP.
ABUGRE: The PRSP process and content are politically explosive.
First the process. Supposedly, the narrative part of the I-PRSP was
public, but no one knew about it. Reporters from Public Agenda,
our newspaper, called a range of actors including a Deputy Finance
Minister, the Minister of Agriculture, the Ghanaian Association of
Private Voluntary Organizations in Development (GAPVOD). No one
knew the first thing about an I-PRSP. This text is an innocuous
policy statement written by our Ministry of Finance and the World
Bank, which describes the nature of poverty in Ghana and approaches
to dealing with it. In fact, a senior Bank official said that the
document was terrible, but that it didn't really matter. The other
part of the I-PRSP, the policy matrix was secret. The policy matrix
is basically a list of policy conditions. External financing - at
least financing by the IMF and World Bank - is contingent upon our
Government's compliance with these policy conditions. The policy
matrix was leaked to us just days before the I-PRSP went to the
Boards of the IMF and World Bank. No one in Ghana had seen this
N&N: Did the parliament have the policy matrix?
ABUGRE: No, it didn't. Nor did the members of the Comprehensive
Development Framework (CDF) sub-committees that have begun work on
the full PRSP. They were working in the dark.
The content of the I-PRSP was also dynamite. People were
astonished that when they saw that the Government commitments
reflected in the policy matrix effectively reversed commitments
made to the people of Ghana just months prior to its presidential
N&N: What government commitments did the I-PRSP reverse?
ABUGRE: In the run-up to the Presidential campaign, our
government made certain promises to the small and medium-scale
businesses and industries in Ghana. They are facing tough times.
As a result of the decline in world market prices for cocoa and
increases in petroleum prices, the country will lose about $500
million in foreign exchange this year. To make things worse,
bilateral donors have been withholding assistance to various
sectors. ... This has created an impossible situation for many
N&N: Did the Government of the Ghana come to the rescue of small
and medium-sized businesses?
ABUGRE: Yes. ... The Government agreed to implement modest export
subsidies and tariff measures that provided temporary protection
for textiles, processed agricultural goods and some household
staples, such as toothpaste and soap.
These measures need to be understood in context. Ghana has low
tariffs by any measure. Cheap goods from abroad are flooding into
the country and squeezing out these industries. The Government's
stop-gap measures were important to Ghana and the policy matrix
effectively reversed them just months before the elections.
Whether the policy measures were good or bad is not the issue. The
issue is that, behind closed doors, the institutions imposed these
policies on a government "on its knees" and desperate for foreign
N&N: What is the problem with the timing of PRSPs?
ABUGRE: Sometimes the IMF and World Bank make all the important
lending decisions for a government just BEFORE a PRSP is finalized.
Then, there is almost nothing left for the PRSP to influence. It
is a "dead letter." For instance, Tanzania's full PRSP comes to
the Board in November 2000, yet before that (from April through
June 2000), the IMF and World Bank approved their lending
frameworks and programs for the country. We wonder what purpose
the full PRSP will serve in Tanzania.
N&N: You've told us that the I-PRSP policy matrix was kept secret.
Are there other problems related to information disclosure?
ABUGRE: First, it's important to realize that failure to disclose
critical information didn't only impair the I-PRSP process. ... In
fact, the credibility problem of the IMF and World Bank is rooted
in the "information parity" problem. ...
In the PRSP context, this means that all the documentation relating
to PRSP should be on the table, including policy matrices, the
Country Assistance Strategy and triggers, HIPC conditions, and
analytical work. ...
The IMF, World Bank and their borrowers release only one of the
three structural adjustment documents. This makes it
impossible to compare the policy aspirations of the PRSP with the
programs that the institutions actually finance. When you think
about it, it is really incredible that governments - together with
the IMF and World Bank - invite parliaments and citizen's groups to
engage in designing macroeconomic policies in ways that can reduce
poverty. Then, they refuse to disclose information about their
N&N: "Information parity" is essential if citizens' groups are to
participate meaningfully in designing macroeconomic and structural
policies. What else is necessary?
ABUGRE: Several things. First, the overall PRSP process must be
transparent. In Kenya's I-PRSP process, there was extensive
participation and citizen's groups hammered out their
recommendations. At the end of the I-PRSP process, citizen's
groups were appalled to learn that there had been an exclusive,
parallel process addressing macroeconomic and structural concerns.
They had no voice in shaping these policies. The same was true in
Uganda's full PRSP process. Citizens had no involvement in
macroeconomic policy choices.
Second, the institutions must sit back while country constituencies
outline economic options and choices. Traditionally, the
institutions have been in the business of marketing and promoting
certain economic reform policies. Advocacy by the
institutions has undermined the accountability of borrowing
governments to their citizens. In many low-income countries,
external donors and creditors supply half of the national budget.
In such cases, how can a borrowing government listen to the cry of
citizens when the external actors are whispering in its "ear?"
External actors have little history of self-discipline in this
We would like to see the institutions support a process wherein
borrowing country governments and citizen's groups develop a set of
macroeconomic policy options (along with the expected impacts of
each option). As it is, the IMF and/or World Bank present one set
of recommendations without any assessment of their potential
N&N: Can the IMF provide leadership by, for instance, renouncing
its practice of imposing rigid policy prescriptions?
ABUGRE: We asked the IMF that question. Maybe it was like asking
a leopard if it could change its spots. A senior IMF official
replied very emphatically, saying that he is suspicious of people
who want flexible approaches to policies. ... It seemed as though
he saw civil society getting in the way of governments governing
and the Fund doing its work.
However, the IMF's public relations staff and its publications
paint a rosy picture.
N&N: Is the IMF taking any positive steps?
ABUGRE: The IMF is endorsing assessments of the distributive impact
of proposed structural adjustment policies. This is important and
long overdue, but it is only a beginning. And a problematic
beginning at that. ...
Citizens' groups generally see adjustment policies as a principal
cause of the widening gap between rich and poor in our countries.
We also see how some adjustment measures promote production and
distribution patterns that contribute to poverty creation and
environmental problems. Yet, the IMF and World Bank almost never
conduct social or environmental assessments of adjustment loans.
When they design adjustment loans, the institutions
increasingly include damage mitigation programs, such as social
safety nets. But these programs offer too little assistance too
late to poor and vulnerable people. Besides, as public
institutions, the IMF and World Bank should be providing benefits
to the poor, women, and other marginalized groups. It is
unacceptable to set a standard that says, "we will limit the damage
we do to vulnerable groups."
The IMF and World Bank do place a much higher priority on the
protection of social sector budgets than they did years ago.
Still, these budgets are often squeezed by efforts to reduce fiscal
deficits and dampen inflation. IMF and World Bank programs still
support efforts by governments to impose and maintain "user fees"
for services, including primary health care and basic education.
This is devastating to our countries.
N&N: Is the World Bank more flexible than the IMF in its approach
ABUGRE: There is flexibility at the margin of social policy-making.
Macroeconomic and structural policies are another story. The
problem is illustrated by the annual report card that the Bank
issues for each of its low-income borrowing countries. ...
The report card raises many questions about the scope and depth of
World Bank involvement in low-income countries and their
qualifications to sit as judge and jury over virtually all aspects
of a government's business. However, I would stress two points
here. First, why should people participate in the formulation of
national policies if the World Bank has predetermined what
constitutes "good policies"? The IMF and World Bank see a good
government as one that does their bidding. The Burkina Faso PRSP
illustrates that nicely.
Many governments are so dependent on external resource flows, they
are forced to try to conform with the Bank's concept of "good
policies" in order to survive. Why bother with the views of
citizens if the meaning of "citizenship" has been hollowed out?
Second, the report card shows that "A" students, like Ghana, are
micro-managed, just like "C" students. Ghana might borrow more than
a "C" student...a dubious benefit. But, Ghana's loan instruments
are as heavily laden with policy conditions and directives as a
poorly performing government. The PRSPs of star performers contain
over 100 policy conditions. Take a look at Ghana's policy matrix.
N&N: What are other factors that undermine democratic processes in
ABUGRE: The manner in which the PRSP and related processes hijack
national, sector-wide and budget planning processes. In Ghana,
there is a vision statement, Ghana 2020, and in addition, there is
a constitutional requirement to develop a medium-term strategy
every five years. ... The problem with the PRSP is that it
conflates two things: the need for a donor coordination system and
the need for a country-owned plan.
This process violates the intent of the constitution, namely that
the government and people of Ghana fashion a 5-year strategy. The
constitution does not invite external donors and creditors into
this process. Citizens' groups are out-gunned by the collusion
between donor interests and government dependency. They are
disadvantaged in other ways, as well. First, their input to policy
choices is handicapped by the fact that they do not have access to
many of the key analytical or planning documents from which the
other actors are working. Second, representatives of civil society
- trade unions, NGOs, religious organizations -- are often
hand-picked in such a way that they do not bring a common position
to the table. ...
N&N: What is your advice to the IMF and World Bank?
ABUGRE: Three things. First, de-link the debt reduction process
from the PRSP process. If the Bank and Fund want to provide debt
relief, they can do so without an I-PRSP or PRSP. All they need is
a simple framework by which special accounts for debt service can
be managed and monitored in a transparent way. Acceptable
performance by a borrowing government can trigger debt relief.
Second, don't conflate a country's national strategy with a
document to coordinate donor and creditor involvement in the
country. These should be two separate processes. A country will
never "own" a process, such as the PRSP process, in which donors
and creditors play a significant role. Furthermore, IMF and World
Bank endorsement of a national strategy is inappropriate. It sets
a bad precedent.
Finally, the institutions need to be clear... are they asking
constituencies in borrowing countries to formulate macroeconomic
and structural policies? Are they agreeing that the litmus test of
macroeconomic and structural policies relate to the capacity of
these policies to reduce poverty? We hope that official actors
understand that citizens' groups have a legitimate role in
discussing a wide range of macroeconomic and structural policies.
These policies should not be left to the economic priesthood. ...
Recently, donor governments and creditors gathered to discuss the
lessons of the PRSP process to date. The donor governments
complained about the IMF and World Bank dominating PRSP processes
and said that they wanted to bigger piece of the action. Donors and
creditors are trying to "have their cake and eat it too." They want
borrowing countries in the "driver's seat," but they won't give up
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC provides
accessible information and analysis in order to promote U.S.
and international policies toward Africa that advance economic,
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