Also in Need of an Environmental Overhaul

Countries seeking debt relief and concessional loans from the World Bank and the International Monetary Fund (IMF) must prepare a Poverty Reduction Strategy Paper (PRSP)—a document detailing the nation’s philosophy and plan for achieving substantive cuts in national poverty. PRSPs have also emerged as a principal policy instrument and process for directing aid from developed countries and international agencies to help developing countries implement the Millennium Development Goals.

Unfortunately, like the Millennium Development Goals, the PRSP process suffers from critical shortcomings when it comes to acknowledging the central role of ecosystems in the lives of the poor, and their potential to reduce rural poverty. Among the current crop of PRSPs, the strategies of most countries fall short of a full commitment to better ecosystem management that benefits the poor. Maximizing environmental income opportunities for the poor requires that PRSPs and other formal poverty-reduction plans recognize the importance of their environmental assets, and embody an ecosystem-based perspective to ensure long-term sustainability of rural livelihoods.

A New Approach to Development?

PRSPs were established in 1999 by the World Bank and IMF as a response to the shortcomings of their earlier development approach centered on “structural adjustment”—an approach that made lending contingent on adoption of certain macroeconomic policies that would change the nation’s basic economic structure and prime it for growth. Unfortunately, in many countries following the structural adjustment approach, the promised growth either did not appear or did not result in sufficient poverty alleviation. In fact, in many cases, the approach exacerbated existing inequalities, creating a “crisis of legitimacy” surrounding the lending approach of major development institutions by the mid-1990s (Reed 2004:7).

The intent behind PRSPs was to replace the approach in which the World Bank and IMF attempted to mold a nation’s development policies along fixed lines as a condition for lending. Instead, the PRSP approach would let countries decide for themselves which development policies to pursue, so long as the policies were aimed at achieving significant, broad-based reductions in poverty and also emphasized governance reforms, including increased transparency and accountability of government decision-making (Oksanen and Mersmann 2003:126).

Six years after their adoption by the World Bank and IMF, PRSPs are now in transition from the preparation stage to implementation. About 70 countries are expected to eventually prepare PRSPs (Levinsohn 2003:2); as of 2004, 53 PRSPs had been produced, including 39 full PRSPs and 14 preliminary versions (Bojö et al. 2004:5). Besides heavily indebted and aid-dependent countries, other countries have also chosen to prepare PRSPs, including many Central European countries as well as middle-income countries like Brazil (Driscoll and Evans 2004a:3).

PRSPs are becoming increasingly important in shaping the planning, policy, and budget priorities of developing countries, as well as in directing the aid flows from richer countries. The PRSP process is credited with focusing the attention of governments and donor agencies on poverty reduction as a central, priority concern rather than a special, marginal activity (Driscoll and Evans 2004b:3). In addition, PRSPs represent a more “upstream” approach to development aid, that is, an approach that redirects donor assistance from specific, discrete projects towards integrated support for sector-wide plans and even general budget support. Already, in eight African countries, up to one-fifth of aid flow is now for general budget support (Chiche and Hervio 2004 in Driscoll and Evans 2004b:5). PRSPs are also intended to draw increased attention to the non-income dimensions of poverty, such as empowerment of poor and marginalized communities, as well as addressing gender disparities (Levinsohn 2003:3).

How Is the PRSP Approach Faring?

PRSPs improve on the previous, structural adjustment approach of the World Bank and IMF in several important respects. For one, developing-country governments are the principal architects of their own development strategies. They are ostensibly free to decide for themselves how to use external aid flows, which in theory should increase national ownership of the plans and lessen the potential for problems caused by lack of country buy-in. PRSPs are also intended to be subject to continual revision and improvement over the years, serving as an umbrella for coordinating the efforts of various agencies in different economic and social sectors. In addition, the PRSP process was designed to promote increased transparency by governments and international agencies alike, as well as to feature meaningful involvement by civil society in the choice of development priorities (Reed 2004:8).

How well is the PRSP approach working in practice? The reviews are decidedly mixed. Assessments have been undertaken by many different actors, including the World Bank and IMF themselves. The consensus seems to be that PRSP processes have somewhat increased transparency, helped sharpen the focus on investments and institutions designed to reduce poverty, and provided greater opportunities for civil-society input and participation in some countries (Reed 2004:9). Some evidence indicates increased expenditures on health, education, and transport (as a percentage of GDP) in PRSP countries (OED 2004:30), and some assessments point to PRSPs as a catalyst for improvements in public financial management (World Bank and IMF 2003:28,32-33).

However, PRSPs have also been heavily criticized for shortcomings inherent in the PRSP approach as well as problems with how the process has actually unfolded in developing countries. Critics say that PRSPs have helped provide general budget support to poor countries without adequate commitments from these countries to specific poverty reduction outcomes, identification of the populations who will benefit from proposed anti-poverty programs, and provisions for monitoring and evaluation of expected outcomes (Reed 2004:9). Others note that, since PRSPs are prerequisites for debt relief and concessional lending, countries have strong incentives to tell donors what they think the donors want to hear rather than what the country is truly committed to doing to help reduce poverty (Tharakan and MacDonald 2004:7). In addition, the initial crop of PRSPs was not very clear about priorities or costs for anti-poverty measures (World Bank and IMF 2003:15,42).