At their annual meetings in the fall of 1999, the IMF and World Bank launched a new, collaborative initiative to tackle poverty: the Poverty Reduction Strategy (PRS) Initiative. The initiative requires that low-income borrowing governments work with their citizens (and a range of donors and creditors) to shape a Poverty Reduction Strategy Paper (PRSP). If the Executive Boards of the IMF and World Bank endorse a government‚s PRSP, it qualifies the government for foreign loans, grants and debt relief. Essentially, the PRSP represents a lifeline to cash-strapped countries a lifeline that most countries cannot afford to lose.

  PRSPs must include a description of the causes of poverty, growth and poverty reduction strategies, and indicators by which citizen‚s groups can monitor progress toward key goals.1 By the end of the fiscal year 2001, the institutions expect to have approved PRSPs for about fifty countries.2

  Many PRSPs are being prepared hastily, on an interim basis, in order to qualify governments for debt relief through the Highly Indebted Poor Country (HIPC) Initiative. This initiative is failing to provide governments with meaningful relief and increasing the debt obligations of many countries (e.g. Tanzania), as they are saddled with new loans along with HIPC debt relief.

  Why the PRS Initiative? The PRS Initiative is the institutions‚ response to accusations by their critics. The institutions are accused of imposing their lending operations on countries in a top-down fashion and, hence, undermining the capacity and ownership of governments and citizens in borrowing countries. Lack of ownership is, in turn, blamed for the failure of loan operations to achieve lasting results (e.g. reduced poverty and inequality).

  The problem with IMF and World Bank programs is not only that they undermine "ownership" (a euphemism for "sovereignty"), but also that their operations can harm poor people. PRSPs cannot focus on poverty reduction, unless the structural adjustment programs (SAPs) of the institutions are transformed. SAPs are widely perceived as exacerbating (or, not stemming the rise of) poverty and inequality. These programs offer governments quick-disbursing loan resources if they agree to implement IMF and World Bank-prescribed economic reforms (e.g. liberalization, privatization, and economic stabilization measures.) (In 1999, IMF SAPs imposed an average of 114 conditions on each sub-Saharan African government.)

  The rhetoric regarding the PRS Initiative sounds wonderful: PRSP not only encourages participatory, national policy-making, but also creates a framework for debt relief and poverty reduction [especially for highly indebted poor countries (HIPCs)]. However, this rhetoric is a misrepresentation a whitewash or cover up of the truth. Experience in numerous PRSP countries shows that SAPs are not being transformed and that, in many ways, participation in PRSPs is engineering consent for structural adjustment policies. (These assertions will be well-documented in a forthcoming publication by the authors.)

  The truth about IMF and World Bank programs can be covered up because key documents of the institution remain top secret. Three of the four documents that describe IMF and World Bank SAPs are not available to the public.3 Hence, it is not possible to hold the IMF and World Bank accountable to the PRSP lending framework. The PRSP is primarily a framework for lending operations and, as such, it deflects attention from actual IMF and World Bank loan operations.

  However, there is a more serious problem with PRSP process: it violates the sovereignty of borrowing countries. Never before have the IMF and World Bank possessed the power to approve or veto a borrower‚s entire national plan, such as the PRSP, which is formulated through popular participation.4 Of course, the institutions should be at liberty to determine which parts of PRSPs they wish to finance. But why should they have the power to stand in judgement of an entire PRSP? Since independence, no foreign government or creditor has ever arrogated such power to itself.

  The IMF, in particular, is a beneficiary of the PRSP process. Even before the advent of the PRSP, the IMF was the "kingpin" of the international financial system. Borrowers which failed to comply with IMF‚s macroeconomic dictates lost the IMF‚s "seal of approval" and, consequently, lost access to aid, credit, trade credits, and debt relief (through the HIPC process).5 Now, the IMF can ostracize a low-income country based on objections not only to macroeconomic policies, but also to a broad range of economic, social and governance policies contained in a PRSP. This represents a massive expansion of the IMF‚s remit.

  Some say that the IMF suffers from "mission creep." However, the PRSP represents a "power grab" by the IMF. Low-income country governments cannot afford to be ostracized by their official creditors. "Blackmail" can be defined as "action extorted by intimidation, as by threats, force or coercion." Many low-income governments see political suicide as the only alternative to preparation of a PRSP that is acceptable by the IMF and World Bank.

  The public should rise up and demand that the institutions be stripped of their new powers to veto entire country plans. They should demand a new debt cancellation process, one which is de-linked from the PRSP process.

  In the meantime, the challenge for many poor countries is to formulate national development strategies which foster "inward" accountability ˆ that is, accountability by government to citizens. Too often, governments exhibit "outward accountability" to foreign donors and creditors. Outward accountability becomes perverse when foreign actors are served at the expense of citizens.

1 Strategies should advance progress toward International Development Goals for 2015 relating to reducing poverty, e.g. reducing child and infant mortality, maternal mortality rates, and universal primary education.

2 Specifically, they expect to approve 13 to 19 PRSPs (interim and full) in FY00 and between 27 and 37 in FY01.

3 World Bank adjustment loans entail approval of a (country-owned) Country Letter of Development Policy (LODP) and a (Bank-owned) President‚s Memorandum. IMF adjustment loans entail approval of a (country-owned Letter of Intent) and an (IMF-owned) Poverty Reduction and Growth Facility (PRGF) Arrangement.

4 The World Bank and IMF have never before taken action on a participatory country plan, such as the PRSP. The World Bank forges a country strategy for each borrowing country, which is called a "Country Assistance Strategy" (CAS). However, the CAS belongs to the World Bank, not to the borrowing country. The PRSP is the successor to the Policy Framework Paper (PFP), which was an IMF-led document, to which the World Bank and borrowing government could provide input. The IMF can approve or veto a government‚s Letter of Intent (LOI). However, the LOI cannot be considered a country plan. A government‚s Letter of Intent is often ghost-written by the IMF itself. Citizens rarely, if ever, participate in formulating a LOI.

5 In 1999, the IMF imposed an average of 114 conditions per year on each sub-Saharan African government, but, historically, only non-compliance with macroeconomic conditions constitute grounds for suspending or terminating an IMF program.

Many nations threw off the yoke of colonialism during the 1960‚s; their citizens set about to realize their dreams of freedom. Imagine that they had a crystal ball and could see their future some 40 years hence (around the year 2000), what would they see? They would see the day when foreign creditors ˜ the IMF and World Bank ˜ have the power to approve or veto their national plans ˆ Poverty Reduction Strategy Papers (PRSPs). They would see themselves providing input to these plans alongside dozens of donors and creditors (as though these donors and creditors were, themselves, citizens). They would see their nations in virtual receivershipa condition wherein severing the national lifeline to creditors could result in catastrophe. They would see proud nations bowedawash in debt and managed by a collection of Northern (and Northern-dominated) donors and creditors. Surely, they would feel outrage. After all, why should foreigners shape their countries‚ future? They would be insulted that their citizenship became demeaned; their votes became cheap; their voices became whispers.