Global Policy Forum

The World Bank and International Monetary Fund's (IMF) trumpeted Poverty Reduction Strategies (PRSPs) are little more than classic structural adjustment says a new report published today by anti-poverty campaigners the World Development Movement (WDM). The study finds that 90 per cent of PRSPs - which are conditions of debt relief, loans and aid to the poorest countries - contain privatisation measures, 96 per cent include strict fiscal policy and over 70 per cent include trade liberalisation. PRSPs will be discussed at the World Bank and IMF annual meetings next week. Gordon Brown and Hilary Benn will be at the meetings in their respective roles as IMF and World Bank directors.

WDM's report analyses the 50 countries for which PRSPs have been signed off (1). PRSPs supposedly replaced the Structural Adjustment Programmes that characterised World Bank and IMF policy prescriptions for loans and aid in the 1980s and 1990s. Structural adjustment conditions, commonly referred to as the Washington Consensus, were widely criticised for both undermining national political processes and causing widespread economic and social damage.

PRSPs evolved under new rhetoric of country ownership as a response to this criticism, and the World Bank declared "the Washington Consensus is dead" (2). WDM's report however, finds that PRSPs contain on average six of nine classic Washington Consensus policy prescriptions (3), that there are no PRSPs that are free of these policies and in Kenya, Sri Lanka and Nepal all nine are present. The report highlights that this should come as no surprise given that the Boards at the World Bank and IMF have the final sign off on PRSPs.

Peter Hardstaff, Head of Policy at WDM said "Our study shows the Washington Consensus to be alive and well, albeit hidden in a sea of 'democratic, civil participation' rhetoric. The striking results show PRSPs to be not only remarkably similar to each other but with policy prescriptions which include privatisation, trade liberalisation, strict fiscal policy and strict monetary policy as standard they are almost indistinguishable from structural adjustment. The only difference between PRSPs and the Washington Consensus is that in an astonishing display of hypocrisy, these policies are now defended under the guise that they are country-owned." WDM's report finds:

• An incredible 96 per cent of PRSPs include fiscal stringency; normally that the government should not borrow from the domestic economy. This stands in stark contrast to developed countries such as the UK and USA which consistently maintain fiscal deficits.

• Despite evidence that it hurts the poor, further trade liberalisation is evident in 72 per cent of PRSPs. (4)

• 90 per cent of the PRSPs include privatisation, and nearly two-thirds specifically include water privatisation / greater private sector involvement in water supply services. None include a review of any privatisation policies or a specific goal to keep water and sanitation under public management. (5)

• Two thirds include investment deregulation and none mention the possible need to regulate investors to ensure re-investment of profits in the country, joint ventures with local companies, technology transfer or employment of local people.

Even more revealing is the virtual lack of any alternative policies being included. Of the policies analysed, 297 were typical of the Washington Consensus; only 11 could be said to diverge from this in any way. For example, Mongolia is allowed to pursue a flexible fiscal policy and Laos's PRSP recognises a need to protect domestic industrial sectors. No 'unorthodox' policies could be found for the areas of privatisation, water privatisation, investment deregulation or financial liberalisation.

Peter Hardstaff continued, "How can PRSPs be country-owned when they are so startlingly similar to each other, across such a diverse range of countries? From Bolivia to Senegal to Cambodia to Sri Lanka to Zambia to Pakistan the prescriptions are the same. In fact, one thing all these countries do have in common has been the public opposition to exactly these policies, which have resulted in price hikes and major job losses, strangled economies and undermined development. (6)

"PRSPs cannot be passed without a rubber stamp from the international finance institutions so how can they possibly be considered country-owned? If the Bank and Fund don't like your PRSP they can hold you to ransom until it reflects what they want. At their heart PRSPs contain a deeply uncomfortable contradiction; if they involve active civil participation and are viewed by citizens as the outcome of a democratic process, and are therefore owned by the country – why are they conditions of loans, aid and debt relief?"

(1) WDM's analysis includes all the countries for which PRSPs have been signed off and information made publicly available in August 2005.

(2) Outgoing World Bank president James Wolfensohn, 2003

(3) The nine fairly standard policy prescriptions imposed on poor countries by the Bank and Fund during the 1980s and 1990s are: strict monetary policy, strict fiscal policy, trade liberalisation, privatisation (generally), water privatisation/greater private sector involvement in water supply (more specifically), investment deregulation, capital account/financial liberalisation, agricultural liberalisation and increased labour market flexibility.

(4) Findings include those by the United Nations Conference on Trade and Development (UNCTAD) that trade liberalisation undertaken by the Least Developed Countries (LDCs) during the 1990s was associated with rising poverty, rising unemployment, increased wage inequality and reductions in average wages, with the countries worst affected being those that had liberalised most.

(5) The persistent failure of the private sector to deliver better water and sanitation to the poor has led UN-Habitat – international experts on urban development – to conclude, "[Increasing private sector involvement] is not a 'solution' that should be promoted internationally in the name of those who currently lack adequate water and sanitation."

(6) WDM's States of Unrest reports catalogued widespread resistance to IMF and World Bank policies. From 1999-2003 some 238 separate incidents of civil unrest involving millions of people in 34 countries.

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