Supporting Poverty Reduction in Low-Income Developing Countries: The International Community's Response

• Author: Masood Ahmed and Hugh Bredenkamp
• Position: Deputy Director of the IMF's Policy Development and Review Department/Chief of the department's PRGF (Poverty Reduction and Growth Facility) Operations Division

Despite developing countries' improved economic growth rates during the 1990s, poverty has remained firmly entrenched. How can developing countries, international financial institutions, and developed countries work together more effectively to reduce the incidence of poverty?

Although economic growth rates in many developing countries improved during the 1990s, many of their people continue to live in extreme poverty. Progress is being made-for example, in increasing life expectancy, school enrollment, and rates of adult literacy and in reducing infant mortality-but it has been painfully slow, and the gap between the industrial and developing worlds remains enormous. In Africa, setbacks in efforts to combat poverty have occurred in countries suffering from armed conflicts and the ravages of the AIDS crisis. More needs to be done if the international development goals proposed in 1996 by the United Nations (see article by Sanjeev Gupta and others in this issue) are to be met.

Focusing development cooperation on accelerated poverty reduction is today's central development challenge. The extent of the challenge is such that efforts will need to be made simultaneously on a variety of fronts:

* National development programs must become more responsive to the needs of the poor.

* The programs and procedures of international development agencies and other lenders need to reinforce country-led efforts to reduce poverty.

* Countries' own efforts need to be complemented by global action to increase aid flows, remove industrial countries' trade barriers, more effectively combat AIDS and other pandemics, and ease cross-border conflicts.

Supporting integrated strategies

There is now a broad consensus in developing countries and among aid agencies that development assistance should support integrated strategies that are formulated by the recipient countries themselves. For low-income countries, these strategies should aim primarily at reducing poverty, by achieving faster growth to benefit the poor. Years of practical experience gained by countries and aid agencies alike have made it clear that any policy strategy will fail, in either design or implementation, unless the country truly "owns" it, with governments leading and civil society participating and contributing.

This important lesson and a broader focus on poverty are now reflected in national aid agencies' frameworks for development assistance, in the World Bank's Comprehensive Development Framework, in the institutional goals adopted by regional development banks, and in the strategy of the United Nations Development Program and other agencies of the United Nations system. And, most recently, they have become the foundation of a new approach to supporting national poverty reduction strategies proposed by the IMF and the World Bank and endorsed by ministers at the Annual Meetings of these two institutions in September 1999.

Poverty reduction strategy papers

The essence of the new approach, on which work is under way in some 30 low-income countries, is to link concessional assistance (grants and subsidized loans) from the IMF and the World Bank, as well as debt relief provided under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, directly to the development and implementation of national poverty reduction strategies. These strategies will be prepared by country authorities, in broad consultation with civil society, and laid out in poverty reduction strategy papers (PRSPs). The strategies should be sufficiently comprehensive-integrating prioritized antipoverty and other social programs, institutional and structural reforms, and macroeconomic policies into a coherent framework-to provide the basis for the assistance...