Human Rights, Poverty Reduction Strategies, and the Role of the International Monetary Fund1
Abstract and Keywords
This chapter describes the theme of hard choices and trade-offs. It specifically provides some observations informed by the ongoing effort to define the international community's role in meeting the Millennium Development Goals (MDGs) in low-income countries. It is noted that the international community is confronting the low-income countries engaged in the Poverty Reduction Strategy (PRS) process with a myriad of imperatives, demands, constraints, and guidelines on both process and content. In addition, it is stated that the Office of the High Commissioner for Human Rights (OHCHR) guidelines will serve low-income countries and their partners well by assuring that human rights considerations underpin all their work together. The value of the human rights approach for a research in low-income countries and the high quality of the work that went into crafting the guidelines make it all the more clear that the international community needs to find a mechanism for making sure that countries can make efficient use of the human rights approach.
The Office of the High Commissioner for Human Rights (OHCHR) recently issued a set of draft guidelines that provide a framework for integrating human rights into poverty reduction strategies (PRSs).2 These guidelines transform the often abstract discussion of the role of human rights in the development process into practical advice. This is valuable not just for low-income countries developing PRSs but also for their international partners using PRSs to frame their development assistance. In reading the guidelines, one could come easily to the conclusion that there is nothing more to be said at this point, given their thoroughness and depth. They point to how PRSs can be framed by a rights approach to development and how the PRS process, as it has been developing over the last four years, can reinforce the efforts of the international community to ensure governments the world over live up to the obligations incumbent upon them in the Universal Declaration of Human Rights and ensuing international agreements. In sum, these guidelines provide practical means to enter into what has heretofore been mostly rhetorical—the virtuous circle of human rights promotion and poverty reduction.
(p.499) The temptation is to let the experiment begin—promote the guidelines, provide assistance to those wanting to implement them, and observe how low-income country governments, donors, and the international institutions in fact use them. In a few years, we can hold conferences, laud best practices, point fingers at each other’s misunderstanding or misuse of, or disregard for, the approach, revise and resubmit the guidelines and begin again. That is, we can enter into our own virtuous (or is it vicious?) cycle of re-framing the development challenge and creating another mini-industry to succor the international bureaucracy and academic community.
This rhetoric points to a skepticism about succumbing to this temptation, but this skepticism does not come out of any doubt about the human rights approach—in fact, the rights approach should be seen as a foundation for development efforts. The skepticism stems instead from watching the development of the PRS approach over the last four years. As the PRS approach gains increasing breadth and momentum, we owe it to our colleagues in low-income countries to step back a bit and ensure that the PRS approach is aimed at helping them solve the very basic problem they confront—reducing poverty in all its aspects. There are three questions to be answered about the integration of the PRS approach with the effort to address the human rights challenges faced by developing countries:
• Is there a good balance between ambition and realism?
• Is there a good balance between process and content?
• What role can the human rights approach play in the international community’s efforts to support poverty reduction?
None of these can be answered definitively in this chapter. Instead, the chapter will offer some observations informed by the ongoing effort to define the international community’s role in meeting the Millennium Development Goals (MDGs) in low-income countries.
To begin to answer the question of whether the integration of the human rights approach will make the PRS approach more effective for development, we need to consider briefly the international context for the PRS process. The international community adopted the MDGs and, at the United Nations Financing for Development Conference in Monterrey, Mexico, came to a consensus about how to proceed to reach those goals (known as the two-pillar approach): the international community will assist low-income countries that adopt the right policies and pursue sound strategies for poverty reduction through sustained economic growth. The International Monetary Fund (IMF) fully supports both the MDGs and the Monterrey Consensus, and its (p.500) Executive Board has reaffirmed that the PRS approach provides the framework for the IMF’s support to low-income countries.3 The World Bank, the regional development banks and bilateral donors, and the agencies of the United Nations System, notably the United Nations Development Program (UNDP), have taken similar stances—the PRS approach will frame the international community’s work with low-income countries.
19.3 AMBITION, REALISM, AND HEAVY DEMANDS
After four years of implementing the PRS approach, there is now a substantial body of experience on which to draw. A recent paper, jointly prepared by the IMF and World Bank staffs and considered by the two Executive Boards, underscored that a number of tensions are beginning to emerge in the PRS process as countries confront the reality of crafting comprehensive poverty reduction strategies formulated through a broad-based participatory process and aimed at providing practical blueprints for policy formulation and execution.4
There is a marked tension between the ambitious goal of providing a comprehensive strategic vision for poverty reduction and the desire to formulate a realistic and operational tactical blueprint for making the myriad of policy choices governments confront every day. The incorporation of the MDGs as the ultimate objectives in the PRS process makes that tension even more acute. For example, some critics of the IMF’s involvement in the PRS process have alleged that macroeconomic frameworks in PRS papers (PRSPs) restrict country policy choices through their reliance on realistic projections (or, in their eyes, conservative projections) of donor support and through their emphasis on the fundamental need for fiscal and monetary discipline. This approach is seen as short-sighted, offering no more than incremental progress rather than the kind of step change needed to meet the MDGs. Such critics would instead prefer to see the IMF open up space for policy choices by helping countries construct ambitious macroeconomic frameworks that would light the path to meeting the MDGs, giving the donor community the information required to make decisions about how much support is needed (p.501) to meet the MDGs and in which countries. The IMF, while recognizing the global need for such information, views its role in the Monterrey Consensus as helping countries maintain macroeconomic stability as a necessary prerequisite for growth and, in practical terms, helping them ensure that growth can be increased and sustained and poverty reduction accelerated without jeopardizing hard-won gains in stabilization. The IMF can be seen, perhaps, as the realistic macroeconomic and growth tactician, and needs to become an integral part of the overall strategic decision-making process to achieve the ambition of the MDGs. Of course, tactics are only effective in the context of a good strategy. So how, in the PRS process, do we, as an international community, intermediate between strategy and tactics? How can we ensure that strategy informs tactics, yet be informed as the day-to-day implementation efforts succeed or fail?
The guidelines for a human rights approach to poverty reduction strategies also struggle with the tension between ambition and realism. They attempt to provide a broader context for the PRS approach by placing it in the frameworks of international legal obligations and binding international rights, broadening its scope to address structures of discrimination and helping to structure mechanisms for accountability through the human rights paradigm. At the same time they suggest rather specific guidance on strategies for realizing rights, including appropriate targets and indicators of progress. The guidelines recognize that all the human rights and associated objectives will not be attained immediately, and that priorities must be set. But do the guidelines simplify or complicate low-income countries’ policy choices and the provision of donor support? Do they limit policy choices or broaden them? There is a risk that, fairly or unfairly, the human rights approach will be seen by low-income countries or their international partners as being grafted onto the PRS process and thus more of a burden than a help. The operational vision for the guidelines is clear—they are to frame and focus the PRS process and thus be integrated into it rather than added on. But how can that be effected, especially in the face of similar guidelines from other multilateral organizations, bilateral donors, and civil society organizations?
One gets a sense, in talking to officials of low-income countries, that they are becoming confused as to what poverty reduction strategies are really supposed to be and to do. A measure of the success of the PRS approach is that many of the international players see it as valuable and that it has become ‘the only game in town’. But the risk we take in making it the principal development instrument for addressing the full panoply of development-related issues is that it could collapse under the weight of the demands put on it. Perhaps what is needed is the development of closer links (i.e., links extending beyond rhetoric) between economic growth, achieving the MDGs, advancing the human rights agenda, and reducing poverty. But how can these links be forged?
(p.502) 19.4 PROCESS OR CONTENT?
This leads to a second tension in the PRS process, which is mirrored in the human rights process—that between the process of developing policies and the content of the policies. A key feature of the PRS process, as underscored in the human rights guidelines, is the participatory process that underpins the actual strategy. This process is meant to broaden the policy debate and include those most affected by policy decisions, thereby strengthening societal consensus and on-the-ground implementation of the strategy. Embedding participation in many low-income countries’ decision-making frameworks has been heralded as one of the important successes thus far of the PRS process. Equally, those schooled in the human rights approach underscore the salutary effects of giving voice to all in society and empowering the poor.
Although participation in formulating the PRS can be seen as an end in and of itself, it is an empty objective if the content of the policies designed through participation is poor or if participation only amounts to involvement. For example, some PRSs have been criticized as being so general that they fail to provide any effective basis for choice; some are seen as internally contradictory or ignoring key policy areas and thus avoiding difficult choices; and some seem to espouse policies that may sacrifice longer-term gains for short-term political solutions. These aspects are characteristic, perhaps, of any political process, but this does not obviate the objective of getting good policies and not just good process. The IMF’s experience in this regard provides some interesting insights, as does the human rights approach as embodied in the PRS guidelines.
The IMF has been criticized for grafting its macroeconomic framework onto some countries’ PRSPs rather than subjecting macroeconomic policy making to a participatory process and integrating the result into the development of the PRSP. Although this criticism is, in fact, a caricature of what happens, it does raise the question as to the level at which meaningful input can be made into macroeconomic decision making. Can villagers be informed about and have some meaningful input into decisions that might have to be made regarding trade-offs between delivery of high-quality secondary education and the inflationary effects of a more expansive monetary policy? Here I am not calling into question the intellectual capacity of village elders but only their perspectives and information bases. Are either sufficiently broad to enable these leaders to make meaningful choices? Is it effective to broaden both so they can give opinions? Given the ultimate responsibility of the government to make difficult societal choices in the face of a budget constraint that spans the country’s entire economy and whose impact may last for generations, how much participation is needed? How (p.503) many voices need to be heard and whose are they? Often governments are uneasy about letting non-elected civil society representatives have a voice in making very difficult, complex, and sensitive macroeconomic policy choices.
The IMF is trying to understand how to open the macroeconomic policy debate to a broader range of stakeholders, recognizing the benefits of such a broadening and knowing full well that we may not have all the answers to the country’s macroeconomic problems. However, like the proverbial central banker, the IMF’s responsibility to the international community is often ‘to take the punch bowl away just as the party is getting started’. We aim to help governments understand the constraints they face—and typically these constraints will not be changed through discussion. Governments must decide how to engage in a full and responsible discussion of macroeconomic policy choices with their people. That discussion should be part of their interaction with the IMF—not just for process’s sake but to find policies that will work better and to understand the societal trade-offs involved in the making of policy decisions. But these discussions need to lead to cogent choices, often in a very short period of time. Difficult macroeconomic choices cannot be avoided by adopting empty or internally contradictory policies; if this is done, the choices will be made by markets—where, for example, currency depreciation or inflation may occur—or postponed until later generations through indebtedness. Politicians may prefer to avoid such discussions, but the responsibility of the IMF is to discourage this.
How do process and content interact in the human rights approach to poverty reduction? A strong point of the guidelines is that they separate how the human rights approach should influence the process aspects of the PRS from how it should influence the content of policies themselves. As noted before, the very existence of a participatory process reinforces voice and empowerment. Although this is an end in itself, if the participatory process is to be effective, it must be focused on what people care about and have knowledge of. The guidelines state clearly that there are limits to participation by the poor, with the proper focus being on their inclusion in setting priorities and benchmarks, often in the context of community-level activities rather than in the technical deliberations on policy formulation.
However, some questions arise. What if the participatory process leads to a policy conclusion at variance with one of the key elements for realizing basic human rights? Can a trade-off between participation and voice and other rights be acceptable? Economists would have a similar difficulty determining an appropriate trade-off between participation and, for example, macro-economic stability. How can this be done in the human rights domain?
Another difficulty in sorting through the guidelines is discerning the hard constraints—that is, what is the minimum pace of introduction of human rights into PRSs that will be tolerated? Any notion of hard constraint is made a bit more elusive by the fact that the full set of rights cannot be achieved (p.504) overnight and thus progress made toward this goal is what needs to be measured. Although governments may recognize the wisdom of adopting such an approach, adopting such a stance risks putting them in a quandary as to what the operational implications of the rights approach are for the PRS. For example, the right to education implies, in the first instance, that primary education should be compulsory and available free to all, but the guidelines put forward some six key features of a strategy for realizing the right to education in a PRS. On the one hand, the principal feature is ensuring access to primary education for the most vulnerable, which would seem to meet the test of being a well-defined policy objective that is not vacuous, inherently contradictory, or time-inconsistent. On the other hand, the last feature states that ‘education should be directed to the full development of the human personality and strengthen respect for human dignity, tolerance, human rights and fundamental freedoms’, which, while clearly a valuable principle, seems so general as to offer little guidance to governments as how to go about making good education policy decisions.
The point here is not to criticize any particular key feature or interpretation of how the human rights approach should influence PRSs. Instead, it is to underscore that the international community is confronting the low-income countries engaged in the PRS process with a myriad of imperatives, demands, constraints, and guidelines on both process and content. Getting the process right will not guarantee the content of policies, and arriving at the right content by a deficient process may be self-defeating. Can countries get the balance right, especially in the face of severe capacity constraints?
19.5 INTEGRATION OF INTERNATIONAL EFFORTS
This leads back to the Monterrey Consensus, one part of which was not mentioned earlier. The international community’s assistance to low-income countries is supposed to leverage the expertise of each partner. Given the imperative of reaching the MDGs by 2015, the various players do not have the luxury of treading on each other’s turf but rather must specialize in their respective areas of comparative advantage. At the same time, each institution should be held accountable for the advice and support it promises and provides. If the donor community transfers its responsibilities on to each country’s PRS process, and implicitly to low-income countries, the process will indeed collapse. If each international institution and donor proposes separate guidelines on what it expects from a PRS, low-income countries will either produce PRSPs that wallow in general principles that can be supported but not implemented or produce encyclopedic documents that no one reads or understands and that certainly cannot be used to hold low-income governments or their partners accountable.
(p.505) The way out is to consider documents such as that produced by the OHCHR not as guidelines for low-income countries to fulfill, but instead as offers by institutions of the developed world to help in their areas of expertise. This cogent and well-crafted document sets out what the OHCHR thinks an ideal PRS looks like from the perspective of its background, expertise, and experience. Following their logic above, it should not be seen by low-income countries as yet another demand on what they must do to live up to some externally or self-imposed standard. Instead it should be seen as an offer by the OHCHR of expertise that it can bring to bear to the benefit of low-income countries. It should be used as a measure of accountability not for Chad or Guinea-Bissau, for example, but instead as a measure of the accountability of the OHCHR. When Chad or Guinea-Bissau decides that it wants to pursue a policy of ensuring that education is directed to the full development of the human personality, it should be able to call on the OHCHR for help in doing so, just as Chad can call on the IMF to help design an efficient tax system or monetary policy. With such an approach, a low-income country’s PRSP would truly become its contribution toward fulfilling the Monterrey Consensus—drawing on the expertise and support offered by international partners through such guidelines, with each country deciding what it was going to do.
Further, with such an approach, international partners would begin to understand how their demands fit together or conflict. For example, confronted with the OHCHR guidelines, an IMF mission chief might view them as yet another demand on the government’s scarce human and financial resources to be satisfied, or as a framework to guide government policy that competes with macroeconomic prudence, or not. If instead the guidelines were recast as OHCHR’s idea of what human rights mean in the PRS process and as an offer of how it can assist low-income countries, then a conversation may be opened up as to how, for example, the IMF’s efforts to establish transparent and sound accounting mechanisms in the budgetary process fit in with the human rights imperatives and how it can complement the OHCHR’s efforts to ensure accountability. Similarly, the OHCHR could begin to understand how the IMF frames its macroeconomic assistance, and the OHCHR could offer ideas as to how participation can best be used to help the discussion of macroeconomic policy choices.
There are several advantages to such an approach. First, the development of guidelines for ourselves in providing assistance to low-income countries begins to make members of the international community accountable in concrete and measurable ways. Second, it makes the various institutions and governments think about their own constraints. If we commit ourselves to helping willing countries meet the standards we lay out, then we are likely to be more parsimonious in what we choose to be criteria worth meeting. Third, it takes a weight off the PRS process and lets the country’s voice be (p.506) more clearly heard. The country can say what it will do and what expertise it wants to draw on without having to jump through all the hoops set for it by the diverse bodies of the international community.
Each international institution should undertake this kind of reflection. The IMF is in the process of thinking about what its role in low-income countries should be in the coming years. The process that began in August 2003 and continues today is meant to describe to the international community what low-income countries and their partners can expect of the IMF in the two-pillar process. In addition, the World Bank and the IMF have recently received the reports of their independent evaluation offices on the PRSP process. In that context, we will look again at the PRSP and at how each of our institutions uses the PRSP to structure its assistance to low-income countries. That reflection will present us with the opportunity to engage other institutions using the PRS process to see how we can work together to ensure the PRS process does not collapse under the weight of our multiple demands.
The OHCHR guidelines will serve low-income countries and their partners well by ensuring that human rights considerations underpin all their work together. The importance of the human rights approach for our work in low-income countries and the high quality of the work that went into crafting the guidelines make it all the more clear that the international community needs to find a mechanism for making sure that countries can make effective use of the human rights approach. Equally, such an approach needs to support the efforts of those countries judiciously, wisely, and with the minimum amount of wasted effort.
(1) I would like to thank my IMF colleagues for their assistance on this paper, particularly Mark Allen, Michael Bell, Klaus Enders, Peter Fallon, Elliott Harris, Peter Heller, Amber Mahone, and Simonetta Nardin. They bear no responsibility for any remaining errors or errant ideas. The opinions expressed in the paper are mine and do not necessarily represent the official position of the International Monetary Fund.
(2) United Nations High Commissioner for Human Rights, Draft Guidelines: A Human Rights Approach to Poverty Reduction Strategies, 10 September 2002 (Geneva: United Nations).
(3) See ‘The IMF Executive Board Reviews the Role of the Fund in Low-Income Countries Over the Medium Term’, Public Information Notice 3/117, International Monetary Fund, 10 September 2003 (http://ww.imf.org/external/np/sec/pn/2003/pn03117.htm) and ‘Role of the Fund in Low-Income Member Countries over the Medium Term—Issues Paper for Discussion’, International Monetary Fund, 21 July 2003 (http://www.imf.org/External/np/pdr/sustain/2003/072103.htm).
(4) See ‘Poverty Reduction Strategy Papers—Progress in Implementation’, International Monetary Fund, 23 September 2003 (http://www.imf.org/external/np/prspgen/2003/091203.pdf).