The Budget and Poverty Alleviation in Pakistan

The newly announced budget in Pakistan relies heavily on the World Bank and IMF’s preferred mode of poverty reduction, liberalization that is supposed to generate investment, preferably foreign, leading to employment, eventually culminating in reduced poverty. That at least is the theory. In practice there have been severe problems with this strategy. However, the Poverty Reduction Strategy Papers espousing this strategy have been sponsored by the World Bank and other donors and are celebrated as being participatory, and dynamic; a ‘living document’ evolving with the needs of the people. The Pakistani PRSP has been recently finalized, in December 2003 and has a profound impact on the recently proposed budget.

Before we look at the Pakistani case in any detail it would be useful to try to understand why the World Bank embarked on the potentially perilous journey of espousing participatory research. Given its recent history, why the change of heart? The disempowerment and immiseration of millions in the Third World as a result of Structural Adjustment Plans that the World Bank promoted in country after country has not only led to considerable documentation and critical analysis, but also to increasingly visible protest movements, critically within the West itself. The first memorable example of the strength of that protest movement remains Seattle 1999 but since then it has become commonplace to find anti-globalisation protestors at every major World Bank, WTO and IMF meeting.

The critiques of these protest movements and alternative theorists seem to be reaching the inner circle of World Bank intellectual supporters such as Stiglitz, Sachs, and Bhagwati. All of them now criticize the Bank’s approach and methodology.

More importantly, the record of the World Bank as aiding ‘development’ in its client countries received a major set back in recent years as many of its ‘star pupils’ like Argentina and Ghana slid into chaos in spite, or more likely because of, following World Bank and IMF dictates closely. Something obviously needed to be done. The Poverty Reduction Strategy Papers are a response to both the obvious issue of increasing world poverty that many claim results from the very policies countries followed under World Bank guidance, and to critiques regarding the non inclusive nature of World Bank policy making.

Final PRSPs had been presented to the boards of World Bank and IMF by around 50 countries by January 2004. According to the World Bank, ‘PRSPs are prepared by governments through a participatory process involving civil society and development partners, including the World Bank and the International Monetary Fund (IMF)’. It would be useful at this point to ask who represented ‘civil society’ to balance a heavy donor presence.

The concept of civil society when not being used to refer to society in general is more specifically used to denote that segment of society that interacts with the state, influences the state and yet is distinct from the state. The principle vehicles of civil society representation in the case of PRSPs have been NGOs. Fortunately for the World Bank the concept of civil society is vague enough to allow easy manipulation. Who is chosen to represent civil society is very much at the discretion of the government and the donors. In Pakistan after the first round of so called public participation, a coalition of NGOs, unions and activists wrote to the World Bank, the Government of Pakistan, IMF and other agencies to register their complaint. The letter writers claim,
‘The Interim-PRSP (I-PRSP) was made public by the Ministries of Finance and Planning in November 2001. While the I-PRSP document itself suggests that extensive public consultation took place in the preparation stages, there is no concrete evidence to confirm this claim. The vast majority of civil society groups are still only discovering that the PRSP process exists’.

A selected group of NGOs were then included in the consultation process. The final PRSP released in December 2003 makes claims regarding inclusion and participation that remain hard to verify. The report claims that ‘the PRSP participatory process has been further enriched by social mobilization at the grassroots level through the Rural Support Programs Network (RSPN) in setting priorities and improving implementation’.

It is generally acknowledged that the RSPN is the archetypical establishment friendly NGO. More importantly the report gives no information about how this participation was solicited, who was invited and how the discussions were conducted. It remains hard to prove these claims of participation. Critically, the IMF and World Bank in their own reports do not raise any questions about the process of participation. The Joint Staff Assessment report on Pakistan’s PRSP supposedly written to critically evaluate the process of PRSP formulation in a country, claims that ‘the broad participatory approach that was initiated during the interim PRSP underpinned the final PRSP’.  The report goes on to indicate satisfaction at the level of participation in strategy formulation, focusing its concerns primarily on the speed of strategy implementation.

In Pakistan, while the who, what and how of civil society participation remains uncertain, the list of donors who contributed remains long and clear: ‘The World Bank and other key donor partners including ADB, DfiD, INGAD, UNDP, UNFPA, ILO, UNICEF, WHO, JICA, CIDA, USAID, EU, GTZ, NORAD actively supported the full PRSP process and contributed towards policy design, implementation, and evaluation’.

This is part of a wider pattern of PRSP in other countries. It might be tempting to view the failure of this PRSP to be as participatory as it claims, as a uniquely Pakistani problem. However, a recent Oxfam report titled ‘From “Donorship” to Ownership?’ points to failures in participation across a range of different countries. Many other monitoring organizations like Focus on Global South and Eurodad have made similar claims. The Oxfam report claims, ‘Donors maintain far too much control over policy content, employing conditionality and ‘backstage’ negotiation to the detriment of participation processes. Lastly, these new opportunities for dialogue on policy remain very fragile and dependant on the largesse of donors, rather than being institutionalised as a right’.

It is however, in the content of the PRSPs that we find the biggest contradiction to the frequent claims of participatory decision-making. In country after country the PRSPs are re-imposing a ‘previously tried and failed policy paradigm’ of the Structural Adjustment Plans. Oxfam reports that the thrust of the PRSP reports has been almost identical in all fifty reports written so far. What a coincidence, that in country after country the PRSPs continue to reflect the ‘structural adjustment emphasis on ‘belt-tightening’ economic frameworks, liberalization, privatisation and growth based on one or two primary exports’.

In almost all the PRSPS there is a complete absence of historical and socio-political analysis regarding why poverty exists. The Pakistani PRSP only notes in passing that as a result of the participatory workshops conducted by the Rural Support Networks Program some reasons for poverty were identified and these included: ‘discriminatory education system, high incidence of health problems, widespread unemployment, inaccessibility to capital from traditional sources to start productive enterprise, few opportunities for women to earn a livelihood, lack of availability of vocational skills,…..environmental degradation, inconsistent water supply, lack of access to justice, and a rapid rise in population,….’. No attempt is made to distinguish the indicators of poverty from the causes.
Herein lies the crux of the matter. The absence of causal analysis is critical in allowing the PRSPs to propose strategies for reduction of poverty that have been documented by others to be contributing towards the growth of poverty. A Focus on Global South report points out that ‘reducing the discussion of poverty to poverty alleviation…..can be intentionally deceptive…..and if the poverty diagnosis is incorrect, so too will the emerging strategy. This is why we believe that the policy matrices that appeared in most PRSP processes seldom show a demonstrable connection with actual poverty reduction’.

The World Bank’s PRSPs continue to support trade and financial liberalization and privatization that has been shown by many researchers to actually lead to increased poverty through elimination of subsistence farming, de-industrialization of third world countries and larger share of value-added going to the multinationals that are receiving increased priority over the concerns of the citizens.

The development industry is not a monolith and there is no doubt that there may be many within the World Bank who may sincerely believe that increased liberalization is the way forward for development in the third world. However, in the face of increasing evidence from all parts of the world that this is not the case, and in the face of increasing revisions by the very economists who supported this framework intellectually, such a belief is hard to justify. 

In fact an organization that operates on non-democratic structures itself is an unlikely champion of participatory decision-making. Voting power at World Bank is determined by a country’s financial contribution. The US has between 15.5-18% of vote in every board and the combined vote of the G7 countries is close to 45%. The headquarters of both IMF and World Bank are at Washington due to the stipulation that headquarters will be located in countries with the highest contribution. Significant changes in policy direction require a majority vote of 85%. So far the US has maintained its veto power by ensuring that its voting power never slips below 15%. This organization certainly understands the language of ‘effective demand’ i.e. responding to the demands of those who can pay, but to expect it to actively promote democratic participation may be naivety of the highest order.



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