The challenge for the millennium: how to consign global poverty to history - Business - News - The Independent

The challenge for the millennium: how to consign global poverty to history

Jack Boorman, of the IMF, explains what needs to be done by industrialised nations to foster development

AGREEMENTS REACHED at the fall annual meetings of the International Monetary Fund (IMF) and World Bank will give new impetus to the international community's efforts to promote more rapid and sustainable development in the world's poorest countries. At the heart of the new approach will be a closer integration than ever before in the operations of the two Bretton Woods institutions in these countries in pursuit of the fundamental objective of poverty reduction. And accompanying these efforts will be a bigger, better debt-relief package.

The new focus reflects a recognition that a more comprehensive policy approach is needed to deliver consistent and broad-based inroads into poverty in developing countries. We have long known sustained growth requires sound macroeconomic policies, structural policies conducive to private-sector activity and the working of markets, and well-designed social safety nets to protect the poor and vulnerable against any transitional fallout from reforms. Promoting and supporting these policies have been, and will remain, the IMF's primary contribution to reducing poverty in the developing world.

Indeed, much has been achieved over the past decade. Growth rates of real per capita income in countries supported by the IMF's concessional loan facility (ESAF) have risen sharply since the mid-1990s - to rates almost double those of other developing countries. Key social indicators have also improved, in part because ESAF-supported programmes have provided for increases in health and education spending averaging 4 per cent a year in real per capita terms.

But it has become increasingly apparent that much more needs to be done to achieve faster and broader-based poverty reduction. Countries need to adopt policies that allow the poor to benefit from growth, by expanding their economic opportunities. Pro-poor policies - such as investing in health, education, rural infrastructure, and private-sector development - also boost growth.

Naturally, the diagnosis and prescriptions for poverty reduction are likely to differ in many respects from country to country, underscoring the need for a national debate in which all voices can be heard, not least those of the poor. To this end, countries seeking to benefit from enhanced debt relief under the initiative for the heavily indebted poor countries (HIPCs), or wishing to draw on concessional lending facilities in the IMF and World Bank, will now be assisted in drawing up a new document called a comprehensive poverty reduction strategy paper (PRSP). This signifies important changes in the way we do business.

The PRSP will be government-led, in close collaboration with the IMF and World Bank. It will identify key obstacles to faster growth and poverty reduction, specify realistic and monitorable poverty goals, and set out the macroeconomic, structural and social policies the country intends to adopt to meet those goals. The needed financing will also be clearly identified.

With these ingredients, a PRSP can fulfill several important functions. First and foremost, it will provide a transparent policy agenda for the country itself, promoting government accountability and serving as a vehicle for a continuing national dialogue on economic and social policies.

Second, the PRSP will be the framework that integrates all IMF and World Bank lending operations in the country concerned. For the IMF's part, the policy programmes we support under our new Poverty Reduction and Growth Facility - which is replacing ESAF - will draw directly from the PRSP. Third, the PRSP will allow a clear connection to be drawn between debt relief and poverty reduction, thereby playing a central role in the enhanced HIPC Initiative, which in turn underpins the new poverty strategy.

In September, the international community agreed to provide more extensive relief to more countries (at least 36 instead of 29), on a quicker path. This will speed up progress in reducing external debt to sustainable levels - the goal is to reduce the debt burdens of these countries by more than one half - and free up more resources for poverty reduction. Of course, the more generous debt-relief package will come with a higher price tag.

Overall costs are now expected to more than double to $28bn (in present- day dollars) from $12.5bn, with the IMF's share rising to $2.3bn from $1.2bn. Following recent decisions by the Executive Board, the IMF is in a position to begin to make its contribution to the strengthened HIPC Initiative as countries qualify for assistance. However, much remains to be done to lock in all the necessary financing for all multilateral creditors.

How can industrial countries help to further the cause of poverty reduction in the developing world? First, they need to take bolder steps to open up their economies to exports from the poorest countries. These exports should have unfettered and guaranteed access to industrial country markets. Trade can do as much - if not more - than debt relief to foster development and reduce poverty.

Second, the industrial countries should step up their efforts to help the countries involved bring peace to war-torn regions. This includes restraining the sales of military equipment to sensitive regions, abolishing the provision of export credit for military purposes, encouraging national maximum levels for military outlays, and co-operating in the interdiction of the smuggling of raw materials and natural resources to finance armed conflict.

Third, they need to ensure that the extra funds for debt relief are truly additional - not financed out of existing aid budgets. They also need to increase aid flows from their current low levels and focus these flows more on poorer countries pursuing the right policies, using PRSPs as a guide. And they need to lengthen the duration of aid commitments, so that recipients can implement poverty- reduction strategies with confidence that the needed external financing will be available.

All this is a challenging agenda. But if we can succeed in ensuring that all resources - not just debt relief - are effectively used toward poverty reduction, we can rebuild the constituency for aid in industrial countries. A virtuous circle of effective aid use, leading to higher aid flows to the best performers, in turn lifting the inhabitants of these countries out of poverty once and for all - now that would be a result of which we could all be proud.

Jack Boorman is the Director, Policy Development and Review Department, IMF

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
PROMOTED VIDEO
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
FootballFull debuts don't come much more stylish than those on show here
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week