Speech

Welcoming Remarks to the Second East Asia and Pacific Regional Conference on Poverty Reduction Strategies, David Burton, Director, Asia and Pacific Department, IMF

October 16, 2003

1.Your Excellency, Prime Minister, Excellencies, ladies and gentlemen, on behalf of the International Monetary Fund, I am very pleased to welcome you to this Second East Asia and Pacific Regional Conference on Poverty Reduction Strategies. We are delighted to have this opportunity, for the second time in two years, to join with the Asian Development Bank, the UNDP, and the World Bank in organizing such a gathering. We are looking forward to learning from your experiences in designing and implementing national poverty reduction strategies, just as we did in the first such conference.

2. It is also a great pleasure to be in the vibrant city of Phnom Penh. I would like to thank the Royal Government of Cambodia for hosting this conference. Holding this conference here is particularly fitting, since Cambodia has already successfully completed preparation of its National Poverty Reduction Strategy. Indeed, this document has been well received, including by the IMF's Executive Board, even though, understandably, many challenges in implementation lie ahead. In this context, I would like also to congratulate the Cambodian authorities for having successfully concluded earlier this year their three year arrangement under the IMF's Poverty Reduction and Growth Facility (PRGF). We look forward to building soon on this good progress with a successor PRGF arrangement.

3. The majority of countries participating in this conference are growing quite rapidly and making progress in reducing poverty. Four countries—Cambodia, Laos, Mongolia, and Vietnam—have already drawn up their national poverty reduction strategies (PRSPs), aimed at meeting their own development objectives framed against the backdrop of the Millennium Development Goals (MDGs). In the case of Indonesia, an interim poverty reduction strategy has been prepared and work is well under way to define a full PRSP. Timor Leste has also embarked on this process, starting with its National Development Plan, which includes poverty reduction among its key objectives.

4.Thus, in this conference, we have a significant body of experience with poverty reduction strategies that are based on the specific circumstances of the Asia region. Worldwide, the PRSP approach has also gained ground. Altogether, 32 countries have completed their full PRSPs, and another 21 countries have finalized interim strategies. This represents a further sizeable pool of experience on which we can all draw.

5. The IMF is committed to the PRSP as the framework for our engagement with the poorer countries to help them make progress towards meeting the MDGs. This was strongly reaffirmed recently at the IMF/World Bank Annual Meetings in Dubai, as was the IMF's role in continuing to help its low income members. With the PRSP approach, we are striving for a new way, a more effective way of helping countries boost growth and reduce poverty. We, therefore, view the PRSP framework as an evolving, learning process. There is much that is not yet understood about how to generate pro-poor growth, and advancing knowledge in this area is crucial for reducing poverty around the globe. Thus, experience with PRSPs is being reviewed jointly by the Fund and the World Bank every year. These reviews have drawn from a very broad range of assessments across stakeholders, including from conferences such as this one and in other regions of the world.

6. The most recent comprehensive IMF review of PRSP experience took place only last month, first in the Executive Board and then by our policy making committee in Dubai. Let me briefly note four sets of issues of particular relevance to the IMF that are emerging from the experience to date:

7. The first group of issues concerns how to strengthen economic growth prospects and make growth more pro-poor. These issues are central to PRSPs and to the IMF's work with its poorer members. Macroeconomic stability is now widely accepted as a core requirement for growth. There is also considerable evidence that macroeconomic instability, especially high inflation, hurts the poor more than the rich. However, much remains to be understood about the relationships between macroeconomic policies and poverty. Also, the linkages of sectoral and structural policies with economic growth performance and poverty reduction have not been well defined in PRSPs so far. I hope that this conference can help shed further light on how countries should approach these complex issues.

8. A second broad issue concerns how to set development goals in PRSPs. Part of the difficulty is our limited knowledge of the effects of policies on outcomes. But beyond that there is the issue of whether targets should be set ambitiously to meet MDGs or whether they should be calibrated more realistically to match the financing outlook and prospects for policy reform. Setting goals ambitiously can challenge policy makers and donors, but risks disappointment and the appearance of failure. Striking the right balance between these considerations inevitably involves difficult judgments that many of you must have had to make.

A third issue
9. concerns how best to sharpen the focus of PRSPs to enhance their operational value for both national authorities and external partners. Key in this respect is the need for PRSPs to prioritize objectives and policies and to provide the specificity necessary to make strategies implementable. This has proved a challenging task in practice. Countries continue to wrestle with how to formulate documents that do justice to the range of competing expectations arising from the consultative process and yet are operational. There is no doubt that many of you have encountered this challenge, and I am sure there is much to learn from your experience in tackling it.

10. Finally, there are the challenges in implementing PRSPs. After four years in existence, the PRSP approach is beginning to mature and is now moving into the implementation stage for many countries, including in four of the countries participating in this conference. Many important issues today, therefore, are operational ones that concern the execution of strategies, rather than their design. Countries are grappling with such questions as how to integrate PRSPs more closely into the national budget framework and with other national planning documents, so as to make PRSPs more relevant operationally. A related practical question is how to link up PRSP teams with other executing units in national governments. And a further—but broader question—is how to put in place effective monitoring arrangements, in order to better track progress in implementation, particularly given capacity constraints in poorer countries.

11.The agenda of this conference is intended to address these and other questions based on the experience of East Asia. In the next three days, we encourage PRSP teams to engage in an open dialogue, sharing your experiences—both positive and negative. It is our hope that you will be able to take away from this conference useful ideas and insights that will help you as you proceed with implementing the PRSPs in your countries. For the IMF's part, we hope again to draw lessons from your experience, to help us better assist you in preparing and implementing poverty reduction strategies, and to help us ensure that PRGF-supported programs are more closely aligned with PRSPs, and are effective in supporting pro-poor growth.

12.Let us then work for a candid and thought-provoking discussion that will advance our knowledge of how to design and implement strategies for reducing poverty to the benefit of all. Thank you.