The Halifax Initiative Coalition members include development, human rights, environment and church organizations. In Canada, it is the main voice for reform of the international financial institutions so that they better serve the poor.
Like many others, the Halifax Initiative Coalition initially extended a tentative welcome to the Poverty Reduction Strategy Process, hoping that the language of "country ownership" and "civil society participation" would, in time, result in some level of empowerment of people affected by IFI policies and programs.
There are two aspects of this hope for empowerment. One is within PRSP countries themselves. It involves concepts of governance and national democratic process. These aspects we will largely leave to our Southern partners to comment upon, bringing their experiences and reflections before the world at large and sharing their visions for indigenous democratic process. It should be noted, however, that within Canada, member organizations of the Halifax Initiative are working with the Canadian International Development Agency (CIDA) to explore the implications for participatory processes and country ownership in international development, and what these mean for CIDA's programming.
The other aspect of empowerment, which is the subject of this submission to the PRSP review, relates to the international financial institutions themselves. This understanding of empowerment includes the relationships between nation states, the IFIs, and private interests. But it also needs to include the dynamic through which affected people are involved in the design and implementation of programs and projects that affect them at the most fundamental levels, including respect for their rights as equal citizens on a shared earth.
As we reflect on what we have seen emerge in the process since the introduction of the PRSP, we cannot but be dismayed at the weaknesses that are manifest in this second aspect.
Globalization as a process has intensely weakened the capacity of the nation state, to either regulate the powerful, especially the large corporations, or to protect the vulnerable, especially the poorest of its citizens. The PRSP process, whatever may be intended in the reduction of poverty, does not provide these vulnerable citizens with an enhanced capacity to respond to the real challenges and dangers to their livelihoods that are inherent to a market system in the context of diminishing regulation (and diminishing capacity or desire to enforce existing regulation).
More to the point, the PRSP process does not allow citizen involvement to affect the programs or policies that the Bank and Fund consider their exclusive prerogative, including conditions of fiscal stringency, privatization, public sector reform, cost-recovery mechanisms, taxation and other aspects of structural reform associated with Bank and Fund support and the approval of debt relief. These areas, which are designed mainly to support the expansion of the market - however poorly regulated - which result in increased inequality, poverty and social exclusion, are off-limits to the PRSP process and influence by affected citizens.
Specifically, we regret that the PRSP process does not permit civil society participation, and thus an adequate level of "country ownership" in these areas of conditionality:
- national spending priorities and externally-imposed requirements to reduce the government budgets,
- privatization, including public services (eg. water, healthcare, telecommunications, electricity, transport) and natural resource extraction,
- currency exchange rate and other aspects of monetary policy where social well-being is affected,
- cost recovery, including user fees in health and education,
- taxation policy, including Value Added Taxes on medicine, food, educational, material,
- bank reform, including the privatization of banks, changes to special services banks such as providers of agricultural credit,
- civil service reform, including worker layoffs.
The PRSP process has restricted policy participation to a limited number of aspects of poverty reduction, however important these may be (they include aspects of health and education spending, for example). At the same time, the expansion of IMF power into poverty and development policy has been allowed to become explicit, through the establishment of the Poverty Reduction and Growth Facility (PRGF). This provides the IMF decisive control in an area that is beyond its mandate and expertise.
The PRGF influence on development policy, and on the delivery of debt relief through the HIPC Initiative, has enhanced IMF control at the expense of power at the state level, with affected people paying the cost but without a commensurate level of input into these processes.
For Heavily Indebted Poor Countries that have applied for debt relief through the HIPC Initiative process, these conditions have resulted in a slow-down of the process, to the point that only four countries have reached their Completion Point as of December 2001. Most countries in the process are falling off-track and behind schedule - not only because of the time required to provide a PRSP or Interim-PRSP, but also because of problems with meeting structural reforms that are outside the scope of the PRSP process and beyond the reach of affected people.
These countries already face daunting social and environmental challenges, given the endemic poverty, the scourge of infectious fatal diseases, the displacement of large numbers of people from their home communities, and macroeconomic vulnerability, among other problems. Add to these the unpredicted problems of drought and falling food crop harvests in the Sahel and other regions of Africa and in Central America, the collapse of coffee prices, the global downturn in the wake of Sept. 11, and other factors that especially affect the poor, and we must conclude that delays in debt relief are not acceptable.
The Halifax Initiative recommends that:
- the Bank and Fund expand avenues of civil society input to include structural reform, and accept that the design of conditions linked to these institutions' support, which is not yet adequately shared between national representatives and the institutions, also incorporate opportunities for meaningful civil society input.
- the Bank and the Fund fully integrate lessons from SAPRI.
- IFIs undertake environmental and social assessments of all adjustment operations.
- the Bank and Fund expand the pilot Social Impact Analysis to include environment and make these impact assessments on all adjustment lending an ex-ante, participatory process.
- Bank and Fund disclose draft and approved documentation related to structural adjustment lending.
- the IMF withdraw from any management role in poverty and development, and close the PRGF. IMF support should be limited to its mandated areas of responsibility, and such support take into account local contexts of social and environmental vulnerabilities and political variables, as well as the economic
- the HIPC Initiative be de-linked from structural adjustment conditionalities, so that countries can move swiftly to their Completion Points in the coming months.
Finally, we repeat our desire that multilateral institutions cancel, without delay, the debts of impoverished countries, through use of their own resources and loan-loss provisions.