Progress and Challenges In Aligning Poverty Reduction Strategies With Millennium Development Goals

Table of Contents

I. Introduction

II. Progress in reaching the MDGs

III. Embedding MDGs into PRSs: Lessons from Selected Countries

IV. Constraints and challenges in embedding MDGs in National Poverty Reduction Strategies

V. The Way Forward: Recommendations of the African PRS Plenary

References

Annex

I. Introduction

1. In the report "In Larger Freedom: Towards Development, Security and Human Rights for All" the Secretary General of the United Nations called on countries with extreme poverty to adopt "national development strategies bold enough to meet the Millennium Development Goals" (United Nations, 2005a). In 2005, this view was endorsed by World leaders assembled at the UN when they called on countries with extreme poverty to adopt and begin to implement by 2006, national development strategies bold enough to meet the targets of the Millennium Development Goal (MDGs)1. Subsequently, in March 2006, the African Plenary on National Poverty Reduction Strategies and the Implementation of MDGs (hereafter the African PRS Plenary) jointly convened by the United Nations Economic Commission for Africa (ECA), the Africa Union Commission (AUC) and the United Nations Development Programme (UNDP), also affirmed that PRSs are indispensable instruments for achieving the MDGs targets2.

2. The importance of achieving the MDGs in Africa is underscored by the high incidence of poverty, limited access to health services, an unacceptably high prevalence of HIV/AIDS and other infectious diseases, low levels of education, marked gender disparities in access to basic social and productive services, high unemployment rates and an unsustainable debt burden in several countries. It was as a result of a mutual desire to address these dire conditions that over 180 African leaders endorsed the Millennium Declaration in September 2000.

3. The rationale for adopting Poverty Reduction Strategies (PRSs) as a key instrument for achieving the MDGs is clear. PRSs provide an opportunity for policymakers to formulate coherent, focused strategies and policy measures to address issues of national priority, including the achievement of the MDGs. Furthermore, where PRSs are credibly costed, aligned to national budgets and expenditure frameworks, and effectively monitored, they stand a good chance of successful implementation. Costing ensures reasonable estimates of the resources required to achieving the MDGs, alignment with the budget facilitates financing of the activities required to achieve the MDGs, while monitoring and evaluation provides feedback to policymakers about the effectiveness of the strategies in achieving the MDGs.

4. While the call for countries to align their PRS or national development strategies to the MDGs is clear and unambiguous, a common understanding of the framework for alignment is critical. There are two critical dimensions of alignment: policy content alignment and policy implementation alignment where the latter includes resource alignment and related efforts to integrate an MDG-based PRS with the budget and expenditure framework. Thus, the challenge for policymakers is to substantively align the PRS to the MDGs both in terms of policy design and policy implementation in the context of an appropriate institutional framework. At the policy level, this requires that the PRS policy package be consistent and coherent with the MDGs. But beyond aligning PRS strategies and policies with the MDGs, political commitment to achieving the MDGs is demonstrated by the extent to which MDG-based PRSs are credibly costed, funded and implemented preferably through the budget and expenditure framework.

5. African countries have achieved varying degrees of alignment of their PRSs to the MDGs. Drawing on case studies undertaken by the UNDP and ECA, this report highlights the opportunities and challenges associated with aligning PRSs to the MDGs. The report also draws on the outcomes of the African PRS Plenary to better assist policymakers in formulating MDG-based PRSs.

6. The remainder of the report is organized as follows: section two assesses the progress of African countries in achieving the MDGs; section three discusses mechanisms for integrating MDGs into national poverty reduction strategies based on selected case studies; section four highlights the constraints and challenges in embedding MDGs in national PRSs and; section five concludes by noting the way forward.

II. Progress in reaching the MDGs

7. To date, the progress of Africa, particularly sub-Saharan Africa, towards the MDGs has not been satisfactory. Nearly all measures of the targets have either remained unchanged or showed little progress over time (Table 1). Despite regional and country-level differences, Africa as a whole remains off the MDGs track, though there was slight improvement in 2002, mainly in the area of education and health.

Table 1: Status of Selected Targets of MDGs in sub-Saharan Africa

+ data is for 2002

++ data for 2003

.*Targets

Note: Data on MDG progress in 2004, except for MDG 8, is from World Bank (2006)

Data on ODA flows to Africa is from UNECA (2006b).

Source: UN (2005c), UNECA (2005b, 2006b) and World Bank (2006)

8. Central to the achievement of the MDGs in Africa is the attainment of MDG 1 (halving the rate of poverty by 2015). Africa has been the only continent where poverty has increased since 1990. However, there was a slightly favourable trend between 2000 and 2004, when the percentage of the population living on less then $ 1/day decreased from 46 per cent to 44 per cent. According to World Bank projections, while poverty is likely to fall in Africa by 2015, the decline will not be sufficient to meet MDG 1 (World Bank 2006). The main reason behind this minimal progress in poverty reduction is that growth in Africa has been slow and highly volatile3. The attainment of MDG 1 requires an estimated sustained gross domestic product (GDP) growth rate of at least 7 per cent and an increase in the investment GDP ratio to 25 per cent (UNECA 1999). However, long-term per capita growth has been negative or stagnant for much of the mid-70s to mid-90s in sub-Saharan Africa. As a result, the incidence of poverty over the period 1980 -2000 showed little change, while notable declines were reported in other parts of the developing world (Figure 1). In contrast, North Africa performed relatively well in reducing absolute poverty during this period.

9. While the growth performance over the period 2000-2004 is comforting, most sub-Saharan countries still need to accelerate and sustain their growth performance over a longer period to achieve the MDGs.

III. Embedding MDGs into PRSs: Lessons from Selected Countries

10. As noted earlier, embedding the MDGs into the PRS requires alignment both in the design and implementation of PRS policies and strategies. Policy content alignment refers to consistency between the strategies of the PRS and the achievement of the MDGs. Policy implementation alignment, on the other hand, focuses on the extent to which PRS policies and strategies are reflected in the budget and expenditure framework. Alignment, both at the level of policy content and policy implementation, is enhanced by the following instruments:

• An MDG Report

• An MDG Needs Assessment

The MDG Report and Alignment

11. The MDG report provides the appropriate context for the design, implementation and monitoring of MDG-consistent policies and strategies. It highlights opportunities and challenges to achieving the MDGs and identifies MDG monitoring benchmarks.

12. Furthermore, MDG reports can be used to customize MDG targets to local conditions based on available statistical resources, country priorities and capacity for implementation. Invariably, the reformulation of MDG targets will have implications for both the design and implementation of policy. For example, the policy and resource implications of using "a dollar a day" as the poverty benchmark may differ markedly from a benchmark based on a "national" poverty line. So far, nearly all PRSP countries have produced MDG reports in collaboration with UNDP country offices (Table 2, Column 3).

MDG Needs Assessments and Alignment

13. An MDG Needs Assessment provides policymakers with an estimate of the total resources required to achieve the MDGs. This is done by costing the outputs and activities required to implement MDG-based policies and strategies. Furthermore, an MDG Needs Assessment facilitates policy implementation because it provides an indication of both the quantity and distribution of budgetary resources required to finance the implementation of MDG-related activities.

14. So far, 16 countries (41% of the 39 countries with data) have conducted MDGs Needs Assessments (see also Table 2, Column 3), which is an indication of progress by these countries in aligning their PRSs to the MDGs. What is less clear is the extent to which the PRSs of these countries are integrated with the Needs Assessment. An important indicator of integration is whether the PRS framework takes into account the macro-economic implications of financing the costed activities and outputs identified in the MDGs Needs Assessment. Carrying out this exercise enables policy makers to appropriately assess and forestall the potentially destabilizing effects of excessive fiscal expenditures.

15. The remainder of this section illustrates the process of alignment based on case studies from selected African countries. According to the UNDP (Table 2) three countries, Ethiopia (Box 1), Tanzania (Box 2) and Uganda (Box 3) have significantly embedded the MDGs into their second generation PRS.

Table 2: PRS Status and Likelihood of MDG-based PRS Strategy with Additional Resources in sub-Saharan African Countries

Source: UNDP (2006)

Notes:

A: PRS:Ratings: 1= First Generation PRS; 2= In the process of formulating the Second Generation PRS; 3= MDGs integrated in the Second PRS

MDGs: 1= MDGs Report completed; 2=Needs Assessment underway; 3= Planning to align PRS with MDGs in progress or completed

B: This likelihood of an MDG-based PRSs rating is based on the assessment of UNDP country offices.

Ethiopia

16. Ethiopia's Plan for Accelerated and Sustainable Development to End Poverty (PASDEP) appears to have achieved significant alignment at the level of both policy content and policy implementation. In terms of policy content, PASDEP has a strong policy emphasis on health, HIV/AIDS, education and infrastructure. In turn, these policies have been costed in the Needs Assessment and integrated with PASDEP in the following ways. First, the cost of PASDEP is based on the MDG Needs assessment. Second, PASDEP takes into account the macro-economic implications of implementing the MDGs Needs Assessment. Finally, resource allocation within the national budget and the Medium Term Expenditure Framework (MTEF), reflect the broad priorities of PASDEP.

Tanzania

17. Tanzania's PRS, known as National Strategy for Growth and Reduction of Poverty (NSGRP), also appears to be aligned to the MDGs in terms of policy content. Furthermore, an attempt has been made to achieve "implementation alignment" through resource allocations to poverty-impacting sectors. However, although the country has carried out an MDG Needs Assessment, it is not linked to the NSGRP through the macro framework. Furthermore, the costing of the NSGRP was not informed by the Needs Assessment but based on inputs from Tanzania's Public Expenditure Reviews (PER) and the Medium Term Expenditure Framework (MTEF). While these are relevant inputs into the process, a MDGs Needs Assessment provides a more comprehensive appraisal of what is required to achieve the MDGs.

18. The NSGRP achieves "policy content alignment by defining broad goals under three clusters that correspond closely with the MDGs. The first cluster focuses on growth, food-security and poverty reduction, the second cluster is about improving societal welfare, with emphasis on education and health services, and the third cluster emphasizes governance and accountability. All clusters fit into MDG priority areas as well as the international call for greater democratization, accountability and transparency.

Uganda

19. The policy content of Uganda's second generation PRS, Poverty Eradication Action Plan (PEAP), appears to be aligned with the MDGs both in terms of policy content and resource allocation. However, policy content alignment has not yielded satisfactory results in several key MDG sectors. Indeed, the PEAP acknowledged that there has been limited progress on the social development front, except in the areas of HIV/AIDS, despite increased public expenditures to improve the delivery of social services over the last decade. Also, since 2000, poverty has increased in spite of relatively rapid real GDP growth. According to the government, the inequitable distribution of the benefits of growth has undermined poverty reduction and social progress in Uganda. Consequently, the next cycle of PEAP will address income inequality issues explicitly by focusing on increasing the incomes of the poor and improving their welfare. In addition, the Ugandan PEAP emphasizes the restoration of peace and reduction of conflict, social progress, particularly in reducing drop-out rates at the level of primary education and transparency in the use of public funds.

20. The lack of satisfactory progress in social development calls for continual monitoring of the alignment process in terms of both policy content and policy implementation. Improving policy implementation may require efforts to integrate the PEAP more closely with Uganda's MDG Needs Assessment. In effect, like Tanzania, the alignment of Uganda's PEAP with the MDGs can be improved by integrating the PEAP with an MDG Needs Assessment through the macroeconomic framework.

21. Overall, most African countries have a desire to partner with regional and international development institutions to implement MDGs. Of the 44 African countries for which information is available, 75 per cent are likely or very likely to formulate and execute MDG-based growth strategies with additional support from donors, while the rest are still undecided or are unlikely to follow the trend (Table 2, column 4). Some of these are countries with persistent internal instabilities and conflict.

Findings of ECA's PRSP-Learning Group

22. Besides the UNDP studies, the ECA also conducted studies on the alignment experiences of 12 African countries as part of the PRSP-Learning Group project. Annex 1 provides a summary of the findings, which are based on interviews with PRSP focal persons, practitioners and civil society representatives in 12 African countries. The findings reveal that most countries have begun the process of aligning PRS with MDGs, but some have progressed much more than others. Thus, there is considerable scope for experience sharing and knowledge transfer across countries. In the past, alignment was hampered by the fact that the introduction of the MDGs did not synchronize with the emergence of first generation PRSPs. Efforts are now being made to speed up the pace of resynchronization.

IV. Constraints and challenges in embedding MDGs in National Poverty Reduction Strategies

23. The experiences of countries such as Ethiopia, Tanzania, Uganda and others described in Annex 1 show that countries have aligned their PRS to the MDGs with varying degrees of success. In addition to differences in the availability and use of MDGs Needs Assessments and MDG Reports, country-level differences in alignment may be attributed to the absence of a supportive environment for alignment. Key among the factors that undermine a supportive environment are: a lack of political commitment to alignment due in part to the perception that PRSs and MDGs are external impositions and not truly nationally owned; a lack of capacity to effect alignment; and an aid architecture that is often unsupportive of the implementation of MDG-based PRSs.

Ownership, Leadership and Accountability

24. Political commitment and support is vital to the processes of formulating and implementing an MDG-based PRS. On balance, the African experience so far suggests that, where the process of alignment is motivated largely by a desire to secure donor funding, alignment is bound to remain a theoretical exercise even if it is underpinned by an MDG Needs Assessment. At the 2005 World Summit, leaders from the developing world affirmed their commitment to prepare national development plans to implement MDGs. Now is the time for concrete action and demonstrated leadership to implement the commitments. Strategies for aligning the PRSs with MDGs must be owned by the country and must ensure broad participation of stakeholders to build broadened consensus around pro-poor policies. Also, the issues of accountability, involvement of parliaments and sub-national governments must be accorded increased attention.

Capacity constraints

25. The alignment of PRSs with the MDGs requires adequate capacity in several areas including policy formulation, policy implementation, monitoring and evaluation, and the carrying out of an MDG Needs Assessment exercise. However, capacity building initiatives in most African countries have been ad hoc, disconnected from national priorities and unsuccessful in retaining existing capacity. The concept of capacity development has significantly evolved over recent years, from a relatively narrow focus on technical skills and training towards a broader concept comprising the institutions, human resources and systems that are deployed to achieve poverty reduction and development. Apart from building capacity, it is also necessary to harness, utilize and sustain existing, often latent capacity. The broader concept thus reflects a growing appreciation that capacity building reflects internal organizational factors, such as incentives, formal and informal rules, and business processes, and also "environmental" factors, including the prevailing economic, social, and political systems. Indeed, the success of PRSs or other development plans will depend crucially on the capacities of various institutions involved in their implementation. So far, very few PRSs have paid systematic attention to capacity issues.

Aid Architecture, PRSs and the MDGs

26. Increased external resource flows are vital in ensuring the implementation of MDG-based PRSs since most African countries lack the resources to fund the process exclusively from domestic resources. It is estimated that more than a doubling of current ODA is required to meet the MDGs. However, the issue is not just about increasing the quantity of aid, it is also about improving the quality of aid. In the past, aid flows have been unpredictable, ridden with hard conditionalities, often misaligned with national priorities and programs and misallocated. As a result, aid effectiveness has been compromised.

27. The Millennium Summit in September 2000 endorsed the MDGs and started a process of global aid reform, which is still unfolding. The landmark event in this process was the Financing for Development Summit (Monterrey, 2002) at which donor nations pledged to increase aid to 0.7 per cent of their GNP. At the Kananaskis Summit in June 2002, the G8 countries endorsed the New Partnership for Africa's Development (NEPAD) and agreed to an Action Plan to support it. In addition to promoting peace and security in Africa, and boosting expertise and capacity, the Action Plan committed to improve aid effectiveness. Since then, three high-level meetings (Rome 2003, Marrakech 2004, Paris 2005), comprehensively addressed the issues surrounding aid effectiveness and results for development. Some progress has also been made in implementing the debt relief initiative for Heavily Indebted Poor Countries (HIPC). At the Summit in 2005, the G8 nations agreed to provide for the full cancellation of debt, owed to the World Bank, the International Monetary Fund and the African Development Bank, by 14 African countries that had already reached the HIPC completion point.

28. Taken together with the G8 commitment of doubling aid for Africa by 2010,these developments suggest a serious commitment to aid reform, with a particular focus on the needs of Africa. Nonetheless, more action is required to ensure that the Monterrey consensus is met. The total ODA commitment by the donor community in 2003 was still below the 0.33 per cent reached in 1990 and falls far short of what is widely considered to be needed to achieve the MDGs. Furthermore, donors are yet to fully comply with the commitments of the Paris Declaration on Aid effectiveness.

V. The way forward: Recommendations of the African PRS Plenary

29. The discussions in the preceding sections noted that the design and implementation of MDGs-based PRSs will require a supportive environment characterized by greater ownership of the PRS process, improved capacity to design and implement MDG-based policy measures and a supportive aid architecture. In this regard, the African PRS Plenary, in its issues paper and Outcome Statement proposed policy measures to address the challenges in the areas of ownership, capacity building and aid reform.

30. To improve ownership, leadership and accountability, the Outcome Statement of the African PRS Plenary recommended that African policy makers resolve to:

• Improve stakeholder participation in the design, formulation, implementation and monitoring of national development strategies by building and enhancing technical capacity for policy design, decision making, implementation and monitoring;

• Generate more reliable, relevant, and timely statistics including gender-sensitive statistics, for decision making and accountability;

• Improve the representation of stakeholders and the quality of their participation; and

• Improve accountability to parliaments and the citizenry in the spirit of strengthening domestic accountability.

31. To improve country-level capacity to effectively design and implement MDG-based PRSs, the African PRS Plenary urged policy makers to:

• Develop and design education curricula and training programs that are responsive to skills needs of both the private and public sectors;

• Ensure a balance between investments in basic education on the one hand, and investments in tertiary education and research and development on the other hand;

• Evaluate the effectiveness of existing capacity building initiatives in nurturing and retaining capacity while adopting and implementing capacity building strategies that integrate capacity building initiatives into national and sub-national processes.

32. To improve the architecture and effectiveness of aid, the African PRS Plenary called on:

• African policy makers to continue dialogue with development partners to improve aid predictability by moving to longer-term commitments;

• donors to coordinate and harmonize their aid delivery processes to minimize transaction costs and improve aid alignment, including technical cooperation, with national priorities as articulated in national development programs.

• African policy makers to strive for long-term economic self-sufficiency by utilizing ODA more productively and efficiently and by embarking on robust and sustainable domestic resource mobilization efforts.

33. Finally, the African PRS Plenary noted that it is of utmost importance for ECA to continue the PRS Policy Dialogue that started with the PRSP-Learning Group initiative and led to the African PRS Plenary. This mechanism provides a unique opportunity to share and transfer knowledge and country and inter-regional experiences that are critical to embedding MDGs into PRSs. To better reflect its new mandate, it was recommended that the PRSP-Learning Group be renamed the PRS-MDG Learning Group. In this regard, this forum will provide the opportunity for peer learning and experience-sharing which are important for the process of aligning PRSs with the MDGs.

References

Federal Republic of Ethiopia, MOFED,(2006), Plan for Accelerated and Sustainable Development to End Poverty (PASDEP).

Fosu, A. (2006), Growth, Poverty and MDGs: the quest for effective poverty reduction strategies, paper presented at the African PRS Plenary, March, Cairo

Republic of Uganda Ministry of Finance and Economic Development (2005), Poverty Eradication Action Plan, (2004/5-2007/8)

United Nations Economic Commission for Africa (ECA) (2006a): Outcome Statement of the African Plenary on National Strategies for Poverty Reduction and Implementation of the Millennium Development Goals, Cairo March 26-28, 2006.

United Nations Economic Commission for Africa (ECA) (2006b) The Economic Report on Africa 200: Capital Flows and Development Financing in Africa (forth coming)

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Secretariat, www.developmentgoals.org New York

United Republic of Tanzania, (2005), National Strategy for Growth and Reduction of Poverty (NSGRP), Vice Presidents Office.

World Bank (2006): Global Monitoring Report 2006, Washington.

Annex 1: Poverty Reduction Strategy Updates: Country experiences

Source: UNECA, (2006) Poverty Reduction Strategy Updates (various country studies, prepared as background documents for the PRSP-LG Plenary, Cairo, Egypt, 2006).

1 United Nations (2005b)

2 UNECA (2006a)

3 UNECA (2005b)