PRSF: Structural Adjustment Repackaged

Stephanie Luce

IN 1999, DUE to external protest and internal criticism, the International Monetary Fund (IMF) and the World Bank replaced their Structural Adjustment program with the Poverty Reduction Strategy Facility approach (PRSF).  The PRSF was meant to improve on noted problems with Structural Adjustment by addressing poverty and not just economic growth, and incorporating more civil society and home government input into economic development planning.

Many saw this shift in policy as an implicit acknowledgment by the IMF and World Bank that even when Structural Adjustment was successful in promoting economic growth, it was not addressing employment, poverty and inequality.

Kenya was among the first group of countries to participate in the new program. It prepared an Interim Poverty Reduction Strategy Paper (PRSP) in 2000 in order to receive IMF funds to assist in dealing with a drought. The PRSP appeared to be a clear improvement on previous conditionalties imposed on the country in order to receive loans. It acknowledged the debilitating impact of poverty on the well-being of the population, calling for the provision of affordable, basic services.

The PRSP states that the plan was developed with input from a broad range of government and non-government stakeholders. The IMF approved the PRSP and awarded an additional loan, payable over three years, of almost $200 million (US) dollars. In 2003, another three-year plan was approved, with a loan of approximately $250 million.

Despite the revisions to Structural Adjustment, Bettina Ng’weno’s article highlights the ways in which the PRSF is hardly different. While the PRSF is an improvement in terms of its rhetoric, in reality, the outcomes of the programs suffer from similar problems. Structural Adjustment and the PRSF are still based on the same economic principles: that free markets are the best avenue for economic growth, and that economic growth is the best avenue for addressing societal needs.

While some countries have experienced economic growth under the last years, there is no guarantee that growth leads to higher employment rates, lower inequality, or a higher standard of living for the average citizen. The fact is that the free market cannot solve poverty. No capitalist country has ever ‘solved’ unemployment, and without full employment, poverty can only be addressed through government programs or private charity.

The PRSF approach allows for economic development plans that call for the provision of public services, yet still pushes for the privatization of government services and a reduced role for government regulation. PRSF’s can call for public programs, but then do not allow governments autonomy in developing ways to pay for them. The PRSF’s are meant to involve greater public participation in the development of economic plans, but this is fundamentally at odds with the assumptions of a free market of atomized actors.

As Ng’weno’s observations show, the “friendly capitalism” PRSF approach is not the solution to Kenya’s problems. No doubt a small segment of the population will benefit and be able to shop at the new large grocery stores. Yet any economic system that gives primacy to free markets will only be able to give lip service, at best, to equality and democratic decision-making.