Week Eight: PRSP, Poverty Reduction Strategy Papers or (African) Populations Rely on Serious Philanthropy?

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Part I

After looking at each plan mentioned by Jeffrey Sachs (Ghana’s Poverty Reduction Strategy (GPRS), Ethiopia’s Sustainable Development and Poverty Reduction Program (SDPRP), Kenya’s Economic Recovery Strategy for Wealth and Employment Creation (ERS), Senegal’s Poverty Reduction Strategy Paper (PRSP), and Uganda’s Poverty Eradication Action Plan (PEAP)), the first thing that I noticed was that the reading was very inaccessible. Even before the actual plans or strategies began their proposals, there was a list of between fifty and two hundred and fifty acronyms that are used throughout the poverty reduction strategy plans (PRSP). Even the names of plans are acronyms that are difficult to remember. If these plans are difficult for me to understand before the bulk of the plans even begin, I cannot imagine that the residents of the countries, for which the plans were created for, would be able to understand them either. I think a huge component for successful poverty reduction in African countries is the involvement of the people. More and more plans involve incorporating the community into their plan to help improve the country’s economy and the local community’s standard of living. The video below shows a plan for smart farming and agriculture in Uganda that incorporates local involvement.

Moyo discusses bonds (which she says are essentially loans or IOUs on page 77) that are given to African countries. She explains that international investors are only allowed to buy bonds for their portfolios from certain approved lists, such as the J.P. Morgan Emerging Market Bond Index, or EMBI. Because I had no idea what the J.P. Morgan EMBI was or measures, I did some research.

The Emerging Markets Bond Index Plus (EMBI+) tracks total returns for traded external debt instruments (external meaning foreign currency denominated fixed income) in the emerging markets. The regular EMBI index covers U.S.dollar-denominated Brady bonds, loans and Eurobonds. The EMBI+ expands upon J.P.Morgan’s original Emerging Markets Bond Index (EMBI), which was introduced in 1992 and covered only Brady bonds. An external debt version, the EMBI+ is the JPMorgan EMBI Global Index

In addition to serving as a benchmark, the EMBI+ provides investors with a definition of the market for emerging markets external-currency debt, a list of the instruments traded, and a compilation of their terms (Wikipedia).

Below is a graph showing the J.P. Morgan EMBI for SubSaharan Africa.

J.P. Morgan EMBI for SubSaharan Africa

     J.P. Morgan EMBI for SubSaharan Africa

Some countries from SubSaharan Africa, as Moyo points out, might not be included in indexes such as the J.P. Morgan EMBI because they might choose to leave the international bond market for domestic bonds, savings, or taxes. Other countries, however, might be forcibly removed from the list if they default on loans or debt. I was curious to see how much money my countries, Liberia and Namibia, had received in loans. According to the World Bank, Liberia has received $626 million and has another $11.7 million that still needs to be distributed. In 2008, Namibia received a $7.5 million Second Development Policy Loan.

Links: GPRS, ERS, JPMorgan EMBI Wikipedia

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