How Best to Link Poverty Reduction and Debt Sustainability in IMF-World Bank Models?

This paper attempts to provide an economic model in the context of developing countries to address the policy strategies related to poverty reduction. With a view to deal with the shortcomings of the existing approaches as regards poverty reduction, this paper develops a model on the basis of the policy framework of the IMF and the World Bank to show how demand growth can be a crucial mechanism in determining the potential rate of growth, and then to suggest ways in which poverty — conceptualized officially in absolute terms with a subjective cut‐off point (e.g. US $1/$2 a day), and a new objective measure in terms of consumption deprivation — can be linked with the key policy variables contained in the adjustment programmes. A strategy of investment in infrastructure and in human development, and improving access to credit markets, particularly in rural areas to encourage or "crowd in" private investment is a precondition for growth and poverty alleviation. Debt relief can only provide a temporary, not a sustainable, solution to the problem of reducing poverty