Back Matter

Back Matter

Author(s):
International Monetary Fund. Independent Evaluation Office
Published Date:
October 2017
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Annex 1. Definitions of Social Protection and Related Concepts/Terms

Social Protection

“Social protection is the systematic intervention intended to relieve households and individuals of the burden of a defined set of social risks. Social risks are defined as events or circumstances that may adversely affect the welfare of households either by imposing additional demands on their resources or by reducing their income. Needs may occur due to sickness, unemployment, retirement, housing, education, or family circumstances .... Social protection can be organized as social assistance or social insurance schemes, with the latter organized as social security schemes or employment-related social insurance schemes.” (IMF, Government Finance Statistics Manual, 2014)

“Generally, social protection and labor refer to the set of policies and programs aimed at preventing or protecting all people against poverty, vulnerability, and social exclusion throughout their life cycles, with a particular emphasis on vulnerable groups. Social protection can be provided in cash or in kind, through noncontributory schemes, providing universal, categorical, or poverty-targeted benefits such as social assistance or social safety nets, contributory schemes with social insurance being the most common form, and by building human capital, productive assets, and access to productive jobs.” (World Bank, The State of Social Safety Nets, 2015)

“In the context of this report, social protection is broadly understood as a set of public and private policies and programs undertaken by societies in response to various contingencies to offset the absence or substantial reduction of income from work; to provide assistance for families with children as well as provide people with health care and housing.” (UN ECOSOC, Enhancing Social Protection and Reducing Vulnerability in a Globalizing World, 2000)

“UNICEF understands social protection as a set of public and private policies and programs aimed at reducing and eliminating economic and social vulnerabilities to poverty and deprivation.” (UNICEF, Social Protection Strategic Framework, 2012)

“Social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people’s exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption/loss of income.” (Asian Development Bank, Social Protection Strategy, 2001)

“Social protection encompasses all interventions from public or private bodies intended to relieve households and individuals of the burden of a defined set of risks or needs, provided that there is neither a simultaneous reciprocal nor an individual arrangement involved. The list of risks or needs that may give rise to social protection is, by convention, as follows: 1. Sickness/Health care; 2. Disability; 3. Old age; 4. Survivors; 5. Family/children; 6. Unemployment; 7. Housing; 8. Social exclusion not elsewhere classified.” (Eurostat, The European System of Integrated Social Protection Statistics (ESSPROS) Manual, 2011)

“[I]n many contexts the two terms, ‘social security’ and ‘social protection’ may be largely interchangeable, and the ILO certainly uses both in discourse with its constituents and in the provision of relevant advice to them. In this report, reference is made to ‘social protection’ both as an alternative expression for ‘social security’ and to denote the protection provided by social security in case of social risks and needs.” (ILO, World Social Protection Report, 2014)

“Social protection refers to policies and actions which enhance the capacity of poor and vulnerable people to escape from poverty and enable them to better manage risks and shocks. Social protection measures include social insurance, social transfers and minimum labor standards.” (OECD, Promoting Pro-Poor Growth: Social Protection, 2009)

“DFID takes a narrower definition of social protection that focuses on a sub-set of public actions that help address risk, vulnerability and chronic poverty. These comprise three sets of instruments: social insurance—refers to the pooling of contributions by individuals in state or private organizations so that, if they suffer a shock or change in circumstances, they receive financial support; social assistance—comprises non-contributory transfers that are given to those deemed vulnerable by society on the basis of their vulnerability or poverty; and, the setting and enforcing of minimum standards to protect citizens within the workplace.” (Department for International Development, Social Protection in Poor Countries, 2006)

“Social protection describes all public and private initiatives that provide income or consumption transfers to the poor; protect the vulnerable against livelihood risks; maintain and build productive assets and livelihoods activities; and enhance the social status and rights of the marginalized, with the overall objective of reducing the economic and social vulnerability of poor, vulnerable and marginalized groups.” (Overseas Development Institute, Guidance Note for DFID: Exploiting the Synergies Between Social Protection and Economic Development, 2014)

“Social protection consists of policies and programs designed to protect people from shocks and stresses throughout their lives…. At a minimum, social protection systems include safety nets, labor market policies, insurance options and basic social services, as in education, health and nutrition.” (World Food Programme, Two Minutes on Social Protection, 2015)

Social Security

“Social security arrangements refer to social insurance and social assistance programs. The former (e.g., pensions and unemployment insurance) may not necessarily be targeted to the poor, while the latter generally are targeted to the poor.” (IMF, “Social Safety Nets in Economic Reform,” 1993)

“Social security is provided through (a) social insurance (generally covering pensions, unemployment benefits and health care), and (b) social assistance (comprising various in-kind and cash transfers to the entire population or to some specific target groups). While the objectives of social insurance are income smoothing and insurance against risks, social assistance is provided to households which are either not covered by any insurance, or are very poor and vulnerable to shocks.” (World Bank and IMF, “Social Security Reforms and Social Safety Nets in Reforming and Transforming Economies,” 1993)

“Social security schemes are social insurance schemes covering the community as a whole, or large sections of the community, and are imposed and controlled by government units. These schemes cover a wide variety of programs, providing benefits in cash or in kind for old age, invalidity or death, survivors, sickness and maternity, work injury, unemployment, family allowance, health care, etc.” (IMF, Government Finance Statistics Manual, 2014)

“The notion of social security adopted here covers all measures providing benefits, whether in cash or in kind, to secure protection, inter alia, from: lack of work-related income (or insufficient income) caused by sickness, disability, maternity, employment injury, unemployment, old age, or death of a family member; lack of (affordable) access to health care; insufficient family support, particularly for children and adult dependents; general poverty and social exclusion.” (ILO, World Social Protection Report, 2014)

Social Safety Nets

“Social safety nets are defined broadly in this paper to include a range of transfer instruments aimed at mitigating possible adverse effects of reform measures on the poor. These instruments include temporary arrangements, as well as existing social protection measures reformed and adapted for this purpose, such as limited food subsidies, social security arrangements for dealing with various life-cycle and other contingencies (e.g., old-age, disability, unemployment, sickness, and drought), and targeted public works.” (IMF, “Social Safety Nets in Economic Reform,” 1993)

“Social safety nets consist of a combination of measures aimed at protecting the poor from the adverse consequences of economic shocks and structural reforms, and helping them escape poverty.” (IMF, Fiscal Adjustment for Stability and Growth, 2006)

“Social safety nets are noncontributory measures designed to provide regular and predictable support to poor and vulnerable people. They are also referred to as safety nets, social assistance, or social transfers, and are a component of larger social protection systems… . The review does not consider generalized subsidies as part of safety nets, which in most cases include regressive interventions tied to fuel and energy consumption.” (World Bank, The State of Social Safety Nets, 2015)

“Safety nets are programs designed to provide people who are vulnerable to poverty, living in poverty or who are facing food insecurity and other forms of deprivation with predictable and reliable support through food, cash or vouchers. Safety nets are best understood as part of the larger social protection system in any given country…” (World Food Programme, Two Minutes on Social Protection, 2015)

Social Spending/Expenditure

“Social spending is defined here as public spending on education and health.” (B. Clements, S. Gupta, and M. Nozaki, “What Happens to Social Spending in IMF-Supported Programs?” IMF, 2011)

“Social spending includes social protection, education, and health care.” (IMF, Fiscal Monitor, April 2014)

“Social expenditure comprises cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low-income households, the elderly, disabled, sick, unemployed, or young persons. To be considered ‘social,’ programs have to involve either redistribution of resources across households or compulsory participation.” (OECD, Glossary of Statistical Terms, 2007)

Social Safeguards

“In this paper, all measures aimed at safeguarding social spending and protecting the most vulnerable are referred to as ‘social safeguards.’ Social safeguards include (i) minimum floors for social and other priority spending, typically established using indicative targets (IT), and (ii) specific reform measures designed to protect vulnerable groups, sometimes established as prior actions or structural benchmarks under Fund-supported programs. In the context of spending floors, social spending is generally defined to include spending on health, education, and social safety nets (e.g., increase social transfers to the poor). Vulnerable groups are defined in a country context and would include, for example, the poor, the elderly, the youth and women.” (IMF, Social Safeguards and Program Design in PRGT and PSI-Supported Programs, 2017)

Annex 2. Social Protection Advice in Article IV Consultations

Social protection advice in IMF surveillance could be grouped into the following themes:

  • 1. Reforming the pension/social security system

    Examples: “Directors emphasized that the sustainability of public finances will require substantive pension reform;” “Directors emphasized the importance of pension reforms to address looming demographic pressures;” “Directors also cautioned that the envisaged changes should not make public sector pensions fiscally untenable;” “Directors cautioned that a declining balance of the social security fund pose long-term challenges.”

  • 2. Reforming unemployment benefits/minimum wage schemes

    Examples: “Directors emphasized the need to curtail the long duration of unemployment benefits;” “Directors called for tightening eligibility for unemployment benefits for those unwilling to work;” “Directors noted that in view of looming labor supply shortages, reforms of early retirement schemes and of sickness and disability leave benefits are also a priority;” “On wage protection, some Directors noted that alternative measures such as expanding in-work benefits for low income workers could be preferable to introducing a minimum wage.”

  • 3. Improving the targeting of social benefits/transfers

    Examples: “To improve public sector efficiency and spending discipline, Directors encouraged better targeting of social spending;” “Directors called for further efforts to rationalize social assistance to target the poor;” “Directors saw scope to reduce generous social benefits.”

  • 4. Protecting vulnerable groups or limiting the social cost of reforms/policies/shocks

    Examples: “Directors advised the authorities to accelerate fuel subsidy reforms, while protecting the most vulnerable segments of the population;” “Directors supported the budget’s mildly expansionary stance, particularly in the light of the need to address the social impact of higher food prices;” “Directors saw scope for further cuts in public spending, complemented with measures to protect the poor;” “Directors supported steps to further reduce wage and subsidy spending, while protecting the most vulnerable segments of the society”

  • 5. Protecting or creating fiscal space, i.e., increasing budgetary allocations, for social spending

    Examples: “Directors stressed that continued fiscal consolidation is needed to create room to raise social spending;” “Directors noted the importance of using fiscal space for priority social spending;” “Directors encouraged the authorities to prioritize expenditures and keep them in line with available resources, while protecting social spending.”

  • 6. Strengthening the social safety net/social transfers/provision of social services

    Examples: “Against the backdrop of continued high poverty, Directors encouraged the authorities to strengthen the social safety nets;” “Directors also encouraged the authorities to cooperate closely with the World Bank and other donors to develop an adequate and well-targeted safety net;” “Directors supported the authorities’ medium term priorities including enhancing social services for the poor;” “Directors encouraged the authorities to consider new approaches to alleviate poverty, including well-targeted cash grants.”

  • 7. Pursuing active labor market policies

    Examples: “Directors supported the authorities’ strategy to reduce unemployment among low-skilled workers through training programs and job placement assistance;” “Directors also recommended additional active labor market policies, including more effective training programs, as well as reforms to reduce skills mismatches and boost incentives to work.”

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Statement by the Managing Director

On The Independent Evaluation Office Report on the IMF and Social Protection

Executive Board Meeting July 19, 2017

I welcome the report of the Independent Evaluation Office (IEO) on the IMF and Social Protection. This is an area in which the Fund has broadened its engagement in recent years, responding to the needs of the membership. The conclusion that I draw from the report—that the Fund has made strong progress—is therefore an encouraging one, even as I recognize that there is scope to do better. The IEO’s analysis and findings have much in common with recent work by Fund staff, while providing a broader perspective that is very valuable. Overall, I find the IEO’s recommendations for refining the Fund’s approach to social protection to be well-judged, and the proposals have my support.

As noted in the IEO report, social protection can be macro-critical, meriting engagement by the Fund in its bilateral surveillance, program design, and technical assistance. The growing attention given to links between inequality and overall macroeconomic performance across the membership underline the role of the Fund in social protection issues.

I welcome the findings in the IEO report of widespread IMF involvement in social protection across countries, with relatively deep engagement in some cases, involving detailed analysis, discussion of policy options, and active advocacy. It is similarly encouraging that the IEO finds that, in a program context, the IMF almost always took account of social protection concerns, including by integrating social protection measures into program design or conditionality.

These findings confirm some of those in the recently published staff paper on “Social Safeguards and Program Design in PRGT and PSI-Supported Programs.” The paper found important progress in developing social safeguards, with indicative targets included in virtually all PRGT-supported programs for social and other priority spending, and with these targets met in more than two-thirds of cases. In addition, staff found that health and education spending have typically been protected in low-income country programs. Reviewing the staff paper, Directors welcomed the findings that Fund-supported programs with low-income countries had helped to safeguard social spending in most cases.

The IEO findings are also consistent with the Fund’s expanded attention to social protection issues in advanced economies and emerging markets, including in the context of the Fund’s bilateral surveillance of macro-structural and emerging macro critical issues such as gender and inequality.

The IEO report also finds, however, that there is scope for further progress: by expanding the Fund’s analysis of vulnerable populations and how they would benefit from additional fiscal resources; by strengthening engagement on social protection during bilateral surveillance; by better reflecting local conditions in program design and conditionality; and by working even more closely with other development partners. In making these recommendations, the IEO report draws lessons from the breadth of the Fund’s engagement, going beyond the focus of the April 2017 staff paper on low-income country program engagement. That said, the IEO report again confirms some of staff’s recent findings and recommendations on scope for progress. For example, the April 2017 staff paper recommended strengthening the effectiveness of indicative targets for social and priority spending, including by tailoring targets to cover the most vulnerable groups and the spending that has the largest impact on their livelihoods. Given differences in local conditions, this process will require close consultation with country authorities. The staff paper also saw scope for greater emphasis in the Fund’s policy advice on strengthening social safety nets. Given that existing social safeguards are often not well-developed in low-income countries, staff recommended that discussions start early, ideally as part of bilateral surveillance. Staff also under-lined the importance of close collaboration with development partners on social safeguards issues.

Response to IEO Recommendations

The IEO makes five recommendations in this report. Below is my proposed response to each of these.

Recommendation 1: Establish a clear strategic framework setting the scope, objectives, and boundaries of the IMF’s involvement in social protection in the face of multiple competing claims on limited staff resources.

The key elements of a framework for guiding Fund involvement in social protection issues are in place, including the integrated surveillance decision and its associated 2015 guidance note, and the 2014 guidelines on conditionality. I recognize, however, that these sources do not provide specific and full operational guidance to staff on how to assess the macro-criticality of social protection, the forms that the Fund’s engagement could take, and the appropriate boundaries between the work of the Fund and other organizations. On these issues, the Board may wish to have an opportunity to provide strategic guidance. As recognized by the IEO, notwithstanding the enhanced importance of the Fund’s engagement on social protection issues, it will need to balance multiple policy priorities for its surveillance and calls on its limited resources, as well as the societal and policy preferences of its member states. More forthright guidance to staff, including on how to manage competing demands, can help strengthen the effectiveness of the Fund’s engagement on social protection issues, and hence I support this IEO recommendation.

Recommendation 2: Provide tailored advice based on in-depth analysis of the particular country situation, for countries where social protection is judged to be a macro-critical strategic priority.

I support the principle that the IMF’s advice should be based on in-depth analysis and tailored to country conditions. These are important principles that should inform the work of the Fund, where it engages, and I therefore support this recommendation. In practice, the appropriate depth of analysis by the Fund in a country will depend on the extent to which the World Bank or other organizations with greater social protection expertise than the Fund are already engaged, and consideration should also be given to issues of sequencing with other aspects of policy engagement. This reinforces the need to engage with the authorities, and the World Bank and other institutions, at an early stage on the nature and adequacy of the social protection system. Anticipated traction may also be a factor. The strategic framework on the scope, objectives, and boundaries for Fund involvement discussed above can provide helpful guidance on these points.

Recommendation 3: Find more realistic and effective approaches for program design and conditionality to ensure that adverse impacts of program measures on the most vulnerable are mitigated.

I concur with the need to consider the adverse effects of program measures when designing programs and establishing conditionality. Indeed, the guidelines on conditionality note that “…if feasible and appropriate, any adverse effects of program measures on the most vulnerable should be mitigated.” Our own analysis and that of the IEO suggests that programs vary in their success in achieving this goal, and there is always scope to identify, and encourage the adoption of good-practice approaches consistent with country-specific circumstances, including the effectiveness of the existing social protection system and country administrative capacity. Staff’s April 2017 paper reviews experience with social safeguards measures in PRGT and PSI-supported programs, and makes recommendations for more effective approaches for program design. To provide comprehensive guidance to staff, we will consider how to extend this analysis to GRA-supported programs.

Recommendation 4: In external communications, realistically explain the IMF’s approach to social protection issues and what it can and cannot do in this area, given its mandate and limited resources and expertise.

I agree with this recommendation. External communications play a critical role in building awareness and support for the Fund’s engagement on social protection. Communications need to be nuanced, given that there are limits to what the Fund can do, and because engagement will differ between countries with good reason. The IEO’s primary recommendation to establish a clear strategic framework setting the scope, objectives, and boundaries of the IMF’s involvement in social protection will help to frame the communications message.

Recommendation 5: Engage actively in inter-institutional cooperation on social protection to find ways to work constructively with development partners, particularly institutions with different mandates and policy priorities.

We agree that collaboration with other organizations is important to complement the skills and expertise of Fund staff, and this principle is emphasized in the 2015 staff guidance on surveillance. To do justice to the growing importance of social protection issues, including for surveillance in advanced economies, Fund staff will need to leverage the expertise of other international organizations with greater involvement in this area. Accordingly, I support this recommendation. The IEO’s recommendation to address the boundaries of the IMF’s involvement in social protection issues as part of a broad strategic framework will help clarify the importance of collaboration and the conditions for successful outcomes. In this connection, the conclusion I draw from the IEO report is that the IMF’s cooperation with the World Bank has been strong, and that much of the collaboration with other institutions has also been constructive. It will be important to build on these achievements, clarifying in the broad strategic framework under what circumstances, in what types of engagement, and with which types of institution the Fund staff should seek to further strengthen collaboration.

I look forward to the discussion of the report’s findings. Subsequently, I will work with staff to implement the recommendations endorsed by the Executive Board.

Table 1.The Managing Director’s Position on IEO Recommendations
RECOMMENDATIONPOSITION
(i)Establish a clear strategic framework setting the scope, objectives, and boundaries of the IMF’s involvement in social protection in the face of multiple competing claims on limited staff resources.SUPPORT
(ii)Provide tailored advice based on in-depth analysis of the particular country situation, for countries where social protection is judged to be a macro-critical strategic priority.SUPPORT
(iii)Find more realistic and effective approaches for program design and conditionality to ensure that adverse impacts of program measures on the most vulnerable are mitigated.SUPPORT
(iv)In external communications, realistically explain the IMF’s approach to social protection issues and what it can and cannot do in this area, given its mandate and limited resources and expertise.SUPPORT
(v)Engage actively in inter-institutional cooperation on social protection to find ways to work constructively with development partners, particularly institutions with different mandates and policy priorities.SUPPORT

The Acting Chair’s Summing up

Independent Evaluation Office—the IMF and Social Protection

Executive Board Meeting 17/64 July 19, 2017

Executive Directors welcomed the report by the Independent Evaluation Office (IEO) on the IMF and Social Protection. Directors stressed that social protection can be macro-critical, meriting Fund engagement in surveillance, programs, and technical assistance. They welcomed that the Fund has broadened and deepened its engagement in social protection issues in recent years, in response to the needs of the membership. At the same time, they recognized scope for further progress. Against this backdrop, Directors agreed with the need to refine the Fund’s approach to social protection and noted the Managing Director’s support for the IEO recommendations. Directors underscored the need to be mindful of the Fund’s mandate to engage only in macro-critical areas while bearing in mind its resource constraints and comparative expertise in implementing these recommendations.

Directors supported Recommendation 1 to establish a clear strategic framework to guide Fund involvement in social protection. This framework could be set out in a Board-approved staff paper (“institutional view”) which delineates the scope, objectives, and boundaries of the Fund engagement in social protection to foster a consistent, evenhanded treatment of social protection issues across the membership. In addition, the Board-approved staff paper could provide guidance for implementation of Recommendations 2 to 5. Consideration will be given to what extent existing guidance notes should be amended accordingly or a new guidance note should be formulated.

Directors broadly agreed with Recommendation 2 on the need to tailor advice to the member countries’ circumstances. They underlined the importance of drawing on work by development partners or country authorities where available. Many Directors considered that the Fund may need to undertake in-house analysis where such work is absent, while a few Directors cautioned about resource constraints and cost-effectiveness.

Directors supported Recommendation 3 on the need to find an effective approach to program design and conditionality to mitigate the adverse impacts of program measures on the most vulnerable. They called for comprehensive guidance to staff in Fund-supported programs across the membership, including those using GRA resources.

Directors supported Recommendation 4 to realistically explain in external communications the Fund’s approach to social protection issues. They noted that clarity about the Fund’s involvement in social protection will help to sharpen external communications and avoid reputational risk to the Fund.

Directors strongly supported Recommendation 5 to engage actively and collaborate constructively with development partners and other IFIs, including the World Bank, to better leverage their expertise in social protection issues, which may become challenging going forward as the approach of these institutions to social protection evolves.

In line with established practices, management and staff will give careful consideration to today’s discussion in formulating the implementation plan, including approaches to monitor progress.

Decision No. 6056-(79/38) states: “In helping members to devise adjustment programs, the Fund will pay due regard to the domestic social and political objectives, the economic priorities, and the circumstances of members, including the causes of their balance of payments problems.” This sentence was retained in the 2002 Guidelines on Conditionality, Decision No. 12864-(02/102), which superseded the 1979 Guidelines on Conditionality.

There is no universally accepted definition of social protection. Moreover, while “social protection” is now a commonly used term globally, other terms such as “social security” and “social spending” may also sometimes be used for the same concept. Annex 1 lists some definitions of social protection and related terms and concepts by the IMF and other organizations.

The Government Finance Statistics Manual (GFSM) classification of government expenditures for the function of social protection does not include healthcare spending although the 2008 European System of Integrated Social Protection Statistics, on which the GFSM classification is based, does.

All member countries were invited to consult with the IEO on this evaluation during the 2016 Spring and Annual Meetings.

This chapter draws on Abrams (2017). The legal framework for the IMF’s internal and external activities is laid out in its Articles of Agreement. IMF policy is determined by decisions of the Board of Governors or of the Executive Board, which may be agreed by Executive Directors at a formal meeting or through a lapse-of-time decision. Institutional guidance, an indicative direction for carrying out IMF policies, may stem from various sources. At the highest level is the International Monetary and Financial Committee, an advisory-only body of IMF Governors, which sets out its views in a communiqué. At the next level is management’s operational guidance for staff.

Article IV, Section 3(b) states: “[T]he Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies…. These principles shall respect the domestic social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members.”

For example, then-Managing Director Michel Camdessus called for broader IMF engagement in social and distributional policies in a series of memos to staff in the mid-1990s. See Abrams (2017).

See also: “IMF watching out for poor in crisis loan talks,” IMF Survey, November 25, 2008; “Changing IMF works hard to combat global crisis,” IMF Survey, February 26, 2009; “IMF to step up its engagement, support in Central Asia,” IMF Survey, June 22, 2009; IMF (2010a); and IMF (2011).

The factsheet on “The IMF and the Sustainable Development Goals” states that: “The IMF is committed, within the scope of its mandate, to the global partnership for sustainable development” (IMF, 2016b). It identifies five IMF initiatives to support member countries in meeting the SDGs: (i) increased access to concessional financing for developing countries; (ii) capacity-building for domestic revenue mobilization; (iii) policy support for public infrastructure provision; (iv) support for fragile states; and (v) intensified engagement on policy issues related to inclusion and environmental sustainability.

“Christine Lagarde wants softer, kinder IMF to face populist anger,” The Financial Times, July 13, 2016.

Surveillance Guidance Notes were issued in 2002, 2005, 2007, 2009, 2010 (Technical Update), 2012, and 2015.

The 2005 Guidance Note explicitly stated that social and related issues “such as poverty, income distribution, social safety nets, social expenditure, and unproductive expenditure” should be addressed in accordance with the macro-relevance principle (IMF, 2005). As part of vulnerability assessment and debt sustainability analysis, the Guidance Note encouraged staff to undertake more comprehensive assessments of significant vulnerabilities, where relevant, such as the long-term impact of aging.

According to the July 2012 Integrated Surveillance Decision, in its bilateral surveillance the IMF would focus on those policies of members that can significantly influence present or prospective balance of payments or domestic stability, consistent with the mandate in Article I(ii) of the Articles of Agreement. In addition, with the agreement of the member country, the IMF may provide policy advice (as a form of TA) on policies that do not need to be covered in bilateral surveillance.

The final possibility not shown in Figure 1 relates to “macro-critical structural issues that are important to a critical mass of members but where Fund expertise is lacking (e.g., labor market reforms)”—in this case, the IMF would “further develop in-house expertise so staff can provide the necessary policy advice, while continuing to draw on other institutions’ expertise” (IMF, 2015a).

Operational Guidance to Staff on the 2002 Conditionality Guidelines was issued in 2003 and revised in 2006, 2008, 2010, and 2014.

The 2002 Guidelines on Conditionality and associated Operational Guidance to Staff defined the IMF’s core areas of responsibility as “macroeconomic stabilization; monetary, fiscal, and exchange rate policies, including the underlying institutional arrangements and closely related structural measures; and financial system issues related to the functioning of both domestic and international financial markets” (IMF, 2002).

“Criticality” in this context is with reference to the achievement of program goals and the monitoring of program implementation.

Feasibility and appropriateness were in the context of the key principles guiding the IMF in designing and setting conditionality, namely: “(i) national ownership of reform programs; (ii) parsimony in program-related conditions; (iii) tailoring of programs to a member’s circumstances; (iv) effective coordination with other multilateral institutions; and (v) clarity in the specification of conditions” (IMF, 2014c).

According to the guidelines, the IMF’s Policy Development and Review Department (now the Strategy, Policy, and Review Department) would “seek clarification” in the event of a significant difference in views between the two institutions on macroeconomic matters (see Zhou, 2017).

The majority of more senior managers (B3 and B4 staff) did feel that they had clear guidance, but this was not the case for A14–B2 staff, let alone A11–A13 staff (Wojnilower and Monasterski, 2017).

See Wojnilower (2017) which is based on a review of public speeches by management and senior IMF officials, as well as official factsheets, blog posts, and other external communications by the IMF’s Communications Department (COM).

See, for example: “Creating breathing room in low-income countries,” iMFdirect, September 3, 2009, and “Health, social spending vital in IMF-supported programs,” IMF Survey, October 26, 2009. In an April 2009 letter to CSOs, the Managing Director noted that about one-third of IMF-supported programs in low-income countries had targets to preserve or increase social spending. In a February 2017 letter to the Huffington Post, the Director of COM cited a 2014 IEO finding that 29 of 30 recent IMF-supported programs incorporated floors for social spending, although many of these floors included other priority spending unrelated to social areas.

“The Future We Want,” June 12, 2012 (http://www.imf.org/external/np/seminars/eng/2012/rio/). The 2014 factsheet on “The IMF’s Advice on Labor Market Issues” advertised the IMF’s “active partnership” with the ILO, including on social protection floor policies (IMF, 2014d). At the 2014 Annual Meetings, the Managing Director also announced that the IMF was “working with the ILO and other international organizations to assess how countries can build effective and sustainable social protection floors” (Lagarde, 2014).

See, for example, “In New Tack, I.M.F. Aims at Income Inequality,” The New York Times, April 8, 2014, and Loungani and Ostry (2017).

FAD’s knowledge was disseminated within (and outside) the IMF in the form of policy papers, research, technical manuals, and guidance notes, among others. Staff papers prepared for informal Board seminars may serve as input for subsequent Board decisions but views expressed by Directors at informal seminars do not constitute IMF policy. IMF Pamphlets, Technical Notes, and/or Manuals do not represent the views of the IMF or IMF policy. While they are often written as technical guidance to member countries on a given topic, such publications are illustrative of the analytical perspectives of staff. Staff Position/Discussion Notes similarly showcase the latest policy-related analysis and research being developed by staff. On occasion, these publications are the result of or the input for Board papers or may contain guidance to staff.

See Abrams (2017) for the list of Board discussions.

See Gupta and others (2000), IMF (2008b), Coady and others (2010), and Clements and others (2013) for staff’s arguments; and IMF (2008c) and IMF (2013b) for the Board’s concurrence and management’s affirmation, respectively. At the October 2008 Board seminar on fuel and food price subsidies, Directors noted that in many countries, imperfectly targeted compensatory measures were more cost effective than universal subsidies, and would be a superior alternative to universal subsidies until better-targeted safety nets were in place (IMF, 2008c). In a March 2013 speech, the First Deputy Managing Director noted that energy subsidies were often inefficient and could be replaced with better means of protecting the most vulnerable parts of the population (IMF, 2013b).

The Manual was prepared in 2000 by FAD, at the request of management, to guide staff on how to remove price subsidies with minimal social disruption. It was also published as a guide for policymakers (Gupta and others, 2000).

While not focused on targeting mechanisms, PSIA can inform reform design options. See Zhou (2017) for further discussion regarding FAD’s PSIA Group.

IMF (2014b) advocated “introducing and expanding conditional cash transfer programs” as a policy option for achieving distributive objectives in developing economies.

In a recent Finance and Development article (Berg, Buffie, and Zanna, 2016), IMF staff argued for a (universal) basic income financed by capital taxation. The April 2017 Managing Director’s Global Policy Agenda indicates that the IMF will “study how fiscal policies—including … the design of social safety nets, and a basic income grant—could help address inequality and other side-effects of economic integration and technology” (IMF, 2017a).

FAD has also undertaken substantial analytical work on public health care reform—see, for example, Clements, Coady, and Gupta (2012).

The same message was highlighted in the October 2014 Fiscal Monitor and in Clements, Eich, and Gupta (2014).

Wojnilower (2017) provides a summary of external perspectives on the IMF and social protection.

Under the human rights-based approach, social protection policies and programs are anchored in a system of rights and corresponding obligations established by international law, including the Universal Declaration of Human Rights (Articles 22 and 25) and the International Covenant on Economic, Social and Cultural Rights (Article 9 of which recognizes “the right of everyone to social security, including social insurance”) (UNRISD, 2016).

Social protection receives explicit attention in three of the 17 SDGs: Goal 1 (End poverty in all its forms everywhere), Goal 5 (Achieve gender equality and empower all women and girls), and Goal 10 (Reduce inequality within and among countries).

The Summing Up of a Board discussion of an Article IV consultation provides a broad overview of the key issues raised during the consultation, the view of Directors, and their recommendations. This measure represents a lower bound on the number of Article IV consultations in which social protection issues were discussed, as Summings Up are necessarily parsimonious, reflecting only those issues that the Board regards as most critical. Social protection issues may thus have been discussed with authorities during Article IV missions without ultimately appearing in the Board Summing Up.

The years for review were selected to include the first year and last year of the evaluation period and alternate years in between.

For the analysis in this evaluation, each piece of advice was classified under only one theme.

Argentina and Somalia had only one Article IV consultation during the period (in 2006 and in 2015, respectively). However, Argentina did have an Article IV consultation in 2016 where the IMF provided advice on reforming the pension system. The 2015 Article IV consultation with Somalia was the first after more than two decades of civil war, and focused on urgent macroeconomic stabilization and capacity-building issues.

As defined in IMF (2014a), social insurance schemes are contributory schemes that require the payment of social contributions by the protected persons or by other parties on their behalf (e.g., employers) in order to secure entitlement to the benefits. In LICs and many EMEs where the informal sector is large, social insurance plays a much smaller part. Many LICs (and EMEs) have price subsidies on food and/or fuel, which they consider to be a form of social protection.

This was based on a review of Board assessments in Article IV Summings Up in 2006, 2008, 2010, 2013, and 2015 for instances where Directors urged the authorities to eliminate, reform, or better target subsidies on food or fuel. Price subsidy reform per se was not counted as one of the themes of social protection advice described in Annex 2.

Given the conciseness of Summings Up, this likely underestimates the extent to which the IMF took account of social protection concerns when advising countries to eliminate/reform food or fuel price subsidies.

The number included SIPs prepared for a cluster of countries from different income categories, such as the Eastern Caribbean Currency Union (comprised of EMEs and LICs).

On average over the past decade, LICs accounted for about 20 percent of all SIPs; advanced economies, around 30 percent; and EMEs, around 45 percent.

Most of the SIPs on inclusive growth were written during the second half of the evaluation period, when the Fund began to give this topic some attention. The review included SIPs on Angola (2014), Azerbaijan (2011), Chile (2014), Colombia (2015), India (2008, 2014), Kazakhstan (2014), Lithuania (2013), Morocco (2013), Namibia (2013), Philippines (2015), Suriname (2014), and Uruguay (2015).

IMF staff began the first round of the pilot project on mainstreaming “emerging macro-critical issues” such as income inequality in Article IV surveillance in 2015. The “inequality pilots” included Bolivia, Colombia, Ethiopia, Korea, Kyrgyz Republic, Malawi, and the Republic of Congo.

According to Phillips and others (2013), social spending in the external balance assessment methodology is captured by public health spending as a ratio to GDP.

Measures related to social security and health insurance reforms classified in MONA under “other social sector reforms” were reclassified under “pension reforms” for this evaluation.

Structural performance criteria were abolished in 2009.

The main objective of the MDGs was the improvement of aggregate social indicators in areas such as primary education and health (reducing child mortality, improving maternal health, and combating diseases such as HIV/AIDS and malaria).

ECF, SCF, and PSI.

Armenia: 2010 ECF/EFF; Ghana: 2015 ECF; Honduras: 2010 and 2014 SCF/SBA; Kenya: 2011 ECF and 2015 SCF/SBA; Kyrgyz Republic: 2011 and 2015 ECF; Lesotho: 2010 ECF; Moldova: 2010 ECF/EFF.

See Wagner and Zhou (2017) for case studies on Iceland and Ireland.

See the staff interview in “Social Safety Nets Key to Helping Poorest in Burkina Faso,” IMF Survey, February 11, 2013. The evaluation heard similar views from other staff members.

While direct price subsidies for staple foods were also common in some LICs, these expenditures tended to be much smaller compared to energy subsidies.

In some cases (e.g., Bangladesh, Honduras, and Senegal), this recommendation was translated into structural conditionality in a Fund-supported program. See Feltenstein (2017) and Klugman and others (2017).

According to IMF (2017b), the social and other priority spending targets were met in more than two-thirds of PRGT- and PSI-supported programs during 2010–16. However, the effect on actual spending on social protection is unclear given the broad coverage of most of these targets.

IEO (2004) concluded that expenditures designated as poverty-reducing under the PRGF were not all truly pro-poor; IEO (2007) noted that authorities in Sub-Saharan Africa preferred to focus pro-poor spending on infrastructure more than on social safety net programs; and IEO (2014a) found insufficient analysis by IMF staff on the quality of these expenditures and the shortfalls in meeting the expenditure targets.

Conceptually, there are always tradeoffs in policymaking, and all policies—not just social protection policies—have distributional impacts and consequences for social welfare. Even if one could objectively measure social welfare pre- and post-program, it would not be possible to determine how much of the change could be attributed to specific actions by the Fund in the absence of a counterfactual.

One-third of IMF arrangements approved during 2006–15 contained structural conditionality pertaining to price subsidy reform (categorized in the MONA database under “public enterprise pricing and subsidies” and “price controls and marketing restrictions”). These program conditions were related to price subsidies for energy (fuels and electricity); there were no program conditions related to food price subsidies.

As noted in Feltenstein (2017), many countries did manage to effectively eliminate energy price subsidies through a step adjustment in prices and/or when international oil prices dropped, but few followed the Fund’s recommendation to institute an automatic price adjustment mechanism and those that did, did not keep it for long.

This figure is based on TA reports completed during the evaluation period. Since not all TA was provided through headquarters-based missions or involved the preparation of a TA report, this understates the number of countries receiving Fund TA on social protection policies.

The IMF also offers training courses for member country officials on energy subsidy reform and on policies for inclusive growth. These courses are not tailored to individual countries’ situations.

See IEO (2014b) for a further discussion of TA allocation in the Fund.

For example, there was a series of TA missions to Greece in 2010–15 on improving the collection of social security contributions; and in the early part of the evaluation period the IMF’s Monetary and Financial Systems Department provided TA to Fiji on enhancing prudential supervision of the pension fund.

One example was the 2013 FAD TA mission to Cyprus to develop a proposal for reforming the social protection system (a structural benchmark under the 2013 EFF-supported program)—a task normally led by the World Bank in the vast majority of countries where similar program conditionality was established (Wagner and Zhou, 2017). The Cyprus TA team included current and former World Bank social protection experts.

The requesting authorities were usually in the Ministry of Finance or related agencies, and not those directly in charge of designing or implementing social protection programs or policies.

“Greece is a case for poverty-solving World Bank, not IMF, says ex-minister,” The Guardian, February 25, 2017.

According to FAD staff interviewed for this evaluation, distributional analysis and awareness of social protection issues are now “routine” in the department.

This chapter draws on Zhou (2017).

See Wojnilower and Monasterski (2017) for further details.

See Klugman and others (2017), and Tan and Selowsky (2017), as well as Feltenstein (2017) and Heller (2017). Heller (2017) noted only one instance where the IMF went against the World Bank’s advice on pension reform.

Under the PRGF, the social impact of major macroeconomic adjustments and structural reforms was expected to be analyzed (by the World Bank) and taken into account in the formulation of the program. The IEO evaluation of The IMF and Aid to Sub-Saharan Africa found that Bank-Fund collaboration on PSIA (for PRGF-supported programs) during the 1999–2005 period was “stymied by unrealistic expectations,” leading the Fund to focus on in-house analysis instead of relying on the Bank (IEO, 2007). The subsequent IEO revisit of issues raised in that evaluation found still “limited Bank-Fund collaboration on PSIA in the post-2007 period” (IEO, 2014a). Under the Fund facilities for LICs introduced in 2010, the requirement to incorporate PSIA of adjustment or reforms was dropped.

In September 2016, the heads of the World Bank Group and the ILO jointly announced a new Global Partnership for Universal Social Protection (World Bank, 2016).

According to World Bank staff, the Bank’s approach to achieving universal social protection could continue to prioritize schemes/programs that target the poor and gradually expand coverage to new areas of social protection and to the less poor; while the ILO’s approach would prioritize schemes/programs that provide universal benefits for various demographic groups (e.g., those in the formal sector) and gradually expand coverage to new areas of protection and to new groups (e.g., those in the rural sector).

The Social Protection Floor Initiative was a key element of the Global Jobs Pact adopted by ILO member states in 2009 to address the social and employment impact of the global financial and economic crisis. The initiative, led by the ILO jointly with the World Health Organization, was adopted by the UN Chief Executives Board in April 2009.

The ILO specialist was responsible for designing and costing various social protection floor proposals (e.g., which social assistance programs to include and how to implement them) and the IMF team was responsible for finding fiscal space in the budget and embedding the expenditures in the macroeconomic framework of the program supported by the Fund’s Policy Support Instrument (PSI).

The Mozambique example was dropped from the 2016 version of the IMF factsheet on Protecting the Most Vulnerable Under IMF-Supported Programs.

According to Jolly (1991), the Fund responded that “[c]ooperation between the World Bank and the IMF on adjustment … was difficult enough without the complications of bringing in UNICEF and/or others of the United Nations, let alone extending adjustment policy and program concerns to include issues such as nutrition.”

Armenia, Bolivia, Burkina Faso, Mauritania, Nepal, Nicaragua, Pakistan, Paraguay, the Republic of Congo, Tajikistan, and Togo.

Ortiz, Chai, and Cummins (2011). See “Austerity measures risk irreversible impact on children, warns UNICEF,” The Guardian, September 25, 2011. Deacon (2013) provides an account of this episode from UNICEF’s perspective.

This assessment was expressed at the fourth joint IMF-UNICEF meeting in December 2011.

OECD members that had an IMF arrangement during the evaluation period were Greece, Hungary, Iceland, Ireland, Poland, and Portugal. As noted in Wagner and Zhou (2017), IMF staff consulted with OECD pension experts in the course of Ireland’s EFF-supported program.

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