The Poverty Reduction and Growth Facility (PRGF) is used by the IMF to provide support for countries’ implementation of their poverty reduction and growth strategies. A key requirement in the design of PRGF programs is understanding the effects of reform program measures on vulnerable groups—particularly the poor—and how to devise measures to mitigate any negative effects. Poverty and social impact analysis (PSIA) is a critical instrument for pursuing this goal. The IMF has therefore established a small group of staff economists to facilitate the integration of PSIA into PRGF-supported programs. In this book, the group’s members review analytical techniques used in PSIA as well as several important topics to which PSIA can make valuable contributions. These reviews should prove useful and interesting to readers interested in PSIA in general and the IMF’s PSIA efforts in particular.
Empirical studies suggest that trade reform has a positive effect on employment and income for the poor; however, there are winners and losers. If the transitional costs of trade liberalization fall disproportionately on the poor, trade reform can be designed to mitigate these effects. This includes making reforms as broad based as possible, sequencing and phasing them to allow for adjustment, and implementing social safety nets and other reforms that facilitate adjustment to the new trade policy. In assessing these findings, it should be borne in mind that the links between trade reform and poverty are complex, making systematic empirical investigations difficult.
Since the early 1990s, many countries in sub-Saharan Africa have made significant progress in opening their economies to external competition through trade and currency liberalization. This paper analyzes trade and policy developments for 22 countries in eastern and southern Africa, looks at regional and multilateral integration issues, and reflects on the main challenges these countries face in the new decade. It addresses the main trade policy issues for these countries and suggests possible actions they and their trading partners could follow.
This study asseses trade liberalization in programs supported by the IMF by reviewing multiyear arrangements in the 1990s and six detailed case studies. It also discusses the main economic factors affecting trade policy targets.
This chapter reviews the distributional impact of agricultural sector reforms in Africa. African governments have intervened in the agricultural sector for decades, but generous pricing policies and operational inefficiencies have often necessitated large budgetary transfers to parastatals. Over the past 20 years many African countries attempted to liberalize their agricultural sector, with mixed success. This chapter describes the forms of government intervention in agricultural markets, the liberalizing reforms undertaken in the past 20 years, the channels by which these reforms affected stakeholders, and the outcomes of the reforms on poor households.100
It is common for governments in developing countries to manipulate prices of goods and services using a range of policy instruments and institutional arrangements. The motivations behind these price manipulations reflect varying objectives, such as the need to raise revenue, the desire to redistribute income toward the poor or toward politically important groups, the desire to provide protection to domestic producers, or the desire to influence the levels of supply or demand in other related markets where prices cannot easily be influenced.17 For example, the major source of revenue in most developing countries is commodity taxation such as domestic sales and excise taxes and taxes on international trade (Burgess and Stern, 1993; and Keen and Simone, 2004); food prices are often kept artificially low for consumers in order to increase the real incomes of poor households (Pinstrup- Andersen, 1988; and Gupta and others, 2000); and public sector prices (e.g., of electricity, gas, petroleum, coal, other fuels, fertilizers) are also often controlled by governments, reflecting either the perceived strategic importance of these inputs for development or the need to provide these sectors with an independent source of revenue and thus greater financial autonomy (Julius and Alicbusan, 1986).
Trade liberalization and devaluation (TLD) policies have always been present in many IMF-supported programs. Tariffs, quotas, and other trade restrictions reduce the level of trade and tend to foster the development of import substitute industries that often fail to attain the degree of efficiency and flexibility shown by firms continuously exposed to international competition.66 Programs tend to promote the removal of trade restrictions in order to improve resource allocation and growth outcomes in the medium term. Devaluation policies in IMF programs tend to play a shorter-term adjustment role instead. The objective is in most cases to restore external viability by switching expenditures from the nontradables sector to the tradables sector.
The poverty and social implications of macroeconomic and structural reform policies are increasingly being recognized in IMF-supported programs and IMF policy advice. In 1999, the IMF replaced the Enhanced Structural Adjustment Facility, its assistance program for supporting low-income countries, with the Poverty Reduction and Growth Facility (PRGF), which explicitly gives poverty alleviation more prominence in its operations. In addition to its focus on promoting macroeconomic stability and growth, the PRGF program focuses on the relationship between macroeconomic policies and their poverty implications.
The Poverty Reduction and Growth Facility (PRGF) is the instrument used by the IMF to provide support for countries in the implementation of their poverty reduction and growth strategies, as identified in their Poverty Reduction Strategy Papers (PRSPs). The core objective of the PRSP approach is to arrive at policies that are more clearly focused on growth and poverty reduction, in which the poverty reduction and macroeconomic elements of the program are fully integrated, and that embody a greater degree of national ownership, thereby leading to more consistent policy implementation. Key requirements in the design of the PRGF programs that support this approach are an understanding of the effect of program measures on vulnerable groups—particularly the poor—and designing measures to mitigate any negative effects. Poverty and Social Impact Analysis (PSIA) is, in turn, a critical instrument for pursuing this goal. In this regard, IMF staff is expected to draw on PSIAs carried out by other institutions (such as the World Bank) and donors in addressing distributive concerns in PRGF-supported programs. To this end, the IMF established a small in-house capability on PSIA to facilitate the integration of PSIA into PRGF-supported programs. The group has only four full-time positions, so its activities are designed to leverage expertise and available resources both inside and outside the IMF. In limited cases, the group also conducts PSIAs in areas that are central to the work of the IMF and where no other analysis is available. The goals of the PSIA group are to assist mission teams to
Trade reform is an important aspect of the Fund’s purposes and objectives. Article I of its Articles of Agreement explicitly refers to the importance of trade for economic prosperity and growth.1 The Fund’s role in the area of trade policy is complementary to that of other international institutions, in particular, the World Bank and the World Trade Organization (WTO) (Box 1).2