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International Monetary Fund. Independent Evaluation Office

Abstract

1. Social protection has become a central concern in the global policy discourse. The global crisis in 2008 triggered job losses and financial turmoil, prompting the Group of Twenty (G-20) to call for actions to “mitigate the social impact,” particularly on the poorest and most vulnerable (G-20, 2009). Attention to social protection has also been raised by recurrent commodity price shocks; by concerns about rising inequality and the implications of increasing trade openness and new technologies for displaced workers and their families; by long-running demographic trends such as aging populations; and by regional social and political stresses such as the “Arab Spring” that brought attention to the need for “inclusive growth.” In 2011, G-20 member countries recognized the importance of “social protection floors”—i.e., nationally-defined guarantees ensuring that all in need have access to essential healthcare and basic income security—and urged international organizations to enhance cooperation on the social impact of economic policies (G-20, 2011). In 2015, world leaders adopted the United Nations’ Sustainable Development Goals (SDGs), pledging to achieve, by 2030, “nationally appropriate social protection systems and measures for all,” among other things (UN, 2015).

International Monetary Fund. Independent Evaluation Office

Abstract

13. Historically, the IMF’s involvement in social issues was quite limited. The Articles of Agreement call for the institution to respect members’ domestic social and political policies in its surveillance activities.7 The Board took this caveat seriously, as evidenced in its discussions on the issue and reflected in formal guidance to staff. Social issues were not part of the IMF’s core areas of responsibility, as laid out in the operational guidelines for surveillance (see IMF, 1991). Staff were not proscribed from addressing such issues but were expected to exercise their judgment as to whether the issue was relevant for macroeconomic conditions and prospects, and to rely, as far as possible, on the expertise of other institutions such as the World Bank. On occasion, particularly since the 1990s, the Managing Director directly instructed staff to pay more attention to concern for the poor and set the tone for greater involvement in social issues by the institution, but this was not built into operational guidelines.8

International Monetary Fund. Independent Evaluation Office

Abstract

32. The IMF addressed an extensive range of social protection issues in Article IV consultations with a number of countries during the evaluation period. To measure coverage, this evaluation examined Board assessments in Article IV Summings Up for advice related to social protection.42 Based on Summings Up examined for all Article IV consultations concluded in 2006, 2008, 2010, 2013, and 2015, this evaluation identified seven themes of IMF advice that were closely related to social protection;43 (i) reforming the pension/social security system; (ii) reforming unemployment benefits/minimum wage schemes; (iii) improving the targeting of social benefits/transfers; (iv) protecting vulnerable groups or limiting the social cost of reforms/policies/shocks; (v) protecting or creating fiscal space, i.e., increasing budgetary allocations, for social spending; (vi) strengthening the social safety net/social transfers/provision of social services; and (vii) pursuing active labor market policies. Examples of each theme are provided in Annex 2. Many Summings Up contained advice on more than one theme.44

International Monetary Fund. Independent Evaluation Office

Abstract

61. To incorporate social protection considerations into IMF operational work, the Board has consistently called on Fund staff to rely on the expertise of other relevant institutions (Abrams, 2017). According to economist staff surveyed by this evaluation, the World Bank was by far the IMF’s major partner on social protection issues: 80 percent of survey respondents reported interactions with Bank staff ranging from periodic or occasional meetings and information-sharing to joint missions. On the other hand, almost 75 percent and 90 percent of survey respondents respectively reported minimal to no interaction with UN agencies (including the ILO) and the OECD (Figure 12).79

International Monetary Fund. Independent Evaluation Office

Abstract

72. Traditionally, the IMF’s role in social protection was limited and its approach fiscal-centric. Social issues were understood to lie outside the IMF’s core areas of responsibility. Formal guidance gave staff some latitude to decide when such issues were sufficiently important to warrant attention in surveillance or programs, and IMF involvement generally aimed to improve expenditure efficiency and/or to ensure medium- or long-term fiscal sustainability. Within this fiscal approach, staff addressed concerns for the poor and the vulnerable by recommending that social benefits be effectively targeted to those most in need. On more specialized issues, such as the design and implementation of social protection schemes, the IMF relied on the World Bank or other institutions with the relevant expertise, per the Board’s direction.

International Monetary Fund. Independent Evaluation Office

Abstract

This evaluation assesses the IMF’s engagement with countries in fragile and conflict-affected situations (hereafter referred to as fragile states or FCS). The role of the IMF in fragile states has been the subject of considerable debate. It is generally recognized that, with its crisis response and prevention mandate, the IMF has a key role to play in international efforts to help these countries, but critics say that it does not sufficiently appreciate the deep-rooted nature of the difficulties such states face or provide financial and technical resources commensurate with their challenges. While many of the issues that demand attention in these countries are outside the IMF’s core competence, and the Fund often has to operate in an environment where key decisions including by the international community are made at the political level, there have been recurrent calls for the IMF to increase and enhance its engagement. The evaluation explores these and other relevant issues by reviewing the IMF’s overall approaches and how the institution has engaged with a sample of current and former fragile states.1

International Monetary Fund. Independent Evaluation Office

Abstract

To assess the IMF’s work on FCS, the evaluation poses the following questions:

International Monetary Fund. Independent Evaluation Office

Abstract

The IMF maintains no formal list of fragile states, and it has relied broadly on the approach taken by the World Bank in identifying such countries for internal purposes. First, a low-income country, eligible for International Development Association (IDA) assistance,10 is considered fragile if the three-year moving average of its Country Policy and Institutional Assessment (CPIA) scores, prepared by the World Bank, is 3.2 or lower.11 Second, and in addition, any country is considered fragile if there has been a United Nations or regional peace-keeping/building operation there during the previous three years or if the CPIA has not been computed because of conflict. The IMF’s definition differs from the World Bank’s in that it uses the three-year CPIA average rather than the annual score.12

International Monetary Fund. Independent Evaluation Office

Abstract

The IMF’s role in fragile states, compared to other member countries, has been particularly important in: (i) providing support in early stages of macroeconomic stabilization after a period of conflict or a natural disaster; (ii) providing a macroeconomic framework valuable for coordinating policies within a country as well as for facilitating engagement by international partners; and (iii) helping to build basic policymaking and institutional capacity in the core areas of IMF expertise. In the view of most stakeholders, the IMF has played its role quite effectively in these areas, though concerns remain that its impact may not have reached full potential.

International Monetary Fund. Independent Evaluation Office

Abstract

The need for collaboration and coordination among development partners in FCS work is well recognized throughout the international donor community; it was highlighted by both the 2007 OECD Principles and the 2011 New Deal Principles. Given the limited capacity of many fragile states, all bilateral donors and multilateral agencies need to collaborate and coordinate, but the need is particularly relevant for the IMF, which is a relatively minor player both as a source of financing and as a provider of technical assistance. Moreover, cooperation to form a unified position can in some instances be the most effective way of engaging with FCS over the highly politically charged issues of corruption and governance-related institutional reform. Among the interviewees for this evaluation, virtually every mission chief or resident representative assigned to a fragile state was keenly aware of the need to collaborate with development partners in order to increase the effectiveness of IMF engagement.