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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. Monetary and Capital Markets Department

Abstract

The global financial system has yet again gathered strength and resilience. As before, this trend has been fueled by continued balance sheet improvements in the financial and corporate sectors in most countries. The continuing global economic expansion, together with determined efforts to restructure and cut costs, has enabled many financial institutions and corporations to generate substantial, or even record, profits over the past three years. As a result, their balance sheets have strengthened to the extent that the financial and corporate sectors can absorb a significant degree of financial shock before coming under systemic stress. With global growth most likely to continue, inflation under control, and financial markets generally benign, we expect the resilience of the global financial system to improve even further. This improvement provides an important cushion in the event that any of the more medium-term risks discussed below were to materialize. This cushion against risks and vulnerabilities in the medium term may have expanded, but risks have not disappeared altogether.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

In the April 2005 Global Financial Stability Report (GFSR), we noted that financial conditions were quite positive, leading risks to be skewed on the down side. Financial market developments since then have reduced risks somewhat, at least for the near term. However, the same forces that have supported buoyant financial markets have also created larger global imbalances and higher levels of debt, thus storing up potential vulnerabilities for the future.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

The factors that determine changes in asset allocation and, hence, capital flows across national borders and sectors have important implications for the conduct of surveillance of global financial markets. The fast growing importance of institutional investors, mostly in mature markets but increasingly in a number of emerging market economies, has two major consequences that are closely interrelated. On the one hand, these nonbank asset gatherers assume sizable market and credit risks, not the least through modern financial engineering, in the form of swaps, derivatives, and so on. Previous issues of the Global Financial Stability Report (GFSR) have examined the driving forces behind that development, potential vulnerabilities, and policies that could mitigate adverse consequences. On the other hand, institutional investors are not only exposed to market and credit risks emanating from financial markets, but their investment decisions increasingly “make markets.”

International Monetary Fund. Monetary and Capital Markets Department

Abstract

The macroeconomic and financial dislocations experienced following the crises in emerging markets (EMs) in the late 1990s have led to increased efforts in these countries to develop local bond markets as an alternative source of debt financing for corporates. A well-functioning bond market can strengthen corporate and bank restructuring and thus accelerate the resolution of a crisis. At the same time, local bond issues facilitate the reduction of currency and maturity mismatches on their balance sheets and thus reduce the vulnerability of the corporate sector. Recent work by the IMF on the use of the balance sheet approach to detect vulnerabilities in EMs has highlighted the importance of corporate sector vulnerabilities and their linkages to other sectors and markets. In this context, the April 2005 Global Financial Stability Report (GFSR) demonstrated the importance of having alternative sources of funding for the corporate sector, both to finance growth and to strengthen balance sheets. In this chapter, we continue this line of work and focus on ways to further develop corporate bond markets in EMs.

International Monetary Fund

This note discusses Chile's macroeconomic policy framework, the role of institutions in Chile, policies over time, export specialization and economic growth, trade policy strategy and recent agreements, an overview of recent developments in capital markets, and corporate financing in Chile. The role of the public sector in establishing debt benchmarks, an assessment of the country’s external position, distress among Chile's foreign-owned firms, balance sheets of public sector finances, and an update on the Chilean banking system have been noted in this paper.