Front Matter

Front Matter

Ke-young Chu, and Sanjeev Gupta
Published Date:
April 1998
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© 1998 International Monetary Fund

Cover design, charts, and composition: In-Ok Yoon, Choon Lee, and IMF Graphics Section

Cataloging-in-Publication Data

Social safety nets:: issues and recent experiences / editors Ke-young Chu and Sanjeev Gupta — Washington: International Monetary Fund 1998.

p. cm.

Includes bibliographical references.

ISBN 1-55775-680-5

1. Structural adjustment (Economic policy) — Developing countries. 2. Poor — Developing countries. 3. Human services — Developing countries — Finance. 4. Social security — Developing countries. 5. International Monetary Fund —Developing countries.

1. Chu, Ke-young, 1941–. II. Gupta, Sanjeev.

HG59.7. S63 1998

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In the early 1980s, as a consequence of the debt crisis, the IMF’s activities in developing member countries intensified. A large number of countries approached the IMF to obtain financial support to help them carry out the policy changes necessary to stabilize and adjust their economies and thus make growth possible. In the 1990s, about 30 countries entered the process of transition from central planning toward a market economy. These countries were also in need of IMF support.

The intensity of the problems faced by all of these economies was very severe. It became obvious that these countries needed major, not just routine, structural adjustment. Some had to devalue by substantial amounts and eliminate the use of multiple exchange rates. Some had to reduce the large subsidies they were providing to particular sectors or groups. Most had to reduce large fiscal deficits by cutting spending or raising the level of taxation. These policies, negotiated in IMF-supported programs, had large and often disproportionate impacts on some groups, some of which were the society’s most vulnerable. These effects became a concern for the IMF.

In the late 1980s, IMF staff started to pay close attention to these effects. At the beginning, they did so by analyzing carefully the design of Fund-supported programs to determine whether some less damaging, but still feasible, policy options could replace the more damaging ones. If so, the programs could incorporate the more socially attractive options. Unfortunately, in many countries, because of institutional constraints, the freedom to choose policy instruments was very limited. In such cases, the only realistic alternative was to proceed with the necessary adjustment policies but complement them with the adoption of social safety nets, that is, mitigating policies aimed at supporting the income—or better, the consumption—of the most vulnerable groups.

The design of these safety nets was limited by the strict budgetary limits imposed by the need to reduce fiscal deficits. In some countries, the work on safety nets was centered on efforts to reduce social expenditure while making it more targeted and efficient. This was particularly the case in economies in transition, which, especially in the earlier years, were spending an unsustainably large share of their budget on poorly targeted social spending.

The 14 papers that comprise this book provide a comprehensive review of the IMF’s work on social safety nets. The book is made up of three parts. Part I provides a broad overview of the social concerns in structural policy and the basic work related to social safety nets. Part II deals with the design of social safety nets. Part III provides case studies on nine countries from different parts of the world. The reader will find these studies particularly informative and, I hope, will appreciate the scope of the IMF’s work in this area. At the time these studies were written, all the writers except one were IMF staff members. The exception, Ravi Kanbur, was with the World Bank.

The coeditors of this book, Ke-young Chu and Sanjeev Gupta, have contributed much to the development of this work, as heads of several missions that dealt with these aspects, as consecutive chiefs of the division in the Fiscal Affairs Department where much of the work on safety nets was done, and as authors of some of the papers.

Vito Tanzi


Fiscal Affairs Department

International Monetary Fund


Many IMF staff members have contributed to the preparation of this volume, but the staff of the Fiscal Affairs Department’s Expenditure Policy Division undertook the principal responsibility for selecting, editing, and revising papers. In this connection, the role of Benedict Clements was pivotal; he worked closely with the editors during different stages of the preparation of the manuscript. Hamid Davoodi provided the much-needed final push to the project. Valuable assistance and advice were also extended by other members of the division, including Željko Bogetić, Elliott Harris, Alexandras Mourmouras, Edgardo Ruggiero, and Gerd Schwartz.

Theresa Garrison edited the manuscript, and Larry Hartwig meticulously coordinated the manuscript preparation and took the lead in converting the various papers into an acceptable format. They were ably supported by Leda Montero and Amy Deigh. Juanita Roushdy, of the External Affairs Department, gave the manuscript a final edit and coordinated publication.

The papers were prepared and published at various times over a 10-year period. Some papers, reprinted in this volume with minimal changes, assess the social implications of IMF-supported programs ongoing at the time of writing.


The following symbols have been used throughout this book:

… to indicate that data are not available;

— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

– between years or months (for example, 1995–96 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

/ between years or months (for example, 1995/96) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million; “trillion” means a thousand billion.

“Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ 1 percentage point).

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this book, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

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