Abstract

The IMF’s mandate is, among other things, “to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income … of all members as primary objectives of economic policy.”3 To this end, the IMF promotes sound macroeconomic policies, growth-enhancing structural reforms, and good social policies–conditions for high-quality growth. The IMF has paid increasing attention to these considerations in its policy advice.

The IMF’s mandate is, among other things, “to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income … of all members as primary objectives of economic policy.”3 To this end, the IMF promotes sound macroeconomic policies, growth-enhancing structural reforms, and good social policies–conditions for high-quality growth. The IMF has paid increasing attention to these considerations in its policy advice.

This paper explores how attention to social issues can be accentuated. It is one of several papers that respond to the request of G-7/G-8 Finance Ministers at the June 1999 Cologne Summit to the World Bank and IMF to work together to strengthen social policies in the design of adjustment programs to protect the most vulnerable and to develop an enhanced framework for poverty reduction.4 It looks at two social policy issues that are important for economic reform and growth— social safety nets and public social sector spending. It also identifies ways to better integrate sound social policies into the IMF’s policy advice and program design within a sustainable macroeconomic framework.5

This paper examines the experiences of two sets of sample country groups. The first set comprises large samples of up to 65 countries with programs supported by the IMF, including the countries that implemented Stand-By Arrangements and programs supported by the Enhanced Structural Adjustment Facility (ESAF) from 1985 to 1997; the analysis aims to identify broad patterns and reach general conclusions. The second set comprises samples of 11-12 countries that implemented ESAF programs, including under the Initiative for Heavily Indebted Poor Countries (HIPCs), during the latter half of the 1990s; the analysis focuses on the use and monitoring of program targets. (See the Glossary for descriptions of these facilities.) The availability of data influenced the choice of countries, which may introduce some bias.

To a large extent, the analysis and policy advice on social issues lie outside the areas of IMF expertise. IMF staff relies on inputs from other international agencies, notably the World Bank. Thus, this paper also discusses collaboration with the World Bank and other agencies in the social policy sphere, including on internationally accepted principles, goals, practices, and indicators, such as those developed collaboratively by the Organization for Economic Cooperation and Development (OECD), United Nations (UN), and World Bank.

The paper has six sections. Section II describes the evolution of the IMF’s social policy advice. Issues related to social safety nets as a mechanism to mitigate the immediate adverse effects of economic crises and reform programs on poor groups are presented in Section III. In Section IV we set out policy issues concerning the adequate provision of education and health care services–crucial for achieving countries’ social development goals. We discuss IMF collaboration with the World Bank and other international organizations in Section V. Section VI, an afterword, briefly describes the IMF’s new Poverty Reduction and Growth Facility, which replaced the Enhanced Structural Growth Facility in November 1999.

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