Abstract

The IMF is concerned with the social dimensions of its economic policy advice. The analysis and policy advice on social issues, however, are to a large extent outside the principal areas of IMF expertise. Between the Bretton Woods institutions, the primary responsibility for social policies lies with the World Bank, and IMF staff relies upon the World Bank in this area. Other international institutions, such as regional development banks and UN agencies (e.g., International Labor Organization, United Nations Development Program, and World Health Organization), the donor community, NGOs, and civil society, on a country-by-country basis, also can provide valuable inputs.

The IMF is concerned with the social dimensions of its economic policy advice. The analysis and policy advice on social issues, however, are to a large extent outside the principal areas of IMF expertise. Between the Bretton Woods institutions, the primary responsibility for social policies lies with the World Bank, and IMF staff relies upon the World Bank in this area. Other international institutions, such as regional development banks and UN agencies (e.g., International Labor Organization, United Nations Development Program, and World Health Organization), the donor community, NGOs, and civil society, on a country-by-country basis, also can provide valuable inputs.

World Bank and IMF staffs have well-established procedures for collaboration, including on social sector issues, in support of members’ efforts to achieve sustainable growth and poverty reduction.39 On social sector issues, IMF staff looks to the World Bank for inputs on social sector policy goals, analysis, reforms, and their budgetary cost, as well as data on social indicators. An iterative interaction between the staffs of the IMF and the World Bank ensures the consistency of the overall macroeconomic framework, including notably the fiscal envelope, with sustainable, cost-effective social policies and strategies for poverty reduction.

Frequent interaction between the staffs of the World Bank and the IMF on social issues takes place through several channels.

  • In addition to exchanges at headquarters, including through the review process, IMF missions to program countries have usually involved parallel World Bank missions or the participation of World Bank staff (and vice versa), as well as in-field consultations with resident representatives. In ESAF countries, overlapping missions are the norm.

  • In ESAF-supported programs, the PFP includes a separate section on poverty and social sector issues.

  • Reflecting the joint nature of the HIPC Initiative and its specific emphasis on achieving social improvements and development, collaboration is intensive in HIPCs, particularly as they approach their decision points under the Initiative.

  • In the fall of 1998, a pilot program for enhanced World Bank-IMF collaboration in low-income (ESAF/IDA) countries was launched in six countries (Cameroon. Ethiopia. Nicaragua. Tajikistan, Vietnam, and Zimbabwe). The pilot includes a specific focus on social sector issues: in particular, it is envisaged that the World Bank would not only identify measures to mitigate adverse effects on the poor and vulnerable, but also assess the social impact of program design more broadly, ex ante and ex post.

  • Periodically, joint institution-wide, forward-looking reviews of work plans and priorities in public sector work are carried out. These reviews aim, among other things, to coordinate IMF and World Bank public sector work and to ensure the timely availability of public expenditure analyses.

  • At the general policy level, the IMF’s Fiscal Affairs Department and its World Bank counterparts in the Poverty Reduction and Economic Management and Human Development Networks have recently initiated regular senior-level meetings to coordinate work programs and to help resolve collaboration issues that may arise.

The importance of social sector issues for the IMF has led to a strengthening of collaboration with the UN system and regional development banks. For example, in the area of labor market and related social policy reform, guidelines were issued in 1996 to IMF staff on collaboration with the International Labor Organization (ILO) that provide for more systematic contacts between staff at the country level, especially through resident representatives. Also, pilot countries were selected for enhanced IMF-ILO collaboration, and interaction on general policy issues has been increased, most recently in the context of the Asian crisis.40 In late 1998, the World Health Organization (WHO) and the IMF strengthened collaboration on health-related issues in low-income countries.

World Bank-IMF collaboration in the social area, however, has not always been seamless. In part, this reflects a mismatch between the timetables adopted for World Bank and IMF work programs and the operational methods of IMF- and World Bank-supported programs, which, in some respects, are not well-attuned to each other since IMF-supported programs are typically formulated under relatively tight deadlines, often demanded by a crisis situation.

  • The pressing country requirements can, unfortunately, cut across the grain of the longer time frame of preparatory work, including a broad participatory approach for social policy formulation. This highlights the importance of an ex ante dialogue and ongoing policy analysis and recommendations in the social policy area.

  • Sufficient time is also not always available to collect information to develop well-targeted social sector reforms.

  • On occasion, World Bank input has not been available within the time frame required by the countries’ circumstances, and the IMF staff and the country authorities have devised policies as best they could. In such cases, the focus has tended to be on mitigating the adverse impact on vulnerable groups through specific social protection mechanisms, rather than in terms of program design based on ex ante social assessments.

From an IMF perspective, more World Bank involvement, including in monitoring and following up on social sector issues, would be desirable, particularly for ESAF countries. The World Bank has shifted away from comprehensive Public Expenditure Reviews (PERs) toward a sequence of more in-depth sector-specific expenditure reviews, which are useful in their own right, but do not provide a comprehensive analysis of budget priorities. The World Bank staff understandably focuses their work programs on the Country Assistance Strategies (CASs) and their own lending operations. Thus, the PFP is not regarded as a priority in the work agenda of World Bank staff. It is no longer discussed by the World Bank’s Executive Board and is generally not directly relevant to World Bank’s operations, which contrasts with the role of the Policy Framework Paper (PFP) at the IMF. This difference has created gaps in needed inputs for ESAF-supported and other programs and has, in some cases, led IMF staff to work with the authorities to fill the gap through IMF technical assistance.

The most recent internal assessment of the World Bank’s support of poverty reduction found that, relative to past benchmarks, performance has been good (World Bank, 1999). At the same time, it raised many of the same concerns noted above.41 As a result, mechanisms for more active monitoring of developments in these areas are being implemented. Various World Bank initiatives should contribute to a better and more systematic integration of social sector issues in World Bank lending operations and hence in IMF-supported programs:

  • developing the Comprehensive Development Framework (CDF), which includes countries’ social sector objectives and policies;

  • strengthening the poverty focus in Country Assistance Strategies;

  • preparing social and structural policy reviews:

  • improving the delivery of Public Expenditure Reviews and their synchronization with countries* budget processes;

  • implementing the joint ESAF/IDA pilot scheme; and

  • developing and implementing the Principles and Good Practices in Social Policy.

World Bank-IMF collaboration in the poverty reduction and social policy area could be strengthened by the formulation, together with the authorities, of a Poverty Reduction Strategy Paper (PRSP) through a participatory process. The PRSP would aim at ensuring the consistency between a country’s macroeconomic, structural, and social policies, and the goals of poverty reduction and social development. It would

  • be owned by the government and endorsed by the Boards of the World Bank and the IMF as a basis for the institutions’ operations;

  • include a macroeconomic framework and structural and social policies consistent with the poverty reduction and social goals;

  • set out technical assistance needs and expected providers; and

  • identify overall external financing needs.

When all these elements are available in the PRSP, it could replace the Policy Framework Paper and provide a framework for World Bank and IMF lending operations for the country.42 While the PRSP might be prepared every three years, there would be annual updates.

Cited By

  • Abed, George, and others, 1998, Fiscal Reforms in Low-Income Countries: Experience Under IMF-Supported Programs, IMF Occasional Paper No. 160 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Anand, Sudhir, and Martin Ravallion, 1993, “Human Development in Poor Countries: On the Role of Private Incomes and Public Services,Journal of Economic Perspectives, Vol. 7 (Winter), No. 1. pp. 13350.

    • Search Google Scholar
    • Export Citation
  • Aninat, Eduardo, Andreas Bauer, and Kevin Cowan, 1999, “Addressing Equity Issues in Policymaking: Lessons from the Chilean Experience,in Economic Policy and Equity, ed. by Vito Tanzi, Ke-young Chu, and Sanjeev Gupta, (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Barro, Robert, 1995, “Inflation and Economic Growth,Bank of England Quarterly Bulletin. Vol. 35 (May), pp. 16676.

  • Bidani, Benu, and Martin Ravallion, 1997, “Decomposing Social Indicators Using Distributional Data,Journal of Econometrics, Vol. 77 (March), No. 1, pp. 12593.

    • Search Google Scholar
    • Export Citation
  • Bredenkamp, Hugh, and Susan Schadler, 1999, Economic Adjustment and Reform in Low-Income Countries (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Bruno, Michael, and William Easterly, 1995, “Inflation Crises and Long-Run Growth,NBER Working Paper No. 5209 (Cambridge. Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Bulír Aleš, 1998, “Income Inequality: Does Inflation Matter?IMF Working Paper 98/7 (Washington: International Monetary Fund).

  • Bulír Aleš, and Anne-Marie Gulde, 1995, “Inflation and Income Distribution: Further Evidence on Empirical Links.IMF Working Paper 95/86 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Chu, Ke-young, and Sanjeev Gupta, 1998, Social Safety Nets: Issues and Recent Experiences (Washington: International Monetary Fund).

  • Cox, Donald, Zekeriya Eser, and Emmanuel Jimenez, 1997, “Family Safety Nets During Economic Transition,in Poverty in Russia: Public Policy and Private Responses, ed. by Jeni (Washington: Economic Development Institute of the World Bank).

    • Search Google Scholar
    • Export Citation
  • Cox, Donald, Wlodek Okrasa, and Emmanuel Jimenez, 1997, “Family Safety Nets and Economic Transition: A Study of Households in Poland,Review of Income and Wealth, Vol. 43 (June), No. 2, pp. 191209.

    • Search Google Scholar
    • Export Citation
  • Davoodi, Hamid R., and Sawilree Sachjapinan, forthcoming, “How Useful Are Benefit Incidence Studies?IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Demery, Lionel, and Lyn Squire, 1996, “Macroeconomic Adjustment and Poverty in Africa: An Emerging Picture,The World Bank Research Observer, Vol. II (February). No. 1. pp. 3960.

    • Search Google Scholar
    • Export Citation
  • Easterly, William, and Sergio Rebelo, 1993, “Fiscal Policy and Economic Growth: An Empirical Investigation.NBER Working Paper No. 4499 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Ferreira, Francisco, Giovanna Prennushi, and Martin Ravallion, 1999, “Protecting the Poor from Macro-economic Shocks: An Agenda for Action in a Crisis and Beyond,Policy Research Working Paper No. 2160 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Filmer, Deon, Jeffrey Hammer, and Lant Pritchett, 1998, “Health Policy in Poor Countries: Weak Links in the Chain,Policy Research Working Paper No. 1874 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Fischer, Stanley, 1991, “Growth, Macroeconomics, and Development,NBER Working Paper No. 3702 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Frankenberg, Elizabeth, Duncan Thomas, and Kathleen Beegle, 1999, “The Real Costs of Indonesia’s Economic Crisis: Preliminary Findings from the Indonesia Family Life Surveys.Labor and Population Program Working Paper 99-04 (Santa Monica: RAND).

    • Search Google Scholar
    • Export Citation
  • Ghosh, Atish, and Steven Phillips, 1998, “Warning: Inflation May Be Harmful to Your Growth,Staff Papers, International Monetary Fund, Vol. 45 (December), pp. 672710.

    • Search Google Scholar
    • Export Citation
  • Goldsbrough, David, and others 1996, Reinvigorating Growth in Developing Countries: Lessons from Adjustment Policies in Eight Economies, IMF Occasional Paper No. 139 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Guitián, Manuel, 1998, “Monetary Policy: Equity Issues in IMF Policy Advice,in Income Distribution and High-Quality Growth, ed. by Vito Tanzi, and Ke-young Chu, (Cambridge, Massachusetts: MIT Press).

    • Search Google Scholar
    • Export Citation
  • Gupta, Sanjeev, 1998, “Economic Transition and Social Protection: Issues and Agenda for Reform,IMF Paper on Policy Analysis and Assessment 98/14 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gupta, Sanjeev, Marijn Verhoeven, and Keiko Honjo, 1997, “The Efficiency of Government Expenditures: Experiences from Africa,IMF Working Paper 97/153 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gupta, Sanjeev, and others 1998, The IMF and the Poor, IMF Pamphlet Series. No. 52 (Washington: International Monetary Fund).

  • Gupta, Sanjeev, Marijn Verhoeven, and Erwin Tiongson, 1999, “Does Higher Government Spending Buy Better Results in Education and Health Care?IMF Working Paper 99/21 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Gupta, Sanjeev, Marijn Verhoeven, Gustavo Yamada, and Erwin Tiongson, 1999, “Education and Health Spending Continues Rise in Countries with IMF-Supported Programs,IMF Survey (March 8), pp. 7980.

    • Search Google Scholar
    • Export Citation
  • Harberger, Arnold C., 1998, “Monetary and Fiscal Policy for Equitable Economic Growth,in Income Distribution and High-Quality Growth, ed. by Vito Tanzi, Ke-young Chu, (Cambridge, Massachusetts: MIT Press).

    • Search Google Scholar
    • Export Citation
  • Iglesias, Enrique V., 1999, “Equity Issues in Latin America,in Economic Policy and Equity, ed. by Vito Tanzi, Ke-young Chu, and Sanjeev Gupta, (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1986, Fund-Supported Programs, Fiscal Policy, and Income Distribution, IMF Occasional Paper No. 46 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1995, Social Dimensions of the IMF’s Policy Dialogue, prepared by the Staff of the International Monetary Fund, IMF Pamphlet Series, No. 47 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1996,“Partnership for Sustainable Global Growth,an Interim Committee Declaration, IMF Survey, October 14, p. 327.

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1997, The ESAF at Ten Years: Economic Adjustment and Reform in Low-Income Countries, IMF Occasional Paper No. 156 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Levine, Ross, and Sara Zervos, 1993, “Looking at the Facts: What We Know About Policy and Growth from Cross-Country Analysis,Policy Research Working Paper No. 1115 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Mauro, Paulo, 1998, “Corruption and the Composition of Government Expenditure,Journal of Public Economics, Vol. 69 (August), No. 2. pp. 26379.

    • Search Google Scholar
    • Export Citation
  • Milanovic, Branko, 1994, “Determinants of Cross-Country Income Inequality: An ‘Augmented’ Kuznels’ Hypothesis,Policy Research Working Paper No. 1246 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Mingat, Alain, and Jee-Peng Tan, 1998, “The Mechanics of Progress in Education: Evidence from Crosscountry Data,Policy Research Working Paper No. 2015 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Sahn, David E., Paul A. Dorosh, and Stephen D. Younger, 1997, Structural Adjustment Reconsidered: Economic Policy and Poverty in Africa (New York: Cambridge University Press).

    • Search Google Scholar
    • Export Citation
  • Sarel, Michael, 1996, “Nonlinear Effects of Inflation on Economic Growth,Staff Papers, International Monetary Fund, Vol. 43 (March), No. 4, pp. 199215.

    • Search Google Scholar
    • Export Citation
  • Sarel, Michael, 1997, “How Macroeconomic Factors Affect Income Distribution: The Cross-Country Evidence.IMF Working Paper 97/152 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sen, Amartya, 1999, “Economic Policy and Equity: An Overview,in Economic Policy and Equity, ed. by Vito Tanzi, Ke-young Chu, and Sanjeev Gupta, (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Subbarao, K., and others 1997, Safety Net Programs and Poverty Reduction: Lessons from Cross-Country Experience (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Tanzi, Vito, 1998, “Corruption Around the World: Causes, Consequences, Scope, and Cures,Staff Papers, International Monetary Fund, Vol. 45 (December), pp. 55994.

    • Search Google Scholar
    • Export Citation
  • Tanzi, Vito, and Ke-young Chu, eds., 1998, Income Distribution and High-Quality Growth (Cambridge, Massachusetts: MIT Press).

  • Tanzi, Vito, and Ke-young Chu, and Sanjeev Gupta, 1999, Economic Policy and Equity (Washington: International Monetary Fund).

  • Ter-Minassian, Teresa, ed., 1997, Fiscal Federalism in Theory and Practice (Washington: International Monetary Fund).

  • World Bank, 1993, World Development Report 1993: Investing in Health (Washington: World Bank).

  • World Bank, 1995, Priorities and Strategies for Education: A World Bank Review (Washington: World Bank).

  • World Bank, 1996, Social Dimensions of Adjustment: World Bank Experience. 1980-93 (Washington: World Bank).

  • World Bank, 1999, Poverty Reduction and the World Bank: Progress in Fiscal 1998 (Washington: World Bank).