Front Matter Page
IMF POLICY PAPER
A STRATEGY FOR IMF ENGAGEMENT ON SOCIAL SPENDING—BACKGROUND PAPERS
June 2019
IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:
The Staff Report, prepared by IMF staff and completed on April 5, 2019 for the Executive Board’s consideration on May 2, 2019.
The documents listed below have been separately released:
A Strategy for IMF Engagement on Social Spending
A Strategy for IMF Engagement on Social Spending—Case Studies
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Electronic copies of IMF Policy Papers are available to the public from http://www.imf.org/external/pp/ppindex.aspx
International Monetary Fund
Washington, D.C.
© 2019 International Monetary Fund
Front Matter Page
A STRATEGY FOR IMF ENGAGEMENT ON SOCIAL SPENDING—BACKGROUND PAPERS
June 14, 2019
Executive Summary
This Supplement presents an account of the extensive consultations and the results of analysis that supported the definition of “A Strategy for IMF Engagement on Social Spending.”
Paper I summarizes comments received from civil society organizations (CSOs), unions, academics, economists, social spending experts, and international development institutions (IDIs). Participants’ comments focused on: the scope of the strategy, the rationale for IMF’s engagement on social spending and the role of the Fund, the need to consider social spending beyond the objective of poverty alleviation, and the debate on universal and targeted benefits.
Paper II presents a cross-country empirical analysis assessing whether IMF-supported programs adequately protected social spending. The analysis confirms that, on average, there is no difference between spending trends in program countries compared to similar countries without a program. However, it finds that in a significant number of instances spending decreased in program countries. Therefore, the paper also examines the factors affecting the probability of a decline in social spending.
Paper III discusses the results of a survey of IMF Area Department mission chiefs. The survey provides information on the nature and extent of their teams’ engagement, and the challenges they faced. It indicates that a vast majority of mission chiefs regard social spending as macro-critical for their country.
Paper IV sets out the issues that need to be considered when providing policy advice on the targeting of transfers, and the trade-offs involved in different approaches to targeting. It highlights the challenges to achieving greater coverage and financing it. It points out the need to consider both the tax and transfer sides when designing redistributive fiscal policy.
Paper V documents how the discussion of social spending issues evolved in IMF surveillance and program staff reports since the late 1970s. It shows that discussions of social spending and inequality issues increased significantly over past decades. However, a wide variation in the intensity of the discussion of social spending issues for both surveillance and program staff reports is observed.
Approved By
Michael Keen and Kristina Kostial
Prepared by an inter-departmental team led by David Coady (FAD) and Zuzana Murgasova (SPR) and consisting of Maura Francese, Dominique Guillaume, Nikhil Brahmankar, Wendell Daal, Brooks Evans, Csaba Feher, Emine Hanedar, Emmanouil Kitsios, Jorge Martinez, Delphine Prady, Baoping Shang (all FAD); Fei Liu, Gohar Minasyan, Ke Wang, Irene Yackovlev (all SPR); and Nicolas Mombrial (COM). Research assistance was provided by Nghia-Piotr Le. Production assistance was provided by Liza Prado.
Contents
Glossary
PAPER I. CONSULTATION WITH THIRD PARTIES: AN OVERVIEW OF RESULTS
A. Introduction
B. Scope of the Framework and Definition of Social Spending
C. Rationale and Timing for IMF Engagement
D. Cooperation with Development Partners and Civil Society
E. The IMF’s Role and Approach
F. Universal and Targeted Approaches to Social Spending
Glossary
| ADB |
Asian Development Bank |
| AEs |
Advanced Economies |
| AfDB |
African Development Bank Group |
| AIIB |
Asian Infrastructure Investment Bank |
| CIS |
Commonwealth of Independent States |
| COM |
Communications Department |
| CPI |
Consumer Price Index |
| CSOs |
Civil Society Organizations |
| DfID |
Department for International Development |
| EA |
Extended Arrangements |
| EAT |
Expenditure Assessment Tool |
| EBRD |
European Bank for Reconstruction and Development |
| ECF |
Extended Credit Facility |
| EDA |
Emerging and Developing Asia |
| EDE |
Emerging and Developing Europe |
| EFF |
Extended Fund Facility |
| EMEs |
Emerging Economies |
| EPA |
Ex-Post Assessment |
| ESAF |
Enhanced Structural Adjustment Facility |
| ESF |
Exogenous Shocks Facility |
| EU |
European Union |
| FAD |
Fiscal Affairs Department |
| FCL |
Flexible Credit Line |
| GRA |
General Resources Account |
| IADB |
Inter-American Development Bank |
| IsDB |
Islamic Development Bank |
| IDIs |
International Development Institutions |
| IEO |
Independent Evaluation Office |
| ILO |
International Labour Organization |
| IMF |
International Monetary Fund |
| ISCED |
International Standard Classification of Education |
| ISPA |
Interagency Social Protection Assessments |
| IT |
Indicative Target |
| LAC |
Latin America and the Caribbean |
| LIDCs |
Low-income and Developing Countries |
| LICs |
Low-Income Countries |
| MCs |
Mission Chiefs |
| MCS |
Mission Chiefs’ Survey |
| MEFPs |
Memoranda of Economic and Financial Policies |
| MENAP |
Middle East, North Africa, Afghanistan, and Pakistan |
| MONA |
Monitoring of Fund Arrangements |
| NDB |
New Development Bank |
| NGOs |
Non-governmental Organizations |
| OECD |
Organisation for Economic Co-operation and Development |
| PCs |
Performance Criteria |
| PCI |
Policy Coordination Instrument |
| PCL |
Precautionary Credit Line |
| PITs |
Personal Income Taxes |
| PLL |
Precautionary and Liquidity Line |
| PMTs |
Proxy-Means Tests |
| PRGF |
Poverty Reduction and Growth Facility |
| PRGT |
Poverty Reduction and Growth Trust |
| PSI |
Policy Support Instrument |
| PSIA |
Poverty and Social Impact Analysis |
| RCF |
Rapid Credit Facility |
| RFI |
Rapid Financing Instrument |
| SAF |
Structural Adjustment Facility |
| SBs |
Structural Benchmarks |
| SBA |
Stand-By Arrangement |
| SCF |
Standby Credit Facility |
| SDGs |
Sustainable Development Goals |
| SEC |
Secretary’s Department |
| SIPs |
Selected Issues Papers |
| SMP |
Staff Monitored Program |
| SPR |
Strategy, Policy, and Review Department |
| SSA |
Sub-Saharan Africa |
| TA |
Technical assistance |
| UBI |
Universal Basic Income |
| UFR |
Use of Fund Resource |
| UNDP |
United Nations Development Programme |
| UNESCO |
United Nations Educational, Scientific and Cultural Organization |
| UNICEF |
United Nations International Children’s Emergency Fund |
| WB |
World Bank |
| WEO |
World Economic Outlook |
| WHO |
World Health Organization |
| SHA |
System of Health Accounts |
Contents
PAPER II. IMPACT OF IMF PROGRAMS ON SOCIAL SPENDING: EMPIRICAL EVIDENCE
A. Introduction
B. Data and Measurement
C. Social Spending Trends During Programs
D. The Impact of IMF Programs on Social Spending
E. Main Implications and Conclusions
References
BOX
1. Inverse Probability-Weighted Regression Adjustment (IPWRA) Estimation
FIGURES
1. Trends in Public Spending on Health and Education during an IMF Program
2. Comparative Trends in Public Spending on Health and Education
3. Average Marginal Effects on Probability of Large Declines in Social Spending
4 Probability of Large Declines in Social Spending
5. Sample Construction Example
APPENDIX
I. Selected Tables
PAPER III. MISSION CHIEFS’ SURVEY: AN OVERVIEW OF RESULTS
A. Introduction
B. Macro-criticality of Social Spending Issues
C. Resources for Addressing Social Spending Issues and Interaction with Other Institutions
D. Policy Advice
E. Programs: Objectives and Conditionality
FIGURES
1. Response Rates by Region and Income Group
2. Is Social Spending Macro-critical for your Country?
3. Why Social Spending is Macro-critical
4. Why Social Spending is Macro-critical by Income Group and IMF Activity
5. Factors Affecting IMF Country Teams’ Engagement on Social Spending Issues
6. Has the IMF Team Recommended Reforms in the Area of Social Spending?
7. Programs Context and Objectives: Does the Program Seek to Protect Expand Social Spending?
8. Does the Program Include Conditionality on Social Spending?
TABLE
1. Interaction with Other Institutions: Mapping Topics and Counterparts
ANNEX
I. Questionnaire
PAPER IV. THE DEBATE ON UNIVERSAL AND TARGETED TRANSFERS
A. Introduction
B. Means-tested Transfers
C. Categorical Targeting
D. Proxy-means Testing
E. Financing Transfers
References
FIGURES
1. Coverage Under Alternative Categorical Programs
2. Benefit Share, Benefit Level, and Coverage
3. Distributional Impact of Tax and Transfer Programs
PAPER V. TRENDS AND PATTERNS IN FUND ENGAGEMENT ON SOCIAL SPENDING: A TEXT MINING ANALYSIS
A. Introduction
B. Description of the Database Used for Text Mining
C. Methodology
D. Results
References
BOX
1. Social Spending Related Terms Used in the Text Mining Analysis
FIGURES
1. Overview of Fund Documents by Type
2. Normalized Frequency Count of Overall Social Spending Concepts
3. Normalized Frequency Count–Breakdown by Surveillance and Program and Outliers
4. Normalized Frequency Count of Overall Social Spending Concepts
5. Normalized Frequency Count of Overall Social Spending Concepts by Topic
6. Normalized Frequency Count of Distribution Analysis Concepts
TABLE
1. Normalized Frequency Count–Repeated Outliers