Social Dimensions of the IMF's Policy Dialogue

Improving the IMF's Contribution

Against the background of the IMF's mandate and in the context of a country's overall macroeconomic framework, the IMF also advises on social issues, while fully recognizing that such issues lie basically in each member government's domain. The IMF is continuously making efforts to learn from its and others' experience, with the aim of improving its policy advice. At present, the staff is examining the pace of recovery of investment and output following the adoption of structural adjustment programs as the most effective way to raise per capita income growth in many developing countries, notably in sub-Saharan Africa. The experience suggests that greater attention needs to be given to the impact of fiscal policy on growth in a medium-term context, as well as to the analysis of distributional implications of expenditure and revenue. There is also scope for improving further the experience with incorporating social aspects in general program design, including the design of key policy instruments, such as pricing policies and tax and tariff systems. This also involves deepening the understanding of the constraints on policy implementation and their implications for improving the design of social policies.

The composition of government expenditure reflects social priorities. The IMF staff is in the process of intensifying collaboration with the World Bank on public expenditure, with a view to improving its policy advice to member governments. Member governments review their own public expenditure policies as part of their sovereign decision making on social priorities. The advice from the IMF (and other organizations) can nevertheless be a technical input to governments seeking to improve the basis for establishing and addressing such priorities.

Through policy discussions and technical assistance, the IMF contributes to improving transparency in governments' decision making and their capacity to monitor social developments. The IMF staff seeks to report on social indicators in country reports and also to increase transparency and accountability in budgetary expenditure, including spending on social services and the poor's access to these services.

Improvement of monitoring of social policies and social indicators in the context of IMF-supported programs is being pursued as central to the achievement of sustainable high-quality growth. Improving collaboration with the World Bank, UN agencies, and others, with the objective that each institution focus on areas of comparative advantage, is the best way to achieve--without duplication of work--a better follow-up on the implementation of social policies in programs.

Since in low-income countries the great majority of the poor live in the rural areas, policy reforms that address structural weaknesses in these areas need more emphasis. One area where there is scope for major improvements is developing widely accessible financial institutions and savings and lending instruments in the rural areas, in close collaboration with the World Bank.