The IMF and the Poor

Summary and Conclusions

The focus of the IMF's policy advice is to help member countries achieve a sustainable macroeconomic framework that creates the conditions for growth and the reduction of poverty. The aim is to devise macroeconomic polices that foster sustainable growth while reforming expenditures and tax policies to reinforce this process, thus ultimately improving income distribution and reducing poverty. Through this process, the IMF's approach to fiscal policy, particularly its social aspects, has evolved so that it is no longer viewed solely as a macroeconomic tool. The IMF is paying more attention to the distributional implications of fiscal policy and its role in fostering long-term growth, particularly during adjustment. Nevertheless, further research is needed on the linkages between social expenditures and social output indicators, with a view to providing guidance for better targeting of social expenditures.

Through the programs it supports, the IMF is continuing its efforts to better protect the poor. Guidelines have recently been issued to IMF staff for improving the monitoring of social expenditures and social output indicators as a further step in this process. IMF-supported programs can be made more effective, in general, if the analysis of the distributive effects of policy measures and economic developments is improved. They can also be strengthened through a more systematic evaluation of the effectiveness of social safety nets and of the composition of expenditures. With the increased emphasis on second-generation reforms to foster high-quality growth––such as the reform of the labor market––there is likely to be an even greater impact on the poor than in the past, which underscores the need for more work in this area. The IMF Board has recently received an assessment by external evaluators of the social aspects of adjustment programs in low-income countries. This will further guide the IMF's policy advice and cooperation with the World Bank on poverty reduction.