## pp061418social-safeguards-guidance-note

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### INTRODUCTION
- Purpose:
  - Provides operational guidance to staff on engaging on social safeguard issues with low-income countries (LICs) in program and surveillance contexts.
  - Not a comprehensive guide; to be used with other operational guidance notes (e.g., conditionality and surveillance).
- Context and objectives:
  - Role of social safeguards: protect vulnerable groups and support poverty reduction and inclusive growth as key objectives for Fund programs supported by the Poverty Reduction and Growth Trust (PRGT) and Policy Support Instrument (PSI).
  - Social safeguards defined to include:
    - Commitments to social and other priority spending (minimum floors on social and other priority spending should be included, wherever possible, in programs supported by PRGT facilities).
    - Specific reforms to protect poor and vulnerable groups (e.g., strengthening social safety nets and improving tracking and monitoring of spending).
  - Focus: heavy emphasis on social safety nets (rather than social insurance) given the limited presence of social insurance in many LICs and the speed at which social safety nets can deliver support.
- Rationale:
  - LICs have progressed on social safeguards but systems are often underdeveloped and underfunded; capacity constraints and data gaps exist.
  - Early engagement with authorities, development partners (DPs), and civil society—especially during surveillance—can lay groundwork for effective policies.

### KEY CONCEPTS (Box 1 highlights)
- Definitions and distinctions:
  - Inclusive growth: robust, broad-based growth with widely shared benefits.
  - Pro-poor growth: incomes of poor people grow faster than those of the population as a whole.
  - Social protection:
    - Social safety nets (social assistance): noncontributory measures providing regular, predictable support (e.g., cash transfers, school meals, in-kind transfers, public works, fee waivers).
    - Social insurance: contributory policies (e.g., pensions, maternity, unemployment, health insurance).
  - Other priority spending: may include infrastructure with limited short-term benefits to vulnerable groups; country teams must exercise judgment in deciding inclusion in program design.

### DESIGN OF FUND-SUPPORTED LIC PROGRAMS
- General guidance:
  - Programs should support social spending and mitigate adverse effects of program measures on the poor and vulnerable.
  - Two guiding principles: flexibility to accommodate country-specific circumstances and national priorities; clarity on how program conditionality achieves social safeguard goals.
- Core expectations:
  - Programs should at least maintain social and other priority spending.
    - For fiscal consolidation: key social and other priority spending should not decline as a share of public spending, and preferably be at least maintained in real per capita terms.
    - For fiscal expansion: consider expanding social and other priority spending consistent with national development priorities.
  - Staff should consider reform measures that protect vulnerable groups and strengthen social safety nets (e.g., increase social transfers to the poor and vulnerable).
- Capacity and country circumstances:
  - Align reform scope and pace with authorities’ implementation capacity.
  - For fragile states: identify achievable short-term objectives delivering rapid success (e.g., basic social safety nets, job creation, increased spending on education and health, promoting inclusive growth).
- Monitoring and adaptation:
  - Periodically re-evaluate social safeguards design and associated conditionality to ensure consistency with economic environment and program objectives.
  - If conditionality is well-designed but targets are missed, strengthen implementation (e.g., enhance public financial management (PFM)).

### A. Quantitative ConditionalITY
- Defining targets:
  - Country authorities should lead in defining social and other priority spending, with staff analytical support.
  - Considerations for targets:
    - Define spending floors to ensure needs of poor and most vulnerable are covered—especially when reforms have adverse distributional consequences.
    - Spending floors can be based on aggregate budgets of key ministries (education, health) or defined more narrowly to better assure coverage of the most vulnerable.
    - Authorities and country teams have flexibility to set targets narrowly (social spending only) or broadly (social and other priority spending combined), depending on country circumstances.
- Prioritization and targeting:
  - Prioritize social spending with greatest impact on poverty, focusing on critical sectors and delivering assistance via social safety nets.
  - Where feasible, extend existing programs rather than create new ones; where targeting capacity is low and resources exist, consider universal access for key protections plus targeted resources to fill gaps.
  - Spending floors may be based on total public spending on education and health if resources are available and safeguards are adequate.
- Tailoring and fiscal considerations:
  - Spending floors should be tailored to country circumstances:
    - Stronger fiscal adjustments and redistributive reforms generally expected to be accompanied by efforts to strengthen social safeguards, including higher social spending floors.
    - Consider availability of fiscal space, including financial support from DPs.
    - Fiscal space can be created via domestic resource mobilization or increasing spending efficiency (e.g., eliminating inefficient spending such as on energy subsidies).
    - Design floors such that they can be met through budgetary resources that authorities have adequate control over.
    - Recognize positive macro impact of social spending via relatively high fiscal multipliers.
- Handling foreign-financed social spending:
  - When foreign funding finances social and other priority spending through the budget, use program adjustors to ensure appropriate program adjustment when foreign funding deviates from projections.
    - Adjustors should be uncapped on the upside so that if foreign funding exceeds projections, expenditure can increase by the full excess provided absorptive capacity exists.
    - Downside design depends on country circumstances; ideally capped so social spending would not be cut and could be accommodated by an increase in the deficit up to the cap (consistent with debt sustainability) or by reallocation of expenditures.
    - Beyond the cap, authorities would need to fill the gap with domestic resources to prevent an excessive decline in social and other priority spending.

### CONDITIONALITY: INDICATIVE TARGETS (IT) VERSUS PERFORMANCE CRITERIA (PC) (section 13.)
- Use of ITs and PCs:
  - ITs are usually used to set the floor on social and other priority spending.
  - An IT is assessed in the context of overall program performance, including progress at addressing poverty.
  - A waiver is not required if the IT is not observed.
  - Staff actions when an IT is missed:
    - Seek to understand why the target was missed.
    - If missed repeatedly, revisit the design of the IT and discuss implementation weaknesses.
  - If a country cannot effectively monitor social and other priority spending and hence an IT cannot be established, program documents should:
    - Explain why an IT cannot be established.
    - Include measures to build the necessary capacity.
  - If improvements in the quality of social spending could be associated with lower spending levels, program documents should explain the circumstances.
- PCs:
  - PCs can be used when necessary for effective monitoring of the program:
    - If a PC is missed, the authorities must request a waiver of non-observance and undertake corrective actions unless the deviation is minor or temporary.
    - Measures to avoid recurrence should be discussed and agreed with authorities.
    - PCs should not be used if there are concerns about data quality.
    - An IT can be converted into a PC during the program if data are adequate and social conditions warrant closer monitoring.
- Footnote context:
  - ITs and performance criteria refer to conditionality under the ECF- and SCF-supported programs. For the PSIs the discussion refers to Assessment Criteria (ACs) and quantitative targets. For the RCF, the discussion refers to informal monitoring targets if these are set by the member to build a track record. (Reference number: 19)

### STRUCTURAL CONDITIONALITY
- Role and design:
  - Well-designed structural measures can protect poor and vulnerable groups in the short term and strengthen social safety nets in the medium term.
  - When program conditionality involves eliminating energy subsidies or tax hikes (notably indirect taxes), programs should include mitigating measures.
  - Savings from subsidy elimination should be used, to the extent possible, to introduce or strengthen social safety nets.
  - If a country lacks social protection programs to channel assistance, the program should seek to establish measures to develop such social assistance, with help from DPs.
  - Appropriate phasing and sequencing of reform measures is essential; implementation can take time.
  - Structural social safeguards measures are usually established as commitments in the Memorandum of Economic and Financial Policies (MEFP) or as structural benchmarks.
  - They can be included as prior actions when upfront implementation is instrumental to program success.
  - Other policy objectives and commitments, including specific timelines, can be articulated in the Letter of Intent/MEFP.

### SURVEILLANCE: ARTICLE IV AND EARLY ENGAGEMENT
- Rationale and actions:
  - The core objective of Article IV surveillance—to assess domestic and external stability—applies to LICs.
  - Macro-social issues such as poverty, unemployment, and gender inequality are often critical for domestic stability in LICs; staff should analyze these during Article IV consultations and provide advice on social safeguards where relevant. (Reference number: 20)
  - Early engagement on social safeguards through Article IVs helps authorities prepare policies and programs to protect vulnerable groups for prompt implementation during fiscal adjustment programs.
  - A clear diagnostic of major social issues is essential for effective policy advice.
    - Staff should draw on DPs to understand key macro-social challenges and interlinkages.
    - Country-specific analysis and prioritization are crucial.
    - Filling data gaps and strengthening data collection is often required to improve reporting and analysis.

### TOPICS FOR POLICY DISCUSSION (tailored to country circumstances)
- Key discussion areas:
  - Adequacy of existing education, health, and social protection systems:
    - Assess risks of contingent liabilities if safety nets are inefficiently managed or underfunded.
    - Use technical assistance to advise on establishing and strengthening programs.
    - Complement reforms such as domestic resource mobilization, tax efficiency, and PFM strengthening.
  - Fiscal sustainability and distributional impact analysis:
    - Social safeguards design benefits from ex-ante technical analysis of fiscal sustainability and distributional impact of policies (e.g., tax or fuel subsidy reforms, social protection reforms).
    - Such analysis takes time and resources—argues for work during surveillance discussions.
  - Other topics: diagnostic studies on extending education, health, and social protection consistent with national development plans; analyzing education and health spending and outcomes with DP expertise.

### COLLABORATION AND CAPACITY DEVELOPMENT (CD)
- Collaboration:
  - Close collaboration with DPs and other stakeholders is warranted:
    - Article IV surveillance offers an opportunity for early consultation with DPs, trade unions, and employer associations.
    - Collaboration draws on DPs’ in-depth knowledge of vulnerable groups and analytical frameworks/tools.
    - Coordinated CD by the Fund and DPs can help authorities address weaknesses in social spending.
- Capacity development:
  - In program contexts where analytical work must be rapid, staff can use analytical methods and tools developed by other institutions to assess spending forms that most impact the poor.
  - Structural measures that establish adequate reporting, tracking, and monitoring systems and/or strengthen social protection systems can benefit from other institutions’ expertise.
  - CD is crucial:
    - For countries with nascent or weak social protection systems, staff should identify CD needs and strive to ensure coverage by the Fund or DPs.
    - Closing data gaps that hinder tracking and monitoring of quantitative conditionality, and assessment of programs/policies, is particularly beneficial.

### DOCUMENTATION GUIDELINES (Box 2 summary)
- Staff reporting and program documents should:
  - Thoroughly discuss social safeguard issues and design/implementation of relevant measures with authorities and consistently document these in staff reports.
  - Place policy-relevant points in main text; technical details in annexes.
  - Analyze social safeguard issues; take stock of social and other priority spending and existing safety nets; identify safeguards gaps; explore social and distributional impact in context of debt sustainability.
  - Refer to engagements with authorities, DPs, and external stakeholders; highlight key achievements.
  - Refer explicitly to relevant DP studies and indicate timelines if analysis is ongoing.
  - Explain how capacity constraints or data gaps are being tackled, even if medium-term or requiring CD.
- Program request documents should:
  - Explain how social safeguard measures support national poverty reduction priorities and the authorities’ strategy to achieve the SDGs.
  - Spell out the link between program design, conditionality, and social safeguards, especially when not obvious.
- Program request and review documents should:
  - Explain process for defining social and other priority spending; note population segments covered under conditionality; identify methodologies guiding what constitutes social spending.
  - Ensure the Technical Memorandum of Understanding (TMU) clearly defines social and other priority spending and any adjustors.
  - Discuss trade-offs in defining priorities and how other priority spending helps deliver national poverty reduction strategy and SDGs.
  - Explain whether fiscal adjustment adverse effects have been effectively mitigated and if vulnerable groups have been protected.
  - Establish TMU reporting requirements for relevant social spending data and monitor spending efficiency via intermediate social objectives (e.g., school enrollment rate, access to health services, social protection coverage).
  - Explain how financial resources for social and other priority spending will be made available (budget or donor support).
  - Discuss design and monitoring challenges (data gaps, tracking systems, capacity, financial resources, presence of safety nets).
  - If quantitative conditionality cannot be established due to data gaps, explain why and how challenges will be addressed by building capacity and strengthening PFM.
  - If improvements in quality of social spending could reduce volume, provide elaboration.
- Program review documents should:
  - Explain realized outcomes and corrective measures in response to missed ITs and PCs.
  - When quantitative conditionality is repeatedly missed, explain why and propose redesign as needed.
  - Justify proposed changes to conditionality on social safeguards, including if quality improvements could reduce overall spending.

### GOOD PRACTICE EXAMPLES (Box 3 takeaways)
- Design ITs so all elements of social and other priority spending are clearly defined, targeted, and country-specific.
- Define pro-poor spending across education, health, social safety nets, agriculture, rural development, potable water, electrification, and other targeted programs.
- Complement spending targets with social safeguard reforms when subsidy or tax reforms are likely to adversely affect vulnerable groups.
  - Use savings from subsidy elimination to strengthen social protection.
  - Prefer targeted cash or near-cash transfers to compensate vulnerable groups for energy subsidy removal.
  - Phase out subsidy reforms gradually and strengthen social protection at program design stage.
- Analyze existing safety nets, incidence of poverty and inequality, and work with World Bank and other DPs for targeting and coverage analysis.
- Surveillance good practices include analyzing social safety net programs’ impact and discussing reform plans, often with DP assistance and use of modeling tools.

### RESEARCH, TOOLS, AND DATA ON SOCIAL SAFEGUARDS (Box 4 summary)
- IMF and DPs provide research products and analytical tools to analyze social safeguard issues; list is illustrative, not exhaustive.
- Inequality and distributional analysis references and tools:
  - 2018 IMF guidelines: How To Operationalize Inequality Issues in Country Work.
  - Macro-structural Policies and Income Inequality in Low-income Developing Countries (2017).
  - General equilibrium model developed with DFID to analyze macroeconomic and distributional impact of policies.
  - FAD analytical work: Inequality and Fiscal Policy (2015); Fiscal Monitor Chapter on Tackling Inequality (2017).
- Social protection systems tools and publications:
  - FAD templates/tools for policy dialogue, distributional analysis of subsidy reforms, pension fiscal sustainability, long-term pension/health projections.
  - Toolkits and databases for energy subsidy reform on FAD’s energy subsidy reform website.
  - FAD publications: The Economics of Public Health Care Reform in Advanced and Emerging Economies (2012); Energy Subsidy Reform (2013); Equitable and Sustainable Pensions (2014).
- World Bank resources:
  - Poverty and Social Impact Analysis (PSIA) and Safety Nets How To; WB 2012–2022 Social Protection and Labor Strategy.
  - Publications: The State of Social Safety Nets (2018); Reducing Poverty and Investing in People: The New Role of Safety Nets in Africa.
  - Research on targeting: A Poor Means Test? Econometric Targeting in Africa (2016); Safety Nets in Africa: Effective Mechanisms to Reach the Poor and Most Vulnerable (2015).
  - Energy Subsidy Reform Assessment Framework and education/health Service Delivery Indicators.
- Interagency Social Protection Assessments (ISPA) tools: Core Diagnostic instrument and tools on Public Works, Identification Systems, and Payments.
- SDG Indicators Global Database: data compiled through the United Nations system for monitoring the 2030 Agenda.
- ILO social protection platform: data, tools, research, financing and social budgeting manuals, World Social Protection Report 2017-19 with country data on coverage and program disaggregation for SDG 1.3 monitoring.

*Source: pp061418social-safeguards-guidance-note (excerpts).*

### EXECUTIVE SUMMARY

### pp061418social-safeguards-guidance-note - EXECUTIVE SUMMARY

### INTRODUCTION
- Purpose:
  - Provides operational guidance to staff on engaging on social safeguard issues with low-income countries (LICs) in program and surveillance contexts.
  - Not a comprehensive guide; to be used with other operational guidance notes (e.g., conditionality and surveillance).
- Context and objectives:
  - Role of social safeguards: protect vulnerable groups and support poverty reduction and inclusive growth as key objectives for Fund programs supported by the Poverty Reduction and Growth Trust (PRGT) and Policy Support Instrument (PSI).
  - Social safeguards defined to include:
    - Commitments to social and other priority spending (minimum floors on social and other priority spending should be included, wherever possible, in programs supported by PRGT facilities).
    - Specific reforms to protect poor and vulnerable groups (e.g., strengthening social safety nets and improving tracking and monitoring of spending).
  - Focus: heavy emphasis on social safety nets (rather than social insurance) given the limited presence of social insurance in many LICs and the speed at which social safety nets can deliver support.
- Rationale:
  - LICs have progressed on social safeguards but systems are often underdeveloped and underfunded; capacity constraints and data gaps exist.
  - Early engagement with authorities, development partners (DPs), and civil society—especially during surveillance—can lay groundwork for effective policies.

### KEY CONCEPTS (Box 1 highlights)
- Inclusive growth vs. pro-poor growth:
  - Inclusive growth: robust, broad-based growth with widely shared benefits.
  - Pro-poor growth: incomes of poor people grow faster than those of the population as a whole.
- Social protection:
  - Social safety nets (social assistance): noncontributory measures providing regular, predictable support (e.g., cash transfers, school meals, in-kind transfers, public works, fee waivers).
  - Social insurance: contributory policies (e.g., pensions, maternity, unemployment, health insurance).
- Other priority spending: may include infrastructure with limited short-term benefits to vulnerable groups; country teams must exercise judgment in deciding inclusion in program design.

### DESIGN OF FUND-SUPPORTED LIC PROGRAMS
- General guidance:
  - Programs should support social spending and mitigate adverse effects of program measures on the poor and vulnerable.
  - Two guiding principles: flexibility to accommodate country-specific circumstances and national priorities; clarity on how program conditionality achieves social safeguard goals.
- Core expectations:
  - Programs should at least maintain social and other priority spending.
    - For fiscal consolidation: key social and other priority spending should not decline as a share of public spending, and preferably be at least maintained in real per capita terms.
    - For fiscal expansion: consider expanding social and other priority spending consistent with national development priorities.
  - Staff should consider reform measures that protect vulnerable groups and strengthen social safety nets (e.g., increase social transfers to the poor and vulnerable).
- Capacity and country circumstances:
  - Align reform scope and pace with authorities’ implementation capacity.
  - For fragile states: identify achievable short-term objectives delivering rapid success (e.g., basic social safety nets, job creation, increased spending on education and health, promoting inclusive growth).
- Monitoring and adaptation:
  - Periodically re-evaluate social safeguards design and associated conditionality to ensure consistency with economic environment and program objectives.
  - If conditionality is well-designed but targets are missed, strengthen implementation (e.g., enhance public financial management (PFM)).

### A. Quantitative ConditionalITY
- Defining targets:
  - Country authorities should lead in defining social and other priority spending, with staff analytical support.
  - Considerations for targets:
    - Define spending floors to ensure needs of poor and most vulnerable are covered—especially when reforms have adverse distributional consequences.
    - Spending floors can be based on aggregate budgets of key ministries (education, health) or defined more narrowly to better assure coverage of the most vulnerable.
    - Authorities and country teams have flexibility to set targets narrowly (social spending only) or broadly (social and other priority spending combined), depending on country circumstances.
- Prioritization and targeting:
  - Prioritize social spending with greatest impact on poverty, focusing on critical sectors and delivering assistance via social safety nets.
  - Where feasible, extend existing programs rather than create new ones; where targeting capacity is low and resources exist, consider universal access for key protections plus targeted resources to fill gaps.
  - Spending floors may be based on total public spending on education and health if resources are available and safeguards are adequate.
- Tailoring and fiscal considerations:
  - Spending floors should be tailored to country circumstances:
    - Stronger fiscal adjustments and redistributive reforms generally expected to be accompanied by efforts to strengthen social safeguards, including higher social spending floors.
    - Consider availability of fiscal space, including financial support from DPs.
    - Fiscal space can be created via domestic resource mobilization or increasing spending efficiency (e.g., eliminating inefficient spending such as on energy subsidies).
    - Design floors such that they can be met through budgetary resources that authorities have adequate control over.
    - Recognize positive macro impact of social spending via relatively high fiscal multipliers.
- Handling foreign-financed social spending:
  - When foreign funding finances social and other priority spending through the budget, use program adjustors to ensure appropriate program adjustment when foreign funding deviates from projections.
    - Adjustors should be uncapped on the upside so that if foreign funding exceeds projections, expenditure can increase by the full excess provided absorptive capacity exists.
    - Downside design depends on country circumstances; ideally capped so social spending would not be cut and could be accommodated by an increase in the deficit up to the cap (consistent with debt sustainability) or by reallocation of expenditures.
    - Beyond the cap, authorities would need to fill the gap with domestic resources to prevent an excessive decline in social and other priority spending.

### DOCUMENTATION, SURVEILLANCE, AND COLLABORATION (summary of related guidance)
- Documentation:
  - Staff should identify the size of on- and off-budget spending in program documents and present in a table whenever feasible.
- Surveillance:
  - Early and sustained engagement on social safeguard issues in surveillance helps prepare for program design and capacity development needs.
- Collaboration and capacity development:
  - Work closely with development partners (World Bank, UN agencies, regional development banks, bilateral donors) and civil society to draw on expertise, analytical work, and data to strengthen social safeguards and implementation capacity.

*International Monetary Fund*

### 13.      The floor on social and other priority spending is usually established as an indicative

### pp061418social-safeguards-guidance-note - 13.      The floor on social and other priority spending is usually established as an indicative

### Conditionality: Indicative Targets (IT) versus Performance Criteria (PC)
- ITs are usually used to set the floor on social and other priority spending.
- An IT is assessed in the context of overall program performance, including progress at addressing poverty.
- A waiver is not required if the IT is not observed.
- Staff actions when an IT is missed:
  - Seek to understand why the target was missed.
  - If missed repeatedly, revisit the design of the IT and discuss implementation weaknesses.
- If a country cannot effectively monitor social and other priority spending and hence an IT cannot be established, program documents should:
  - Explain why an IT cannot be established.
  - Include measures to build the necessary capacity.
- If improvements in the quality of social spending could be associated with lower spending levels, program documents should explain the circumstances.
- PCs can be used when necessary for effective monitoring of the program:
  - If a PC is missed, the authorities must request a waiver of non-observance and undertake corrective actions unless the deviation is minor or temporary.
  - Measures to avoid recurrence should be discussed and agreed with authorities.
  - PCs should not be used if there are concerns about data quality.
  - An IT can be converted into a PC during the program if data are adequate and social conditions warrant closer monitoring.
- Footnote context: ITs and performance criteria refer to conditionality under the ECF- and SCF-supported programs. For the PSIs the discussion refers to Assessment Criteria (ACs) and quantitative targets. For the RCF, the discussion refers to informal monitoring targets if these are set by the member to build a track record. (Reference number: 19)

### Structural Conditionality
- Well-designed structural measures can protect poor and vulnerable groups in the short term and strengthen social safety nets in the medium term.
- When program conditionality involves eliminating energy subsidies or tax hikes (notably indirect taxes), programs should include mitigating measures.
- Savings from subsidy elimination should be used, to the extent possible, to introduce or strengthen social safety nets.
- If a country lacks social protection programs to channel assistance, the program should seek to establish measures to develop such social assistance, with help from DPs.
- Appropriate phasing and sequencing of reform measures is essential; implementation can take time (Box 3 referenced for best practices).
- Structural social safeguards measures are usually established as commitments in the Memorandum of Economic and Financial Policies (MEFP) or as structural benchmarks.
- They can be included as prior actions when upfront implementation is instrumental to program success.
- Other policy objectives and commitments, including specific timelines, can be articulated in the Letter of Intent/MEFP.

### Surveillance: Article IV and Early Engagement
- The core objective of Article IV surveillance—to assess domestic and external stability—applies to LICs.
- Macro-social issues such as poverty, unemployment, and gender inequality are often critical for domestic stability in LICs; staff should analyze these during Article IV consultations and provide advice on social safeguards where relevant. (Reference number: 20)
- Early engagement on social safeguards through Article IVs helps authorities prepare policies and programs to protect vulnerable groups for prompt implementation during fiscal adjustment programs.
- A clear diagnostic of major social issues is essential for effective policy advice.
  - Staff should draw on DPs to understand key macro-social challenges and interlinkages.
  - Country-specific analysis and prioritization are crucial.
  - Filling data gaps and strengthening data collection is often required to improve reporting and analysis.

### Topics for Policy Discussion (tailored to country circumstances)
- Adequacy of existing education, health, and social protection systems:
  - Assess risks of contingent liabilities if safety nets are inefficiently managed or underfunded.
  - Use technical assistance to advise on establishing and strengthening programs.
  - Complement reforms such as domestic resource mobilization, tax efficiency, and PFM strengthening.
- Fiscal sustainability and distributional impact analysis:
  - Social safeguards design benefits from ex-ante technical analysis of fiscal sustainability and distributional impact of policies (e.g., tax or fuel subsidy reforms, social protection reforms).
  - Such analysis takes time and resources—argues for work during surveillance discussions.
- Other topics: diagnostic studies on extending education, health, and social protection consistent with national development plans; analyzing education and health spending and outcomes with DP expertise.

### Collaboration and Capacity Development (CD)
- Close collaboration with DPs and other stakeholders is warranted:
  - Article IV surveillance offers an opportunity for early consultation with DPs, trade unions, and employer associations.
  - Collaboration draws on DPs’ in-depth knowledge of vulnerable groups and analytical frameworks/tools.
  - Coordinated CD by the Fund and DPs can help authorities address weaknesses in social spending.
- In program contexts where analytical work must be rapid, staff can use analytical methods and tools developed by other institutions to assess spending forms that most impact the poor.
- Structural measures that establish adequate reporting, tracking, and monitoring systems and/or strengthen social protection systems can benefit from other institutions’ expertise.
- CD is crucial:
  - For countries with nascent or weak social protection systems, staff should identify CD needs and strive to ensure coverage by the Fund or DPs.
  - Closing data gaps that hinder tracking and monitoring of quantitative conditionality, and assessment of programs/policies, is particularly beneficial.

### Box 2: Documentation Guidelines (summary of required documentation practices)
- Social safeguard issues and design/implementation of relevant measures should be thoroughly discussed with authorities and consistently documented in staff reports.
- Policy-relevant points in main text; technical details in annexes.
- Program and surveillance documents should:
  - Analyze social safeguard issues; take stock of social and other priority spending and existing safety nets; identify safeguards gaps; explore social and distributional impact in context of debt sustainability.
  - Refer to engagements with authorities, DPs, and external stakeholders; highlight key achievements.
  - Refer explicitly to relevant DP studies and indicate timelines if analysis is ongoing.
  - Explain how capacity constraints or data gaps are being tackled, even if medium-term or requiring CD.
- Program request documents should:
  - Explain how social safeguard measures support national poverty reduction priorities and the authorities’ strategy to achieve the SDGs.
  - Spell out the link between program design, conditionality, and social safeguards, especially when not obvious.
- Program request and review documents should:
  - Explain process for defining social and other priority spending; note population segments covered under conditionality; identify methodologies guiding what constitutes social spending.
  - Ensure the Technical Memorandum of Understanding (TMU) clearly defines social and other priority spending and any adjustors.
  - Discuss trade-offs in defining priorities and how other priority spending helps deliver national poverty reduction strategy and SDGs.
  - Explain whether fiscal adjustment adverse effects have been effectively mitigated and if vulnerable groups have been protected.
  - Establish TMU reporting requirements for relevant social spending data and monitor spending efficiency via intermediate social objectives (e.g., school enrollment rate, access to health services, social protection coverage).
  - Explain how financial resources for social and other priority spending will be made available (budget or donor support).
  - Discuss design and monitoring challenges (data gaps, tracking systems, capacity, financial resources, presence of safety nets).
  - If quantitative conditionality cannot be established due to data gaps, explain why and how challenges will be addressed by building capacity and strengthening PFM.
  - If improvements in quality of social spending could reduce volume, provide elaboration.
- Program review documents should:
  - Explain realized outcomes and corrective measures in response to missed ITs and PCs.
  - When quantitative conditionality is repeatedly missed, explain why and propose redesign as needed.
  - Justify proposed changes to conditionality on social safeguards, including if quality improvements could reduce overall spending.

### Box 3: Good Practice Examples (high-level takeaways)
- Design ITs so all elements of social and other priority spending are clearly defined, targeted, and country-specific.
- Examples show defining pro-poor spending across education, health, social safety nets, agriculture, rural development, potable water, electrification, and other targeted programs.
- Complement spending targets with social safeguard reforms when subsidy or tax reforms are likely to adversely affect vulnerable groups.
  - Use savings from subsidy elimination to strengthen social protection.
  - Prefer targeted cash or near-cash transfers to compensate vulnerable groups for energy subsidy removal.
  - Phase out subsidy reforms gradually and strengthen social protection at program design stage.
- Good practice includes analyzing existing safety nets, incidence of poverty and inequality, and working with WB and other DPs for targeting and coverage analysis.
- Surveillance good practices include analyzing social safety net programs’ impact and discussing reform plans, often with DP assistance and use of modeling tools (examples cited from various country cases and model use).

### Box 4: Research, Tools, and Data on Social Safeguards (summary)
- IMF and DPs provide research products and analytical tools to analyze social safeguard issues; list is illustrative, not exhaustive.
- Inequality and distributional analysis:
  - 2018 IMF guidelines: How To Operationalize Inequality Issues in Country Work.
  - Macro-structural Policies and Income Inequality in Low-income Developing Countries (2017).
  - General equilibrium model developed with DFID to analyze macroeconomic and distributional impact of policies.
  - FAD analytical work: Inequality and Fiscal Policy (2015); Fiscal Monitor Chapter on Tackling Inequality (2017).
- Social protection systems:
  - FAD develops templates/tools for policy dialogue, distributional analysis of subsidy reforms, pension fiscal sustainability, and long-term pension/health projections.
  - Toolkits and databases for energy subsidy reform available on FAD’s energy subsidy reform website.
  - FAD publications: The Economics of Public Health Care Reform in Advanced and Emerging Economies (2012); Energy Subsidy Reform (2013); Equitable and Sustainable Pensions (2014).
- World Bank resources:
  - Poverty and Social Impact Analysis (PSIA) and Safety Nets How To; WB 2012–2022 Social Protection and Labor Strategy.
  - Publications: The State of Social Safety Nets (2018); Reducing Poverty and Investing in People: The New Role of Safety Nets in Africa.
  - Research on targeting: A Poor Means Test? Econometric Targeting in Africa (2016); Safety Nets in Africa: Effective Mechanisms to Reach the Poor and Most Vulnerable (2015).
  - Energy Subsidy Reform Assessment Framework and education/health Service Delivery Indicators.
- Interagency Social Protection Assessments (ISPA):
  - Tools include Core Diagnostic instrument and tools on Public Works, Identification Systems, and Payments.
- SDG Indicators Global Database: data compiled through the United Nations system for monitoring the 2030 Agenda.
- ILO social protection platform: data, tools, research, financing and social budgeting manuals, World Social Protection Report 2017-19 with country data on coverage and program disaggregation for SDG 1.3 monitoring.

*Source: pp061418social-safeguards-guidance-note (excerpts).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2018/pp061418social-safeguards-guidance-note.pdf_