{
  "title": "Forging a Stronger Social Contract—the IMF’s Approach to Social Spending",
  "publication": "IMF News, June 14, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/06/14/sp061419-md-social-spending",
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  "summary": "Social spending is a core component of the social contract and must take its rightful place in macroeconomic policy discussions, said IMF chief Christine Lagarde at the International Labour Organization in Geneva.",
  "authors": [
    "Christine Lagarde"
  ],
  "publishDate": "2019-06-14",
  "sections": [
    {
      "heading": "Social Spending—a Key Policy Lever",
      "content": "- Definition: social spending = social insurance, social assistance, and public spending on health and education.\n- Core assertions:\n  - Social spending is a core component of the social contract and must be central to macroeconomic policy discussions.\n  - Public pensions, health care, and primary and secondary education are vital to well-being, social cohesion, and enabling citizens to reach their potential.\n  - Inclusive growth underpinned by social spending provides social and political buy-in for growth-supporting policies and builds trust.\n- Drivers and challenges motivating greater social spending:\n  - More retirees, fewer workers.\n  - The effects of technology on work and wages.\n  - Rising inequality and demands for greater fairness.\n  - Barriers to women participating in the economy and realizing their full potential.\n  - The existential threat of climate change.\n  - Diminishing trust, rising discontent, and a turn away from global cooperation.\n- Public sentiment:\n  - Surveys indicate rising public support for income redistribution policies in many countries.\n- Policy takeaway:\n  - Social spending is one of the most important levers to respond to complex social and economic challenges and must be treated as macro-critical."
    },
    {
      "heading": "The IMF’s Strategy on Social Spending",
      "content": "- Strategic intent:\n  - The IMF has published a new strategy on engaging in social spending issues to guide more consistent, higher-quality policy advice and country engagement.\n- Empirical findings and analytical points:\n  - Research shows high inequality can undermine sustained growth.\n  - Public investment in health and education boosts productivity and growth, and reduces inequality of opportunity and income.\n  - Social spending programs that redistribute from higher-income to lower-income groups can decrease poverty and inequality and increase household resilience to economic shocks.\n- Country-level diagnostics and engagement:\n  - The IMF brings together 189 of the nations of the world in its work.\n  - Four out of five IMF mission chiefs view social spending as “macro-critical” in their countries.\n  - Nearly half view social spending as essential to socio-political stability and investing in people.\n- Examples of IMF country engagements:\n  - Ghana: helped create fiscal space to increase spending on public education to achieve universal secondary education.\n  - Japan: helped develop options for pension reform in an aging society.\n  - Cyprus: helped strengthen the social safety net during a severe crisis, including introduction of a new guaranteed minimum income program.\n  - Jamaica: supported expansion of social assistance programs during a period of belt tightening.\n- Fiscal and financing work:\n  - Technical assistance to help countries raise more domestic revenue nearly doubled between 2010 and 2018.\n  - Estimated additional spending needed to finance core SDGs (health, education, and priority infrastructure): an extra 15 percentage points of GDP on average for low-income developing countries in 2030.\n- Operational principles for IMF assessment and advice:\n  - Spending adequacy.\n  - Spending efficiency.\n  - Fiscal sustainability.\n  - These yardsticks will be used to assess the “macro-criticality” of social spending.\n- Implementation roadmap:\n  - Over the next year and a half, the IMF will provide more specific guidance to staff underpinned by augmented tools and databases; ongoing analytical work; and background notes on pensions, social assistance, education, and health."
    },
    {
      "heading": "A Partnership for Success",
      "content": "- Rationale:\n  - Effective social spending policy design and implementation require collaboration across international organizations, academics, country authorities, civil society, and the private sector.\n- Consultative process:\n  - The IMF undertook a broad consultation process in developing the strategy and highlights the value of close engagement with organizations like the ILO.\n- Complementary roles:\n  - The ILO and similar organizations offer significant expertise on social spending that can help IMF teams.\n  - Civil society, academics, think tanks, and labor unions bring unique perspectives that can enrich IMF analysis and help avoid groupthink.\n- Program design principle:\n  - There is no one-size-fits-all; country preferences, challenges, and long-term aspirations differ and require tailored approaches.\n- Ethical and economic imperative:\n  - The IMF frames the obligation to the poor and vulnerable—and to achieving the Sustainable Development Goals by 2030—as both ethically right and economically sound.\n- Closing quote highlighted:\n  - Franklin D. Roosevelt: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”\n\nBy Christine Lagarde, Managing Director, IMF — Geneva, June 14, 2019.\n\n---\n\n\n References\n\n- Christine Lagarde\n- A Strategy for IMF Engagement on Social Spending\n- A Strategy for IMF Engagement on Social Spending: Background Papers\n- A Strategy for IMF Engagement on Social Spending: Case Studies\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/06/14/sp061419-md-social-spending"
    }
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    "Authors: Christine Lagarde",
    "Published: June 14, 2019",
    "Definition: social spending = social insurance, social assistance, and public spending on health and education.",
    "Core assertions:",
    "Drivers and challenges motivating greater social spending:",
    "Public sentiment:",
    "Policy takeaway:",
    "Strategic intent:",
    "Empirical findings and analytical points:",
    "Country-level diagnostics and engagement:",
    "Examples of IMF country engagements:",
    "Fiscal and financing work:",
    "Operational principles for IMF assessment and advice:",
    "Implementation roadmap:",
    "Rationale:",
    "Consultative process:",
    "Complementary roles:",
    "Program design principle:",
    "Ethical and economic imperative:",
    "Closing quote highlighted:",
    "[Christine Lagarde](https://www.imf.org/en/About/senior-officials/Bios/christine-lagarde)",
    "[A Strategy for IMF Engagement on Social Spending](https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/06/10/A-Strategy-for-IMF-Engagement-on-Social-Spending-46975)",
    "[A Strategy for IMF Engagement on Social Spending: Background Papers](https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/06/10/A-Strategy-for-IMF-Engagement-on-Social-Spending-Background-Papers-46976)",
    "[A Strategy for IMF Engagement on Social Spending: Case Studies](https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/06/10/A-Strategy-for-IMF-Engagement-on-Social-Spending-Case-Studies-46977)",
    "[Speeches](https://www.imf.org/en/News/SearchNews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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