SOCIAL DIMENSIONS OF THE IMF'S
POLICY DIALOGUE
IMF Involvement in Social Issues
IMF involvement in social issues has to be seen in the context of the IMF's mandate.
This mandate, as laid down in its Articles of Agreement, is clear: (i) to promote
international monetary cooperation; (ii) to facilitate the expansion and balanced growth
of international trade, and to contribute thereby to the promotion and maintenance of high
levels of employment and real income; (iii) to promote exchange stability and to maintain
orderly exchange arrangements among members; (iv) to assist in the establishment of a
multilateral payments system; and (v) to give confidence to members by providing temporary
financial resources to help them correct balance of payments disequilibria. Given this
essentially macroeconomic mandate, the IMF's contribution to social development is mainly
indirect, and its role in social policy advice is necessarily limited. Nevertheless, the
IMF's involvement in social issues has evolved over time, drawing not only from its own
experience but also from that of member countries and of other agencies (see Box 1).
| Box 1. Role of the IMF in the World Economy |
| The IMF--the world's central international monetary institution--has the
responsibility for carrying out effective surveillance over its members' exchange rate and
macroeconomic policies. Thus, one of the IMF's key tasks is to help countries pursue sound
macroeconomic policies aimed at sustained economic growth. It advises members on economic
and financial policies and promotes policy coordination among the major industrial
countries. The IMF also provides temporary balance of payments financing to members to
help them to correct their external payments difficulties. Financial assistance has been
provided to both developing and industrial countries to carry out economic reform and
transformation, such as the re-establishment of market economies in the countries of
Eastern Europe and the former Soviet Union, and adjustment and structural change in the
economies of Africa, Asia, and Latin America. In providing financial support, the IMF pays
attention to social aspects of economic adjustment. |
During the 1950s and 1960s, when the IMF provided financial assistance
mainly to industrial countries, its policy advice focused primarily on macroeconomic
policies. With the shift to lending to developing countries since the 1970s and economies
in transition since the late 1980s, much greater attention has been given to the
complementarity of macroeconomic policies and structural reforms and to the formulation of
policies in a medium-term context. 2 With this broadening of
focus, the interrelationships between economic and social issues have also increasingly
been recognized. The experience has shown the need for protecting vulnerable groups during
the adjustment period by constructing well-targeted social safety nets and by safeguarding
their access to basic public services, such as primary health and education. These
measures would also serve to enhance the political sustainability of economic reforms.
The broader context for the IMF's policy advice has called for much closer
collaboration than in the past among international agencies, with a delineation of
responsibilities according to each agency's mandate and expertise. Much of the analysis
and policy and technical advice on social issues is undertaken by international agencies
other than the IMF, such as the World Bank, regional development banks, the FAO, the ILO,
the UNDP, and UNICEF, as well as by bilateral donors and nongovernmental organizations.
The issues are complex, and analysis and action are often hindered by weaknesses of data
and administrative structures; given the difficulties, it has been important that the
various parties build not only on their own experience but also on that of members and
other agencies.
In its policy advice to member countries, the IMF is constrained not only by resource
limitations and its general focus on macroeconomic policies but also, at times, by member
countries' difficulties in developing domestic political support for improving social
spending policies and their targeting. Notwithstanding the IMF's role in advising
governments on policy design, the choice of social and economic policies belongs
ultimately to the member.
The increasing involvement of the IMF in social matters has been discussed by its
Executive Board on several occasions. In 1988, for example, the Board stressed the need to
assist member countries to evaluate the implications of IMF-supported adjustment programs
for income distribution and poverty, to strengthen the staff's understanding of the
channels through which adjustment policies affect the poor, and to draw more extensively
on the expertise of the World Bank and UN institutions. At the same time, it reaffirmed
its decision not to establish conditions on the use of IMF resources related to income
distribution. The joint World Bank-IMF Development Committee, which also has discussed
social issues, has encouraged both the World Bank and the IMF to further intensify their
efforts, working closely together, to help design and implement well-targeted measures to
mitigate the costs of adjustment.
Footnotes
2 The IMF created new facilities that emphasized structural
reforms set in a medium-term context: the extended Fund facility in 1974, and two
concessional lending facilities--the structural adjustment facility (SAF) in 1986, and the
enhanced structural adjustment facility (ESAF) in 1987--for the benefit of low-income
countries. The latter facility was extended and enlarged in 1993.
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