IMF's new Strategy for Engagement on Social Spending
review by Barry Herman
Four years have passed since the International Monetary Fund adopted a new Strategy for Engagement on Social Spending that was meant to increase the support that IMF gives to national policies on social protection, health and education. The Fund interprets this as instructing its staff to focus on the adequacy, efficiency and sustainability of social programs when they can affect macroeconomic conditions (are “macro-critical”) in member countries. The staff make their judgments during annual assessments of macroeconomic conditions in individual countries or when devising policy adjustment programs with countries that need to work toward recovery from macroeconomic crises. One way to assess how the new strategy is being implemented is to look for changes in IMF advice and the policy requirements for IMF loans. Results so far have not been encouraging, although it is still early. Another way is to examine the guidance that IMF gives its staff when they go on country missions. This paper takes the latter approach. While the IMF has not issued a formal guidance note to staff as of 2023, it has published two interim guidance papers that give insight into the strengths and weaknesses of IMF thinking on how to implement its strategy. This paper supports some aspects and takes issue with other aspects of the guidance thus far given.
Discussion on the “IMF's strategy on social spending facing austerity: new direction or bandaid?”
Civil society organized a discussion with the IMF on the IMF's new policy on social spending. The event took place on 12th April at the Civil Society Policy Forum (CSPF) during the 2023 International Monetary Fund - World Bank Group Spring Meetings.
Civil society organizations expressed their concern that spending on social protection, health and education is still not given sufficient priority in government budgets. They fear conditionality in IMF country programs will continue to negatively impact essential social spending. Questions were discussed: how should IMF and other international agencies, labor movements and CSOs each work to enhance and protect national social spending programs? And, how might international cooperation be strengthened to assure more adequate, efficient, universal and sustainably financed social protection and social services in all countries.
The event was co-organized by the Global Coalition for Social Protection Floors (GCSPF), Bretton Woods Project, Human Rights Watch, International Trade Union Confederation (ITUC), Kvinna till Kvinna Foundation, NGO Committee on Financing for Development, Oxfam International, Social Justice in Global Development, Social Policy Initiative (South Africa).
Moderator was Alex Campbell, International Trade Union Confederation (ITUC)
• Rodrigo Cerda, Division Chief, Expenditure Policy Division, Fiscal Affairs Department, International Monetary Fund (IMF). (Download presentation)
• Shahra Razavi, Director, Social Protection Department, International Labour Organization (ILO)
• Alexander Kentikelenis, Oxfam International. (Download presentation)
• Ahilan Kadirgamar, Senior Lecturer, Department of Sociology, University of Jaffna, Sri Lanka. (Article "IMF, Austerity and Social Protection" (pdf version), Daily Mirror, April 17, 2023.
Download bios here.
Civil Society Training Manual on Public Financial Management for Social Protection
SocDevJustice members Gemman Adaba and Barry Herman drafted a Civil Society Training Manual on Public Financial Management for Social Protection.
This manual on PFM is part of the programme Improving Synergies Between Social Protection and Public Finance Management (SP&PFM) which provides medium-term support to multiple countries aiming to strengthen their social protection systems at a national level and ensure sustainable financing. Funded by the European Union (EU), the initiative is implemented jointly by the International Labour Organization (ILO), Unicef, and the Global Coalition for Social Protection Floors (GCSPF), in collaboration with national partners and EU Delegations in each country.
COVID-19 spurred health, social and economic crises that hit developing countries the hardest. The pandemic deepened development and inequality challenges and erased years of progress on poverty reduction and women’s rights. Countries continue to face fallen revenues, lower foreign exchange earnings and higher fiscal and debt burdens. Many of these countries cannot afford expenditures vital to bring the pandemic under control, increase social protection to survive lockdowns and prepare to recover with equity and resilience. Of the trillions spent on stimulus packages around the world so far, wealthy countries account for 88 percent, while developing countries account for the rest.
A multilateral solution is needed. One that will not push low- and middle-income economies into further debt distress. To that end, we ask that you urgently support a new allocation of IMF Special Drawing Rights (SDRs) in the amount of US$3 trillion. We believe that an allocation of this size is required to address the real needs in a decisive and sustainable way. In 2009, the international community responded to a crisis of much smaller scope and proportions with an allocation of US$250 billion in Special Drawing Rights. This initiative had a significant role in restoring market confidence and supporting global recovery. Last year, even before the scale of this crisis was clear, IMF estimates placed emerging economies’ financing needs at US$2.5 trillion.
A new and significant allocation of SDRs would enable countries to boost reserves and stabilize economies, helping to minimize other economic losses. It would free up funds urgently needed for the pandemic response, including gender-responsive public health systems, universal social protection and comprehensive vaccine rollouts. It would also provide much-needed foreign exchange resources to countries whose capacity to earn them continues to be severely constrained in the short to medium term. SDRs do not add to countries’ debt burdens, promote debt sustainability and do not represent a loss for anyone – only a gain. Importantly, they would provide a liquidity injection with economic stimulus benefits worldwide.
So far, the international financial response to the pandemic crisis fails to uphold the standard of solidarity we all should expect in the face of such threat. A new SDR allocation would send a strong signal of renewed multilateral coordination that puts life first and is within your immediate reach. We ask for your leadership in ensuring the international community rises up to this historic moment to do what is needed. See signatories of the letter here >>>
Read the letter here in English
Lea la carta aqui en Español
Lire la lettre ici en Français
On 18 November 2019, SocDevJustice joined over 40 civil society organizations in collectively signing a letter that is being sent to all the ambassadors to the United Nations urging their countries to support proposed reforms of how sovereign debt crises are addressed internationally. While the specific reform proposals are far from consensus at this moment, the letter also calls upon the United Nations to begin an intergovernmental and multi-stakeholder set of discussions under its Financing for Development Follow-Up Forum to strengthen the multilateral framework to prevent and resolve sovereign debt crises. See and download the statement here >>>
Can we simultaneously create incentives for governments to sustainably finance adequate and fair social protection floors and internationally assure they will have the fiscal resources to meet the need for social protection expenditures during economic or natural crises? A new paper by Barry Herman from The New School in New York proposes such a policy initiative that would involve automatic emergency financing and/or debt relief for countries maintaining sustainably financed social protection floors that rely on adequate and appropriate taxation. It builds on existing policies and international policy priorities, involving several modest amendments to existing policies that together would amount to a major policy initiative. The proposal is offered for discussion. See and download the paper here >>>.
The thinking behind the proposal began with a presentation at a conference organized by the London School of Economics and the International Monetary Fund in November 2018. A brief video by the author of the paper is available here: https://www.youtube.com/watch?v=2y7MIZImwh4&feature=youtu.be .
Following up on the interest that SocDevJustice has taken in promoting universal social protection floors by focusing on issues in their financing, Barry Herman wrote a paper for the Civil Society network "Global Coalition for Social Protection Floors", of which SocDevJustice is a member. It was published by Brot fuer die Welt in April 2018 as "Sustainably Financing Social Protection Floors Toward a Permanent Role in National Development Planning and Taxation". See and download paper here >>>.
Importantly, in 2017, the Independent Evaluation Office (IEO) of the International Monetary Fund prepared a critical assessment of IMF involvement in social protection policy issues, especially in the context of the typical negative impact on social protection programs when countries approached the IMF for assistance in recovering from macroeconomic crisis situations.
See document including background papers here >>> https://ieo.imf.org/en/our-work/evaluation-reports/Completed/2017-0724-the-imf-and-social-protection.
The IMF responded to the IEO report by undertaking a year-long reflection in 2018 on what its role should be regarding social protection expenditures and their financing in its annual macroeconomic surveillance of IMF member countries and when IMF is called upon to assist countries come out of crises.
The review was meant to lead to the adoption of an "institutional view" on the role of IMF in social protection, which is to be followed by a guidance note for IMF staff going on country missions. IMF anticipates presenting the "institutional view" paper to its Executive Board in May 2019.
IMF has sought the views of stakeholders in its process of reflection and SocDevJustice in this regard has contributed as joint author of a paper prepared for the Global Coalition for Social Protection Floors. It was circulated to IMF Executive Directors and senior staff in January 2019.
CSO session at the Civil Society Forum at the IMF/World Bank Annual Meetings
The NGO Committee on Financing for Development, Social Justice in Global Development, Brot für die Welt, and the Virginia Gildersleeve International Fund jointly organized a session on financing universal social protection in developing countries at the Civil Society Forum of the 2017 Annual Meetings of the International Monetary Fund and the World Bank.
Governments at the United Nations agreed in May 2017 to discuss aspects of the financing of “social protection systems and measures, including floors” during the next meeting of the Financing for Development Follow-up Forum, which will take place in New York on 23-26 April 2018. This would be the first opportunity for a broad, intergovernmental discussion of policy experiences and needs regarding the financing of social protection and it seemed important to the organizers of this civil society session at the Fund/Bank Annual Meetings to alert the development community to this upcoming event. To this end, the session brought together senior representatives of the International Labor Organization, the International Monetary Fund, the United Nations and the World Bank, as well as a representative of the civil society Global Coalition for Social Protection Floors.