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The IMF admits “narrow focus on poverty targeting,” but workers see “no clear change in policy”


The IMF social spending view has impacted on social protection in MongoliaThe IMF commented on its pushing of poverty-targeting of child benefits in Mongolia

The IMF has acknowledged it has had an “overly narrow focus on means-tested targeting” in social protection and that life-cycle benefits have some advantages.
The details of the new IMF social spending strategy, announced by Christine Lagarde in a speech at the ILO, suggest shifts in the advice offered on both social spending levels and on the use of poverty-targeting.
The strategy says that advice on social spending should be provided where this is “macro-critical,” which it says is the case for the majority of countries.
The document goes on to say that such advice should consider “the adequacy” of such spending, as well as its efficiency and fiscal sustainability. It points to how, on average, only a small fraction of the poorest 20% currently are covered by social protection in low- and middle-income countries.
It also acknowledges its “overly narrow focus” on poverty-targeting when it comes to social protection, and points to how many nations do not have the capacity for “perfect targeting,” and should therefore consider life-cycle benefits. And it admits in a case study on its engagement on social protection in Mongolia in which it pushed for the targeting of universal child benefits introduced by the Government — as Development Pathways highlighted last year — that “a lesson” from this case was a “consideration of authorities’ objectives and preferences is paramount”.
However, the IMF social spending strategy’s accompanying background paper says that there are advantages and disadvantages to both targeted and universal social protection and comes to no firm conclusions.
It emphasises that “what matters” is the mix of tax and social protection policies that together have the biggest redistributive impact, and says “even the use of regressive taxes to finance progressive transfers can achieve significant redistribution”. And it declares that “uniform benefits for children up to five years are very progressive” and underlines — agreeing with Development Pathways experts — that “to build middle-class policy support may make targeting of transfers just to the poor undesirable”.
On the other hand, the background paper also warns that life-cycle benefits — which it calls ‘categorical targeting’ — will likely mean accepting lower transfer values, and will furthermore have “targeting errors”. Not all of those in the deepest poverty have children or older persons, and not all with children or older persons are in extreme poverty, it argues.
Lagarde hailed the strategy as an important step for securing “inclusive growth,” and said she was determined to reduce inequality, as this undermines sustained growth.
However, the IMF’s strategy, in weighing up the pros and cons of targeting, does not, in the view of the International Trade Union Confederation, represent “a decisive step to align the IMF with the goal of social protection for all”. ITUC General Secretary Sharan Burrow commented: “The IMF view remains focused on social assistance, generally targeted at the poorest.”
While the IMF had acknowledged the difficulties of narrow-targeting in the strategy, Burrow said, this recognition “does not result in a clear change in policy”. The IMF has continued to argue for the shrinking of social spending, impeding the ability of states to deliver on their commitment to deliver adequate, comprehensive social protection systems consistent with ILO standards, the statement said.
She added: “The institutional view is thin on details about essential forms of social protection beyond assistance, such as pensions.”

The IMF Social Spending Strategy is available here. Development Pathways is sharing our skills on developing the case for inclusive, life-cycle benefits in a new training course.


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