The IMF and Human Development : A Dialogue with Civil Society

Michel Camdessus

• Publisher: INTERNATIONAL MONETARY FUND
• eBook ISBN:
  9781557758903
• Year: 2000

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The IMF and Human Development: A Dialogue with Civil Society

1. How are development concerns—and, in particular, poverty reduction—addressed in IMF programs? How does the IMF intend to engineer economic growth and have the poor benefit from its programs?

There is absolutely no doubt that poverty—and inadequate health care and education—not only offend human values, but also represent wasted human potential that is immensely costly to development. But it is clear that the best solution to poverty, and the only lasting solution, is through economic growth—sustainable, equitable growth as a means to improved living standards and a better society, with less poverty, better health, and better education.

Having said that, we must keep two things in mind. First, each country’s development priorities are unique. The degree of emphasis that a government chooses to place on the different items of its development agenda varies across countries. Second, the reform programs that the IMF supports are not directed at a specific policy agenda. Rather, they are directed at creating the conditions conducive to the realization of members’ development goals and objectives. In other words, our principal aims are to assist in the creation of a policy framework that makes possible sustainable, high-quality growth.

Consequently, it should not surprise you to hear that the IMF’s assistance is extended in the context of its concerns for policy—macroeconomic and structural. Economic growth and development can only take place in a stable macroeconomic environment; it is toward the creation of such a stable environment that the IMF focuses its activities, by assisting in the formulation of sound and appropriate policies regarding the budget, the amount of money in circulation, the value of the currency, and the quality of government spending. IMF assistance is provided through a consultation process and through financial and technical assistance in support of economic programs.

In the more than half-century of the IMF’s existence, we have learned and shared several valuable lessons about the value for economic growth of price stability, of high saving and investment, and of directing scarce resources to their most productive uses. We have also learned that good economic policies—prudent monetary, fiscal, exchange rate, and trade policies—are truly compatible with a country’s meeting its basic needs for health care, education, and social services. Good social policy depends on good economic policy. Let me elaborate:

• Creating an environment of low inflation and steady growth is of tremendous benefit to the poor—for it is they who are most likely to lose their livelihoods during economic downturns and who are least able to protect the real value of their incomes and savings during periods of high inflation. Reducing inflation—one of the goals of monetary policy—is therefore critical to establishing and maintaining an environment conducive to saving and investment, so crucial for employment creation and a better life. No wonder, for instance, that in the two years following the adoption of the courageous Real Plan in Brazil, more than 10 million people were able to rise above the poverty line.
• Ensuring that government’s demands on the resources available to the economy are kept within reasonable bounds is also critical to establishing a healthy economic environment. This is the role of fiscal policy. But it is not only quantities that warrant our attention; the quality and composition of fiscal spending can have profound and direct effects on poverty alleviation and economic growth. This is why the policy emphasis of IMF-supported programs has increasingly focused on reducing unproductive spending, including military spending; and reallocating spending to activities that are most beneficial to the poor, such as basic health care, primary education, housing, and other critical investment. We are also aware of the need to pay more attention to the efficiency and effectiveness of spending within priority sectors. This means, for example, that primary education should not be underfunded relative to higher education. Public health spending should likewise not be skewed toward large urban hospitals at the expense of rural health programs.
• For many countries, exchange rate policy also bears directly on social issues. An overvalued exchange rate is likely to have a negative effect on the incomes of the rural poor who depend on agricultural exports. The experience of the 14 countries of the CFA franc zone is striking. Since January 1994, when the overvalued CFA franc was devalued, with appropriate accompanying policies, the economic performance of these countries has been transformed. After many years of stagnation, they have been experie...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• The IMF and Human Development: A Dialogue with Civil Society