Although the International Monetary Fund (IMF) claims that poverty reduction is one of its objectives, some studies show that IMF borrower countries experience higher rates of poverty. This paper investigates the effects of IMF loan conditions on poverty. Using a sample of 81 developing countries from 1986 to 2016, we find that IMF loan arrangements containing structural reforms contribute to more people getting trapped in the poverty cycle, as the reforms involve deep and comprehensive changes that tend to raise unemployment, lower government revenue, increase costs of basic services, and restructure tax collection, pensions, and social security programmes. Conversely, we observe that loan arrangements promoting stabilisation reforms have less impact on the poor because borrower states hold more discretion over their macroeconomic targets. Further, we disaggregate structural reforms to identify the particular policies that increase poverty. Our findings are robust to different specifications and indicate how IMF loan arrangements affect poverty in the developing world.
No surprises obviously but I had no clue “stabilisation reforms” were a thing:
stabilisation reforms and their disaggregated conditions appear to have limited impact on poverty. Although stabilisation policies including cutting government spending, raising interest rates, and repaying debts cause economic pain, the IMF sets broad targets on macroeconomic indicators linked to stabilisation reforms, providing the borrower more policy discretion relative to structural reforms
I had always only heard of structural reforms which mostly include removing government intervention and privatisation of public services which, to no one’s surprise, increase poverty and inequality.
No surprises obviously but I had no clue “stabilisation reforms” were a thing:
I had always only heard of structural reforms which mostly include removing government intervention and privatisation of public services which, to no one’s surprise, increase poverty and inequality.
I’m not quite sure what they mean by stabilisation reform, but at fist pass it seems to be just rearranging chairs on the austerity Titanic .
Seems to be similar to structural reforms just not as coercive.