Rise in social spending under IMF programs continues, but benefits are unequal

• Author: Sanjeev Gupta; Robert Gillingham; Marijn Verhoeven, and Erwin Tiongson
• Position: IMF Fiscal Affairs Department
• Pages: 95-96

Page 95

Arecent review of data on government spending on education and health care reveals that such spending has continued to grow in countries with IMF-supported programs (see IMF Survey, March 8, 1999, page 79; February 23, 1998, page 52; and July 21, 1997, page 217). Indicators of education attainment and health status have also continued to improve. But underlying the increase in average spending are significant differences among countries and an uneven distribution of the benefits. The review, which covers 66 countries with IMF-supported programs during 1985–98, is part of an ongoing effort by the IMF to compile and analyze data on government spending in the education and health care sectors.

Average trends

Under IMF-supported programs, public spending on both education and health care has increased on average, both as a share of GDP and total spending and in real per capita terms, and social indicators have improved (see top chart, this page). Average spending growth slowed during 1998, but was not out of line with developments in earlier years. The spending increases were, on average, equally split between current and capital outlays.

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Variation in spending across countries

The averages mask substantial variation across countries and within regions. Public education and health care spending have increased in real per capita terms in just under two-thirds of the countries with IMF-supported programs. On average, the largest spending decreases in real per capita terms have taken place in countries where such spending was relatively high and inefficient at the outset of the program (most notably in transition economies).

The variation in spending trends has been especially large in sub-Saharan Africa. This region includes four of the countries with the largest declines in real per capita education spending under IMF-supported programs (the Republic of Congo, CôtePage 96 d’Ivoire, Madagascar, and Niger), as well as four of the countries with the largest increases in such spending (Burkina Faso, Cameroon, Ethiopia, and Lesotho). Both the level and the growth in spending on social sectors have been relatively low in highly indebted poor countries (HIPCs)—that is, countries that are eligible for relief of external debt under the HIPC Initiative—compared with other countries that are eligible for the...