IMF Watching Out for Poor in Crisis Loan Talks

• Author: Michaela Schrader
• Position: IMF External Relations Department
• Pages: 191

Page 191

In loan negotiations with countries hit by the financial crisis, the IMF is encouraging governments to maintain or develop social safety nets for the poor even as they adjust to the harsher environment of the economic downturn, IMF Managing Director Dominique Strauss-Kahn says.

Speaking in Paris to a meeting of parliamentarians from around the world on November 20, Strauss-Kahn said that the IMF was helping countries affected by the crisis with policy advice and lending to those that needed balance of payments support.

The IMF has recently announced loans to Hungary, Iceland, Pakistan, and Ukraine and is also in talks with several other countries affected by the global crisis.

In a speech and subsequent question-andanswer session with the group of 170 parliamentarians, Strauss-Kahn said that the IMF was trying to limit the conditions attached to its loans to terms that were essential for resolving the country's immediate economic difficulty.

Often in the past, the IMF had included conditions that were felt desirable for the country's prospects, but were not necessarily directly related to the achievement of objectives set under the program.

The IMF was also trying to ensure that economic adjustments agreed with governments in response to the crisis would take into account the impact on the poor and most vulnerable.

"The Fund is trying to implement what I call 'social conditionality'-helping countries develop or maintain safety nets for segments of the population that may be affected by an IMF program," Strauss-Kahn said. "The IMF intervenes when things aren't going well, so reform measures will inevitably be unpleasant. But we have to make sure that these measures affect as little as possible the poorest and most vulnerable populations."

As part of the $16.4 billion loan package for Ukraine, for example, the government envisages an increase in targeted social spending amounting to 0.8 percent of GDP to shield vulnerable groups.

In the Pakistan program, expenditure on the social safety net will be increased to protect the...