Pro-Poor Macroeconomic Policies Require Poverty and Social Impact Analysis

The IMF's PRGF is supposed to provide policy flexibility based on a PSIA of the targets it imposes. In practice, PRGF programmes have failed to incorporate this objective. Increasingly, this is leading to public embarrassment for the Fund such as that which followed revelations about limits on teacher recruitment and retention in Zambia and Honduras. This article argues that the IMF continues to use a rigid economic model that fails to recognise the existence of different macroeconomic policy options. Considerable work is going on outside the IMF on developing techniques for such analysis. Unless the IMF takes more concrete steps to ensure policy flexibility and adopt PSIAs, its commitment to poverty reduction will become rapidly discredited. Copyright Overseas Development Institute, 2005.