Programs and the Poor
Not adjusting is costliest for the poor. Adjustment has costs, too, but the poor can and should be protected. Economic adjustment is a process of adapting an economy to live within its means. Whether or not it is supported by International Monetary Fund resources, it cannot be achieved costlessly. There will be temporary, adverse effects. However, the effects of economic adjustment policies and programs on the living standards of the poor are an important concern. The poor should be safeguarded, where possible, from the adverse effects these programs can have in the short-run.
Fund-supported adjustment programs have often been misunderstood and have been criticized for seeking excessive reductions in aggregate demand, resulting in unwarranted contractions of output and employment opportunities and declines in the living standards of people in poverty. Some commentators have suggested that more explicit account be taken of the effects of programs on the living standards of different socioeconomic groups in the countries undertaking these programs. Others have suggested that macroeconomic adjustment programs be designed to mitigate the adverse distributional implications of external shocks, and to improve the welfare of poverty groups.
The principal mandate of the Fund is to help its member countries to maintain, or restore, internal and external financial balance. It seeks to assist countries to achieve this balance in ways that are compatible with the achievement of sustainable economic growth yet do not intrude on a country's prerogative to make its own social choices in the process of its economic adjustment, growth, and development. The Fund has always recognized that adjustment policies have implications for income distribution and that these are important considerations for any country in the formulation of its adjustment policies.