Government policies matter when it comes to public health. And when a country’s economy is suffering a severe economic crisis, the decisions become even more critical. Over the past few decades, protecting social programs and spending on health has been a cornerstone of the IMF’s support for countries.
All too often we hear the claim that the programs the IMF supports in low-income countries hurt the most vulnerable by forcing cuts in social spending. This is a misconception. Our study concludes that, contrary to these claims, IMF-supported programs boost education and health spending in low-income countries for as long as countries are engaged with the IMF.
We’ve released a new paper earlier this week assessing the effectiveness of IMF-supported loan programs in combating the crisis in emerging markets. Although it is a bit early to be evaluating these programs, “real-time” cross-country reviews are important. In today’s blog, I want to pick up a few takeaways from our latest review.
First, there is the sheer scale of the challenges the program countries, and the IMF, have faced. In Chart 1 below, each bubble is a Fund program—its size being the amount of lending and the vertical distance being the GDP loss associated with the crisis. You can see how, after a few quiet years while emerging markets boomed, the crisis hit hard: multiple simultaneous crises involving severe output crashes, and massive Fund financing. From our perspective at the IMF, it’s been quite a challenge to manage all these new programs, some of which were put in place within weeks of the crisis hitting. (click on each chart for a larger image)