World Bank treatment of the social impact of adjustment programs

Since 1987 the Bank's operational guidelines have required President's Reports supporting structural adjustment loans (SALs) to pay particular attention to an analysis of the short term impact of the adjustment program on the poor and to measures proposed to alleviate negative effects. The authors review how SAL President's Reports prepared between July 1986 and December 1988 have addressed the social impact issue. The authors find that most efforts to address this issue have focused on targeted projects, including special employment programs, nutrition projects, resettlement projects, and credit, severance pay, and retraining projects for displaced workers. By contrast, there has been little analysis of the impact of the chosen policy mix on major sub-groups in poverty. Design modifications other than reallocations of social expenditures, have received relatively less attention. For example, the composition, incidence, and effectiveness of public expenditures and their implications for reducing poverty have not generally been examined. In preparing for adjustment operations, Bank staff should explore policy choices that eliminate economic distortions in a way that creates a basis for a more equitable pattern of long-term growth. To the extent that some adjustment measures may hurt the poor in the short term, this should be mitigated through appropriate modifications in SAL design and carefully designed targeted projects.