Social Dimension of Adjustment: World Bank Experience, 1980-93

Abstract

This comprehensive study by the Bank's independent Operations Evaluation Department looks at all the evaluated adjustment operations supported by the Bank in 1980-93 (114 operations in 53 countries) and tracks what happened to poverty and income distribution. The findings dispel some popular myths about adjustment lending: 1) two-thirds of the 53 countries implemented the adjustment policies agreed with the Bank with a substantial measure of success. They reduced price distortions and inflation, stabilized their foreign exchange reserves, and achieved growth in income per head; 2) countries that successfully implemented adjustment reduced poverty; and 3) successful adjusters maintained or increased their social spending. The principal message of the study is that good macroeconomic policies and measures - combined with relevant sectoral policies and appropriate public expenditure allocation - provide a favorable environment for accelerating savings and investment, both necessary for sustained economic growth and poverty reduction. In all the cases studied, growth and poverty reduction have been closely related. Finally, the study confirms previous OED findings regarding borrower ownership: the most common reason why adjustment efforts fail is poor government commitment. Thus, the Bank should lend for adjustment only where governments are committed to reforms and likely to sustain them.

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