Implications of fund-supported adjustment programs for poverty

The social implications of adjustment programs— particularly those supported by the Fund-have re ceived increasing attention in recent years, as reflected in numerous theoretical and empirical studies.' The effect of adjustment policies on income distribution in general, and on the living standards of the poor in particular, is important for all parties concerned. The distributional implications of Fund-supported adjust ment programs may vitally influence their viability and acceptability. Implementation of adjustment measures that are perceived to be detrimental to the poor may not only jeopardize a current adjustment program but may also deter governments from embarking on such programs in the future.

At the same time, the question of the distributional implications of adjustment programs is complex. Many conceptual and practical difficulties impede definitive empirical analyses of the distributional implications of the macroeconomic objectives, targets, and policy instruments of an adjustment program, particularly as they relate to the poor. Purely macroeconomic policy instruments may affect poverty through diverse chan nels that cannot be readily specified. Moreover, there are many related questions. Do the short-run and long run objectives of a program or the direct and indirect effects of program policies necessarily conflict with each other or with the distributional objectives? Are there conflicts in the realization of the equity and efficiency objectives of an adjustment program?