The IMF has announced the creation of a unit to work on producing Poverty and Social Impact Analysis (PSIA). This is a tool to assess in advance the likely impacts of policy reforms.

According to the Fund, the four person team will work exclusively to better understand the effect of IMF programmes on vulnerable groups – especially the poor – and to improve the quality of programme design.

The Fund’s PSIA will assess the appropriateness, timing, and sequencing of alternative measures and, where appropriate, design and integrate compensatory measures to mitigate negative effects of reform policies.

the World Bank approach to PSIA has caused considerable dissatisfaction

The group will establish a repository of information on existing PSIAs and analyze their relevance for the design of loan programmes.

Meeting with NGOs at the Spring Meetings, Sanjeev Gupta, the head of the Fiscal Affairs Department where the group will operate, conceded that PSIA implementation had been uneven and better integration in Fund programme design was needed.

A letter from Oxfam, Trocaire and other NGOs in April welcomed the decision to set up the unit, but warned that the Fund must set out transparent principles of operation, such as guaranteeing the inclusion of social development specialists, involving country authorities and civil society from the beginning of studies; and exploring policy options, not simply focusing on designing safety nets for pre-determined reforms. These steps are necessary if the Fund is to avoid “the problems encountered with the World Bank approach to PSIA which has caused considerable dissatisfaction amongst stakeholders”.

Much more needs to be done if PSIAs are to be mainstreamed within Bank and Fund operations. Bank vice president for infrastructure, Minouche Shafik conceded “never having come across PSIA” when asked about it at a meeting with UK NGOs in May.