Social Funds in Stabilization and Adjustment Programmes: A Critique

This article evaluates the impact of the large number of Social Funds (SFs) which were introduced over the last fifteen years to offset the increase in poverty induced by adjustment. SFs have enjoyed greater visibility and financial support by the donor community than traditional social security programmes, and raised expectations about improvements in living conditions in developing countries. Notwithstanding the visibility and administrative flexibility they enjoyed, and their fairly rapid implementation, SFs played only a minor role in reducing the number of adjustment poor and chronic poor and reversing adverse shifts in income distribution. This was due to problems in funding, targeting and sequencing, and cost‐effectiveness. The article concludes that, all in all, SFs have proven to be no panacea. Many of them were formulated with the political objective of reducing domestic opposition to the adjustment process. Greater impact on poverty would have required increased resources, more permanent relief structures, improved planning and targeting and, especially, better timing in relation to the fiscal cuts entailed by macroeconomic adjustment.