Bretton Woods Project (04.04.2018) In recent years, the World Bank and IMF have played an influential role in shaping national social protection policies. Social protection comprises a significant share of World Bank loans, reaching almost 10 per cent of lending to low-income countries in 2017, while around 10 per cent of IMF loans include conditionality linked to social protection. While the institutions collaborate closely on social protection, there are serious shortcomings of the approach of both institutions to the issue.
While it is generally accepted that social protection is a core public service, the design of national systems is highly contested. There are two broad camps in the debate: one regards social protection as a universal human right, arguing for inclusive schemes that offer high or universal coverage; the other promotes targeting social protection at the ‘poor,’ often combined with sanctions or work obligations. The IMF and World Bank fall into the second camp.
The two approaches result in very different types of social protection systems. The inclusive approach builds systems focused on relatively high-cost lifecycle schemes, in particular old age pensions and disability and child benefits. Universal pensions are the most common schemes in developing countries, often with budgets above 1 per cent of GDP, reaching 4.3 per cent of GDP in Georgia. While there are fewer inclusive disability and child benefits, their costs can also be relatively high: for example, Mongolia’s universal child benefit cost 1.4 per cent of GDP in 2017.