Structural adjustment, state capacity and child health: evidence from IMF programmes

Abstract

Background: Consensus is growing that policy reform programmes by the International Monetary Fund (IMF)-an international organization mandated with upholding global financial stability and assisting countries in economic turmoil-produce adverse effects on public health. However, this consensus is unclear about which policies of these programmes underlie these effects. This article fills parts of this gap by examining the impact of four kinds of IMF policies (fiscal policy, public-sector employment, privatization of state-owned enterprises and price liberalization) on public-health expenditure, child vaccination and child mortality.

Methods: We conducted time-series cross-section analyses for up to 128 developing countries over the 1980-2014 period using observational data on health outcomes and IMF conditionality for different policy areas. IMF effectiveness research faces two types of potential biases: self-selection into IMF programmes and IMF policy conditions. We deployed instrumental variables in a seemingly unrelated regression framework to address both types of endogeneity, besides traditional remedies such as the use of fixed effects on countries and years.

Results: IMF policy conditions on public-sector employment are negatively related to child health. A change from the minimum to the maximum number of such policy conditions decreases vaccination (which ranges from 0 to 100) by 10.97% [95% confidence interval (CI): 1.16 to 20.79]. This effect is robust against different sets of control variables. In addition, IMF programmes increase the share of government expenditure devoted to public health in developing countries by 0.91 percentage points (95% CI: 0.15 to 1.68).

Conclusions: These findings suggest that IMF policies-particularly those that require public-sector reforms-undermine health by weakening the capacity of states to deliver vaccination. Therefore, international financial institutions need to increase their awareness of the public-health impact of their policy prescriptions. Strengthening state capacity in times of economic crisis would ensure that increased health spending also delivers quality healthcare.

Keywords: International Monetary Fund; child mortality; conditionality; health expenditure; health systems capacity.