IMF’s Policies, Social Spending and Human Development: An Analysis from South Asian Countries

Abstract

IMF policies can considerably affect South Asian economies through lending, policy advice, and conditionality attached to financial assistance. The IMF's support, together with loans under the extensive credit facility, extended fund facility, and resilience and sustainability facility, can help stabilize the economies predominantly throughout periods of crisis. Though these policies can also lead to economic adjustments and reforms, which may affect positively and negatively the various sectors and segments of the population. Considering the effects of the IMF’s policies, we have checked the impact of social spending and trade on human development in some South Asian countries. Regression results showed that general Government health expenditures, education, and trade have enhanced human development in the South Asian countries. However, the real interest rate negatively affected the human development of the people in these countries because of the involvement of lending institutions. It is suggested that the Government should allocate more budget towards health and education in these economies. There should be a stable economic and political environment for attracting more investment from abroad. Moreover, there should be fewer conditions and policy interventions by the lending authorities. Finally, there is a need to diversify the economies, reshape their relationship with international financial institutions, and provide the population with sufficient amenities for uplifting their living standard.