How Adjustment Programs Can Help the Poor

Experience has proven that an orderly adjustment process designed to establish a new equilibrium growth path is indispensible for improving the longer-term position of the poor. Some adjustment measures can affect the poor adversely. The most common way of addressing the adverse impact of adjustment has been the implementation of targeted compensatory programs. Such programs can compensate those affected directly by adjustment or provide temporary employment or relief to the chronically poor. Changes in the design of adjustment programs can promote the longer-run interest of the poor, but have received relatively little attention. Appropriate design changes can help to foster pro-poor growth and enable reallocations of public expenditures in ways that support, or improve the efficiency of, programs that help the poor to take advantage of the emerging economic opportunities. Finally, appropriate design changes can target subsidies more effectively. Subsidies that have a large impact on the incomes of the poor, should not be reduced or eliminated unless alternative means of reaching the poor are introduced.