_Policy, Planning, and Research Working Paper Series_ 45 _tor's interests_ to _grant some debt relief in exchange for a higher export effort._ Despite their productive inefficiencies, export promotion andimport substitution policies can improve welfare in a highly indebted country.

After all, the ultimate penalty facing defaulting countries is exclusion from international trade markets. Export promotion can increase available foreign financing, and import substitution can reduce the debt service.

Choosing between export promotion and import substitution is a matter of determining whether it is more profitable to increase the credit ceiling to borrow more

- or to reduce the credit ceiling below inherited debt so there is less to repay. Important determinants in this choice are the stock of inherited foreign debt, the level of world interest rates, the terms of trade, and the availability of profitable investment opportunities.

Generally, a policy of export promotionis bestif the level of debt and interest rates are low and the terms of trade are high.

As these variables deteriorate - as a Korea becomes a Peru - the optimal strategy becomes import substitution. In those circumstances, it is in the creditor's interests to grant some debt relief in exchange for a higher export effort.

This paper is a product of the Debt and International Finance Division, International Economics Department. Please contact Ishac Diwan, room S7-033, extension 33910.

# 128. Public Finance In Adjustment Programs

## Ajay Chhibber and Javad Khalilzadeh-Shirazi

_Countries undergoing adjustment have increasingly found it difficult to sustain cuts in public sector deficits to match cuts in external financing, thus exacerbating inflation and financial disequilibrium. Moreover, fiscal contraction has often been short-term orientea Fundamental fiscal reform involving_ a _medium-term perspective has been rare. Given the central importance of fiscal issues in adjustment programs, however, greater focus on them is essential if such programs are to succeed._ This paper, prepared in part as a background study for the Bank's Report on Adjustment Lending, reviews the experience with public finance issues under adjustment programs. This experience shows that fiscal changes are often triggered by budget and balance of payment crises. As a result, short-term considerations have dominated the policy measures introduced. Traditional stabilization policies usually emphasize measures aimed at reducingaggregate demand. On the fiscal side, this has implied cut-backs in public expenditures. There is, however, growing recognition of the need for more growth-oriented adjustment programs, which entail a more comprehensive and durable approach to fiscal reform and therefore require a medium-term perspective.

Countries committed to fundamental reform offiscal and other key policy areas should be able to avail themselves of external financial support that lasts long enough for them to initiate and sustain the change process. They must strike a balance between stabilization and adjustment. On the expenditure side, this includes a much better understanding of and attention to compositional changes followed byreorientation ofe expenditure program. On the revenue side, it entails comprehensive tax reform designed to reduce distortions, to increase buoyancy, and to ensure equity.

This paper is a product of the Public Economics Division, Country Economics Department. Please contact Ann Bhalla, room N10-061, extension 60359.

# 129. Women In Development: **Defining the Issues**

## Paul Collier

_Changing many apparently gender-neutral public policies will make women a_ - _more productive part of the economy and allow them a more equitable 8hare of its benefits - in some not-so-obvious ways._ Women can be viewed as an underused resource (affecting efficiency) or as a disadvantaged target group (getting an inequitable share of health, education, material advantages, status, and leisure time). Within the household, they are burdened not only with the physical demands associated with reproduction but also with obligations that are not commensurate with their rights. At the societal level, they are discriminated against in their access to public services andjobs, and they lack role models for economic advancement.

Much public policy affects men and women differently, in ways that are not immediately apparent.

A study in rural Tanzania, for example, revealed that job discrimination against women lessened as education increased. A 36-year-old man with secondary education had a three in four chance of nonfarm wage employment; a woman of the same age and education had half the chance. A woman who had completed primary education had only a quarter the chance of a man of the same age and education. With partial primary education or less she had only one-fifth the chance. The policy implication: general expansion of the education system may reduce the aggregate incidence of discrimination if it enables women to continue their schooling.

However, other factors are at work, too. For example, women are less likely to get the many public sector jobs available in rural areas because they are poorly placed to lobby for patronage.

Self-employed women are also at a disadvantage. The credit market is intrinsically male-biased. Lacking the autonomy to build up creditratings, - women must rely on savings and, as managers of the household, they have a greater need than men for liquid assets. Public support of savings institutions to reach small-scale farmers or entrepreneurs tends to improve women's lot.

Some public services tend to be gender-biased. To the extent that certain jobs tend to be done by women, public policy can easily be targeted to benefit women. Rural water, fuel, and health services tend to benefit women more than men. Pricing firewood substitutes, for example, affects women disproportionately because women spend a lot of time gathering firewood. Piped water in effect increases women's time for other productive activities (or even forleisure) because they traditionally spend much time fetching water. Education and extension services (as currently administered) tend to benefit men more than women.

Food subsidies directly benefit net purchasers of food (namely, urban households, for which the population is disproportionately male). Indirectly, some of the subsidy may accrue to sellers, who, at least in Africa, are disproportionately women. Income taxes tend to fall more