Streamlined conditionality?

• Pages: 233-245

Page 233

In the 1990s, the number of structural conditions attached to IMF lending rose sharply but concerns deepened about the strength of national ownership of Fund-supported policy programs. As a result of a major review, the IMF in 2002 began to place greater emphasis on streamlining. How well are the IMF's new guidelines on conditionality being implemented? A look at experience to date suggests that progress has been made in terms of clearer and more focused conditions.

Ultimately, the new guidelines will be judged successful if they contribute to better economic outcomes, but it is too early to gauge whether this has been the case.

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Has IMF conditionality really been streamlined?

In 2000-02, the IMF conducted a major review of the conditions it attaches to its lending-its conditionality-and replaced guidelines dating back as far as 1979. The new policy chiefly stems from concerns that there had been a large expansion of structural conditionality in the 1990s and that disappointing implementation suggested relatively weak ownership of IMF-supported programs by national authorities. New guidelines highlight the need for greater focus and streamlining, but has there been real progress? In many areas, yes, says Tessa van der Willigen (IMF Policy Development and Review Department). She summarizes here the findings of a recent IMF evaluation on the application of the new guidelines.

Conditionality remains a subject of controversy and debate. Some argue that conditions should be done away with altogether, but from the IMF's point of view conditionality is not optional. The IMF must be sure that its resources are supporting policies that help countries resolve their balance of payments difficulties and allow them to repay loans so that these resources can, in turn, be used by other countries. Conditionality also clarifies the terms on which future installments of IMF loans will be available, thus giving countries the confidence to embark on programs that could not be sustained without such support.

Of course, that conditionality is here to stay does not mean that it is, or has been, perfect. The new policy is the culmination of a long process of internal and external discussion that led the IMF to embark on streamlining. These efforts actually began in 2000, even before the new policy was formally in place, and in March 2005, the IMF's Executive Board assessed how much progress had been made.

The 2002 guidelines are based on five key principles: national ownership of policy...