Progress on IMF conditionality?

Added 15 Nov 2012

A first reading of the press statements and overview paper from the IMF’s review of conditionality, completed in September 2012 might give the impression that the IMF has made a 180 degree turn in its conditionality policy, one of the most controversial aspects of the Fund’s role. However, the transformation doesn’t seem as complete as the IMF argues. Harmful conditions are still being imposed, not only to developing countries, but also in Europe, and the IMF claim to have increased its focus on poverty reduction and social protection seems uneven, both throughout countries and time.  Has the IMF really change the way it sees and implements conditionality?

As a thoughtful reading of the conditionality review papers shows, lending reforms and changes in conditionality have already had some impacts in the way the IMF deals with countries under different Fund programs, but much more can and must be done.

The IMF claims for instance to have internalized the objective of poverty reduction in the programmes in low-income countries, but outcomes seem uneven. They recognise that there's a need for a better and more systematic analysis of social impact of policy measures in programmes. One of the main challenges remaining is therefore to monitor and evaluate, both quantitatively and qualitatively, the impacts of IMF policies in the most vulnerable people.

As the review concludes, debt relief is responsible for the only observable macroeconomic positive effects of IMF policies in low-income countries, including not only sustainable debt levels, but also an increase in social spending. In a time when, after HIPC and MDRI, there will not be a specific debt relief initiative in place for those countries in debt distress, and the chances for having a new debt crisis, not only in Europe but also in the global South, are growing, there’s also an urgent need to evaluate what will happen when no further debt relief is a resource for impoverished and highly indebted countries.

Furthermore, and as the IMF recognises, more efforts in ownership and transparency are also vital for the programmes success, and a better analysis on projections and evaluation would also help. The role of CSOs in monitoring and fostering these transformations is vital for assuring further change within the IMF. Some changes are certainly happening, mostly at a slower pace than what is needed. But the IMF has still a long way to go to be a fully democratic, transparent and efficient institution with no harmful conditions imposed on the countries.

The following briefing analyses these and other issues that arise from the IMF review of conditionality.