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Independent Evaluation Office - IEO Publications

September 9, 2003
The IEO provides objective and independent evaluation on issues related to the IMF. The Office operates independently of IMF management and at arm's length from the IMF's Executive Board.

Evaluation Report
Fiscal Adjustment in IMF-Supported Programs

The IEO would welcome feedback from the public on the report, particularly on the recommendations it makes.
Comments may be submitted at

Full text in PDF Format (521 kb pdf file)

Cover (11 kb PDF file)
Main Report (356 kb PDF file)
Appendix (106 kb PDF file)
Summary of Findings and Recommendations
  A. Framework
  B. Findings: Quantitative Aspects of Fiscal Adjustment
  C. Social Spending and Social Protection in IMF-Supported Programs
  D. Reforms in the Fiscal Area Under IMF-Supported Programs
  E. Recommendations
I. Introduction
II. Fiscal Targeting in IMF-Supported Programs: Cross-Country Analysis
  A. Relevant Considerations in Determining the Fiscal Stance
  B. Factors Determining the Scale and Nature of Fiscal Adjustment
III. Fiscal Adjustment as Presented in Program Documents and the Internal Review Process
  A. Fiscal Adjustment in Program Request Documents
  B. The Internal Review Process Prior to Board Approval and During Program Implementation
IV. Fiscal Performance Compared with Targets
  A. Cross-Country Analysis
  B. Flexibility of Fiscal Targets During Program Reviews
  C. What Accounts for Large Fiscal Underperformance? Evidence from the Smaller Sample
V. Economic Recovery and Growth
  A. Economic Recovery in the Program Period: Outcomes and Expectations
  B. Optimism in Projecting Private Demand and Investment
  C. Is the Fiscal Stance in IMF-Supported Programs Unnecessarily Contractionary?
VI. Social Spending and Social Protection in IMF-Supported Programs
  A. Has Donor Aid Been Underestimated?
  B. Social Spending Under IMF-Supported Programs: Cross-Country Evidence
  C. The Role of the IMF in Connection with Social Expenditure and Social Protection
VII. Fiscal Reforms in IMF-Supported Programs
  A. Fiscal Reforms in Programs: An Overview
  B. Progress in Implementing Reforms
  C. Learning from the Past and the Role of Surveillance in Monitoring Progress
1. Initial Conditions as Seen by Staff at the Start of the Program
2. Program Projections: Changes in Balances from (T-1) to (T+1)
3. The Direction of Change in Selected Macroeconomic Targets in IMF-Supported Programs as a Share of GDP
4. The Pace of the Envisaged Fiscal Adjustment
5. Degree to which Program Documents Explain the Rationale, Magnitude, and Composition of the Envisaged Fiscal Adjustment
6. Average Public Debt Prior to and Following the Initial Program Year
7. Selected Topics Commented on During the Review of 15 IMF-Supported Programs
8. Changes in External and Fiscal Balances from (T-1) to (T+1)
9. Differences Between Actual and Projected Changes in Fiscal Balances
10. The Dynamics of Fiscal Adjustment
11. Percentage Distribution of Programs with Fiscal Shortfalls
12. The Composition of Fiscal Adjustment in Programs with Fiscal Underperformance
13. Changes in Government Balances, Revenue, and Expenditures in Large Episodes of Envisaged Adjustment from (T-1) to (T+1)
14. Distribution of Programs According to Revisions in Growth and Fiscal Balances
15. Revisions in Fiscal Balance Targets for T+1
16. Summary of Reasons for the Revised Fiscal Balance Target
17. Envisaged and Actual Fiscal Adjustment in Nine IMF-Supported Programs
18. Comparing Growth and Revenue Underperformance
19. Revenue-Related Structural Reform Measures in Selected Programs with Large Revenue Shortfalls
20. Experience with GDP Growth Prior To and During Program Periods
21. Programs Showing Deceleration/Negative Growth
22. Envisaged and Actual Two-Year Cumulative Growth Rates over T and T+1
23. Indicators of Growth Optimism for T+1
24. Investment Projections and Actuals Under IMF-Supported Programs, 1993-2001
25. Macroeconomic Balances in SBA and EFF Programs in Nontransition Countries
26. Public Sector Social Spending Indicators
27. Number of Countries With and Without Statistically Significant Results
28. Effectiveness in Identifying and Monitoring Social Spending in the Program Requests of 15 Selected Arrangements
29. The Ecuador Program: Imbalance Between Efficiency and Equity Measures Underpinned by Conditionality
30. Distribution of Areas of Fiscal Reforms and Those Supported by Conditionality
1. Distribution of Programs According to the Magnitude of the Envisaged Change in the Overall Fiscal Balance (T-1 to T+1)
2. Distribution of Programs According to Differences in Fiscal Adjustment Between Original Targets and Reviews
3. Distribution of Programs According to Differences Between Actual and Envisaged Cumulative Growth Over a Two-Year Period (T and T+1)
4. SBA and EFF Programs According to Differences Between Actual and Projected Investment Rates for T+1
5. Estimated Impact of a Two-Year IMF-Supported Program
6. Index Indicating Implementation Progress in 153 Fiscal Reform Measures in 15 IMF-Supported Programs
7. Progress Implementing Fiscal Reforms in 15 IMF-Supported Program
8. Index of Performance: Learning, Follow-Up, and Links Between Programs and Surveillance
9. Distribution of Cases According to Performance
1. How Well Do Documents Explain the Rationale for Fiscal Adjustment?
2. The 1997 Guidelines on Social Expenditure
3. How Public Hospitals in Ecuador Adjusted in a Time of Crisis
4. Protecting Critical Programs is Not Costly When Programs are Well Targeted
5. Public Finance Reform Areas
6. Ecuador: What a Determined Head of Tax Administration Can Do
7. The Romania Program: Diminishing Returns to Raising Tax Rates
8. Tax Reform in the 1996 Tanzania ESAF
9. Good Examples of Learning from the Past
I. Table 1. Determinants of the Envisaged and Actual Fiscal Adjustment (T-1 to T+1) in IMF-Supported Programs
I. Table 2. Determinants of the Differences Between Envisaged and Actual Fiscal Adjustment
II. Code Book for Assessing the Need for Fiscal Adjustment
III. Table 1. Levels of Grants in a Sample of Sub-Saharan African Countries
III. Table 2. Changes in Levels of Grants
III. Table 3. Aid Flows Under IMF Programs, 1995-2001
IV. Explanatory Variables and Methodological Issues in the Analysis of Social Spending in IMF-Supported Programs
IV. Table 2. ARIMA Model with Control Variables and Endogenous Fund Programs
IV. Table 3. Summary of Robustness Analysis
IV. Table 4. Summary of Regression Results
IV. Table 5. Control Variables for Social Spending
IV. Table 6. List of Countries and Sub-Samples
V. Table 1. Coverage of Social Issues in IMF-Supported Programs
VI. Table 1. Progress with Reforms in 15 Selected IMF-Supported Programs
VII. Illustrative Selection of TA Inputs to Fiscal Reforms in the Lead Up to the IMF-Supported Programs in 15 Countries
VIII. Table 1. Effectiveness of Surveillance
VIII. Table 2. Article IV Reports Reviewed in the Pre-Program Period

Bibliography (57 kb pdf file)
Statement by the Managing Director
Staff Response
IEO Comments on Staff Response
Summing Up of the IMF Executive Board Discussion by Acting Chair (23kb pdf file)