## INTRODUCTION

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---

### Overview
- Conditionality is a key element of IMF-supported programs to help members strengthen their economic and financial policies; under the IMF's Guidelines on Conditionality (IMF, 2002) structural conditions must be critical to either the achievement of program goals, monitoring program implementation, or implementation of specific provisions under the Articles of Agreement.
- Conditionality has been a feature of Fund lending since the 1950s and, since the 1980s, has expanded beyond monetary, fiscal and exchange policies to target structural weaknesses outside monetary and fiscal domains.
- The possible economic transformation following the Covid-19 pandemic may trigger heightened structural reform needs.

### Scope of analysis in this paper
- The paper analyzes program conditionality for the period 2011 to 2017 (post-Global Financial Crisis) and contrasts with earlier periods.
- Two program samples are contrasted:
  - “2018 RoC sample”: 133 programs initiated between September 2011 and December 2017.
  - “2011 RoC sample”: 159 programs initiated between January 2002 and September 2011.
- A subsample of 12 programs from the 2018 RoC sample is used for text analysis of program objectives, structural conditions, and preceding Article IV surveillance findings.

### Key high-level findings summarized
- The average number of structural benchmarks per year under IMF-supported programs remained broadly unchanged over 2002–17 despite a shift toward programs focused on structural reforms.
- Structural conditionality is heavily biased toward the Fund’s core expertise (fiscal, monetary, financial areas) and rarely addresses other macro-structural areas (labor or product market reforms) even when surveillance identified needs.
- Structural conditions often consist of preparatory steps (plans, strategies, roadmaps) rather than final implementation measures.

### Trends in Structural Conditionality: Number, Depth, Implementation, and Flexibility

- Number
  - The average number of structural conditions per program year did not increase notably over 2002–17.
  - Across country groups the average number per program year was broadly similar; commodity exporters had a somewhat higher number.
  - Structural conditions mostly relate to fiscal, monetary, and financial sector areas; there were on average just three conditions per year dedicated to other structural areas (pension and civil service, SOE reform, social sector, other macro-structural reforms including product and labor market reforms).

- Depth (classification and findings)
  - Depth categories: High-depth (permanent institutional changes or legislative changes), Medium-depth (immediate significant one-off changes), Low-depth (steps toward change).
  - Structural conditions in GRA programs displayed higher depth than in PRGT programs.
  - Despite EFF and ECF being designed to address structural impediments, structural conditions in EFF and ECF arrangements did not display significantly higher depth than those in SBAs and SCFs.
  - Social sector reforms and pension and civil service reforms exhibited the highest depth; other macro-structural reforms (including labor and product market reforms) were of lower depth than average.

- Implementation
  - Implementation (based on staff report assessments classified as “met”, “met with delay”, or “not met”) exceeds 80 percent in programs between 2011 and 2017.
  - Implementation was somewhat higher for GRA than for PRGT programs.
  - Countries under political or economic transformation and other developing countries (mostly low-income) featured somewhat lower implementation rates.
  - The share of unmet conditions was somewhat higher for high-depth structural conditions.
  - Implementation rates were notably lower for:
    - other macro-structural reforms (mostly non-core areas like labor and product market reforms),
    - SOE reforms,
    - pension and civil service reforms,
    - to some extent PFM/RA (public financial management and revenue administration).

- Flexibility / Modifications
  - Most modifications of structural conditions at program reviews consist of delaying a measure by changing its test date only.
  - The overall share of modified conditions was roughly similar in GRA and PRGT programs.
  - Modification rates were higher in other developing countries and in countries undergoing economic/political transformation.
  - Modification rates were somewhat higher in non-core areas of IMF expertise (e.g., pension and civil services reform, other macro-structural reforms, financial sector reforms, and social reforms).
  - Example: Serbia (2015 SBA) modified SOE reforms into a sequence of medium- and low-depth structural conditions due to capacity constraints and pushback from vested interests.

### Did Conditionality Tackle Key Macro-Structural Gaps Identified in Surveillance?

- Alignment of program objectives and structural conditions
  - 85 percent of program objectives were covered by structural conditions.
  - Almost 95 percent of structural conditions were consistent with program objectives.
  - Caveats:
    - Program objectives often remained ambiguous or were stated in very broad terms (e.g., “enhancing economic growth” or “achieving macroeconomic stability”).
    - Structural conditions tended to be narrowly focused (examples: transfer control over education payroll to Ministry of Finance (Honduras); increase electricity tariffs by CFAF10 per kilowatt hour on average (Benin)).

- Surveillance gaps vs. structural conditions (subsample analysis)
  - About 40 percent of identified structural weaknesses in preceding surveillance were in other macro-structural areas (labor and product markets).
  - 30 percent of structural conditions were concentrated in public financial management and revenue administration (PFM/RA).
  - Using the IEO classification of Fund expertise:
    - About half the surveillance gaps are in non-core and shared areas.
    - Less than 30 percent of structural conditions fall into non-core and shared areas in the subsample; only 2 percent of structural conditions are found in the non-core area in the subsample.
  - Coverage detail:
    - Two thirds of surveillance gaps covered by structural conditions fell into core areas.
    - Most gaps not covered by structural conditions tended to be in shared or non-core areas.
  - Country variation:
    - Mauritania’s 2010 ECF contained conditionality on less than half of previously identified surveillance gaps; many not addressed pertained to labor market and business environment reforms.
    - Greece’s 2010 SBA covered most surveillance gaps (2009 Article IV listed eight major reform needs; 2010 program request included conditionality on all except one).

- Interpretation of discrepancy
  - Possible explanations include country circumstances (technical capacity constraints, pressing adjustment needs), Fund practices (higher bar for criticality outside core expertise), parsimony drive, and that demand management policies can more easily deliver program objectives albeit possibly less sustainably.
  - The heavy use of EFF or ECF (geared toward addressing structural weaknesses) appears out of line when programs do not address weaknesses in macro-structural areas.

### Evaluating Structural Reform Options: A Tool (Evaluation Criteria and Rationale)

- Motivation
  - Diagnosis suggests structural conditionality could be better geared toward tackling structural weaknesses and that lack of internal expertise in some reform areas may be a factor.
  - Many program documents provide limited discussion of alternative reforms or how chosen reforms best achieve objectives.
  - The 2018 Review of Conditionality (IMF, 2019a) recommends improving identification, prioritization and sequencing of reforms based on criticality.

- Proposed evaluation approach
  - Develop a set of evaluation criteria bringing together economic and political aspects to identify reforms most critical for program objectives (reducing vulnerabilities, enhancing growth).
  - Criteria reflect macroeconomic impact, reform design, and implementation risks to arrive at a holistic view and maximize program success chances.
  - Criteria are interrelated and should be interpreted holistically; explicit laying out of criteria helps authorities and staff justify conditionality choices.

- Key evaluation categories and considerations
  - Context
    - Cyclical condition: business cycle conditions matter for the economy-wide impact of reforms, especially labor and product market reforms; output gap size affects reform prioritization and design.
    - Fiscal and monetary policy space: budget constraints and public debt influence prioritization toward budget-neutral reforms or those with positive demand effects; buffering negative short-run effects requires sufficient policy space.
    - Income level or reform priorities: stage of development affects reform priorities; benchmarking against comparable countries useful (IMF Structural Reform Database).
    - Consistency with overall program design: reforms should address major macro-structural weaknesses identified in surveillance; conditionality design must be parsimonious yet effective given program length, access, and program risks.

  - Reform Interactions (Packaging and Sequencing)
    - Packaging: combine reforms with enabling or complementary policies; identify binding constraints needing removal to facilitate reform payoffs.
    - Sequencing: chronological order and speed of reforms are key to successful implementation; appropriate sequencing can mitigate short-term costs.
    - Political economy: some reforms may require second-best designs to obtain political feasibility; explicitly considering political constraints is important.

### Case-study insights and practical lessons (summary)
- Fund-supported programs could draw more on macro-structural gaps identified in prior surveillance while keeping conditionality parsimonious.
- To prioritize reform needs, program objectives should be formulated in sufficiently specific terms.
- To achieve reform objectives, attention is needed to:
  - Appropriate sequencing and packaging of reforms.
  - Implementation risks, including political risks and capacity constraints.
  - Policies to alleviate short-term contractionary effects; buffering requires sufficient fiscal or monetary policy space.
- Common pitfalls and good practice:
  - Structural reforms tend to take a long time and require sustained, outcome-oriented action and strong ownership.
  - Conditionality design can help by breaking reforms into smaller steps and focusing on concrete actions, but steps need to end with final reform implementation rather than interim outputs (plans, strategies, roadmaps).
  - Strong macroeconomic policies and wide consultation can bolster ownership; openness to second-best reform designs may be necessary.
- Cross-cutting empirical and literature-based lessons (selected)
  - Chapter 3 of IMF (2019b) identifies weak governance or high corruption and insufficient access to credit as the two key binding constraints in emerging market and developing economies.
  - Literature on sequencing and packaging reports mixed findings: some argue product before labor reforms (Blanchard and Giavazzi, 2003), others the reverse (Munkacsi and Saxegaard, 2017), others advocate lockstep or bundled approaches (Benlamine and others, 2019; Rodrik, 1994).
  - Political windows, ownership, legal and capacity constraints, and realistic assessment of reform payoffs are recurrent determinants of reform success.

### Selected case-study highlights and exact figures preserved
- Latvia (2008 27-month SBA)
  - Between August 2007 and December 2008, private sector deposits fell by 10 percent and official reserves fell by almost 20 percent during the months prior to the program.
  - Fiscal reallocation: 20 million lats reallocated from the European Social Fund for active labor market policies and temporary public employment programs.
  - Four structural benchmarks on labor market reforms were introduced.

- Portugal (2011 3-Year EFF)
  - Fiscal deficit of 9.1 percent of GDP and a public debt ratio of 93 percent at program entry.
  - Program contained extensive product market reforms including revision of Competition Law; ex post evaluation found payoffs often materialize long after program end.

- Madagascar (2016 40-month ECF)
  - Program approval was subject to a prior action to submit draft laws establishing special anti-corruption centers and strengthening asset declarations.
  - By end-2018 several laws adopted: an anti-corruption law, a law on anti-corruption courts, a law on international cooperation, and a law on AML/CFT; one important anti-corruption law on asset recovery was not passed.
  - Seven structural benchmarks related to economic governance and two continuous benchmarks (PPP contract publication and procurement notifications).

- Serbia (2015 36-month SBA)
  - Structural benchmarks included prior actions and review conditions for state aid elimination, financial restructuring plans for EPS and Srbijagas, and specified employment reductions: net employment reduction in 2016 of at least 2700 employees in Railways of Srbija and no less than 1,000 net staff position reduction in EPS in 2016.

- Georgia (2017 3-Year EFF)
  - Pension reform sequencing: submit law establishing 2nd pillar (Dec 2017); establish independent pension agency (Jul 2018); submit rule-based indexation legislation (Dec 2019).
  - Short-term impact: None. Long-term impact: Positive growth impact via mobilizing domestic savings and private investment; inequality: Unclear.

- Ireland (2010 3-Year EFF)
  - 3rd review: Finalize a strategy for broader legal reforms around personal insolvency, including significant amendments to the Bankruptcy Act 1998. Dec 2011.

- Jordan (2016 3-Year EFF)
  - Prior actions included committing to maintain NEPCO at operational balance and adopting an automatic electricity tariff adjustment mechanism effective January 1, 2017.
  - Short-term impact: Mixed. Long-term impact: Positive growth impact from improved energy and fiscal sustainability. Inequality: Possible large impact depending on offsetting measures.

### Policy recommendations and proposed improvements
- Parsimony in conditionality design:
  - Program objectives should be more specific to help identify the most critical reforms to achieve them.
- Expand Fund expertise and adapt policies:
  - Fund policies and practices could be adjusted to ensure structural conditionality focuses on key macro-structural weaknesses, particularly labor and product markets.
- Systematic evaluation of reform options:
  - A more systematic evaluation of reform designs and options would improve reform prioritization, sequencing, and chance of success; laying out considerations in staff reports and Ex-Post Evaluations would improve transparency and accountability.
- Practical implementation guidance:
  - Break complex reforms into smaller steps that culminate in final implementation measures.
  - Combine conditionality with technical assistance and collaboration with development partners (World Bank, OECD, EU, AfDB, FATF) where Fund expertise is limited.
  - Adopt conservative assumptions about timing and magnitude of reform payoffs; plan buffering measures when fiscal or monetary space allows.

*Source: wpiea2021139-print-pdf - INTRODUCTION.*

### INTRODUCTION ...........................................................................................................

### INTRODUCTION

### STRUCTURAL CONDITIONALITY IN RECENT IMF-SUPPORTED PROGRAMS
- A. Number, Depth, Implementation and Flexibility of Structural Conditions ...........................................................................................8
- B. Did Conditionality Tackle Key Macro-Structural Gaps Identified in Surveillance? ....13

### EVALUATING STRUCTURAL REFORM OPTIONS: A TOOL
- A. Context ..........................................................................................................................18
- B. Reform Interactions .......................................................................................................19
- C. Reform Implementation ................................................................................................20
- D. Reform Impact ..............................................................................................................21

### CASE STUDIES
- A. Labor Market Reforms: The Case of Latvia .................................................................22
- B. Product Market Reforms: The Case of Portugal ...........................................................24
- C. Governance Reforms: The Case of Madagascar ...........................................................27
- D. SOE Reforms: The Case of Serbia ................................................................................30
- E. Pension Reform: The Case of Georgia ..........................................................................33
- F. Financial Sector Reforms: The Case of Ireland .............................................................35
- G. Energy Reforms: The Case of Jordan ...........................................................................38

### CONCLUSION
- CONCLUSION ...................................................................................................................41

### BOXES
- 1. Evaluation Matrix: Labor Market Reforms During Latvia’s 2008 27-Month SBA ...........23
- 2. Evaluation Matrix: Portugal’s 2011 3-Year EFF  ...............................................................26
- 3. Evaluation Matrix: Madagascar’s 2016 40-Month ECF .....................................................29
- 4. Evaluation Matrix: Serbia 2015 36-Month SBA ................................................................ 32
- 5. Evaluation Matrix: Georgia’s 2017 3-Year EFF ................................................................ 34
- 6. Evaluation Matrix: Ireland’s 2010 3-Year EFF .................................................................. 37
- 7. Evaluation Matrix: Jordan’s 2016 3-Year EFF ................................................................... 40

### FIGURES
- 1. Fund Arrangements by Facility .............................................................................................7
- 2. Number of Structural Conditions  ..........................................................................................9
- 3. Depth of Structural Conditions ............................................................................................11
- 4. Implementation of Structural Conditions.............................................................................12
- 5. Modified Structural Conditions ...........................................................................................13
- 6. Program Objectives and Structural Conditions ....................................................................13
- 7. Structural Conditions and Surveillance Gaps ..................................................................... 16
- 8. Evaluation Matrix: Criteria ................................................................................................. 18
- 9. Top 4 Programs with Labor Market Reforms ..................................................................... 22
- 10. Top 4 Programs with Product Market Reforms ................................................................ 24
- 11. Financial Sector Conditions by Type ................................................................................ 35

### TABLES
- 1. 2018 RoC Sample ............................................................................................................... 46
- 2. 2018 RoC Sample and Subsample Composition ................................................................ 47
- 3. Classification of Structural Conditions by Area ................................................................. 48

### ANNEXES
- I. Glossary ............................................................................................................................... 43
- II. Sample Characteristics ....................................................................................................... 46
- III. Classification of Structural Conditions ............................................................................. 48
- IV. Structural Benchmarks of Case Studies ............................................................................ 49

### REFERENCES
- References  ...............................................................................................................................53

*Source: wpiea2021139-print-pdf - INTRODUCTION (table of contents).*

### INTRODUCTION

### INTRODUCTION

### Overview
- Conditionality is a key element of IMF-supported programs to help members strengthen their economic and financial policies, and under the IMF's Guidelines on Conditionality (IMF, 2002) structural conditions must be critical to either the achievement of program goals, monitoring program implementation, or implementation of specific provisions under the Articles of Agreement.
- Conditionality has been a feature of Fund lending since the 1950s and, since the 1980s, has expanded beyond monetary, fiscal and exchange policies to target structural weaknesses outside monetary and fiscal domains.
- The possible economic transformation following the Covid-19 pandemic may trigger heightened structural reform needs.

### Scope of analysis in this paper
- The paper analyzes program conditionality for the period 2011 to 2017 (post-Global Financial Crisis) and contrasts with earlier periods.
- Two program samples are contrasted:
  - “2018 RoC sample”: 133 programs initiated between September 2011 and December 2017.
  - “2011 RoC sample”: 159 programs initiated between January 2002 and September 2011.
- A subsample of 12 programs from the 2018 RoC sample is used for text analysis of program objectives, structural conditions, and preceding Article IV surveillance findings.

### Key high-level findings summarized
- The average number of structural benchmarks per year under IMF-supported programs remained broadly unchanged over 2002–17 despite a shift toward programs focused on structural reforms.
- Structural conditionality is heavily biased toward the Fund’s core expertise (fiscal, monetary, financial areas) and rarely addresses other macro-structural areas (labor or product market reforms) even when surveillance identified needs.
- Structural conditions often consist of preparatory steps (plans, strategies, roadmaps) rather than final implementation measures.

---

### Trends in Structural Conditionality: Number, Depth, Implementation, and Flexibility

- Number
  - The average number of structural conditions per program year did not increase notably over 2002–17.
  - Across country groups the average number per program year was broadly similar; commodity exporters had a somewhat higher number.
  - Structural conditions mostly relate to fiscal, monetary, and financial sector areas; there were on average just three conditions per year dedicated to other structural areas (pension and civil service, SOE reform, social sector, other macro-structural reforms including product and labor market reforms).

- Depth (classification and findings)
  - Depth categories: High-depth (permanent institutional changes or legislative changes), Medium-depth (immediate significant one-off changes), Low-depth (steps toward change).
  - Structural conditions in GRA programs displayed higher depth than in PRGT programs.
  - Despite EFF and ECF being designed to address structural impediments, structural conditions in EFF and ECF arrangements did not display significantly higher depth than those in SBAs and SCFs.
  - Social sector reforms and pension and civil service reforms exhibited the highest depth; other macro-structural reforms (including labor and product market reforms) were of lower depth than average.

- Implementation
  - Implementation (based on staff report assessments classified as “met”, “met with delay”, or “not met”) exceeds 80 percent in programs between 2011 and 2017.
  - Implementation was somewhat higher for GRA than for PRGT programs.
  - Countries under political or economic transformation and other developing countries (mostly low-income) featured somewhat lower implementation rates.
  - The share of unmet conditions was somewhat higher for high-depth structural conditions.
  - Implementation rates were notably lower for:
    - other macro-structural reforms (mostly non-core areas like labor and product market reforms),
    - SOE reforms,
    - pension and civil service reforms,
    - to some extent PFM/RA (public financial management and revenue administration).

- Flexibility / Modifications
  - Most modifications of structural conditions at program reviews consist of delaying a measure by changing its test date only.
  - The overall share of modified conditions was roughly similar in GRA and PRGT programs.
  - Modification rates were higher in other developing countries and in countries undergoing economic/political transformation.
  - Modification rates were somewhat higher in non-core areas of IMF expertise (e.g., pension and civil services reform, other macro-structural reforms, financial sector reforms, and social reforms).
  - Example: Serbia (2015 SBA) modified SOE reforms into a sequence of medium- and low-depth structural conditions due to capacity constraints and pushback from vested interests.

---

### Did Conditionality Tackle Key Macro-Structural Gaps Identified in Surveillance?

- Alignment of program objectives and structural conditions
  - 85 percent of program objectives were covered by structural conditions.
  - Almost 95 percent of structural conditions were consistent with program objectives.
  - Caveats:
    - Program objectives often remained ambiguous or were stated in very broad terms (e.g., “enhancing economic growth” or “achieving macroeconomic stability”).
    - Structural conditions tended to be narrowly focused (examples: transfer control over education payroll to Ministry of Finance (Honduras); increase electricity tariffs by CFAF10 per kilowatt hour on average (Benin)).

- Surveillance gaps vs. structural conditions (subsample analysis)
  - About 40 percent of identified structural weaknesses in preceding surveillance were in other macro-structural areas (labor and product markets).
  - 30 percent of structural conditions were concentrated in public financial management and revenue administration (PFM/RA).
  - Using the IEO classification of Fund expertise:
    - About half the surveillance gaps are in non-core and shared areas.
    - Less than 30 percent of structural conditions fall into non-core and shared areas in the subsample; only 2 percent of structural conditions are found in the non-core area in the subsample.
  - Coverage detail:
    - Two thirds of surveillance gaps covered by structural conditions fell into core areas.
    - Most gaps not covered by structural conditions tended to be in shared or non-core areas.
  - Country variation:
    - Mauritania’s 2010 ECF contained conditionality on less than half of previously identified surveillance gaps; many not addressed pertained to labor market and business environment reforms.
    - Greece’s 2010 SBA covered most surveillance gaps (2009 Article IV listed eight major reform needs; 2010 program request included conditionality on all except one).

- Interpretation of discrepancy
  - Possible explanations include country circumstances (technical capacity constraints, pressing adjustment needs), Fund practices (higher bar for criticality outside core expertise), parsimony drive, and that demand management policies can more easily deliver program objectives albeit possibly less sustainably.
  - The heavy use of EFF or ECF (geared toward addressing structural weaknesses) appears out of line when programs do not address weaknesses in macro-structural areas.

---

### Evaluating Structural Reform Options: A Tool (Evaluation Criteria and Rationale)

- Motivation
  - Diagnosis suggests structural conditionality could be better geared toward tackling structural weaknesses and that lack of internal expertise in some reform areas may be a factor.
  - Many program documents provide limited discussion of alternative reforms or how chosen reforms best achieve objectives.
  - The 2018 Review of Conditionality (IMF, 2019a) recommends improving identification, prioritization and sequencing of reforms based on criticality.

- Proposed evaluation approach
  - Develop a set of evaluation criteria bringing together economic and political aspects to identify reforms most critical for program objectives (reducing vulnerabilities, enhancing growth).
  - Criteria reflect macroeconomic impact, reform design, and implementation risks to arrive at a holistic view and maximize program success chances.
  - Criteria are interrelated and should be interpreted holistically; explicit laying out of criteria helps authorities and staff justify conditionality choices.

- Key evaluation categories and considerations
  - Context
    - Cyclical condition: business cycle conditions matter for the economy-wide impact of reforms, especially labor and product market reforms; output gap size affects reform prioritization and design.
    - Fiscal and monetary policy space: budget constraints and public debt influence prioritization toward budget-neutral reforms or those with positive demand effects; buffering negative short-run effects requires sufficient policy space.
    - Income level or reform priorities: stage of development affects reform priorities (e.g., market functioning reforms for emerging markets; technological progress facilitation for advanced economies); benchmarking against comparable countries useful (IMF Structural Reform Database).
    - Consistency with overall program design: reforms should address major macro-structural weaknesses identified in surveillance; conditionality design must be parsimonious yet effective given program length, access, and program risks (e.g., reform fatigue).

  - Reform Interactions (Packaging and Sequencing)
    - Packaging: combine reforms with enabling or complementary policies; identify binding constraints needing removal to facilitate reform payoffs.
    - Sequencing: chronological order and speed of reforms are key to successful implementation; appropriate sequencing can mitigate short-term costs.
    - Political economy: some reforms may require second-best designs to obtain political feasibility; explicitly considering political constraints is important.

---

### Case-study insights and practical lessons (summary)
- Fund-supported programs could draw more on macro-structural gaps identified in prior surveillance while keeping conditionality parsimonious.
- To prioritize reform needs, program objectives should be formulated in sufficiently specific terms.
- To achieve reform objectives, attention is needed to:
  - Appropriate sequencing and packaging of reforms.
  - Implementation risks, including political risks and capacity constraints.
  - Policies to alleviate short-term contractionary effects; buffering requires sufficient fiscal or monetary policy space.
- Common pitfalls and good practice:
  - Structural reforms tend to take a long time and require sustained, outcome-oriented action and strong ownership.
  - Conditionality design can help by breaking reforms into smaller steps and focusing on concrete actions, but steps need to end with final reform implementation rather than interim outputs (plans, strategies, roadmaps).
  - Strong macroeconomic policies and wide consultation can bolster ownership; openness to second-best reform designs may be necessary.

*Source: INTRODUCTION (wpiea2021139-print-pdf)*

### Chapter 3 of IMF (2019b) identifies weak governance or high corruption as well as insufficient access to

### Chapter 3 of IMF (2019b): Weak Governance, Access to Credit, and Structural Reform Implementation

### Key binding constraints identified
- Weak governance or high corruption and insufficient access to credit are identified as the two key binding constraints in emerging market and developing economies.

### Evidence and literature on packaging and sequencing of reforms
- Kugler and Pica (2004): product market rigidities can mitigate the impact of labor market deregulation.
- Blanchard and Giavazzi (2003): argue to initiate product before labor market reforms, as the former can increase real wages, while the latter can drive them down.
- Munkacsi and Saxegaard (2017): sequencing labor before product market reforms facilitates an earlier new equilibrium.
- Benlamine and others (2019): conclude that reforms should proceed in lockstep.
- Bouis and others (2020): gains from non-manufacturing industry deregulation in advanced economies were statistically and economically significant already after two years; no evidence of short-term costs; authors advocate prioritizing product market reforms over labor market reforms in crisis times.
- Funke (1993): cautions against gradualism due to administrative challenges and time for interest groups to form lobbying power.
- Rodrik (1994) and Dewatripont and Roland (1995): reform bundling can help obtain voter support by packaging less popular reforms with more popular ones.
- Martinelli and Tommasi (1993): winners of early reforms may have an incentive to derail later reforms from which they lose.
- Wei (1997): a package of reforms that would have been rejected by majority voting may gain approval if submitted piecemeal because of a growing constituency in favor of reforms.

### Reform implementation: risks and design considerations
- Ownership and political window:
  - Reforms are easier if the political window of opportunity is right, e.g., when government credibility and reform ownership is high (Funke, 1993; Agarwal and others, 1992) and no election is looming (Ciminelli and others, 2019).
  - Crises may offer a window of opportunity despite weaker short-term economic payoffs for some reforms (Duval and others, 2020b find weak macroeconomic conditions are the most robust correlate of labor market reforms).
- Political economy and distributional effects:
  - If reforms have strong distributional effects, finding consensus may take long, especially in polarized societies (Alesina and Drazen, 1991; Alesina, 1994).
- Legal and capacity constraints:
  - Implementation risks include country-specific legal issues, constitutionality, legal challenges, constrained capacity of courts.
  - In less developed countries, informality and governance weaknesses can hinder reform implementation; administrative and capacity constraints may be binding.
  - Reforms may need to be broken down into smaller steps and closely aligned with technical assistance.
- Fund expertise and collaboration:
  - If Fund expertise is insufficient, evaluating reform options should consider collaboration opportunities with institutions such as the World Bank or the OECD.
  - IEO (2020) and other measures to enhance capacity could be elaborated in the country’s capacity development strategy document.

### Reform impact: measurement challenges and considerations
- Growth payoffs:
  - The 2018 Review of Conditionality (IMF, 2019a) finds that the growth payoff from structural reforms is often overestimated in programs; some structural reforms have short-term growth costs while benefits may take longer to materialize.
- Fiscal and distributional implications:
  - Structural reforms can have fiscal implications (Banerji and others, 2017).
  - Analyses of distributional impact—such as growth incidence assessments (Kireyev and Chen, 2017)—help gauge political support and anticipate vested interests (Ciminelli and others, 2019).
  - If fiscal offsets (e.g., social assistance) are considered to compensate short-term negative employment effects, realistic assumptions about phase-out are necessary. Direct compensation may fail if its temporary nature is anticipated (Fernandez and Rodrik, 1991).
- Quantitative literature references:
  - Closed-economy analyses: Berger and Danninger (2005), Boken and Hallett (2008), Fernandez-Villaverde and others (2014).
  - International spillovers: Lusinyan and Muir (2013), Andres and others (2014), Eggertson and others (2014), Vogel (2014).
  - Informal sector focus: Farrell (2004), Bailey and others (2005), La Porta and Shleifer (2008), Charlot and others (2015), Anand and Khera (2016), Munkacsi and Saxegaard (2017).
  - Labor and product market reforms: Cacciatore and Fiori (2016) and IMF (2016b).

### Case studies and lessons

- General:
  - The evaluation applies an ex-ante view (putting the IMF mission chief in the position at the time), while lessons benefit from hindsight.
  - Seven case studies are used to apply evaluation criteria and derive lessons.

- A. Labor Market Reforms — Latvia (2008 27-month SBA)
  - Context and scope:
    - SBA approved in 2008 after years of unsustainably high growth and large current account deficits that culminated in a balance of payments, financial and fiscal crisis.
    - Between August 2007 and December 2008, private sector deposits fell by 10 percent and official reserves fell by almost 20 percent during the months prior to the program.
    - Fiscal policy: fiscal consolidation necessary; 20 million lats are reallocated from the European Social Fund for active labor market policies and temporary public employment programs.
    - Monetary policy: Latvia’s currency is pegged to the euro.
    - Latvia is an emerging market economy with strong reform drive in anticipation of membership in the European Economic and Monetary Union.
    - Program objectives:
      - Immediate: stabilize the financial sector, restore depositor confidence, avoid disorderly adjustment while preserving the exchange rate peg.
      - Medium-term: facilitate economic adjustment and strengthen the peg.
    - Program risk: considerable, given difficulty correcting currency misalignment without nominal depreciation.
  - How problems were addressed:
    - Internal devaluation required substantial internal wage adjustment; several labor market-related conditions were introduced over the program as external conditions deteriorated.
    - Four structural benchmarks on labor market reforms were introduced to promote wage restraint and prepare an active labor market policy strategy.
  - Implementation features:
    - High ownership to safeguard euro accession prospects.
    - Need for substantial technical assistance to relieve institutional constraints.
    - Close cooperation with the EU, the ECB, the World Bank, the EBRD, and some Nordic country authorities, including participation in Fund missions.
  - Impact and outcomes:
    - Internal devaluation policies helped support relative price adjustment including nominal wage declines in the labor market.
    - Mismatches in the labor market usually take time to unwind; structural unemployment remained elevated over a longer period.
    - Inequality may have increased, raising issues around the guaranteed minimum income scheme.
  - Lessons:
    - Success attributed to very specific circumstances, notably strong ownership tied to euro accession prospects.
    - Flexibility in program design, adapted to deteriorating external environment, helped achieve objectives.
    - Adjustment was more lengthy than anticipated.

- B. Product Market Reforms — Portugal (2011 3-Year EFF)
  - Context and scope:
    - Since entering the euro area, Portugal experienced large economic imbalances: significant REER overvaluation, large current account and fiscal deficits, and high financial and corporate indebtedness.
    - Deep-rooted structural deficiencies: impediments to competition and a weak court system.
    - Fiscal and monetary policy space: very limited. Portugal had a fiscal deficit of 9.1 percent of GDP and a public debt ratio of 93 percent. Monetary policy is governed by the ECB.
    - Program objectives:
      - Enhancing competitiveness and growth; instilling confidence and ensuring fiscal sustainability; safeguarding financial stability and avoiding excessively fast deleveraging.
    - Program risk: several risks including elections in June 2011.
  - How problems were addressed:
    - Extensive structural reform agenda with product market reforms aimed at fostering competition to reduce non-tradable relative prices and enhance productivity.
    - Structural condition to revise the Competition Law among other commitments.
    - Program initially had broad political consensus; later faced reform fatigue and vested interests (notably energy sector).
  - Implementation features:
    - Enabling and complementary reforms included labor market reforms, fiscal devaluation, market liberalization in energy and telecommunications, privatizations, and judicial system efficiency improvements.
    - Sequencing: front-loading of fiscal and labor market reforms to achieve internal devaluation.
    - Collaboration: close coordination with European partners.
  - Impact and outcomes:
    - Ex Post Evaluation (IMF, 2016c): despite wide-ranging structural reforms, growth remained tepid and unemployment high.
    - Difficulty establishing a link between competitiveness reforms and their effects on prices; payoffs from product market reforms often materialize long after program end.
    - Short-term: negative growth impact given front-loaded fiscal adjustment; long-term: positive growth impact expected but slow to materialize.
    - Inequality: reforms may have detrimental impact; targeted support measures included enhancing means-testing and exemption thresholds for health sector fees.
  - Lessons:
    - Taper expectations of rapid competitiveness gains.
    - Inappropriate sequencing may reduce reform effectiveness (product liberalizations before labor reforms could have made labor reforms more effective).
    - Maintaining parsimony in program conditionality is difficult: Gershenson and others (2016) estimate more than 150 measures in product markets implemented within Portugal’s structural reform program containing close to 500 actions. Such breadth can overburden administrations with lower capacity.

- C. Governance Reforms — Madagascar (2016 40-month ECF)
  - Context and scope:
    - Following re-establishment of constitutional democracy in 2014, Madagascar faced recovery challenges from a long political crisis and international isolation.
    - In 2015, economic recovery failed to gain momentum due to falling commodity prices and weather-related shocks; poverty was widespread; governance remained weak and corruption widespread.
  - How problems were addressed:
    - After RCF support and a successful SMP, Madagascar requested a 40-month ECF arrangement in 2016 to reinforce macroeconomic stability and boost sustainable and inclusive growth.
    - Reform objectives matched Article IV surveillance findings: enhance economic governance and reduce corruption.
    - Governance-related conditionality included a comprehensive set of measures to strengthen public financial management (PFM), fight corruption, and reform the legal system.
  - Implementation features:
    - Fund has increasingly built expertise in some governance reform areas; collaboration with World Bank and assessor bodies such as FATF remains important.
  - Outcomes:
    - Madagascar (2016 ECF) program demonstrates solid progress toward better governance and reduced corruption.

### Cross-cutting lessons and policy implications
- Ownership, political windows, and credibility are central to reform success; strong ownership can enable deep adjustments (Latvia example).
- Sequencing and packaging matter; country-specific circumstances determine whether product or labor market reforms should be prioritized and whether reforms should proceed sequentially, in lockstep, or be bundled.
- Flexibility in program design can be critical when external conditions deteriorate.
- Reforms with distributional consequences require realistic design of compensatory measures and careful assumptions about their phase-out.
- Administrative capacity and governance weaknesses necessitate breaking reforms into smaller steps and aligning with technical assistance.
- Collaboration with other institutions (World Bank, OECD, FATF, EU, ECB, EBRD) can augment Fund expertise and support implementation.
- Programs should adopt conservative assumptions about the timing and magnitude of payoffs from structural reforms; many benefits materialize well after program horizons.

*Italic: Source — wpiea2021139-print-pdf, Chapter 3 of IMF (2019b).*

### Annex IV.C). Program approval was subject to a prior action to submit legislation for

### Evaluation Matrix: Madagascar’s 2016 40-Month ECF

### Program performance and governance reforms
- Program approval was subject to a prior action to submit legislation for establishing special anti-corruption centers, strengthening asset declarations, as well as expanding the definition of corruption offenses.
- Other conditionality was strongly biased toward the governance area and included structural benchmarks to improve PFM and legislative amendments to regulate assets management and public establishments.
- Performance under the ECF program:
  - The performance of the ECF program has remained generally strong with solid growth and robust external position.
  - Implementation of the structural agenda has been quite good, although capacity constraints posed difficult challenges.
  - On the economic governance side, implementation of PFM reform plans has been broadly satisfactory, including the adoption of the new strategic plan in 2018.
  - Noteworthy progress made in strengthening the anti-corruption framework: several laws adopted since 2016 helped bring Madagascar’s legal framework toward international standards: an anti-corruption law, a law on anti-corruption courts, a law on international cooperation, and a law on Anti-Money-Laundering/Countering Financing of Terrorism (AML/CFT) were adopted by end-2018.
  - Legislative actions were followed by implementation measures, including the opening of the first anti-corruption court in June 2018 and increased budget allocation to the anti-corruption agency.
- Caveat:
  - However, one important anti-corruption law on asset recovery was not passed.

### Evaluation matrix: context, sequencing, and implementation
- Context
  - Macroeconomic situation: Madagascar is a fragile country striving to recover from an extended political crisis and international isolation between 2009 and 2013. At program request, Madagascar has a negative output gap.
  - Fiscal and monetary policy space: Limited.
  - Income level or reform priorities: Madagascar is a low-income country with weak economic climate in need of quick wins to help build public support for continued reforms.
  - Surveillance gaps: The 2014 Article IV surveillance report notes that weak institutions and weak governance eroded the foundation for solid economic growth, with short-term rent-seeking having taken precedence over longer-term nation building. It highlights the need to strengthen the economic climate, including through improving governance.
  - Program objectives: One of the main structural reform objectives is enhancing economic governance and fighting corruption.
  - Program risk: Significant risks to program success, including political uncertainty and lack of progress to tackle corruption.
- Reform interactions and sequencing
  - Packaging
    - Enabling reforms: The three main areas of PFM reforms, anti-corruption reforms, and AML/CFT reinforce each other in improving economic governance.
    - Complementary reforms: Among other, tax and customs administration reform to improve administration and fight corruption; business environment reform to reduce excessive bureaucratic procedures; and public investment and debt management, especially for publicly guaranteed loans and PPP projects.
  - Sequencing
    - PFM reforms: (i) reduce administrative discretion; (ii) develop a medium-term PFM strategy and action plan; (iii) reinforce external audits; (iv) strengthen expenditure management on procurement procedures for public entities and SOEs.
    - Anti-corruption reforms: (i) drafting and approving new, stronger anti-corruption legislation; (ii) restructuring the public anti-corruption agency; (iii) establishing anti-corruption units at all ministries; (iv) developing an information system that tracks all legal anti-corruption cases; (v) establishing a commission to improve the integrity of the judicial system; (vi) launching of a system for the coordination, monitoring, and evaluation of anti-corruption measures; and (vii) making the Council of Budget and Financial Discipline (CDBF) fully operational.
    - AML/CFT: (i) conducting a national risk assessment; (ii) developing an action plan; and (iii) joining the regional Anti-Money Laundering Group.
- Reform implementation
  - Political economy: Authorities show high buy-in as they recognize that action is necessary to reverse harmful trends. However, political and institutional constraints limit the scale and pace of some measures.
  - Capacity constraints and legal issues:
    - There are significant administrative and institutional capacity constraints, as also indicated by low revenue collection and substantial low-priority spending.
    - Lack of judicial independence allows frequent political interference in the judiciary affairs. Long time lags for enacting legal changes.
  - Collaboration: TA provided by World Bank, EU, and AfDB. Close collaboration with the World Bank on improving social sector and PFM efficiency as well as AML/CFT. AfDB provides support on various areas including governance.
  - Reform impact:
    - Short-term: Positive impact on confidence from strengthened governance.
    - Long-term: Better economic governance is expected to improve growth and stability, including by attracting private investment.
    - Inequality: Mitigating inequality (staff analysis in Selected Issues Paper).

### Lessons and policy implications
- Use of Fund conditionality
  - Madagascar’s ECF showcases the use of Fund conditionality to achieve progress in a difficult but critical reform area.
  - Applying structural conditions on concrete measures ensured Madagascar could achieve solid progress in enhancing governance and fighting corruption.
- Preconditions for success
  - Successful implementation of governance reforms requires the authorities to be fully committed and to cooperate closely with the Fund.
  - Madagascar’s case shows that significant achievements can be made—outside the Fund’s traditional core area of expertise—even under a difficult political situation, including a political transition and elections.
- Practical considerations
  - Capacity constraints and political/institutional limits can slow implementation, and some important laws (e.g., an asset recovery law) may not be passed despite overall progress.
  - Close collaboration with development partners (World Bank, EU, AfDB) supports implementation, especially for technical assistance and complementary reforms.
  - Sequencing and packaging reforms across PFM, anti-corruption, and AML/CFT can reinforce each other and enhance reform impact.

*Source: Annex IV.C). Program approval was subject to a prior action to submit legislation for establishing special anti-corruption centers, strengthening asset declarations, as well as expanding the definition of corruption offenses.*

### Box 5. Evaluation Matrix: Georgia’s 2017 3-Year EFF

### Box 5. Evaluation Matrix: Georgia’s 2017 3-Year EFF

### Context
- Macroeconomic context:
  - Macroeconomic situation: Growth is subdued, partly due to adverse external circumstances.
  - Fiscal and monetary policy space: There is no fiscal space to support structural reforms, with fiscal consolidation a key objective of the program. Monetary policy has already been loosened, yet inflation is low.
  - Income level or reform priorities: Georgia is an emerging economy with policy agenda to bolster continued growth.

### Program context
- Surveillance gaps:
  - The 2013 Article IV surveillance report notes a need for reforming the social system (universal health care, pension, targeted social assistance and education).
  - It also discusses higher private savings through developing local capital markets and creating a contributory pension system.
- Program objectives:
  - Fiscal consolidation over the medium term
  - Structural reforms aimed at promoting savings, private sector investment, and improved competitiveness
- Program risk:
  - Sustained weak domestic demand, in the context of fiscal consolidation and subdued global growth, could weaken the growth outlook. In such an environment, reform fatigue could set in and support for the program could decline.

### Reform interactions
- Packaging:
  - The pension reform is accompanied by a capital market reform.
- Sequencing:
  - In a first step, a law establishing the second pillar pension system will be submitted.
  - In a second step, an independent pension fund agency will be established.

### Reform implementation
- Political economy:
  - High ownership at the outset. Recent parliamentary elections gave the ruling party a constitutional majority, and the new government is united around a policy agenda, including pension reforms.
- Capacity constraints and legal issues:
  - Adequate capacity.
- Collaboration:
  - Technical assistance is provided by the World Bank.

### Reform impact
- Short-term:
  - None.
- Long-term:
  - Positive growth impact. The pension reform is expected to mobilize domestic savings and private investment and deepen domestic capital markets.
  - The pension reform could improve fiscal sustainability while rule-based indexation for basic pensions can reduce uncertainty.
- Inequality:
  - Unclear.

*Source: Box 5. Evaluation Matrix: Georgia’s 2017 3-Year EFF (from the provided IMF content).*

### Box 7. Evaluation Matrix: Jordan’s 2016 3-Year EFF (concluded)

### Box 7. Evaluation Matrix: Jordan’s 2016 3-Year EFF (concluded)

### Reform implementation
- Political economy
  - "The transition government is committed to implementing policies and reforms. (However, a new government was formed following widespread protests over rising fuel and electricity prices and the delayed income-tax law in 2018. Complex socio-political challenges including corruption added to public discontent and eroded support for politically difficult reforms.)"
- Capacity constraints and legal issues
  - "The authorities need to enhance capacity of debt and public financial management of the central government and its agencies, including the National Electric Power Company and the Water Authority of Jordan. Technical assistance to be delivered by the IMF, the World Bank, and the U.S. Treasury."
- Collaboration
  - "The World Bank provided support on energy reform and policy advice on social measures to alleviate the impact of this reform on the most vulnerable. The implementation of the tariff adjustment mechanism is monitored by the World Bank and Japan’s International Cooperation Agency."
- Reform impact
  - Short-term: "Mixed impact. While the energy reform can facilitate fiscal consolidation, social resistance could endanger macroeconomic stability."
  - Long-term: "Positive growth impact from improved energy and fiscal sustainability."
  - Inequality: "Possible large impact depending on offsetting measures."

### Conclusions and policy recommendations
- Recent findings
  - "In recent years, IMF-supported programs increasingly faced situations dominated by structural challenges."
  - "While this paper finds an increased focus on structural policies in Fund arrangements, efforts toward transformational reforms as part of IMF-supported programs often remains unsuccessful."
  - "Improving conditionality design could help to achieve more impactful reforms."
- Proposed improvements (complementing the 2018 Review of Conditionality)
  - First: "parsimony in conditionality design commands program objectives to be more specific which helps to identify the most critical reforms to achieve them."
  - Second: "Fund expertise could be expanded and Fund policies and practices could be adjusted to ensure structural conditionality focuses on key macro-structural weaknesses, particularly in areas such as labor and product markets, which could make countries more resilient against future shocks."
  - Third: "a systematic evaluation of reform options in IMF-supported programs could improve reform prioritization and increase reform success."
    - "While Fund staff implicitly takes some of these aspects into account, a more systematic evaluation of reform designs and options would improve staff’s ability to rigorously identify, package and sequence structural reforms and ensure that chosen measures have tangible impact."
    - "Laying out these considerations in Fund staff reports as well as in Ex-Post Evaluations would also improve transparency and accountability."
- New tool and findings from case studies
  - "This paper therefore proposes a new tool for evaluating structural reform options. The evaluation matrix provides a short summary of the most pertinent considerations in reform design, including the macroeconomic and program context, packaging and sequencing of reforms, implementation hurdles including political aspects and capacity constraints, and the reforms’ macroeconomic impact."
  - Applied to seven case studies, the evaluation matrix reveals pressure points that often emerge in reform implementation:
    - "the difficulty of implementing reforms when there is no space for offsetting macro policies,"
    - "the extensive time needed to properly sequence reforms and accommodate reform delays, including due to capacity constraints,"
    - "and the reforms’ limited macroeconomic impact during the program horizon."
  - "Taking time to evaluate reform options and laying out the considerations can help in building consensus, thereby boosting ownership, and arrive at realistic reform designs addressing key structural weaknesses."

### ANNEX I. GLOSSARY (selected entries)
- Article IV: "Country surveillance is a process that culminates in regular (usually annual) consultations with individual member countries. The consultations are known as "Article IV consultations" given their legal foundations in Article IV of the IMF's Articles of Agreement. During an Article IV consultation, an IMF team of economists assesses the country’s economic and financial developments and discusses economic and financial policies with government and central bank officials as well as parliamentarians, the private sector, and representatives of labor unions and civil society."
- Core areas of responsibility: "The 2002 “Guidelines on Conditionality and associated Operational Guidance to Staff” defines the Fund’s core areas of responsibility as “macroeconomic stabilization; monetary, fiscal, and exchange rate policies, including the underlying institutional arrangements and closely related structural measures; and financial system issues related to the functioning of both domestic and international financial markets” (IMF, 2002)."
- Criticality: "Conditions are established only on the basis of those variables or measures that are reasonably within the member’s direct or indirect control and that are, generally, either (i) of critical importance for achieving the goals of the member’s program or for monitoring the implementation of the program, or (ii) necessary for the implementation of specific provisions of the IMF’s Articles of Agreement or policies adopted under them."
- Extended Credit Facility (ECF): "The Extended Credit Facility provides financial assistance to countries with protracted balance of payments problems. The ECF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs."
- Extended Fund Facility (EFF): "When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist with the adjustment process under an Extended Fund Facility. Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period."
- General Resources Account (GRA) arrangement: "General Resources Account arrangements comprise a variety of lending programs with different disbursement schedules and maturities depending on the balance of payment needs of the member. All IMF members can draw under GRA facilities."
- IMF-supported program: "Countries facing difficult economic conditions may request financial support and policy advice from the IMF. The financial support provided by the IMF helps the country with its most immediate macroeconomic problems, and the government's economic policy program aims to restore financial stability while laying the foundations for strong economic growth. While the effects of an economic or financial crisis are felt immediately and can last many months, the results of remedial actions may take longer to materialize."
- Monitoring of Fund Arrangements (MONA): "The Monitoring of Fund Arrangements database contains comparable information on the economic objectives and outcomes in Fund-supported arrangements. It tracks the performance of countries in terms of scheduled purchases and reviews, quantitative and structural conditionality, and macroeconomic indicators. Data are available for most arrangements since 2002 and are collected at the time of arrangement approval and following each review."
- Parsimony: "Parsimony means that program-related conditions should be limited to the minimum necessary to achieve the goals of the Fund-supported program or to monitor its implementation and that the choice of conditions should be clearly focused on those goals."
- Poverty Reduction Growth Trust (PRGT) arrangement: "Poverty Reduction Growth Trust arrangements represent lending programs providing concessional financing support to low-income countries."
- Prior action: "Prior actions are measures that a country agrees to take before the IMF’s Executive Board approves financing or completes a review. They ensure that the program has the necessary foundation to succeed or is put back on track following deviations from agreed policies. Examples include the elimination of price controls or formal approval of a budget consistent with the program’s fiscal framework."
- Review of Conditionality: "Conditionality is reviewed regularly by the Fund as part of its effort to assess its policies and adapt them to a changing environment. The latest review commenced in 2018 and was concluded in 2019 (IMF, 2019a)."
- Standby Credit Facility (SCF): "Arrangements under the Standby Credit Facility provides financial assistance to low-income countries (LICs) with short-term balance of payments needs. The SCF was created under the PRGT as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of shocks or crisis."
- Stand-By-Arrangement (SBA): "In an economic crisis, countries often need financing to help them overcome their balance of payments problems. Since its creation in June 1952, the IMF’s Stand-By Arrangement has been used time and again by member countries, and it is the IMF’s workhorse lending instrument for emerging and advanced market countries. The SBA was upgraded in 2009 along with the Fund’s broader toolkit to be more flexible and responsive to member countries’ needs. Conditions were streamlined and simplified, and more funds were made available up front, as borrowing limits were doubled in response to the Global Financial Crisis. These limits were increased further in 2016. The new framework also enables broader high-access borrowing on a precautionary basis."
- Structural conditionality: "When a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid from the international community. These loan conditions also serve to ensure that the country will be able to repay the Fund so that the resources can be made available to other members in need. Lending reforms approved in 2009 streamlined IMF conditionality in order to promote national ownership of strong and effective policies."
- Structural benchmarks: "Structural benchmarks are (often non-quantifiable) reform measures that are critical to achieve program goals and are intended as markers to assess program implementation during a review. They vary across programs: examples are measures to improve financial sector operations, build social safety nets, or strengthen public financial management."
- Surveillance: "A core responsibility of the IMF is to oversee the international monetary system and monitor the economic and financial policies of its 189 member countries, an activity known as surveillance. As part of this process, which takes place at the global, regional, and country levels, the IMF identifies potential risks to stability and recommends appropriate policy adjustments needed to sustain economic growth and promote financial and economic stability."

### ANNEX II. SAMPLE CHARACTERISTICS (selected figures)
- Table 2. 2018 RoC Sample and Subsample Composition (Percent of total)
  - By analytical group
    - Post-GFC: 29.3 / 30.8
    - Political/economic transformation: 10.5 / 7.7
    - Commodity exporters: 14.3 / 7.7
    - Other developing: 45.9 / 53.8
  - By arrangement/instrument
    - Extended Credit Facility: 35.3 / 46.2
    - Extended Credit Facility/Extended Fund Facility blend: 3.0 / 0.0
    - Extended Fund Facility: 14.3 / 15.4
    - Policy Coordination Instrument: 0.8 / 0.0
    - Precautionary Credit Line: 0.8 / 0.0
    - Precautionary and Liquidity Line: 2.3 / 0.0
    - Poverty Reduction and Growth Facility: 6.0 / 0.0
    - Poverty Reduction and Growth Facility/Extended Fund Facility blend: 0.8 / 0.0
    - Policy Support Instrument: 8.3 / 7.7
    - Stand-By Arrangement: 20.3 / 23.1
    - Stand-By Arrangement/Exogenous Shocks Facility blend: 0.8 / 0.0
    - Stand-By Arrangement/Standby Credit Facility blend: 3.8 / 7.7
    - Standby Credit Facility: 3.8 / 0.0
  - By region
    - Africa: 47.4 / 46.2
    - Asia and Pacific: 6.8 / 7.7
    - Europe: 18.8 / 15.4
    - Middle East and Central Asia: 16.5 / 23.1
    - Western Hemisphere: 10.5 / 7.7

*Source: wpiea2021139-print-pdf - Box 7. Evaluation Matrix: Jordan’s 2016 3-Year EFF (concluded).*

### ANNEX IV. STRUCTURAL BENCHMARKS OF CASE STUDIES

### ANNEX IV. STRUCTURAL BENCHMARKS OF CASE STUDIES

### A. Latvia: Labor Market Reforms
- Initial program period: 23 December 2008 to 22 March 2011.
- Timeline / Condition / Initial test date:
  - Program request: Establishment of a committee to promote wage restraint. Jan 2009
  - 1st review: Reform of the Committee to Promote Wage Restraint by involving the social partners and outside labor market experts. Aug 2009
  - 2nd review: Prepare a comprehensive report on proposed revisions to the public-sector wage grid and the relative wage adjustment across public institutions since end-December. Oct 2009
  - 4th review: Preparation of an active labor market policy strategy to replace Latvia’s Public Works Program. Nov 2011

*Source: MONA.*

### B. Portugal: Product Market Reforms
- Initial program period: 20 May 2011 to 19 May 2014.
- Timeline / Condition / Initial test date:
  - Program request: Amend the Insolvency Law to better facilitate effective rescue of viable firms and support rehabilitation of financially responsible individuals. Dec 2011
  - Program request: Review the Code of Civil Procedure and prepare a proposal addressing the key areas for refinement. Dec 2011
  - 3rd review: Submit to Parliament legislation revising the Competition Law, making it as autonomous as possible from the Administrative Law and the Penal Procedural Law and more harmonized with the European Union competition legal framework. Jan 2012
  - 3rd review: Make effective the amendments to the Corporate Insolvency Law to better support rescue of viable firms (after completing all necessary legislative and publication requirements). Jun 2012
  - Program request: Prepare a proposal to implement identified best international practices in order to reinforce the independence of the main sectoral regulators. Sep 2012
  - Program request: Submit to Parliament amendments to the Code of Civil Procedure to streamline and speed up the court procedures. Nov 2012

*Source: MONA.*

### C. Madagascar: Governance Reforms
- Initial program period: 27 Jul 2016 to 26 Nov 2019.
- Timeline / Condition / Initial test date:
  - Program request / Prior action: Submission to Parliament of draft laws (i) establishing special anti-corruption centers that ensures the operational independence of each center and establishes an independent committee at each center that is responsible for staff recruitment and management, supervision, monitoring, and evaluation of the center activities; and (ii) strengthening asset declarations and their use, as well as expanding the definition of corruption offenses.
  - Program request / continuous: The terms and conditions of all PPP contracts will be published within one month of the date of signature on ARMP’s web site.
  - Program request / continuous: Prior notification of World Bank and IMF staff of any exceptions (such as emergencies) allowing for single source procurement contracts for JIRAMA’s purchases of electricity and purchases and rentals of generators.
  - Program request: Make the Council of Budget and Financial Discipline (CDBF) operational by issuing a decree, appointing its staff, and publishing its disciplinary decisions. Sep 2016
  - Program request: Submission to Parliament of the law regulating the collection, administration, and management of assets that have been seized because of investigations related to corruption, embezzlement, money laundering, financing of terrorism, or organized international criminal activities, in line with the relevant FATF recommendations. Oct 2016
  - 1st review: Publication and submission of the 2015 financial statements of ten large SOEs to the Court of Auditors: Air Madagascar, FANALAMANGA, CEM, ARO, ADEMA, SOAVOANIO, SPAT, SMMC, SONAPAR, and SEIMAD. Dec 2016
  - 2nd review / Prior action: Submit draft law on asset recovery, that is consistent with all FATF recommendations, to parliament.
  - 2nd review: Extend performance contracts to the anti-fraud service (in charge of ex post inspections) at customs. Sep 2017
  - 2nd review: Revise and submit to Parliament the law governing the National Public Establishments (Etablissements Publics Nationaux, EPN). Jun 2018
  - 4th review: Start the process of publishing, including providing searchable internet access (using the criteria of topics and presiding judges), of all final court decisions by the anticorruption centers. Sep 2018
  - 4th review: Establish a public registry of companies that have violated the procurement regulations and are prohibited from participating in future bids. Aug 2019
- Additional summary from source text:
  - There are seven structural benchmarks related to economic governance including improving transparency of contracts and financial statements, budget and financial discipline, law of regulating assets management, law of governing the public establishments, registry of companies which violated the procurement regulations.
  - There are two continuous benchmarks to publish terms and conditions of PPP contracts and notification regarding certain single source procurement contracts.

*Source: MONA.*

### D. Serbia: SOE Reforms
- Initial program period: 23 Feb 2015 to 22 Feb 2018.
- Type / Condition / Initial test date:
  - Program request / Prior action: Elimination of state aid—including budget subsidies, government guarantees, lending from the budget, or any other forms of public support—to steel producer Zelezara Smederovo and preventing accumulation of arrears by this company.
  - Program request / Mar 2015 / Prior action: Adoption by the Government of a financial restructuring plan for EPS (Serbia Electricity).
  - Program request / Sep 2015: Adoption by the Government of a corporate and financial restructuring plan for Railways of Serbia, to be prepared by an independent consultant.
  - Program request / Oct 2015 / 1st review: Adoption by the Government of a financial restructuring plan for Srbijagas, to be prepared by an independent consultant.
  - Program request / Prior action: Submission to the Energy Agency of the Republic of Serbia a request to increase the regulated electricity tariff by 4.5 percent, to be effective from August 1.
  - Prior action / 2nd review: Adoption of the EPS financial restructuring plan by the Government.
  - 2nd review: Amendment to the EPS collective agreement to allow for the implementation of the rightsizing identified in the restructuring plans. Dec 2015
  - 3rd review: Resolution through either privatization or bankruptcy of at least 7 of the 17 strategically important companies that received protection from debt enforcement until May 2016. May 2016
  - 3rd review / Prior action: Finalize the terms of reference for hiring an independent audit firm to establish a credible baseline for the financial position of Srbijagas.
  - 3rd review / Mar 2016: Adoption by the Government Steering Committee of a decision on net employment reduction in 2016 of at least 2700 employees in Railways of Srbija.
  - 4th/5th review: Resolution through either privatization of or initiation of bankruptcy procedures for the remainder of 17 strategically important companies that received protection from debt enforcement until May 2016. May 2016
  - Prior action: Adoption by the EPS supervisory board, in consultation with World Bank, of a credible 2016-19 optimization plan with no less than 1,000 net staff position reduction in 2016.
  - Oct 2016: Adopt, in consultation with World Bank, debt restructuring plan for Srbijagas.
  - Nov 2016 / 8th review: Complete special diagnostic review of Dunav Osiguranje.
  - Prior action / 8th review: Launch of privatization tender for MSK privatization.
- Additional summary from source text:
  - In addition, there were related prior actions and structural benchmarks including on amendments of the corporate insolvency law, full registry of public employees, law on transactions between public entities, resolution through privatization or bankruptcy procedures, and employment reduction.

*Source: MONA.*

### E. Georgia: Pension Reform
- Initial program period: 12 April 2017 to 11 April 2020.
- Timeline / Condition / Initial test date:
  - Program request: Submission of a pension law establishing a 2nd pillar pension system and introducing indexation of public pensions. Dec 2017
  - 1st review: Establishing an independent pension agency. Jul 2018
  - 2nd review: In consultation with the IMF, we will submit to Parliament legislation proposing a rule-based mechanism to index basic pensions. Dec 2019

*Source: MONA.*

### F. Ireland: Financial Sector Reforms
- Initial program period: 16 December 2010 to 15 December 2013.
- Timeline / Condition / Initial test date:
  - 3rd review: Finalize a strategy to guide the development of broader legal reforms around personal insolvency, including significant amendments to the Bankruptcy Act 1998 and the creation of a new structured non-judicial debt settlement and enforcement system. Dec 2011

*Source: MONA.*

### G. Jordan: Energy Reforms
- Initial program period: 24 August 2016 to 23 August 2019.
- Timeline / Condition / Initial test date:
  - Program request / continuous: Indicative targets on domestic payment arrears of National Electric Power Company (NEPCO) and Water Authority of Jordan (WAJ).
  - Program request / Prior action: Prepare detailed quarterly financing plan for next 12 months in coordination with NEPCO and WAJ.
  - Program request / Prior action: Announce the government’s commitment to maintain NEPCO at operational balance during the program period and over the medium term and to adopt by mid-December 2016, and start implementing on January 1, 2017, an automatic electricity tariff adjustment mechanism.
  - Program request: Publish studies on cross-subsidization and options for price adjustments in response to oil price changes. Sep 2016
  - Program request: Adopt an automatic electricity tariff adjustment mechanism, with effective implementation on January 1, 2017. Dec 2016
  - Program request: Submission to Cabinet and publication of an updated action plan on how to reduce the water sector’s losses over the medium term. Dec 2016
  - 2nd review / Prior action: Approval by cabinet of a comprehensive energy-reform plan that ensures NEPCO’s medium-term sustainability and gradually phases out cross-subsidies; with initial implementation to include upfront revenue and cost-savings measures that prevent further losses in 2019.
  - Program request: Transfer the Water Authority of Jordan to the 2020 general budget law. Nov 2019

*Source: MONA.*

*Source: wpiea2021139-print-pdf - ANNEX IV. STRUCTURAL BENCHMARKS OF CASE STUDIES*

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