IMF Survey: IEO Evaluates IMF Loan Conditions
IMF News, January 3, 2008
Source details
- Canonical URL
- IMF Survey: IEO Evaluates IMF Loan Conditions
Other formats
Bibliographic details
- Published: January 3, 2008
Overview
- Publication: IMF Survey online, January 3, 2008.
- Study focus: Structural conditionality in IMF-supported programs (programs approved in 1995-2004).
- Central finding: Conditions attached to loans have become more focused on IMF core areas, but there remain too many conditions and some may not be tied to principal program goals.
- Noted limitation: Many conditions had limited structural depth—examples include requirements to draft legislation or prepare plans rather than implement deeper reforms.
Key IEO findings
- After the streamlining initiative was launched, the composition of structural conditions shifted significantly toward IMF core areas.
- Compliance and effectiveness:
- Higher in IMF core competency areas, such as public expenditure management and tax-related issues.
- Lower in areas such as privatization and reform of the public sector.
- Number of conditions:
- The number of structural conditions in Fund programs remained stable at about 17 per program/year, contrary to expectations when the streamlining initiative was launched.
- A contributing factor was strong demand by donors and others to include these conditions as a monitoring tool for their own programs and initiatives.
- Alignment with core areas:
- Approximately one-third of the conditions remain outside core areas.
- Compliance metrics:
- Only about one-half of the conditions were complied with on time.
- There was a weak link between compliance and subsequent reforms.
IMF response and Executive Board assessment
- IMF staff observations:
- Counting the number of conditions is a limited metric for evaluating reform success.
- Success should be measured by whether program goals are achieved and sustained, not by reforms beyond the program.
- The report did not provide specific evidence to substantiate the conclusion that some conditions may not have been critical enough.
- The Fund should retain the option to adopt conditions in areas outside IMF expertise (assuming appropriate external expert advice) if such conditions are critical to achieving program goals and are not part of another institution’s supported program (such as the World Bank).
- Managing Director Dominique Strauss-Kahn quote:
- "While we have been making progress in recent years in streamlining conditionality and focusing it on our core areas of expertise, we will need to ensure parsimony in the selection of conditions in the future, limiting them to measures that are critical to achieve the objectives of the programs we support".
- IEO head Tom Bernes quote:
- "progress has been made in better aligning IMF conditionality to its core areas of responsibility and expertise. The report also provides evidence of higher compliance with conditionality in the IMF's core areas. However, approximately one-third of the conditions remain outside core areas and compliance overall—at about one-half—remains weak. This analysis underscores that achieving the objectives of parsimony and criticality remains an important challenge for the Fund and further progress is necessary."
- Executive Board conclusions (meeting on December 12):
- The Board broadly agreed with the IEO findings and noted the assessment gives impetus to ongoing efforts to make the Fund more focused and relevant.
- The Board endorsed specific recommendations (see below).
Board-endorsed recommendations and policy implications
- Parsimony of conditions:
- Objective: have parsimony of conditions in Fund-supported programs.
- IMF staff should have candid exchanges with country authorities to identify critical structural reforms that are linked to program goals and likely to have a significant and sustainable impact.
- Several Directors advised caution on setting conditions in non-critical areas at the request of donors.
- Justification and documentation:
- Fund documents should justify the criticality of proposed conditions (especially those outside areas of IMF competence) and their relation to program goals.
- Use of external expertise and coordination:
- IMF should continue including conditionality on all measures critical to programs while drawing on the expertise of other institutions in non-core areas.
- A recently agreed action plan on Bank-Fund collaboration will help coordinate the coverage of conditions by the two institutions.
- Monitoring and evaluation:
- The IMF should strengthen its monitoring and evaluation framework to link conditions to program goals and enhance accountability.
Source: IMF Survey: IEO Evaluates IMF Loan Conditions