The Catalytic Impact of IMF Lending on Official Development Assistance

IMF Working Papers, June 28, 2024

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Canonical URL: The Catalytic Impact of IMF Lending on Official Development Assistance

Coverage period: 1990-2019.
Focus: Low-Income Countries (LICs).
Objectives:
- Disentangle the effect of IMF lending on Official Development Assistance (ODA) via the extensive margin (countries’ participation in IMF programs) and the intensive margin (size of IMF-supported program).
Identification strategy and instruments:
- Instrument for program participation: interaction of past IMF program participation and IMF liquidity.
- Instrument for size of disbursements: the review of access limits.
Analytical approaches: econometric analysis and sensitivity analysis to address selection biases.

Baseline catalytic effect:
- A one percentage point (pp) of GDP increase in IMF disbursements catalyzes additional ODA of 2.7 pp of GDP.
Donor composition of catalytic ODA:
- Multilateral donors: 1.3 pp of GDP.
- Traditional bilateral donors: 0.6 pp of GDP.
Among multilateral donors:
- Strongest catalytic effect on World Bank disbursements.
- Next strongest effect from the EU.
Nonlinearity:
- Catalytic effects on ODA exhibit decreasing returns to large IMF disbursement amounts.

Subjects: Balance of payments, Capital account, Concessional external borrowing, Current account balance, Econometric analysis, External debt, Foreign aid, Official development assistance, Sensitivity analysis.
Keywords: Capital account, catalysis, catalytic effect, Concessional external borrowing, Current account balance, Global, IMF disbursement, IMF program participation, IMF quota, International Monetary Fund (IMF), ODA flow, Official development assistance, official development assistance (ODA), Sensitivity analysis.