## A Review of IMF-Supported Lending Programs

_IMF Blog, May 20, 2019_

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## Bibliographic details
- Authors: Petya Koeva Brooks, Martin Mhleisen, Chad Steinberg
- Published: May 20, 2019

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### Overview
- Authors: Petya Koeva Brooks, Martin Mühleisen, Chad Steinberg
- Date: May 20, 2019
- Scope: Review of 133 IMF-supported lending programs in operation between September 2011 and December 2017.
- Context: First major stocktaking of IMF programs since the Global Financial Crisis, a period of unexpectedly slow economic growth.

### Programs as shock absorbers
- Primary role: Enable countries to meet immediate financial needs and cushion economic distress.
- Catalytic effect: Programs help catalyze additional financing from markets, other official lenders, and donors, protecting economies from greater disruption.
- Performance:
  - Three-quarters of IMF programs were successful or partially successful in achieving their objectives (examples: resolving balance of payment problems, fostering economic growth).
  - Social spending was generally protected as a share of GDP.
  - Over a third of IMF programs, mostly in low-income countries, targeted fiscal expansion to support growth and poverty reduction.

### Lessons learned and way forward
- Forecasting and contingency planning:
  - Overoptimistic economic forecasts reduced a program’s chances of success.
  - Recommendation: Use a more conservative approach to economic forecasts and provide deeper analyses of the impact that policies under the program could have on economic growth.
  - Recommendation: Include more extensive contingency planning when designing programs.
- Public debt and debt sustainability:
  - Debt sustainability improved in most cases where debt vulnerabilities started out high.
  - In some programs, debt exceeded the Fund’s initial projection by considerable margins.
  - Recommendation: Apply more careful diagnosis and develop sharper tools for the IMF’s debt sustainability analysis to reduce any bias in judgement when assessing debt.
  - Note: Fund policies are already in place to deal with unsustainable debt in Fund-supported programs; debt restructuring should be considered on a case-by-case basis.
- Fiscal composition and growth:
  - Many programs applied fiscal adjustments that were less growth-friendly than initially envisaged.
  - Fiscal adjustment tended to be achieved by cutting public investment rather than by lowering current spending or raising revenue.
  - Recommendation: Set more granular fiscal targets in programs (for example, a floor for critical public investments) to better guide government fiscal policy.

### Tackling structural challenges to bolster growth prospects
- Conditionality focus:
  - Programs generally kept closer to reforms within the Fund’s traditional areas of expertise.
  - Conditionality in fragile and small states should be better tailored to these countries’ specific challenges.
- Expanding scope and expertise:
  - Where critical for achieving program goals, conditionality may need to go beyond traditional domains such as fiscal and monetary policy (examples: labor and product market reforms).
  - Recommendation: Build more expertise in these areas and continue collaboration with partner institutions where the Fund lacks expertise.
- Program duration consideration:
  - Some reforms may take longer to implement and yield results.
  - Recommendation: Consider extending the program duration of arrangements under the Extended Fund Facility in exceptional cases to five years, alongside appropriate safeguards.

### The importance of ownership
- Ownership and success:
  - Programs tended to be most successful when country authorities had strong ownership of the specified course of action.
- Recommendations to strengthen ownership:
  - IMF should better understand domestic institutional and political capacities to avoid unrealistic targets.
  - Tie programs to national reform plans to facilitate sustained commitment by authorities and citizens.
  - Improve public information and engagement—effective communication is underappreciated but important for program implementation.
  - If a program goes off-track, the Fund should strive to remain involved (for instance, by encouraging countries to use Staff-Monitored Programs to help maintain the country’s track record with the Fund).

### Implementation and institutional learning
- Institutional response:
  - In line with its commitment to be a learning institution, the Fund will draw on the lessons of the review to improve program design in the future.
  - The Fund will continue to conduct regular reviews of its conditionality.

*Source: A Review of IMF-Supported Lending Programs (IMF blog page, May 20, 2019).*

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## References

- [Review of Program Design and Conditionality](https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/05/20/2018-Review-of-Program-Design-and-Conditionality-46910)

_Source: https://www.imf.org/en/blogs/articles/2019/05/20/a-review-of-imf-supported-lending-programs_