{
  "title": "Conditionality as an Instrument of Borrower Credibility",
  "publication": "IMF Policy Discussion Papers, February 1, 1997",
  "sourceUrl": "https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/conditionality-as-an-instrument-of-borrower-credibility-2109",
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  "summary": "Fund member countries that adopt market-friendly policies often encounter a credibility problem—market-friendly policies are not effective in stimulating private investment as long as there remains a significant risk of policy reversal.",
  "sections": [
    {
      "heading": "Executive summary and central argument",
      "content": "- Fund member countries that adopt market-friendly policies often encounter a credibility problem—market-friendly policies are not effective in stimulating private investment as long as there remains a significant risk of policy reversal.\n- The root of this risk lies in the discretionary policy-making authority of governments.\n- Committing to a program with the Fund, and endorsing its conditionality, is one instrument available to governments to overcome this difficulty.\n- The paper develops this interpretation of conditionality and indicates some of its operational implications for Fund programs."
    },
    {
      "heading": "Key findings",
      "content": "- Market-friendly policies fail to stimulate private investment when significant risk of policy reversal remains.\n- Discretionary policy-making authority of governments is identified as the root cause of credibility problems.\n- Endorsing IMF conditionality within a Fund program can serve as a commitment device to enhance borrower credibility."
    },
    {
      "heading": "Operational implications for Fund programs",
      "content": "- Conditionality can be interpreted and applied as an instrument to reduce perceived policy reversal risk.\n- Fund program design should account for the credibility-enhancing role of conditionality when engaging with member countries that face discretionary policy-making challenges."
    },
    {
      "heading": "Subject, keywords, and classification",
      "content": "- Subject: Credit ratings, Money\n- Keywords: Conditionality/Credibility, Credit ratings, financing, Fund, Fund arrangement, Fund program, Global, market, market credibility, options vis-à-vis market participant, PDP, policy, policy framework underpinning IMF conditionality practice, renewed appreciation\n\n---\n\n Content in this bundle\n\n- Conditionality as an Instrument of Barrower Credibility - PPAA/97/2\n  - Conditionality as an Instrument of Barrower Credibility - PPAA/97/2 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Conditionality as an Instrument of Barrower Credibility - PPAA/97/2 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/conditionality-as-an-instrument-of-borrower-credibility-2109"
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    "Authors: Pierre Dhonte",
    "Published: February 1, 1997",
    "Series: IMF Policy Discussion Papers",
    "DOI: https://doi.org/10.5089/9781451974423.003",
    "Fund member countries that adopt market-friendly policies often encounter a credibility problem—market-friendly policies are not effective in stimulating private investment as long as there remains a significant risk of policy reversal.",
    "The root of this risk lies in the discretionary policy-making authority of governments.",
    "Committing to a program with the Fund, and endorsing its conditionality, is one instrument available to governments to overcome this difficulty.",
    "The paper develops this interpretation of conditionality and indicates some of its operational implications for Fund programs.",
    "Market-friendly policies fail to stimulate private investment when significant risk of policy reversal remains.",
    "Discretionary policy-making authority of governments is identified as the root cause of credibility problems.",
    "Endorsing IMF conditionality within a Fund program can serve as a commitment device to enhance borrower credibility.",
    "Conditionality can be interpreted and applied as an instrument to reduce perceived policy reversal risk.",
    "Fund program design should account for the credibility-enhancing role of conditionality when engaging with member countries that face discretionary policy-making challenges.",
    "Subject: Credit ratings, Money",
    "Keywords: Conditionality/Credibility, Credit ratings, financing, Fund, Fund arrangement, Fund program, Global, market, market credibility, options vis-à-vis market participant, PDP, policy, policy framework underpinning IMF conditionality practice, renewed appreciation",
    "**Conditionality as an Instrument of Barrower Credibility - PPAA/97/2**"
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