## Vested Interests in a Positive Theory of IFI Conditionality

_IMF Working Papers, April 1, 2002_

## Source details

**Canonical URL:** [Vested Interests in a Positive Theory of IFI Conditionality](https://www.imf.org/en/publications/wp/issues/2016/12/30/vested-interests-in-a-positive-theory-of-ifi-conditionality-15776)

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## Bibliographic details
- Authors: Alex Mourmouras, Wolfgang Mayer
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849479.001

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### Summary
- Understanding of the domestic political environment is key to building broad country ownership and the successful implementation of reform programs supported by international financial institutions (IFIs).
- Recipient countries are not unitary actors: policymakers are influenced by special interest groups (SIGs) opposing reforms, leading to distorted policies.
- Using a new model of the financial relations between a benevolent IFI and a sovereign borrower subject to influence by SIGs, the paper analyzes the determinants and welfare impacts of conditional and unconditional assistance.
- While conditionality may raise IFI welfare, economize on the amount of assistance, and lower domestic distortions, it may not always raise recipient country welfare.
- Recipient governments are always better off if assistance is provided unconditionally.

### Key findings and analysis
- Conditionality effects:
  - May raise IFI welfare.
  - May economize on the amount of assistance.
  - May lower domestic distortions caused by SIG influence.
  - May not always raise recipient country welfare.
- Recipient government welfare:
  - Recipient governments are always better off if assistance is provided unconditionally.
- Analytical approach:
  - Employs a model of financial relations between a benevolent IFI and a sovereign borrower influenced by special interest groups (SIGs).

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## Content in this bundle

- **Vested Interests in a Positive Theory of IFI Conditionality - WP/02/73**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/vested-interests-in-a-positive-theory-of-ifi-conditionality-15776_