Series: Occasional Papers. 2007.
Author: Banco de España.
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Abstract
In IMF lending to countries in balance of payments difficulties, access to Fund resources
is conditional to complying with series of measures and reforms contained in an
economic program. The IMF periodically revises the design and conditionality of economic
programs. One of the key findings of the latest Review of Conditionality concluded
in 2019, comprising programs between 2011 and 2017, is a proposal to measure
the effectiveness of IMF programs in terms of their objective of correcting borrowing
countries imbalances. This exercise shows modest results. In addition, the review has
revealed the excessive optimism of macroeconomic projections used in programs,
together with an overestimation of the positive effects of structural reforms. These
factors may jeopardize the effectiveness of economic programs. There remain open
questions when revising the design and conditionality of IMF programs. Among them, the
links between conditionality and stigma, the social impact and communication strategy
of adjustment policies so that they can be more socially acceptable, the duration of IMF
programs, the role of debt restructurings, and the adequacy of policy recommendations,
beyond the strict compliance with conditionality procedures.