Eurodad, 09 April 2008
Faced with strong criticism for its expansive and erroneous use of conditionality, and in the wake of a financial crisis, the International Monetary Fund (IMF) approved in 2002 a set of guidelines to inform its use of structural conditionality. The Conditionality Guidelines committed the Fund to reduce the overall number of conditions attached to Fund lending and ensure that those attached respected and were drawn from nationally developed poverty plans in recognitions that developing country ownership is instrumental for successful development.
The IMF’s own Independent Evaluation Office (IEO) issued a study in January 2008 which concluded that the Fund dramatically increased both the number of structural conditions and their intrusiveness in recipient countries’ domestic affairs.[i] However, this evaluation only covered a limited period of time after the Conditionality Guidelines were approved in 2002 (it assessed operations approved between 1995 and 2004).
This report by the European Network on Debt and Development (Eurodad) goes further, assessing more recent IMF loans and going into more detail on the content of the loans. This report looks at the effectiveness of the Conditionality Guidelines in reforming IMF conditionality during the five years since the Guidelines were approved. Based on IMF figures, Eurodad examines the share of Fund structural conditions which prescribe highly sensitive and intrusive policy reforms.
This report finds that since the Conditionality Guidelines were approved, the IMF has not managed to decrease the number of structural conditions attached to their development lending. Moreover, the Fund continues to make heavy use of highly sensitive conditions, such as privatisation and liberalisation. Eurodad’s analysis finds that a quarter of all the conditions in Fund loans approved after 2002 still contain privatisation or liberalisation reforms.
The IMF conditionality streamlining initiative was supposed to decrease the average number of structural conditions and increase ownership of national governments. It also introduced certain tests for whether IMF conditions were necessary, including a test of “criticality”. This report analyses the IMF’s own figures to demonstrate that no further progress has been made since 2004, and casts serious doubts about the genuine commitment of the institution to streamlining its structural conditionality and speed up the application of their own conditionality policy. Faced with in-depth structural reforms of its own, the Fund should take this opportunity to speed up implementation of their Conditionality Guidelines and take further steps in the streamlining initiative.