IMF Conditionality, Implementation and the New Political Economy of Ownership
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IMF Conditionality, Implementation and the New Political Economy of Ownership GRAHAM BIRD1 AND THOMAS D WILLETT2 1
Surrey Centre for International Economic Studies, University of Surrey, Guildford, Surrey GU2 7XH, UK. E-mail: [email protected] 2 The Claremont Colleges, 160 East 10th Street, Claremont, CA 91711, USA. E-mail: [email protected]
Recent attempts to explain the implementation of conditionality incorporated in IMF-supported programmes have used the concept of ‘ownership’. A literature on ownership has begun to emerge and, alongside this, policy changes in the form of streamlining conditionality and broadening participation in its design have been introduced to encourage ownership. However, ownership is difficult to define precisely and this limits its operational value. This paper focuses instead on implementation and suggests that wider participation will not guarantee better implementation. However, it stresses that political economy variables are important in assessing the chances of implementation and argues that these need to be considered more fully than they are at present when programmes are being negotiated. We suggest a narrow concept of ownership that focuses on prospects for implementation. One implication is that the Fund may have to make concessions on the technical design of programmes in order to maximise the chances that improved policies will be adopted. Comparative Economic Studies (2004) 46, 423–450. doi:10.1057/palgrave.ces.8100060
Keywords: IMF conditionality, ownership, IMF implementation JEL Classifications: F33, F34, F41
INTRODUCTION For a long time, the conditionality of the International Monetary Fund has been criticised by those on the left of the political spectrum for being too harsh and invasive. More recently, it has also come under attack from some on the right who claim that conditions are seldom enforced.
G Bird & TD Willett Ownership and IMF conditionality
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Thus, rather than imposing excessive adjustment, IMF programmes are seen by them as postponing adjustment.1 Academic commentators pointed to the escalation in IMF conditionality during the 1980s and early 1990s and suggested that this may have discouraged governments from implementing programmes (Bird, 2001b). Certainly, a number of studies, including ones conducted by the IMF itself, have found that the track record of implementation has been poor.2 This in turn has raised questions about the value of the IMF’s seal of approval and its value as a catalytic agent to influence private capital flows. Some critics, such as the majority of a commission appointed by the US Congress and chaired by Allen Meltzer (International Financial Institution Advisory Commission (IFIAC), 2000) have gone so far as to propose that IMF conditionality should be entirely abandoned and replaced with ex ante rules for eligibly to borrow. Others have proposed a wider range of reforms relating to conditionality. Faced with these criticisms, the Fund undertook a review in which it broadly accepted
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