Conditionality review exposes divergent opinions

10 September 2001

Consultations held in Berlin, Tokyo and London for the IMF‘s conditionality review have revealed significant differences in opinions. While many IMF, Bank and some donor government staff are adamant that conditionality remains vital and the priority is to find mechanisms for coordination and harmonisation between the Bank and Fund, others have questioned whether streamlining conditionality simply addresses symptoms, not causes, of problems with the IMF.

British researcher Tony Killick commented that streamlining will not solve the fundamental tension between conditionality and ownership. Governor of the State Bank of Pakistan and former World Bank director, Ishrat Hussain, pointed out that the IMF has a monopoly on what it considers “good” intellectual knowledge against which all other policies are judged. It also has a monopoly on the access to resources. Unless these asymmetric power relations are rectified then the problem of conditionality will not be resolved. Moreover, those IMF staff with most knowledge in a country context are the least influential in the decision making process.

Barbara Unmussig, WEED, and Martin Khor, Third World Network, emphasised that programme effectiveness was the key issue. Hence the content of conditionality that was the primary concern. Unless this was addressed, simply cutting back the number of conditions or overlaps between the Bank and Fund would have minimal impact.

Syrus Rustomjee, IMF ED for many African countries, pointed out a need to define more clearly what is “ownership” and to develop mechanisms to allow borrowers to make policy choices. David Vines, Oxford University, proposed that it would be helpful to distinguish between different types of countries, for example, those with long-term development issues, those with typical short-term balance of payments stabilisation and those with short-term crises linked to capital market issues. Conditionality should be applied differently in the three cases. There should be more government ownership in the first case, a focus on macroeconomic conditions in the second case and in the third case a focus on quick acting structural reforms.

Mohsin Khan from the IMF Institute presented a paper on results based conditionality. This would emphasise monitoring outcomes, leaving governments free to determine their policy paths. Some staff expressed concerns about how outcomes could be monitored and how this could be linked to the disbursement of resources. Some borrower governments supported results based conditionality in principle and also emphasised the need for improved technical assistance for policy design. Several representatives noted that all donors needed to collaborate in the process of reducing the overall burden of conditionality. Further staff papers on this issue will be available in September. New conditionality guidelines will be agreed by April 2002.

Ishrat Hussain presentation

Martin Khor presentation

Papers from the Japan consultation

IMF Structural Conditionality, How Much is Too Much? Morris Goldstein, IIE