Conditionality through the back door?

26 November 2002

A recent report from the UK‘s Overseas Development Institute shows that the ongoing ‘streamlining’ of IMF conditionality might not live up to expectations (see Bretton Woods Update 23, 25). The IMF Board has decided that the application of conditionality should be limited to a focus on structural reforms necessary to achieve macroeconomic targets.

The report written for DFID by Tony Killick is an early assessment of IMF efforts. Based on a sample of PRGF countries, it claims that the number of conditions has been cut by one quarter on average, but large disparities between countries remain. Killick warns against persistent ‘cross-conditionality’ as the World Bank takes on areas dropped by the Fund.

The report also complains that the IMF has failed to debate the macroeconomic framework and focused on enhancing program effectiveness rather than the issue of ownership. As a consequence remaining conditionality is likely to be enforced more strictly, which raises serious questions about freedom of choice.

PRSPs have entailed little change in substance – especially in the macro framework or in the IMF‘s ‘negotiation style’, with programmes being agreed on by a few actors behind closed doors. As far as the nature of conditions is concerned, the increase in the use of ‘prior actions’ (by which actions must be taken before money is provided) is worrying as it sends a signal of distrust.

Killick concludes that the streamlining of IMF conditionality may not live up to the expectations it creates. Many NGOs had warned of flaws in the IMF‘s streamlining process when it was launched and think the IMF efforts amount to little, encouraging conditionality ‘through the backdoor’. More recently Doug Hellinger from Development Gap told IPS that “instead of being overtly ‘impositionist’, the Bank and the Fund are intervening with heavy-handed technical assistance and implicit conditionality”. Early assessments seem to reinforce these concerns.

Moreover, the new staff guidelines on conditionality approved by the Executive Board before the Annual meetings are unlikely to encourage a rapid uptake of the new principles spelled out by the Board in the last 12 months. The new guidelines are loosely-worded, leaving considerable scope for interpretation.

The ‘streamlining’ of IMF conditionality: aspirations, reality and repercussions, Tony Killick, April 2002

New IMF guidelines

The Bretton Woods Project will release a short briefing on conditionality in January