In a period of rising global instability, increased geopolitical tensions and a worsening climate emergency, the International Monetary Fund (IMF) is conducting an extensive Program Design and Conditionality Review, aiming to measure the effectiveness and adaptability of IMF programmes. The Fund’s last conditionality review – conducted in 2018 – exposed the IMF’s persistent failure to learn from past mistakes. While the 2018 review claimed that 75 per cent of programmes were “partially or fully successful”, this vague metric sidesteps the harsh reality: 60 per cent of countries are in debt distress, raising questions about the ability of Fund programmes to assist states to escape recurrent debt crises. Though the IMF has increased lending to 93 countries today, up from 68 in 2018 – its conditionality continues to entrench economic hardship, fuel inequality and prioritise creditor interests over sustainable development (see Observer Summer 2019).
Austerity, debt trap and the fictions of economic recovery
Despite the Fund’s 2018 review confirming what critics had long raised – that fiscal consolidation is not effective in ensuring sustainable growth – the IMF’s obsession with it remains unchanged. Harsh fiscal adjustments, cuts to social spending and public sector layoffs disproportionately harm the most vulnerable, as academic and civil society evidence has documented (see Observer Winter 2023). Although the IMF increasingly includes ‘social spending floors’ in programmes as supposed safeguards, Oxfam’s 2023 research showed these are often non-binding, lack transparency and fail to prevent the erosion of social protection systems.
Another glaring issue is the IMF’s chronic overestimation of economic recovery. The 2018 review admitted that programme projections were “overly optimistic” and acknowledged better outcomes where debt restructuring was included. Yet the Fund continues to set unrealistic fiscal targets, pushing governments into premature austerity under the guise of “debt sustainability”, contributing to “the worst debt crisis ever” – twice the distress levels seen before Heavily Indebted Poor Countries (HIPC) relief – locking countries into dependency and paving the way for future bailouts that favour creditors over citizens (see Observer Summer 2023).
The 2018 review was, ultimately, a self-indictment. It acknowledged major design flaws but failed to deliver meaningful reform. As a November 2022 study by the Boston University Global Development Policy Center noted, IMF conditionality policies are influenced by political choices shaped by dominant shareholders, not just technical considerations – raising enduring concerns over ‘even-handedness’ of Fund programmes. Despite repeated promises of more flexible, country-specific approaches – a key 2018 recommendation – the IMF continues to impose rigid structural reforms that undermine national sovereignty. Often out of sync with local realities, these measures have triggered widespread unrest, contributing to the IMF’s growing “protest problem” (see Observer Autumn 2024).
Hopes for meaningful change this time are fading. The review timeline and consultation process remain unclear, despite 70 civil society organisations calling for transparency in a September 2024 letter (see Observer Autumn 2024). “Despite engaging in new areas such as gender and climate, IMF programmes reinforce unequal global dynamics and incentivise austerity and extractivism. The review must assess whether IMF programmes enable climate-resilient, rights-based development,” said Federico Sibaja, IMF Campaign Manager at Recourse.
