The IMF Review of Conditionality: Putting the IMF’s money where its research is
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Article summary
Notes from the Civil Society Policy Forum session on 15 April, titled The IMF Review of Conditionality: Putting the IMF’s money where research is. As the IMF conducts its first Review of Program Design and Conditionality (RoC) since Covid-19, researchers and civil society representatives question whether the Fund is genuinely learning from its own research. Panellists examined persistent gaps between IMF surveillance findings and programme practice – on growth realism, fiscal multipliers, social spending and political economy – and debated what meaningful reform would require.
Moderator
Hossein Cheaito, Researcher, Arab Watch Coalition
Panellists
- Tim Hirschel-Burns, Policy Liaison, Boston University Global Development Policy Center
- Rabie Nasser, Co-Founder and Director, The Syrian Center for Policy Research
- Sarah Saadoun, Senior Advisor on Poverty and Inequality, Human Rights Watch
- Timothy E. Kaldas, Deputy Director, The Tahrir Institute for Middle East Policy
- Irene Yackovlev, Senior Economist, IMF
A video recording of the event can be found here.
Renée: What makes this moment significant is the gap that has so often existed between IMF research and evaluation on one hand, and programmes and practice on the other. Recurring issues keep resurfacing: overly optimistic macroeconomic assumptions, insufficient attention to country-specific realities, and limited space for meaningful public engagement in how programmes are designed. The question we are here to ask is: what is the Fund actually learning from its own research, what changes are seriously being considered, and will this review result in programmes that are more realistic and attuned to the realities borrowing countries face?
Tim: Think of the IMF as a doctor. Countries come to it when they are sick, and there is going to be some pain – but doctors do not always prescribe the best treatment, and right now the treatment comes with some fairly nasty side effects. We released three new publications last week. The first finds that IMF programmes have an ambiguous-to-negative relationship with capital formation. The second finds they are associated with increased deforestation. The third – a review of 21 peer-reviewed papers alongside the IMF’s own research – finds that programmes fall short of resolving balance of payments problems and are associated with increases in poverty, inequality, neonatal mortality, and deforestation. Growth outcomes have improved, but consistently lag staff projections – the IEO found half of programmes between 2018 and 2019 underperformed by more than 0.5 per cent of GDP. When advanced economies faced COVID, they deployed fiscal stimulus of 7–9 per cent of GDP. Countries with no alternative but the IMF received a very different prescription. Countries are experiencing the pain without the gain – and that is what needs to change.
Rabia: If the doctor cannot make a proper solution for the patient, either we need to change the curriculum or the clinic. In Syria right now, the minister of finance has removed all subsidies as shock therapy – in a country with 90 per cent poverty, destroyed infrastructure, and a collapsed private sector. Trade has been liberalised without protecting domestic producers. Indirect taxes have been maximised while public investment has been cut to the minimum. The result is 0.3 per cent growth, and the government is celebrating a budget surplus. Both the IMF and World Bank have broadly validated this direction. This is not new: the 2009 IMF Article IV praised reforms in Syria that ignored crony capitalism and the inequalities that contributed to subsequent conflict. If we do not understand the political economy context, we risk fuelling the very instability we are trying to resolve. Austerity in a devastated economy is like doing a nice interior redesign while the foundations of the house are collapsing.
Sara: I want to trace how the IMF’s own thinking on social spending has shifted – and not for the better. By 2019, social spending had been elevated to macro-critical status: for its fiscal multiplier effects, its role in reducing inequality, and its function in sustaining the social contract. But in practice, social spending floors in programmes are almost universally accompanied by language about “mitigating harm on the poor and vulnerable.” That framing represents a fundamental retreat – from social spending as the heart of economic recovery, to social spending as a Band-Aid. Research on three years of post-Covid programmes found floors inconsistently defined, rarely backed by distributional impact assessments, and set with no reference to international benchmarks – WHO recommends 5 per cent of GDP for a basic health system, yet 141 countries spend below that; Abuja Agreement education targets do not appear in a single IMF programme I reviewed. Most floors are set as indicative targets rather than performance criteria, meaning governments miss them without consequence. Social protection is not charity for the poor – it is the foundation of a resilient economy and a functioning social contract.
Irene: A lot of us have been working overtime on current programmes, and we approach this with both humanity and a policy perspective – I am from Venezuela, so I really understand economic crisis. The RoC is the first review since Covid and its aim is to ensure IMF-supported programmes help countries restore medium-term external viability in a very challenging context. Our objectives remain unchanged: resolve balance of payments problems, rebuild policy space, and foster macroeconomic stability as a foundation for inclusive growth. On forecast realism, we have made notable progress since the IEO report. We are now looking not just at headline growth but at the realism of fiscal, revenue, debt and inflation projections – including whether we need to be more conservative in fragile and low-income contexts. Our public consultation is now open on our website, please submit your views, ideally by April 21st. The previous global consultation received four responses. The full analytical findings will be published upon conclusion, planned for fall 2026.
Timothy: A decade ago, IMF researchers concluded that standard reform prescriptions had substantial costs in terms of inequality – and that increased inequality actually hurts the level and sustainability of growth. A decade later, fiscal compression remains central to most IMF programmes for lower-middle income countries. Blanchard found in 2013 that fiscal multipliers in crises can reach 2.5 – yet the IEO has found that country-specific multipliers continue to be applied inconsistently, directly explaining why growth targets are persistently missed. In Egypt, adjustment measures contributed to female labour force participation collapsing from 25 per cent to 15 per cent. The World Bank estimates closing that gender gap would now add 56 per cent to Egypt’s GDP. Egypt’s dollar GDP is essentially where it was in 2016, despite population growth of 30 per cent and hundreds of billions in financing. The IMF does not hire political economists or country experts, yet lends tens of billions to individual countries. Mapping macro-critical political structures before programme design is a precondition for realism, not a luxury.
Questions and answers
CSO representative (anti-corruption background, Georgia/Ukraine): The root cause of most crises is governance and corruption. If the programme does not address these root causes, macroeconomic stabilisation will keep patching a wound that reopens. Austerity needs to be combined with a strategy for economic growth, private capital mobilisation, and a genuine enabling environment.
Sara: I want to distinguish between unaccountable spending – which is a real governance problem – and how social spending should be targeted. Universal health, education and social protection systems function through a completely different logic than targeted cash transfer schemes. Error rates in targeting programmes regularly reach around 70 per cent, and it is usually the poorest who cannot navigate the bureaucratic requirements to access them. Governance failures are not a reason to narrow social protection to charity – they are a reason to improve governance.
CSO representative (Egyptian NGO, on the capital expenditure cap): Gross fixed capital formation in Egypt has fallen from around 30 per cent of GDP in the 1980s to around 12 per cent today. At a moment when industrial policy is being revived globally – including through the US Inflation Reduction Act – why does IMF conditionality continue to impose ceilings on public investment and insist on private-sector-led growth?
Timothy: The cap in Egypt was a specific response to military-connected enterprises leveraging state finances unsustainably – not an unreasonable attempt. But the broader structural question is real. IMF programmes are not generating the private investment expected either: new findings show neutral-to-negative impacts on capital formation, and current account improvements tend to come from import compression, not export-led transformation.
Saudoun (on transparency in the RoC process): It would be very helpful if the Fund could share an issues paper – as the IEO does – so civil society can engage with the questions actually being examined rather than responding to an open-ended consultation. Is the review also looking at even-handedness in programme implementation? Subsidy removal is treated as a hard red line for disbursement, while social protection floors are missed without consequence.
Irene: The public consultation questions give a sense of our analytical focus. I understand the desire for more transparency, but we cannot publish material before the Board has engaged – if we put it out and the Board redirects the analysis, we have undermined that process. What I can say is that the full analytical work, including all background papers, will be published at the conclusion of the review in fall 2026. On even-handedness, I encourage you to put that directly in your consultation submission.
