V Performance Under Programs

Saleh Nsouli, and Justin Zulu
Published Date:
April 1985
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Performance under programs is difficult to assess insofar as the assessment depends on the yardstick selected. Guitián (1981) discusses the problem in detail, focusing on three yardsticks: (1) the performance that would have been achieved without a program; (2) the performance in the previous year or series of previous years; and (3) the targets of the programs.

The first yardstick is essentially a hypothetical situation, about which it would be hard to reach a consensus. The second yardstick addresses mainly the question of whether there has been an improvement or deterioration from the previous year or years. The third assesses the performance against the targets of the program. Without entering into a detailed discussion of the relative merits of the yardsticks, in this part we shall assess the performance of countries against two yardsticks: (1) the targets of the program, and (2) the previous year’s performance.

These quantitative yardsticks are not sufficiently adequate in giving an idea of the contribution to adjustment of the measures taken. A number of measures tend to improve economic conditions only gradually, so that their effect can only be fully realized over the medium and long term. Other measures tend to bring about important qualitative changes—such as the removal of bottlenecks or the enhancement of financial intermediation—that are not easily measurable. Furthermore, there are numerous other factors at work so that it is, at times, difficult to isolate the positive effects of measures taken. Accordingly, the analysis that follows should be cautiously interpreted.

Achievements Versus Targets

Charts 1a14a7 provide an idea of the achievements compared with the targets. The results generally indicate that in many cases the performance fell short of targets. In most countries, economic growth was below target levels, although there are a number of exceptions where the performance exceeded the targets (Chart 1a). Results on reducing inflation, as measured by the consumer price index, were mixed. Nevertheless, most countries were close to targets and succeeded in keeping inflation below 20 percent (Chart 2a). Most countries fell short of achieving the targeted improvement in their current account positions as a proportion of GDP, as can be seen from Chart 3a. About half of the countries met their goal with respect to the overall balance of payments position as a proportion of GDP. Thus, as far as the objectives of programs are concerned, there was generally a shortfall in economic growth, inflation targets were attained or nearly attained in most programs, and the external sector current account targets were achieved in about a third of the cases.

Turning to policy indicators, the ratios of savings and investment to GDP were generally close to targets.8 With regard to fiscal policy, revenues (excluding grants) as a proportion of GDP were, in most cases, close to target. However, the ratio of expenditure (excluding grants) to GDP was generally exceeded. Because of this, in most countries the budgetary deficit (excluding grants) as a proportion of GDP was considerably exceeded. The rate of growth of net credit to the government, accordingly, generally did not conform to targets. Furthermore, credit to the private sector was exceeded in numerous cases. Reflecting these developments, net domestic credit growth exceeded the targets in about half the countries. In most, domestic liquidity growth was, therefore, considerably above target. Insofar as external debt is concerned, the data indicate that nearly all countries exceeded the targets.

Achievements Versus Previous Year

Given these deviations from targets, Charts 1b14b9 show how countries performed relative to the previous year. In terms of economic growth, there was a considerable improvement in a number of countries but a decline in most Inflation worsened in just over half the countries. In the external sector, neither the current account position nor the overall balance of payments as a ratio of GDP appears to have improved or worsened significantly in most countries.

With regard to policy indicators, there were no major changes in the savings and investment ratios. Government revenue as a ratio to GDP increased in most countries, while government expenditure as a ratio to GDP remained unchanged or declined in most countries. Accordingly, the budgetary position (excluding grants) improved in the majority of cases. On the monetary front, net credit growth to the government sector remained about the same as the previous year or declined in most cases. Credit growth to the private sector for most countries, however, was nearly equal to or exceeded the previous year’s rates. Overall net domestic credit expansion was mostly nearly equal to or less than the previous year’s. Chart 13b suggests that, in most cases, domestic liquidity increased at a faster rate. The external debt ratio as a proportion of GDP increased for virtually all countries.

From these diverse results it is hard to generalize whether in a one-year period there was an improvement or deterioration in the economic situation of the countries adopting Fund-supported programs. The results seem to be almost evenly divided. It is, therefore, essential to examine the reasons for these deviations. Table 4 provides information on objectives, as indicated by economic growth, inflation, and the current account position, as well as on two key financial policy instruments—the budgetary deficit (excluding grants) as a proportion of GDP and the rate of growth of net domestic credit. Table 4 shows a close correlation between attaining program objectives and observing the quantitative policy instruments. In 14 programs where either or both of the 2 policy instruments were observed, 2 or 3 objectives were attained. In 9 programs where the policy instruments were not observed, 2 or more of the objectives were not attained. Accordingly, we find a close correlation in 23 of the programs. Only in 7 programs is a relationship not clear.

Table 4.Africa: Indicators of Performance Under Fund-Supported Adjustment Programs, 1980–81

InflationRatio of

Current Ac

count Deficit

to GDP
Ratio of


Deficit (ex

cluding grants)

to GDP



Two or




One or

Two In



and Instru

ments Si


Attained 1
Central African
Central African
Equatorial GuineaGNGN
Equatorial GuineaNNLALAA
Greater than One (G)
or Attained (A)18512121317911155817161617142014
Less than One (L) or
Not Attained (N)8211815141618181421191215151816139


G=Greater than oneT/P=Ratio of target to previous yearN=Not attainedX=Targets attained but instruments not attained, or vice versaL=Less than oneA/T=Ratio of actual outcome to targetA=AttainedA/P=Ratio of actual outcome to previous year

Source: International Monetary Fund.

In some instances, where information was incomplete, assessments based on various indicators were used. This column indicates whether targets and instruments in the previous two columns were simultaneously attained.

This line covers the third year of Gabon’s extended arrangement, which started in 1980.


G=Greater than oneT/P=Ratio of target to previous yearN=Not attainedX=Targets attained but instruments not attained, or vice versaL=Less than oneA/T=Ratio of actual outcome to targetA=AttainedA/P=Ratio of actual outcome to previous year

Source: International Monetary Fund.

In some instances, where information was incomplete, assessments based on various indicators were used. This column indicates whether targets and instruments in the previous two columns were simultaneously attained.

This line covers the third year of Gabon’s extended arrangement, which started in 1980.

Factors Affecting Implementation

There are several reasons why certain programs could not be implemented or, in rare instances, where the measures were implemented, the targets could not be reached. These factors are essentially the following: unforeseen developments, difficulties in mobilizing strong political support, limitations in the administrative infrastructure, overly ambitious program expectations, and delays in inflows of development assistance. Notwithstanding such problems, a number of countries readapted their policies and successfully carried out their adjustment programs.

By far the most important factor resulting in unsuccessful implementation of programs was unforeseen developments. Even in instances when the program could be judged “successful,” the success was limited by unforeseen factors. For example, in Liberia a higher-than-expected increase in oil prices caused losses in the energy-intensive iron ore sector. This, in turn, contributed to a fall in tax revenue, which made attaining the budgetary target more difficult. In addition, the increase in interest rates abroad contributed to pressures on both the budgetary and the external sector positions. A soft world coffee market caused a shortfall in export receipts for Madagascar. In Malawi, the failure of the maize crop resulted in an increased demand for imported maize. Compounding this problem was the increase in international interest rates that also contributed to budgetary and balance of payments pressures. Implementation of the Fund-supported program in Mauritius was adversely affected by two factors: a higher oil bill, owing to increases in international prices, and cyclones, which damaged the sugar crop and caused exports to decline sharply.

While Morocco was implementing its adjustment program, the world demand for phosphate fell. This led to a shortfall in Morocco’s phosphate export receipts. At the same time, Morocco’s agricultural output fell, owing to drought. Higher-than-anticipated international interest rates also added to the budgetary and external sector imbalances, while the appreciation of the U.S. dollar resulted in an increase in the domestic subsidy of basic consumer goods.

In Senegal, performance under the Fund-supported program was affected by drought. Sierra Leone also suffered from a weakening of export prices and unexpectedly high levels of rice imports made necessary by unfavorable weather. In Tanzania, export prices turned out to be lower than projected. Togo’s export performance suffered because of shortfalls in both the quantity and the price of exports. In Zaïre, export prices took a turn for the worse at the same time that capital inflows fell short of expectations. Zambia’s performance was affected by two developments: the sharp decline in copper and cobalt prices—its two main exports—and an increase in debt service payments, owing mostly to higher international interest rates. In Zimbabwe, a landlocked country, a disruption of the transport system had a severe impact on the implementation of the program.

The second most important reason for unsuccessful programs was the difficulty that governments encountered in mobilizing sufficient political support for their adjustment efforts. This is most apparent with regard to the implementation of fiscal policies. The governments of the Central African Republic, Ethiopia, Equatorial Guinea, Kenya, Madagascar, Malawi, Morocco, Senegal, Sierra Leone, Togo, Zaïre, and Zambia found it difficult to keep to the level of expenditures outlined in their programs. Furthermore, in a number of countries revenues fell short of expectations either because necessary tax measures were delayed or because improvements in tax collection enforcement could not be carried out as expected.

Related to the last point is the question of the administrative capability of countries to implement measures that are necessary for adjustment. In most countries this is particularly apparent in the case of fiscal measures, where improvements in expenditure control and revenue collection could not be effected, even where the government appeared to be determined to bring about such improvements. In a number of programs it was also expected that action would be taken to improve the position of public enterprises. The expected improvements did not materialize, mainly because of the limited administrative capabilities of the government to effect the requisite changes.

Another factor was the appropriateness of the targets set out in the programs. In some instances the requisite policies were observed, but the targets were not attained. Interestingly, there are virtually no cases where the targets were attained without the observance of the requisite policies. In some cases, the macroeconomic interrelationships may have been different from those assumed in the initial design of the program. In other cases, data limitations may have resulted in errors in economic forecasting. Some targets may also have been too optimistic in light of the constraints operating in the economy.

Finally, in a few cases there were either delays or shortfalls in net inflows of development assistance. In this group the notable examples are Mauritania, Kenya, Sierra Leone, and Tanzania.

Performance Criteria

Certain indicators were used in the course of implementation to determine whether the programs were progressing satisfactorily. Whenever these indicators deviated from targets, the Fund and the country would consult on whether additional measures were needed to keep adjustment on track. These indicators, usually referred to as performance criteria, included net credit to the government sector and net domestic credit or net domestic assets. In addition, in many countries quantitative limits were set on nonconcessional external loans contracted and on external payments arrears. In rare instances, where it was deemed applicable, subceilings were set on credit to the private sector, as were limits on external payments arrears, the ratio of the government budgetary deficit to GDP, and domestic government payments arrears. The programs also provided that there be no intensification of restrictions on payments and transfers for current international transactions, nor on imports for balance of payments purposes. The programs also set dates for reaching understandings about future policies and performance criteria.

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