This paper examines the accuracy of IMF projections in 175 programs approved in the period 1993–2001, focusing specifically on ratios of the fiscal surplus to GDP and external current account surplus to GDP. Four potential reasons for the divergence of projections from actual values are identified: (a) mismeasured data on initial conditions; (b) differences between the “model” underlying the IMF projections and the “model” suggested by the data on outturns; (c) differences between reforms and measures underlying the projections and those actually undertaken; and (d) random errors in the actual data. Our analysis suggests that while all are important, incomplete information on initial conditions is the largest contributor to projection inaccuracy. We also investigate the role of revisions over time in projection error, and find that they improve projections for fiscal account data, while the current account continues to in dicate a great deal of variability in the revision process.

Recent Staff Research