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Mr. Tubagus Feridhanusetyawan, Mr. Alun H. Thomas, Ms. Tessa Van der Willigen, Ms. Uma Ramakrishnan, S. Reichold, Mr. Juan Zalduendo, and Mr. James P Walsh

9. The key purpose of conditionality is to ensure that Fund resources are used to assist a member in solving its balance of payments problem, thus providing adequate safeguards for the temporary use of these resources, and to provide assurances to the member of access to Fund resources. To provide its resources to a member, the Fund must be confident that policies are such that these resources will be used in accordance with its purposes, and that they will be repurchased or repaid. At the same time, in order to embark on a course of action that may hold together only in the presence of Fund support, the member needs to be assured that it will have access to Fund resources in defined circumstances.

Mr. Tubagus Feridhanusetyawan, Mr. Alun H. Thomas, Ms. Tessa Van der Willigen, Ms. Uma Ramakrishnan, S. Reichold, Mr. Juan Zalduendo, and Mr. James P Walsh

22. Since little time has elapsed since the introduction of the guidelines, any review of experience must be treated with caution. The present chapter describes this experience. It does not attempt to ascertain whether changes are statistically significant, and indeed, given the small sample sizes (generally some 20 arrangements a year, divided roughly equally between GRA and PRGF), any attempts to establish significance would likely fail. To be sure, changes in the characteristics of members that seek Fund support or in their circumstances could influence some of the developments described below. But the hope was that the guidelines would make a visible difference, and this review seeks pointers as to whether this difference has yet materialized.

International Monetary Fund. External Relations Dept.

THE SOVIET experience teaches at least one cautionary lesson: development strategies emphasizing state-administered investment may produce rapid growth at first but are prone to eventual stagnation.

Mr. Tubagus Feridhanusetyawan, Mr. Alun H. Thomas, Ms. Tessa Van der Willigen, Ms. Uma Ramakrishnan, S. Reichold, Mr. Juan Zalduendo, and Mr. James P Walsh

53. Thus, insofar as conclusions can be drawn from brief experience, the guidelines appear to have brought important changes. Conditions have become more focused and more concentrated in the Fund’s core areas, although they have not become significantly fewer in number; and they are specified more clearly. The eventual implementation of conditions also seems to have improved, albeit often with delayed timing or in modified form. Importantly, more programs are successfully implemented, with fewer suffering permanent interruptions. And the staff appears to be making serious efforts to use effective processes in the course of program negotiation.

Mr. Tubagus Feridhanusetyawan, Mr. Alun H. Thomas, Ms. Tessa Van der Willigen, Ms. Uma Ramakrishnan, S. Reichold, Mr. Juan Zalduendo, and Mr. James P Walsh

1. The Fund reviews its conditionality at regular intervals. These reviews may encompass issues related to the design of Fund-supported programs or to the formal aspects of conditionality. Both sets of issues are fundamental to the effectiveness of the Fund’s financial support, which requires that program design reflect the best possible analysis in its formulation of both objectives and policy content, and that the formulation and application of conditionality be supportive of good program design and of program implementation.