Strategy, Policy, and Review Department
© 2009 International Monetary Fund
Production: IMF Multimedia Services Division
Typesetting: Alicia Etchebarne-Bourdin
Creating policy space in low-income countries during the recent crises/Yongzheng Yang . . . [et al.].—Washington, D.C.: International Monetary Fund, 2009.
Includes bibliographical references.
1. Economic assistance—Developing countries. 2. International Monetary Fund—Developing countries. 3. Conditionality (International relations). 4. Monetary policy—Developing countries. 5. Fiscal policy—Developing countries. I. Yang, Yongzheng. II. International Monetary Fund. III. Title.
Disclaimer: This publication should not be reported as representing the views or policies of the International Monetary Fund. The views expressed in this work are those of the authors and do not necessarily represent those of the IMF, its Executive Board, or its management.
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Abbreviations and Acronyms
Civil Society Organization
Debt Sustainability Analysis
Extended Fund Facility
Exogenous Shocks Facility
Foreign Direct Investment
Heavily Indebted Poor Countries
Gross Domestic Product
High-Access Component (of ESF)
Independent Evaluation Office (IMF)
Millennium Development Goal
Multilateral Debt Relief Initiative
Monitoring of Fund Arrangements
Public Financial Management
Poverty Reduction and Growth Facility
Poverty Reduction Strategy
Policy Support Instrument
Rapid-Access Component (of ESF)
World Economic Outlook
Low-income countries have been hit hard by the sharp increases in world food and fuel prices in 2007–08 and subsequently by the global financial crisis and ensuing recession. The International Monetary Fund (IMF) has responded quickly to the need of its low-income country members to address the impact of these global shocks. It has substantially scaled up its financial assistance to low-income countries and revamped its concessional lending facilities to make them more flexible. Together with the ongoing reforms to streamline structural conditionality, these efforts have formed an important part of the IMF’s strategy to help low-income countries address the fallout from the crises.
This Departmental Paper provides an initial empirical assessment of the outcome of these efforts and reforms. It examines the responsiveness of macroeconomic policies and structural conditionality in recent IMF-supported programs in a number of low-income countries. We hope the results of this exercise will help improve understanding of how IMF-supported programs in low-income countries have been adapted to the changing economic circumstances and which aspects of program design may need further improvement in the future.
Many people contributed to the undertaking of this exercise and to the production of this paper. Hugh Bredenkamp, Deputy Director of the Strategy, Policy, and Review Department of the IMF, and Catherine Pattillo, Advisor and Chief of the Low-Income Countries Strategy Unit of the Department, oversaw the exercise and provided invaluable guidance. The paper benefited enormously from data and comments provided by many staff, both within and outside the Strategy, Policy, and Review Department. Neri Gomes helped with administrative and editorial work, and Joanne Blake and her team helped turn the original paper into this Departmental Paper. We are grateful to all these colleagues.