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    Strategy, Policy, and Review Department

    © 2009 International Monetary Fund

    Production: IMF Multimedia Services Division

    Typesetting: Alicia Etchebarne-Bourdin

    Cataloging-in-Publication Data

    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.

    ISBN 9781589069305

    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.

    HC60.Y36 2009

    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)


    Low-Income Country


    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)


    Stand-By Arrangement


    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.

    Yongzheng Yang

    Paolo Dudine

    Eteri Kvintradze

    Pritha Mitra

    Nkunde Mwase

    Sibabrata Das

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