The Review of Conditionality (RoC) was completed under the supervision of Dominique Desruelle, and by a team led by Ranil Salgado, Marshall Mills, Hans Weisfeld, and Amina Lahreche (all SPR). Other team members comprised Tushara Ekanayake, Katrin Elborgh-Woytek, Lars Engstrom, Richard Harmsen, Christian Henn, Emmanuel Hife, Robert Gregory, Armine Khachatryan, Jean-Baptiste Le Hen, Anton Op de Beke, Christian Saborowski, Mika Saito, Sarah Sanya, Joe Thornton, Jarkko Turunen, and Nick Young (all SPR). Valuable contributions were also provided by: Alexei Kireyev (AFR); Christoph Klingen, Ester Perez Ruiz, and Yan Sun (EUR); Aqib Aslam, Jack Grigg, Izabela Karpowicz, Masahiro Nozaki, Sailendra Pattanayak, Mario Pessoa, and Shamsuddin Tareq (FAD); and Mali Chivakul, Karina Garcia, Gavin Gray, Kai Guo, Linda Kaltani, Sergi Lanau, Yanliang Miao, and Nathan Porter (SPR). This overview paper was drafted by a team led by Marshall Mills and including Katrin Elborgh-Woytek and Robert Gregory. Two external advisers, Professors Randall Stone (University of Rochester) and Shang-Jin Wei (Columbia University), provided inputs and comments on the RoC background papers.
The RoC also comprises four background papers: Content and Application of Conditionality (referred to as Background Paper 1); The Design of Fund-Supported Programs (referred to as Background Paper 2); Outcomes of Fund Supported Programs (referred to as Background Paper 3); and Technical Appendices (referred to as Background Paper 4). The issues addressed in these papers are consistent with the 2011 Review of Conditionality and the Design of Fund-Supported Programs-Concept Note, and the subsequent Board discussion on February 14, 2011.
An IEO Evaluation of Structural Conditionality in IMF-Supported Programs.
The analysis of the RoC covers the period 2002-September 2011, and since the EA programs were initiated toward the end of the period, the coverage of these programs is limited in several ways. In particular, the Greece program, as redesigned in the request for a new extended arrangement, was not formally part of the sample covered. This paper does not attempt to conduct in-depth assessments of these or any other individual programs, especially since the programs are ongoing. The assessments in this Overview Paper nevertheless do take into account the broader implications of subsequent developments in these programs for the review’s conclusions, keeping in mind the limitations on an assessment of ongoing programs that face evolving challenges and risks.
The 2004-05 RoC consisted of two parts. The first part examined key features of Fund-supported programs approved during 1995-2000 (with data through 2003), including their design, their objectives, and the success in achieving these objectives (discussed by the Executive Board on December 17, 2004; http://www.imf.org/external/np/sec/pn/2005/pn0516.htm). The review included the following documents: The Design of Fund-Supported Programs—Overview; Fund-Supported Programs—Objectives and Outcomes; Policy Formulation, Analytical Frameworks, and Program Design); and Macroeconomic and Structural Policies in Fund-Supported Programs: Review of Experience. The second part (Review of the 2002 Conditionality Guidelines) considered the application of the Conditionality Guidelines, which were introduced in 2002, reviewing arrangements approved from 2001 to mid-2004 (discussed by the Executive Board on March 25, 2005: http://www.imf.org/external/np/sec/pn/2005/pn0552.htm). The 2004-05 RoC resulted in the 2006 Revised Staff Statement on Principles Underlying the Guidelines on Conditionality and Operational Guidance Note on the 2002 Conditionality Guidelines.
Review of Recent Crisis Programs and Creating Policy Space - Responsive Design and Streamlined Conditionality in Recent Low-Income Country Programs.
The sample of programs included all programs under the PSI and excluded all Staff Monitored Programs (SMPs).
The FCL and PCL facilities and programs were reviewed by the Board in November 2011, leading to the creation of the Precautionary and Liquidity Line (PLL).
The Executive Board reviewed the debt sustainability framework for market-access countries in August 2011 and the debt sustainability framework for low-income countries in February 2012. New guidance notes reflecting the Board’s conclusions are expected to be issued in the third and fourth quarters of 2012, respectively.
In 2000-02, the Fund carried out a comprehensive review of its program conditionality, culminating in the adoption of a set of conditionality guidelines by the Executive Board in 2002 (Guidelines on Conditionality, September 2002). This was the first major revision of conditionality since 1979.
The recent “Report of the Task Force on the Fund’s Technical Assistance Strategy” noted that further efforts should be made to integrate TA with the Fund’s surveillance and program responsibilities.
The staff report on Greece’s 2010 request for a SBA included a discussion of the exceptional access criteria.
The uniformity of treatment principle requires consistent and even-handed treatment of similarly situated countries (but does not require members in different circumstances to be subjected to the same treatment). Higher access for Euro area programs, therefore, would be consistent with uniformity of treatment if justified by special circumstances present in those countries (e.g., higher balance of payments needs as a result of systemic risks).
These proposals are now being developed into specific guidance.
A recent review of the Fund’s engagement with fragile states can be found in the paper Macroeconomic and Operational Challenges in Countries in Fragile Situations, and The Chairman’s Summing Up— Macroeconomic and Operational Challenges in Countries in Fragile Situations—July 7, 2011. A new guidance note was issued in April 2012.
As discussed in the 2011 Fund paper Analytics of Systemic Crises and the Role of Global Financial Safety Nets, these are countries with relatively strong fundamentals for which likelihood of an idiosyncratic crisis is normally low.
See Box 4 in Background Paper 1; Background Paper 2, Section III; and Background Paper 3, Section V. The Guidelines on Conditionally (Paragraph 4) recognize that “in helping members to devise economic and financial programs, the Fund will pay due regard to the domestic social and political objectives, the economic priorities, and the circumstances of members.”
The findings on social spending are drawn from the recent What Happens to Social Spending in IMF-Supported Programs? (IMF Staff Discussion Note, No. 11/15 and its associated database).
For countries that maintain fixed exchange rates or are members of a currency union, addressing competitiveness problems requires an “internal devaluation” to lower production costs, which usually includes a reduction in real wages.
For example, between 2006 and 2010, nine of the 18 countries in the case study sample for this review were subject to program conditionality affecting the prices of products consumed by the poor.
Recent IMF fact sheets provide information on key cross-country issues. See, for example, http://www.imf.org/external/np/exr/facts/protect.htm.