What is IMF conditionality?
The International Monetary Fund (IMF) is an intergovernmental organization with 189 member-states, seeking to uphold global financial stability. Among its various activities (including data collection, research, and training policy elites), IMF lending programmes have attracted most attention. In exchange for financial support, borrowing countries agree to implement a package of obligatory policy reforms, or ‘conditionality’.
Learn more about the types of conditionality.
Why is conditionality important?
Over the years, the IMF’s conditional lending practices have changed significantly. Until the 1980s, conditionality primarily required reforms to fiscal and monetary policy, as well as exchange rate adjustments, with the aim of reaching sustainable balance of payments. In the mid-1980s, the IMF expanded conditionality to bring about ‘structural adjustment’. This new approach advanced four main types of reforms: stabilization, liberalization, deregulation, and privatization. These policy conditions had a substantial impact on the underlying economic architecture of borrowing countries.
Conditionality has been linked to several detrimental economic, social, and political outcomes. On the economic side, IMF conditionality has been linked to reductions in economic growth and increases in inequality. On the social side, studies have found detrimental impacts to health systems in Africa and Europe, and identified adverse effects on population health. On the political side, research has linked conditionality to decreases in unionization and greater incidence of civil war.
Read more about the consequences of IMF conditionality.