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Conditionality and Ownership in IMF Lending: A Political Economy Approach

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Listed:
  • Allan Drazen

    (Tel-Aviv University and University of Maryland, NBER, and CEPR)

Abstract

The relation between IMF conditionality and country ownership of assistance programs is considered from a political economy perspective, focusing on the question of why conditionality is needed if it is in a country's best interests to undertake the reform program. It is argued that heterogeneity of interests must form the basis of any discussion of conditionality and ownership. The paper stresses a conflict between a reformist government and domestic interest groups that oppose reform, leading to a distinction between government and country ownership of a program. After discussing conceptual issues, I present a model of lending and policy reform that illustrates the effects of unconditional and conditional assistance first without and then with political constraints. It is shown that conditionality can play a key role even when the IMF and authorities agree on the goals of an assistance program. Copyright 2002, International Monetary Fund

Suggested Citation

  • Allan Drazen, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 36-67.
    • Handle: RePEc:pal:imfstp:v:49:y:2002:i:si:p:36-67
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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F35 - International Economics - - International Finance - - - Foreign Aid

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