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The Role of the IMF in Well-Performing Low-Income Countries

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  • Steve Radelet

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    Abstract

    The IMF began to play a prominent role in low-income countries in the late 1970s and 1980s when many countries faced overvalued exchange rates, growing budget deficits, high inflation, and low reserves. But times have changed, and many low-income countries no longer face these problems and do not need classic IMF programs. This paper explores options for the role of the IMF in well-performing low-income countries that no longer require IMF financing. It argues that in these countries the IMF should use more non-funded programs, and it should play a much less dominant role in overall conditionality. These countries should be able to focus more on achieving high-priority development goals that are outside the expertise of the IMF, such as in health, water, education, private sector development, and agriculture. While playing a less prominent role, the Fund should continue to be engaged in helping countries to maintain an appropriate macroeconomic framework. For some countries, a non-funded program like the new Policy Support Instrument (PSI) would be appropriate, while others could shift further to a program of surveillance and monitoring. In well-performing countries the Fund should provide public ratings on macroeconomic policy, ideally fully incorporated into the World Bank’s CPIA rating system.

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    File URL: http://www.cgdev.org/content/publications/detail/6350
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    Bibliographic Info

    Paper provided by Center for Global Development in its series Working Papers with number 83.

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    Length: 21 pages
    Date of creation: Feb 2006
    Date of revision:
    Handle: RePEc:cgd:wpaper:83

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    Web page: http://www.cgdev.org

    Related research

    Keywords: IMF; exchange rate; budget deficit; inflation; reserves; conditionality;

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