The Role of the IMF in Well-Performing Low-Income Countries
AbstractThe 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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Bibliographic InfoPaper provided by Center for Global Development in its series Working Papers with number 83.
Length: 21 pages
Date of creation: Feb 2006
Date of revision:
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Web page: http://www.cgdev.org
IMF; exchange rate; budget deficit; inflation; reserves; conditionality;
Find related papers by JEL classification:
- F0 - International Economics - - General
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- O0 - Economic Development, Technological Change, and Growth - - General
- E0 - Macroeconomics and Monetary Economics - - General
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-19 (All new papers)
- NEP-CBA-2006-08-19 (Central Banking)
- NEP-DEV-2006-08-19 (Development)
- NEP-FMK-2006-08-19 (Financial Markets)
- NEP-MAC-2006-08-19 (Macroeconomics)
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