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Conditionality and Ownership in IMF Lending: A Political Economy Approach

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  • Drazen, Allan

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. A model of lending and policy reform is presented 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 Fund and authorities agree on the goals of an assistance program.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3562.

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Date of creation: Sep 2002
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Handle: RePEc:cpr:ceprdp:3562

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Keywords: conditionality; foreign aid; IMF; ownership;

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References

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  1. Diwan, I. & Rodrik, D., 1992. "External Debt, Adjustment, and Burden Sharing: A Unified Framework," Princeton Studies in International Economics 73, International Economics Section, Departement of Economics Princeton University,.
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  4. Svensson, Jakob, 1997. "When is foreign aid policy credible : aid dependence and conditionality," Policy Research Working Paper Series 1740, The World Bank.
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  8. Jeffrey D. Sachs, 1989. "Conditionality, Debt Relief, and the Developing Country Debt Crisis," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 255-296 National Bureau of Economic Research, Inc.
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  12. repec:imf:imfpdp:9702 is not listed on IDEAS
  13. Giulio Federico, 2001. "IMF Conditionality," Economics Papers 2001-W19, Economics Group, Nuffield College, University of Oxford, revised 01 Sep 2001.
  14. Jeffrey D. Sachs, 1989. "Conditionality, Debt Relief, and the Developing Country Debt Crisis," NBER Chapters, in: Developing Country Debt and the World Economy, pages 275-284 National Bureau of Economic Research, Inc.
  15. International Monetary Fund, 1998. "Do IMF-Supported Programs Work? A Survey of the Cross-Country Empirical Evidence," IMF Working Papers 98/169, International Monetary Fund.
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