The Influence of IMF Programs on the Re‐election of Debtor Governments

The paper develops a model explaining why IMF programs are less likely to be concluded before national election dates. Since conclusion of an IMF arrangement may signal the incumbent's incompetence, rational voters use this signal when deciding upon his re‐election. In order to demonstrate competence, politicians may therefore decide not to conclude IMF programs prior to elections. The model also shows that re‐election probabilities of politicians who nevertheless conclude arrangements at election times depend on the state of the economy. Using panel data for 96 countries between 1976 and 1997, the model is tested empirically. The results show that conclusion of an IMF arrangement within six months prior to an election increases re‐election probabilities when GDP growth is low, but reduces the chance to win an election with high growth rates.