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Conditionality and Ownership in IMF Lending: A Political Economy Approach


  • Drazen, Allan


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.

Suggested Citation

  • Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3562

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    References listed on IDEAS

    1. 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.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
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    4. Keisuke Iida, 1993. "When and How Do Domestic Constraints Matter?," Journal of Conflict Resolution, Peace Science Society (International), vol. 37(3), pages 403-426, September.
    5. 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.
    6. Olivier Jeanne & Jeromin Zettelmeyer, 2001. "International bailouts, moral hazard and conditionality," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 407-432, October.
    7. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
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    9. 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,.
    10. Giulio Federico, 2001. "IMF Conditionality," Economics Papers 2001-W19, Economics Group, Nuffield College, University of Oxford, revised 01 Sep 2001.
    11. Svensson, Jakob, 2000. "When is foreign aid policy credible? Aid dependence and conditionality," Journal of Development Economics, Elsevier, vol. 61(1), pages 61-84, February.
    12. Mohsin S. Khan & Sunil Sharma, 2001. "IMF Conditionality and Country Ownership of Programs," IMF Working Papers 01/142, International Monetary Fund.
    13. 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.
    14. Thomas D. Willett, 2000. "A Soft-Core Public Choice Analysis of the International Monetary Fund," Claremont Colleges Working Papers 2000-56, Claremont Colleges.
    15. Alex Mourmouras & Wolfgang Mayer, 2002. "Vested Interests in a Positive Theory of IFI Conditionality," IMF Working Papers 02/73, International Monetary Fund.
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    More about this item


    conditionality; foreign aid; IMF; ownership;

    JEL classification:

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

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