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

Steve Radelet ()

No 83, Working Papers from Center for Global Development

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.

Keywords: IMF; exchange rate; budget deficit; inflation; reserves; conditionality (search for similar items in EconPapers)
JEL-codes: E0 E4 E43 F0 F4 O0 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2006-02
New Economics Papers: this item is included in nep-cba, nep-dev, nep-fmk and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:83

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