Conditionality and Ownership in IMF Lending: A Political Economy Approach

Allan Drazen
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Allan Drazen: Tel-Aviv University and University of Maryland, NBER, and CEPR

IMF Staff Papers, 2002, vol. 49, issue Special issue, 36-67

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. After discussing conceptual issues, I present a model of lending and policy reform 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 IMF and authorities agree on the goals of an assistance program. Copyright 2002, International Monetary Fund

JEL-codes: F34 F35 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (64)

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