IMF Conditionality and Country Ownership of Programs

32 Pages Posted: 12 Oct 2001

See all articles by Mohsin S. Khan

Mohsin S. Khan

International Monetary Fund (IMF)

Sunil Sharma

George Washington University - Elliott School of International Affairs

Date Written: September 2001

Abstract

The paper uses finance and agency theory to establish two main propositions: First, that the conditionality attached to adjustment programs supported by the IMF is justified. Second, that ownership of programs by the borrowing country is crucial for their success. Hence, since both IMF conditionality and country ownership are necessary, the task is one of designing conditionality to maximize program ownership, subject to providing adequate safeguards for IMF lending. The paper discusses some recent proposals for enhancing ownership, and in particular, makes a case for incorporating floating tranches and outcomes-based conditionality in IMF-supported adjustment programs.

Keywords: IMF-supported programs, conditionality, ownership, principal-agent, moral-hazard

JEL Classification: D82, F34, G20

Suggested Citation

Khan, Mohsin S. and Sharma, Sunil, IMF Conditionality and Country Ownership of Programs (September 2001). IMF Working Paper No. 01/142. Available at SSRN: https://ssrn.com/abstract=286968 or http://dx.doi.org/10.2139/ssrn.286968

Mohsin S. Khan

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4518 (Phone)
202-623-6440 (Fax)

Sunil Sharma (Contact Author)

George Washington University - Elliott School of International Affairs ( email )

Institute for International Economic Policy
1957 E Street NW
Washington, DC 20052
United States

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