Conditionality and Ownership in IMF Lending: A Political Economy Approach

44 Pages Posted: 30 Oct 2002

See all articles by Allan Drazen

Allan Drazen

University of Maryland - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: September 2002

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. 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.

Keywords: IMF, foreign aid, conditionality, ownership

JEL Classification: F34 , F35

Suggested Citation

Drazen, Allan, Conditionality and Ownership in IMF Lending: A Political Economy Approach (September 2002). CEPR Discussion Paper No. 3562. Available at SSRN: https://ssrn.com/abstract=346620

Allan Drazen (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742-1815
United States
301-405-3477 (Phone)
301-405-7835 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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