June 2002 - Article - Modalities of IMF conditionality - further considerations
B T Thoka
Last Modified Date:
2020-10-01, 09:31 PM
Quarterly Bulletins > Articles and Notes
The International Monetary Fund (IMF) has, since its establishment in 1944, evolved into a major actor in the international economic and financial arenas. This development can be attributed largely to the global economic shocks of the 1960s, 1970s and 1980s and more recently to the major financial crises of the 1990s. In tandem with these changes, the role and responsibilities of the IMF as an international financial institution have consequently expanded considerably and in so doing, inspired vigorous debate and discussion among policy makers, IMF member countries and academics. A major issue of contention is the appropriate scope and intrusiveness of IMF conditionality. There are two prominent issues at the core of the debate and discussions: one is the issue of the ownership of Fund-supported programmes and the other, the issue of streamlining or simplifying IMF conditionality. A recent IMF response was the publication of an IMF Staff Paper, titled “The modalities of conditionality – further considerations.” The authors of the paper accept that conditionality should be simplified and greater ownership be assumed by member countries receiving IMF support. The paper proposes two approaches which would incorporate the aforementioned issues, namely outcomes-based conditionality and floating tranche conditionality. Both approaches are distinct, albeit related concepts. This paper begins by giving a historical overview of the evolution of IMF conditionality from its simple origins to a complex set of instruments utilised for the purpose of monitoring compliance. Next it summarises outcomes-based conditionality and floating tranche conditionality. Then the relationship between programme ownership and conditionality and also the process of streamlining conditionality are reviewed. The paper ends with a broad overview of some unresolved issues and summarises South Africa’s position in the ongoing debate.