Toward More Effective IMF Programs: Learning from the Evidence on Conditionality

The International Monetary Fund (IMF) conducts periodic Reviews of Program Design and Conditionality (RoC), and it is currently undergoing the first review since 2018. These reviews analyze the performance of IMF programs in recent years and establish changes to the framework guiding future programs. IMF programs are designed to address balance-of-payments challenges, and countries must meet certain conditions to receive planned disbursements.

As the IMF reviews its design of programs and conditionalities, it is important to base this evaluation on the best available evidence. A new policy brief by Tim Hirschel-Burns and Marina Zucker-Marques summarizes evidence from 21 recent peer-reviewed academic studies and the IMF’s own research. Recognizing that IMF programs and external conditions have evolved over time, they place stronger emphasis on recent research published between 2015 and 2025.

The authors focus on three main sets of questions. First, do programs help overcome the problems that led countries to seek financial assistance? Second, are there unintended consequences and negative spillovers from IMF programs that could be destructive of national prosperity? And third, is conditionality applied uniformly among IMF members, in line with the IMF’s commitment to neutrality?

Main findings:

• IMF programs fall short of their stated goal of resolving countries’ balance-of-payments problems: The literature suggests that IMF programs have improved their ability to increase growth but still underestimate the negative impacts of contractionary policies and struggle to change borrowing countries’ export structures.
• IMF programs create collateral damage: They are associated with increased poverty, inequality, neonatal mortality and deforestation.
• IMF programs suffer from a lack of evenhandedness: Countries aligned with Western shareholders are more likely to receive IMF loans with less stringent conditionalities.

Policy recommendations:

• IMF programs should apply more realistic and gradual volumes of fiscal adjustment, ensuring that countries have the space to increase investment, stimulate growth and change their export structures to avoid chronic balance-of-payments problems.
• Beyond prioritizing short-term stabilization and growth-enhancing policies, IMF programs should be coordinated with multilateral development banks and national authorities to support long-term policies to promote export diversification and export growth; implement stronger social and environmental safeguards; and favor revenue mobilization over expenditure cuts.
• The 2026 Review of Program Design and Conditionality should send a strong signal that the IMF is committed to evenhandedness and political considerations will not lead to differentiated treatment among borrowing members.

In a world of increasing external shocks and uncertainties that impact the balance of payments of individual countries and the financial stability of the entire membership, it is imperative that the IMF has the adequate resources and program design to prevent and mitigate financial instability. The evidence suggests that significant improvements are needed for the IMF to fulfill its mission.