CIAO DATE: 07/02

IMF Structural Conditionality: How Much Is Too Much?

Abstract

As suggested above, an active debate has long been underway–and has intensified in the wake of the Asian crisis–about the appropriate scope and intrusiveness of IMF policy conditionality. In this paper, I take up one key element of that debate, namely, the role of structural policies in IMF-supported adjustment programs. By “structural policies,” I mean policies aimed not at the management of aggregate demand but rather at either improving the efficiency of resource use and/ or increasing the economy's productive capacity. Structural policies are usually aimed at reducing/ dismantling government-imposed distortions or putting in place various institutional features of a modern market economy. Such structural policies include, inter alia: financial-sector policies; liberalization of trade, capital markets, and of the exchange rate system; privatization and public enterprise policies; tax and expenditure policies (apart from the overall fiscal stance); labor market policies; pricing and marketing policies; transparency and disclosure policies; poverty-reduction and social safety-net policies; pension policies; corporate governance policies (including anti-corruption measures); and environmental policies.

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