*EPF409 12/20/2001
IMF to Streamline Conditions For Loans
(Will work more closely with World Bank, official says) (520)

By Kathryn McConnell
Washington File Staff Writer

Washington -- The International Monetary Fund (IMF) has begun to streamline its lending conditionality, IMF officials say.

James Boughton, assistant director of policy development and review, said in a forum December 19 in Washington that less extensive and less detailed conditionality will be accompanied by more collaboration with the World Bank. He added that the streamlining will not lead to "looser or weaker" programs.

Conditionality is the link between approval or continuation of IMF lending and the implementation of specific economic policies by the recipient country. The scope of conditionality has expanded since the early 1980s and in the process "tensions arose between the desire to cover aspects of policy central to program objectives and the importance of minimizing intrusion into national decision-making," according to an IMF statement.

Boughton said a new plan to improve interactions with countries applying to use the Fund's resources grew from an "ambiguity that crept into the [lending] process."

He said the Fund should focus on its primary goal of helping countries alleviate balance of payment problems and not take measures that effectively are "destructive of national or international prosperity."

"We should get minimum conditionality to achieve our goals," he said.

Boughton said one goal is for the recipient country to take ownership of strong economic policies. "The IMF shouldn't step in to tell it what to do," he said.

"Conditionality must go hand in hand with ownership for successful implementation of Fund supported programs," said IMF Deputy Managing Director Shigemitsu Sugisaki in a December 14 statement.

He said this requires IMF flexibility and active participation by countries in the lending process.

The Fund will concentrate on analyzing political issues in individual countries to better understand forces that might block or weaken implementation of its programs, said Sugisaki. "In doing so, the IMF must be careful to keep in mind that the goal is to increase its sensitivity to the problems and needs of individual countries and not to get involved in or interfere with domestic politics," he said.

He said a dilemma for the Fund is how to respond to requests for financial assistance by countries "whose commitment to reforms may be weak." In such cases when "doubts are paramount" the Fund should be prepared to delay or interrupt lending, he said.

He said that technical assistance should be more medium- and long-term focused and IMF schedules should be flexible enough to allow for consensus building. He added that many IMF missions are already communicating directly with the public to gain consensus.

Boughton said conditionality began in 1954 with one condition on a loan to Peru and escalated to 117 conditions on lending to Indonesia in 1998.

Joanne Salop, World Bank vice president of operations policy and country services said the Bank and Fund are talking to each other more and pulling back to concentrate on their core competencies.

(The Washington File is a product of the Office of International
Information Programs, U.S. Department of State. Web site:
http://usinfo.state.gov)


(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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