Explain the meaning of IMF conditionality and why it has been criticized

Question

What will be an ideal response?

Answer 1

IMF conditionality refers to the changes in economic policy that borrowing nations are required to make in order to receive IMF loans. Conditionality typically covers monetary and fiscal policies, exchange rate policies, and structural policies affecting the financial sector, international trade, and public enterprises. Each additional installment of an IMF loans is conditional on some of these requirements being met. Often these types of reforms generate significant opposition since they seem to override national sovereignty and generally impose contractionary macroeconomic policies. Some argue that conditionality requirements intensify the recessionary tendencies of a crisis, although there is a debate over whether countries recover faster with IMF assistance than without it. Until the early 1990s, the IMF focused its efforts on economic policy reforms in a way that more or less ignored their social consequences. Public outcry against the effects of conditionality on the vulnerable members of societies have forced a closer look at the social impacts of policies, and the IMF has tried to make adjustments. However, there are still widespread complaints that IMF conditionality is too punitive and too contractionary, and a few countries in crisis have refused IMF assistance.