Back to Basics: The Great Recession and the Narrowing of IMF Policy Advice

Abstract

Abstract:This article contributes to the literature on the dynamics of change and continuity in the International Monetary Fund's (IMF's) policy paradigm. The IMF embarked on a process of 'streamlining conditionality' during the 2000s, but many observers have argued that the IMF's policy paradigm from the 1990s remains intact. This article examines whether the scope of the IMF's policy advice to borrowers during the Great Recession narrowed in comparison with its advice to borrowers during the heyday of the Washington consensus in the 1980s and 1990s. The article uses qualitative content analysis to establish the frequency of a series of policy dialogue indicators in four sample sets of countries requesting IMF stand-by arrangements (SBAs) over three decades. The evidence suggests that contemporary IMF policy advice to borrowers continues to stress the importance of fiscal consolidation, with reduced emphasis on promoting the structural economic reforms associated with the Washington consensus era.

The politics of external approval: Explaining the IMF's evaluation of austerity programmes

“…This comparison suggests that the IMF evaluates countries more positively if they emphasise expenditure reduction for achieving fiscal balance, especially during the initial stages of adjustment (Broome ; IMF : 26). Indeed, the IMF also reacted to the other unexplained negatively rated programmes with calls for more expenditure containment (France in 2012, Germany in 2010).…”

“…While these patterns are compatible with the ‘defensive forecasting’ argument (Aldenhoff ; Dreher et al ; Fratscher & Reynaud ), our overall results suggest that this is as much about implementation credibility and, ultimately, about exerting influence as it is about legitimising lending activities. First, when the IMF's policy advice is backed up with financial incentives for domestic compliance through loan programmes, it is harder for national authorities to reject the IMF's reform recommendations (Broome : 149). Second, the IMF possesses more information on and control over whether a government is serious about enacting ‘IMF friendly’ policy reforms (Broome & Seabrooke : 2).…”

The IMF Record on Social Protection: Pro‐poor or Poor?

“…Beyond this potential unintended impact on the tax and spend preferences of citizens, the IMF has a well‐established history of intentional engagement on this front through its focus on fiscal policy interventions. In particular, IMF advice has consistently advocated measures to ‘broaden’ members’ tax bases (that is, to increase the value of the underlying financial flows or assets upon which taxation is levied) (see Broome, : 156; IEO, : 8). A favoured mechanism through which the IMF has sought to achieve this goal is through the introduction or expansion of value added tax (VAT), charges levied on domestic consumption.…”

Bretton Woods Institution Narratives about Inequality and Economic Vulnerability on the Eve of South African Austerity

“…Some new phraseology would come in handy: for example, "country ownership," "poverty reduction," and "social protection." 106 In June 2011, Strauss-Kahn's temporary replacement, John Lipsky, was even heard pronouncing the words "social justice" as his top priority objective, when seducing Egypt to borrow more so as to repay $33 billion of the dictator Hosni Mubarak's old loans. 107 The South African name of this game is "talk left, walk right."…”