Tailoring IMF-Supported Programs to Fragile and Conflict-Affected States’ Needs

Abstract

We consider the impact of Fund-supported programs in fragile and conflict-affected states (FCS) on aid flows and what factors determine program success. Using several indicators of fragility in a multivariate setting, we find that the catalytic role of IMF engagement on aid is significant in general and particularly so in fragile states. There is clear evidence that risks are more elevated in FCS due to conflict and political instability. Probit analysis for metrics of program success indicates that programs in FCS have a significantly higher probability of non-completion than non-FCS. We find a strong negative effect of high public debt on program completion. Usage of prior actions is associated with weaker program performance, suggesting that their use occurs in situations that are perceived as more risky. We recommend a greater focus on the drivers of conflict and instability in FCS and consideration of program measures that contribute to better economic outcomes.