On the Viability of Conditional Assistance Programs

June 1, 2005

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Wolfgang Mayer, and Alex Mourmouras. On the Viability of Conditional Assistance Programs, (USA: International Monetary Fund, 2005) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Economic adjustment and reform programs, including those supported by international financial institutions (IFIs), must cope with informational asymmetries and special interest politics. This presents a particularly serious issue when IFIs make structural economic reforms a condition for providing economic assistance. This paper examines what conditions must be satisfied to make conditional assistance programs viable; that is, to ensure that the assistancereceiving government not only takes the assistance but also implements reforms, without compromising the country's political stability and the IFI's financial integrity. It is pointed out that tightly budgeted conditional assistance programs never bring about reforms, that the IFI's cost of viable programs rises with the dependence of the government on domestic interest groups, and that unconditional assistance might be viable when conditional assistance is not.

Subject: Financial sector stability, Loans, National income, Personal income, Tax incentives

Keywords: Economic policy, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/121
Stock No:

WPIEA2005121
ISBN:

9781451861402
ISSN:

1018-5941

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