Economic stabilization, conditionality, and political stability

Abstract

IMF conditionality is seldom so important that it dominates all other considerations for political stability. IMF stabilization programs often shift benefits from one group to another. They expose elites to charges of selling the sovereignty of their countries. The imposition of IMF conditions, particularly subsidy cuts, may lead to sharp outbreaks of civil disorder. Nonetheless, the IMF provides resources that make adjustment easier and thus may lessen the chances of political instability for a country. IMF programs are seldom implemented fully as negotiated, and the penalties for partial compliance are not great. Debtor countries have more flexibility in imposing austerity measures, and the economic constraints are less binding than often assumed. The very availability of alternatives to IMF programs results in internal divisions because some favor debt repudiation and others oppose it. Groups now contend over solutions to the debt problems of their countries.