IMF calls for 'fewer but deeper' reforms in loan programs

Key facts

• The IMF called for fewer but deeper reforms in its loan programs to reflect a more shock-prone global economy.
• The IMF review assessed programs from January 2018 to December 2024, a period including the US-China trade war, the COVID pandemic, and the war in Ukraine.
• The IMF's executive board backed recommendations for more balanced reforms, better risk assessment, and greater realism in project financing.
• The IMF is introducing a new medium-term structural reform tool to identify, sequence, and tailor key reforms.
• Critics argue the IMF has sometimes failed to enforce its policies, leading some countries to cycle through lending programs.
• Eric LeCompte of Jubilee USA Network stated that previous IMF policies have not been adequate to keep countries out of crisis.

The International Monetary Fund (IMF) is advocating for a more focused approach to its loan programs, emphasizing "fewer but deeper" reforms to better suit a global economy increasingly prone to shocks. The call comes as part of a review of the IMF's program design and conditionality, its third since 2002.

The review, which assessed IMF-supported programs from January 2018 to December 2024, acknowledges the challenges posed by events like the US-China trade war, the COVID-19 pandemic, and Russia's invasion of Ukraine. The IMF's executive board has endorsed recommendations for reforms that balance revenue growth with fiscal consolidation, improve risk assessment, and ensure greater realism in project financing.

Rishi Goyal, deputy director of the IMF’s strategy, policy and review department, stated that while the overall framework is sound, adjustments are needed to address social strains and changing contexts. He highlighted the introduction of a new medium-term structural reform tool designed to identify, sequence, and tailor key reforms for maximum impact. Additionally, new tools are being developed to help IMF teams adjust course in response to unforeseen shocks.

However, the proposed changes have raised concerns among some civil society groups, who worry about increased austerity measures for developing countries already burdened by high debt and reduced development assistance. Critics also point to instances where the IMF has allegedly failed to enforce its policies, allowing some nations to repeatedly rely on lending programs. Eric LeCompte, executive director of the Jubilee USA Network, noted that past IMF conditionality has not been sufficient to prevent countries from falling into crisis, sometimes negatively impacting essential services like healthcare. Martin Muehleisen, a former IMF strategy chief, questioned the IMF's past insistence on program conditionality and the need for material changes to ensure future success.