Why do governments fail to implement policy commitments in contractual agreements with international organizations? While scholars have scrutinized domestic factors as obstacles to compliance, we argue that reform programs may be unimplementable by design. We study this hypothesis in the context of International Monetary Fund (IMF) programs, in which borrowing countries must commit to far-reaching economic policy reforms for access to credit. We collect detailed compliance data on individual policy conditions to assess the determinants of compliance failures of IMF programs from 1980 to 2009. Controlling for a host of borrower-specific variables, features of the loan, unexpected shocks during implementation, donor influence, and bureaucratic interest, we find that the number of conditions is a robust predictor of implementation failure. Our theoretical explanation for these findings is that over-ambitious program designs are the result of intra-organizational bargaining within the IMF bureaucracy. While an area department within the IMF drafts the initial reform program, functional departments use their amendment power to include policy conditions that they care about, without due consideration of local circumstances, which leads to over-ambitious programs. These findings have important implications for theories of compliance as well as for policymaking in international organizations.
Unimplementable by design? Understanding (non-)compliance with International Monetary Fund policy conditionality
Kentikelenis, Alexander
2022
Abstract
Why do governments fail to implement policy commitments in contractual agreements with international organizations? While scholars have scrutinized domestic factors as obstacles to compliance, we argue that reform programs may be unimplementable by design. We study this hypothesis in the context of International Monetary Fund (IMF) programs, in which borrowing countries must commit to far-reaching economic policy reforms for access to credit. We collect detailed compliance data on individual policy conditions to assess the determinants of compliance failures of IMF programs from 1980 to 2009. Controlling for a host of borrower-specific variables, features of the loan, unexpected shocks during implementation, donor influence, and bureaucratic interest, we find that the number of conditions is a robust predictor of implementation failure. Our theoretical explanation for these findings is that over-ambitious program designs are the result of intra-organizational bargaining within the IMF bureaucracy. While an area department within the IMF drafts the initial reform program, functional departments use their amendment power to include policy conditions that they care about, without due consideration of local circumstances, which leads to over-ambitious programs. These findings have important implications for theories of compliance as well as for policymaking in international organizations.
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