Conditionality and Structural Adjustment Programmes

Abstract

In 1952 a decision was taken by the IMF Executive Board to introduce conditionality, requiring any country seeking financial assistance to abide by certain conditions. These conditions are embodied in structural adjustment programmes (SAPs), which borrowing countries have to meet in order that their requests for loans are approved or the funds that have already been approved are released. Typically, structural adjustment programmes are based on laissez-faire free-market economics and the ideology of neoliberalism, in the spirit of the ten commandments of the Washington Consensus or variants thereof. Until the early 1980s, IMF conditionality largely focused on macroeconomic policies. Following the expansion of the scope of the IMF operations to cover low-income and transition countries, the guidelines on conditionality were revised in 2002. In March 2009, the IMF revised the conditionality framework with the objective of preventing and resolving crises. In 2012, the Executive Board discussed staff papers reviewing the guidelines on conditionality, emphasising the need to "draw lessons from previous crises and provide better targeted and flexible lending". Unfortunately, none of these lessons was the big lesson learned from the global financial crisis: that laissez-faire free-market policies could bring about devastation. Even the former chairman of the Federal Reserve, Alan Greenspan, admitted once that he had learned that lesson-not the IMF though. Rather than learning this lesson, the IMF reconsidered debt limits