WASHINGTON: The International Monetary Fund (IMF) on Thursday called for changes to the design and implementation of its loan programs as the global economy faces more frequent and severe shocks.
The IMF recommended focusing on fewer but deeper reforms. It said loan programs should better reflect the challenges facing countries in a more unstable global economy.
Civil society groups have expressed concern that the review could leave developing countries facing tougher austerity measures.
They said many developing economies already face rising public debt, higher borrowing costs and declining official development assistance.
The IMF said its recommendations support more front-loaded and sustained fiscal adjustments because they are linked to higher chances of program success.
However, the lender stressed that governments should implement such measures only when feasible. It also called for realistic growth measures and adequate social spending to protect vulnerable populations.
“The framework, by and large, is fine,” said Rishi Goyal, deputy director of the IMF’s Strategy, Policy and Review Department.
“But because the context is changing, because there are social strains in a number of members, we need to make sure that our reforms are appropriately tailored,” he said.
“What this means is a clear focus on fewer but deeper reforms,” Goyal added.
IMF Seeks New Tools for Economic Shocks
The IMF review examined the design and conditions attached to its lending programs between January 2018 and December 2024.
The period included the US-China trade war during US President Donald Trump’s first term, the COVID-19 pandemic and Russia’s full-scale invasion of Ukraine.
The IMF executive board approved recommendations calling for a more balanced approach to reforms.
The recommendations include combining revenue increases with fiscal consolidation, improving risk assessments and adopting more realistic approaches to project financing.
The IMF said the changes aim to improve the implementation and outcomes of its programs rather than reduce lending standards.
Goyal said the review showed that the IMF had responded quickly and flexibly to major crises during the seven-year period.
He said the lender helped several countries restore economic stability. However, some countries failed to achieve medium-term stability, highlighting the need to improve program design.
The IMF also plans to introduce a new medium-term structural reform tool.
According to Goyal, the tool will identify key reforms and sequence them according to individual countries’ needs. The aim is to help governments gain greater results from their reform programs.
Other tools will allow IMF teams to adjust programs more effectively when unexpected economic shocks occur.
Critics Raise Concerns Over Loan Conditions
Critics have accused the IMF of failing to enforce some of its own policies consistently.
They pointed to countries such as Egypt, Pakistan and Argentina, which have moved from one lending program to another.
Eric LeCompte, executive director of the Jubilee USA Network, said IMF policies had helped some countries but had also affected public services such as healthcare in others.
“One of the greatest challenges is that countries are getting back in debt because the previous financial policies, the previous conditionality reports and debt reviews have not been adequate to keep countries out of crisis,” he said.
Martin Muehleisen, a former IMF strategy chief, said he had not reviewed the latest assessment.
However, he questioned whether the IMF had insisted strongly enough on countries meeting program conditions and whether it had withheld loan disbursements when governments failed to meet them.
He said the IMF needed to determine what had materially changed, where previous programs had failed and what measures could improve outcomes despite the changing global environment.
