The International Monetary Fund

The International Monetary Fund

Distinguishing Reality from Rhetoric

Graham Bird and Dane Rowlands

There is no shortage of opinion about the International Monetary Fund (IMF). Some see it as the agent of austerity, being manipulated by wealthy nations and forcing poorer countries to pursue economic policies that suppress growth and development. A sharply contrasting view regards it as bailing out such countries with large amounts of soft finance, allowing them to avoid necessary adjustment. The challenge is to evaluate the alternative arguments and to distinguish reality from rhetoric. In this book, the authors undertake a careful and detailed empirical analysis of the underlying issues, covering participation in IMF programs, their implementation and effects on economic growth, and on the willingness of international capital markets to lend.

Chapter 7: The effects of IMF programs on economic growth

Graham Bird and Dane Rowlands

Subjects: economics and finance, financial economics and regulation, international economics, politics and public policy, international relations


A central part of the IMF’s role is to assist member countries in achieving sustainability in their balance of payments. In order to do this some countries periodically negotiate programs with the Fund at times when their balance of payments has become unsustainable. In earlier chapters, and often drawing on our already published research, we have examined the factors that influence participation in such programs, as well as the extent to which they are implemented by the countries that negotiate them. The next question, and the one to which we turn in this previously unpublished chapter, relates to the effects of IMF programs. There is a large literature examining the impact of IMF programs and we have alluded to this in the introductory chapter of this book. However, the research has not led to unambiguous conclusions. Indeed, those with starkly opposing views can find some evidence to support their arguments if they use the literature and empirical record selectively. Thus some claim that IMF programs have positive effects, some claim that they have negative effects, and some claim that they have no significant effects at all.

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