IMF Programmes: Is There a Conditionality Laffer Curve?

Abstract

The long-standing debate over IMF conditionality has received a new lease of life in the context of the debate over a new international financial architecture. Conditionality has increased in recent years and some proposals for reform envisage a continuation of this trend. However, by emphasising the importance of implementation as well as design it may be argued that increased conditionality will have a negative effect on final out-turns; there may be a conditionality Laffer curve. The policy issue is whether conditionality has reached or gone beyond its optimal level. There is some evidence that is consistent with the claim that conditionality has become excessive.