ABSTRACT
The International Monetary Fund (IMF or Fund) was originally created to monitor and maintain the Bretton Woods par value exchange rate system, and loaned resources on a revolving basis for the narrow purpose of helping members offset short-term payments imbalances in order to defend their exchange rates. In 1952, the Fund first attached conditions to its loans, and since then Fund conditionality has changed dramatically. The number of conditions that a borrowing member must meet in order to receive timely installments of a Fund loan has increased. The types of conditions have evolved, from broad macroeconomic targets in the 1950s and 1960s to the “microconditionality” today, which specifies conditions pertaining to policy implementation in great detail. The Fund’s loans are now generally larger, longer term, and tackle new problems. Today the Fund offers advice and sets conditions not only on policies from areas of long-standing focus like exchange rates and credit expansion, but also on new areas of concentration, including governance and enterprise reform. These changes in the terms of Fund conditional loan agreements influence the policies and the political and economic trajectories of numerous borrowing states. In the 2000/2001 fiscal year alone, 80 countries participated in Fund conditional loan agreements.2
