ABSTRACT
From the day in 1947 that the Fund opened its doors for business, member countries came to it to seek credit when they encountered deficits in their balances of payments that they found difficult to finance from their own reserves. To ensure that these countries would correct their payments positions within a reasonable period, the Fund had to have an understanding of the causes of the payments deficits and, both qualitatively and quantitatively, of the policy measures necessary to overcome them. Only then could it come to a judgment whether the actual or proposed policies of the member country would be sufficient to restore balance and, if not, to insist on a strengthened policy package as a condition for its credit. The model developed in the Fund to meet this need, first published in Polak, 1957 [1977]1 appeared to be still very much alive 30 or 40 years later. Approximately one-half of a 1987 IMF Occasional Paper (No. 55), attributed to no fewer than eight senior staff members of the Research Department and entitled Theoretical Aspects of the Design of FundSupported Adjustment Programs (International Monetary Fund, 1987, hereinafter referred to as OP55), was devoted to an exposition of the model and its implications for policy. In 1996, a workbook prepared as a training manual in the Fund’s Institute (Financial Programming and Policy: The Case of Sri Lanka; International Monetary Fund, 1996, hereinafter referred to as Sri Lanka) focuses, as its title indicates, on the technique of financial
programming, and its monetary chapter is built around the same model. Fund stand-by and other financial support arrangements continue to be designed around monetary targets serving as ‘performance criteria’ for the release of successive tranches or as ‘benchmarks’ that play a major role in the reviews of such arrangements.
