Takagi, De Resende, Prieur, Loyola & Nguyen: A Review of Crisis Management Programs Supported by IMF Stand-By Arrangements, 2008-11

From the Executive Summary:

A review of crisis management programs supported by IMF Stand-By Arrangements (SBAs) approved between 2008 and 2011 indicates that, on average, access was large and disbursements highly frontloaded. The IMF was rapid in response, especially during the early phase, and flexible in allowing resources to be channeled directly as budget support. It collaborated, especially in early European programs, with multilateral and bilateral donors in a transparent manner. It sought private sector involvement proactively while attempting to build investor confidence and public support for these programs through public communications efforts.

Programs generally targeted a gradual reduction in the fiscal deficit. Actual outturns were looser than programmed as the targets were relaxed when the crisis proved to be more severe than originally forecast. Programs allowed fiscal automatic stabilizers to operate when output collapsed, but IMF financing generally does not appear to have accommodated the full extent of the fiscal shortfall.

Considerable learning had taken place since the emerging market crises of the late 1990s and early 2000s. In responding to the 2008 crisis, structural conditionality was more streamlined and more focused on the IMF’s core areas of competence. About half the programs called for greater exchange rate flexibility, but the IMF cautioned against too rapid a depreciation as having an adverse balance sheet effect. Less than 65 percent of committed resources were actually drawn, indicating that financing was sufficiently large to restore investor confidence. Program documents explicitly recognized risks, though the presentation was too pro forma to add value. For the most part, however, staff did their due diligence in contingency planning. The IMF-supported programs likely helped avert deeper contractions of output and a financial meltdown. While the average GDP growth of SBA countries in 2009 was lower by 2.7 percentage points than that of their non-program peers, the difference narrowed in 2010 to 1.6 percentage points. Though attribution is difficult, especially given the substantial and contemporaneous global easing of macroeconomic policies, IMF program financing seems to have been a factor contributing to this relatively quick turnaround.

In a number of countries, especially in high access cases, structural reforms did not progress much or were reversed after the program engagement ended, raising a question about the appropriateness of crisis programs as a vehicle for catalyzing difficult structural changes.  Also, about half the countries left the program engagement without completing reviews, raising questions about the extent of demand for SBA-type program engagements in calmer times.


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