Can “Soft” Advice from International Organizations Catalyze Natural Resource Sector Reform?

Abstract

Abstract Can international organizations improve natural resource governance? The International Monetary Fund (IMF) is most noted for its role in crisis lending, where it can wield the “teeth” of loan suspensions to push for reforms. But IMF officials also spend a large amount of time conducting routine surveillance through Article IV consultations, which assess a country’s economic developments and provide non-binding recommendations. Do governments follow this “toothless” advice? To answer this question, we examine the content of all Article IV staff appraisals published between 2004 and 2019. Using text analysis and a difference-in-differences estimator, we find that resource-rich developing countries are more likely to adopt legislation reforming the oil, gas, and mining sectors in the wake of an Article IV appraisal that extensively discusses the natural resource sector and recommends natural resource governance reforms. Our results suggest that technocratic advice—a tool often overlooked in international organization scholarship—can lead to the adoption of policies that help ameliorate the resource curse.