Cross-conditionality or the Spread of Obligatory Adjustment: A Review of the Issues and Questions for Research

Abstract

The issue of cross-conditionality arises in the context of a veritable explosion of conditionality that characterised the 1980s. Not only are many developing country governments having to negotiate simultaneously with different international or bilateral institutions at the same time, but a far higher proportion of loans granted by each agency have tighter conditions than in the past, and these conditions relate to a far broader range of policy issues than in the past. The number of developing countries thus affected is also very large, because so many countries have been obliged to seek IMF/World Bank and bilateral official lending, as their foreign exchange situation has deteriorated in the early 1980s and indeed as IMF/World Bank lending has become an almost obligatory part of debt-rescheduling/new money packages; as a result, cross-conditionality and enhanced conditionality is a problem largely related to countries with severe foreign exchange strangulation, usually — but not always — manifesting themselves in debt crises. It is therefore highly concentrated geographically in Latin America and Africa. Indeed, those critical of the type of policy conditionality implied in IMF/World Bank lending could argue that these countries are suffering simultaneously from (1) inherited effects of mistaken or inadequate policies in the past, (2) severe shocks coming from the ‘darkening’ international environment in the 1980s, and (3) pressure from the World Bank, IMF and other institutions to undergo structural transformations, several of which may not be consistent with the governments’ objectives.KeywordsGross Domestic ProductStructural Adjustment ProgrammeInternational Financial InstitutionPackage DealDevelop Country GovernmentThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.