Abstract
ABSTRACT We study the long-run relationship between expenditure conditionality in IMF programmes and the composition of public spending. We compile a granular dataset on government expenditure conditions in 115 countries during 1992–2016 and find that it is structural conditionality which delivers lasting benefits. Structural public financial management conditionality has proven effective in boosting long-term levels of education, health, and investment expenditures. We further find that non-structural conditionality (such as spending floors) for raising specific spending categories may come at the expense of other expenditures, such as health. Finally, successful implementation and not mere existence of the conditionality is crucial for improved outcomes.
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