The Impact of World Bank and IMF Programs on Democratization in Developing Countries

Abstract

This paper proposes a theory on the interference of World Bank and IMF programs with domestic politics by changing the prevailing power balance between pro-democratic and anti-democratic forces. However, World Bank and IMF programs differ in design and impact. Thus, the question arises whether the participation in different types of World Bank and IMF programs also has a different impact on democratization in recipient countries. Therefore, this paper analyzes empirically the separate and joint effects of World Bank and IMF programs on democratization in 76 developing countries in Africa and Asia from 1974 to 2007. Our results show that aid modalities matter. In general, while World Bank and IMF programs do not change electoral accountability mechanisms in recipient countries, they induce changes in civil liberties and domestic oversight of the borrower government. Traditional lending types have significant negative short-term effects on the extent of horizontal accountability and civil liberties in recipient countries, while more flexible policy lending types significantly increase the extent of checks and balances at the domestic level in the long term. Moreover, civil society’s participation in the formulation and implementation of national poverty reduction strategies potentially increases a country’s civil liberties record.