Why Do Governments and the imf Enter into Agreements? Statistically Selected Cases

Abstract

Why do governments and the International Monetary Fund (imf) enter into agreements? Conventional wisdom holds that governments turn to the Fund for a straightforward reason: they need an imf loan. An alternative argument is that governments want imf conditions to be imposed to help push through unpopular economic reforms. To illustrate how the desire for imf conditions can play a role in the decision to enter into an agreement, this article considers two analytically significant cases. Drawing upon a data set of 7011 country-year observations of 199 countries from 1952 (or year of independence) to 2000, two outliers are selected: the country observed with the least need for an imf loan participating in an imf program (Uruguay in 1990) and the country with the strongest need for an imf loan not participating in an imf program (Tanzania in 1983).