What is conditionality, Business Economics

What is Conditionality?

Conditionality is the needs imposed onto countries as pre-conditions for loans.

Into crisis situations member countries seek assist from the IMF for example Argentina in 2002 year. The IMF gives a support conditional onto economic reforms as laid out within an SAP as an example the LDC should:

• Lower government spending balance and run balanced budget. Resultant cuts into education and health decrease welfare and hence the costs of adjustment frequently fall disproportionately onto the poorest and most vulnerable into society

• Privatisation of state owned monopolies for example a 2002 IMF loan is conditional onto privatisation of sale of Ghana's water system

• End government forced wage, interest-rate and price controls,

• End price control as well as subsidies.

• Increase real interest rates to market levels and

• Lower tariffs, end quotas and eliminate exchange controls.

Posted Date: 8/30/2013 6:54:01 AM | Location : United States

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