In response to charges that it establishes conditions for financial assistance that often prove to be politically intolerable, the International Monetary Fund yesterday published a new set of more flexible guidelines.
They were adopted by the IMF board on March 2, 1979 in response to a review ordered by the policymaking Interim Committee at its Mexico City meeting in April 1978.
A number of poor countries had complained that the IMF conditions for loans were unnecessarily onerous, and applied in a way so automatic that special situations were not taken into consideration.
An example frequently cited is that the IMF strongly urged Egypt to drop subsidies on food as a condition for a loan. When Egypt subsequently complied, riots broke out in the streets, and the subsidies had to be restored.
Currently, the IMF is engaged in negotiations for a standby loan to Turkey, and once again, the "conditionality" of the loan is a source of dispute.
A statement accompanying the new guidelines says one source of complaint stems from a natural reluctance on the part of many countries to apply for help early enough. When conditions have deteriorated badly, the statement said, "the financial programs have had to be more stringent than they would have been if corrective measures had been taken earlier."
Nonetheless, the IMF appeared to have made a major concession to the complaining countries when it pledged in the new guidelines to "pay due regard to the domestic, social and political objections, the economic priorities, and the circumstances of members, including the causes of their balance of payments problems."
Specifically, the IMF now pledges that performance criteria will be limited strictly to those necessary to evaluate the success of the program. It thus limits the extent to which the IMF will intrude itself in a member nation's activities. Presumably, for example, this would eliminate getting entangled again in a problem like the Egyptian food subsidies.
The new guidelines also formalize the practice that the IMF has followed for the past two years, recognizing that it takes some countries longer than others to complete an adjustment process Thus instead of being limited to one year, a loan can now be extended up to three years.