IMF Working Papers

IMF-Supported Programs in Low-Income Countries: Fragile versus Non-Fragile States

By Kailhao Cai, Edouard Martin, Felix J Vardy

October 11, 2024

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Format: Chicago

Kailhao Cai, Edouard Martin, and Felix J Vardy. "IMF-Supported Programs in Low-Income Countries: Fragile versus Non-Fragile States", IMF Working Papers 2024, 221 (2024), accessed October 11, 2024, https://doi.org/10.5089/9798400289866.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines the macroeconomic frameworks of IMF-supported programs with low-income countries from 2009 to 2022, focusing on how macroeconomic targets and their achievement differ between fragile and conflicted-affected states (FCS) and non-FCS. Key findings include similar program targets for FCS and non-FCS, optimism in all dimensions considered other than inflation, and no significant correlation between targets and outcomes. For variables other than inflation, country-independent targets equal to the mean or median outcomes of other programs outperform program projections as predictors of actual outcomes. This underscores the challenges in setting realistic, country and program-specific targets in IMF-supported programs with low-income countries. Finally, we discuss potential caveats, including GDP rebenchmarking, non-linear relationship between initial conditions and targets, and repeat programs. We do not study, and make no claims about, causality.

Keywords: Fragility, IMF Programs, LICs, Optimism, Tailoring

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