Dr. Donal Donovan:

Conditionality has always been a feature of IMF loans and this is grounded in the legal requirement that if the IMF provides funds to a country, it has to have assurances that those funds will be repaid so that they will come back into the pool - it is like a credit union - and be available for another country potentially later. The basis for conditionality is that in order for the IMF to have such assurances that such funds will be repaid, it needs to be confident that the government is undertaking measures to reform, change and alter the policies that got itself into the problem in the first place. This is the basis of conditionality which has been there since 1950.

The IMF has always applied this approach in its lending activities. The groups of countries to which it lent have varied somewhat over time. There was some lending to industrial countries in first few decades of the IMF ending in the mid-1970s. There was continuous lending to low-income countries in Africa for many years. There was intensified engagement with middle-income countries. The Deputy referred to the debt crisis of the 1980s and, indeed, there were the crises in East Asia, Russia and Argentina at the end of the decade. The pattern of lending to different groups of countries has varied a little bit and now we are back into lending to industrial countries, but the principle of conditionality has always been there.