IMF Backs 'Fewer but Deeper' Reforms in Overhaul of Loan Program Design

The International Monetary Fund has proposed targeted changes to how its lending programs are designed and implemented, urging a sharper focus on "fewer but deeper" reforms to suit an era defined by overlapping global shocks.

The recommendations, endorsed by the fund's executive board, stem from its third review of program design and conditionality since guidelines were laid down in 2002. The assessment examined IMF-supported programs between January 2018 and December 2024 — a stretch that took in the US-China trade war, the COVID-19 pandemic and Russia's full-scale invasion of Ukraine.

Rishi Goyal, deputy director of the IMF's strategy, policy and review department, said the fund's basic framework had held up well, but the changed environment demanded greater precision. "Because the context is changing, because there are social strains in a number of members, we need to make sure that our reforms are appropriately tailored," he said, describing the aim as a clear emphasis on fewer but deeper reforms.

The review found that the fund responded swiftly and flexibly to successive crises and helped several countries restore stability. Yet not every borrower managed to regain medium-term stability, which the review cited as grounds for rethinking how programs are put together.

Among the recommendations are more balanced reform packages that draw on both revenue growth and fiscal consolidation, improved assessment of risks, and greater realism about how projects will be financed. The IMF said the objective is to improve implementation and outcomes rather than to lower its standards.

The review encourages front-loaded and sustained fiscal adjustment, which it links to a higher likelihood of program success, but says such steps should be taken only where feasible, alongside realistic measures to spur growth and adequate social spending to shield vulnerable groups.

Alongside the policy adjustments, the fund is rolling out a new medium-term structural reform tool intended to identify priority reforms and then sequence and tailor them so that countries get more value from their efforts. Other new instruments are meant to help IMF teams and staff correct course when fresh shocks emerge.

The exercise follows changes to a joint IMF-World Bank debt framework for low-income countries and precedes a review of how the fund evaluates national economies.

Civil society organisations have cautioned that the review could leave developing countries confronting harsher austerity as they grapple with rising public debt, costlier borrowing, falling official development assistance and repeated systemic shocks. Eric LeCompte, executive director of the Jubilee USA Network, said IMF policies had aided some countries but harmed public goods such as healthcare in others, cutting funds that the poorest people rely on. He argued that a central problem is that countries keep sliding back into debt because earlier financial policies, conditionality reports and debt reviews have not been sufficient to keep them out of crisis.

Critics have also contended that the IMF has at times failed to enforce its own rules, allowing countries such as Egypt, Pakistan and Argentina to move from one lending program to another.

Martin Muehleisen, a former IMF strategy chief who said he had not seen the review, framed the key question as whether the fund had insisted firmly enough on program conditions being met and withheld disbursements when they were not. "What they really need to ask themselves is: what has materially changed and where did things go really wrong?" he said, adding that the fund must also determine what will change materially to give programs a chance of meeting their goals amid global turbulence.