Adjustment with IMF lending

Adjustment programs supported by the IMF are frequently criticized by creditor countries as involving conditions which are too lax or, once violated, too easily modified or pushed aside. At least as frequently, these same conditions are criticized by international debtors, or those adopting their interests, for being too harsh and rigid. Neither side has explained very well (1) how exactly the Fund impinges on the path of adjustment a country would choose unaided and what that path is, (2) why the Fund must be expected to accelerate adjustment to safeguard its objectives, and (3) what limits the Fund's ability to do so. This paper attempts a theoretical deduction showing how this two-sided conflict arises from the Fund's obligation to adjudicate benefits and costs in negotiating programs acceptable not only to its debtor, but also to its creditor countries.