Expansive agendas and weak instruments: governance related conditionalities of international financial institutions

This paper analyzes the new lending conditionalities of the Bretton Woods institutions in the area of “governance” in a sample of twenty-five upper tranche arrangements in 1999. It finds that the scope and number of conditions, defined both narrowly and loosely, have expanded. Is this expansion likely to improve the quality of the development process? The paper's findings are negative based on a retrospective analysis of the effectiveness of conditionalities in shaping borrower behavior as well as the content of the current agenda with respect to three important issues: the problems posed by aggregation and trade-offs among conditionalities; the relative emphasis on external versus internal factors; and the temporal dimension of the institutional underpinnings of “good governance.” The paper argues that the pessimistic prognosis is further reinforced when taking into account the governance and interests of the IFIs themselves and their consequences on the content and enforcement of conditionalities.