Conditionality and Sovereign Debt

Abstract

International financial institutions (IFIs) typically condition the provision of loans, grants, and debt relief on the implementation, by the recipient country, of policy reforms that are aimed at making the fiscal and debt situation sustainable, improving competitiveness, and boosting economic growth. These so-called ‘conditionalities’ afford IFIs substantial policy influence on governments throughout the world, thereby reducing national policy space and undermining national development agendas. The measures also have implications for the enjoyment of human rights. This chapter provides an overview of these policies, as well as their impact on the ability of the implementing governments to provide basic public services necessary for the realisation of human rights, including health, labour, and civil and political rights. The chapter begins with an examination of the mandates of the IMF and World Bank. It then discusses the lending practices of the two institutions and reviews existing debates around the effects of conditionalities on human rights. Finally, the chapter offers suggestions for reform of IMF and World Bank lending practices in ways that ensure that they respect human rights.

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