, Volume 8, Issue 2, pp 265-290
Date: 25 Sep 2012

“The silent revolution:” How the staff exercise informal governance over IMF lending

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This paper examines how the staff exercise informal governance over lending decisions of the International Monetary Fund (IMF or Fund). The essential component of designing any IMF program, assessing the extent to which a borrowing country is likely to fulfill its policy commitments, is based partly on informal staff judgments subject to informal incentives and normative orientations not dictated by formal rules and procedures. Moreover, when country officials are unable to commit to policy goals of the IMF, the IMF staff may bypass the formal channel of policy dialogue through informal contacts and negotiations with more like-minded actors outside the policymaking process. Exercising informal governance in these ways, the staff are motived by informal career advancement incentives and normative orientations associated with the organization’s culture to provide favorable treatment to borrowers composed of policy teams sympathetic toward their policy goals. The presence of these sympathetic interlocutors provides the staff both with greater confidence a lending program will achieve success and an opportunity to support officials who share their policy beliefs. I assess these arguments using a new dataset that proxies shared policy beliefs based on the professional characteristics of IMF staff and developing country officials. The evidence supports these arguments: larger loan commitments are extended to countries where government officials and the Fund staff share similar professional training. The analysis implies informal governance operates in IOs not just via state influence but also through the evolving makeup, incentive structure, and normative orientations of their staffs.

Earlier versions of this paper were presented at the Annual Meeting of the American Political Science Association, Chicago, IL, 30 August – 2 September 2007, the Annual Meeting of the International Political Economy Society, Stanford University, Palo Alto, CA, 9–10 November 2007 and the University Seminar on Global Governance and Democracy, Duke University and University of North Carolina, Durham/Chapel Hill, NC, 17 April 2008. The author is grateful for helpful assistance and comments on earlier drafts from Pablo Beramendi, David Brady, Benjamin J. Cohen, Mark Copelovitch, Axel Dreher, Christopher Gandrud, Randall Henning, Judith Kelly, Katharina Michaelowa, Layna Mosley, Thomas Oatley, and Randall Stone.