Growth at a Cost: Evaluating IMF Program Effects in South Asia Through Policy Conditionalities

Abstract

This paper examines the effects of International Monetary Fund (IMF) program participation on economic growth in four South Asian countries from 2000 to 2003, using panel data and fixed effects estimation. Results show a statistically significant, lagged decline in GDP per capita, averaging USD 132 during IMF program years and USD 143 in the subsequent year, which highlights the delayed adverse effects of IMF conditionalities. Other macroeconomic indicators, including government consumption, foreign direct investment, trade openness, and current account balance, were not statistically significant. The findings call for IMF agreements that align with domestic development goals, safeguard social spending, enhance fiscal discipline, and strengthen macroeconomic institutions to minimize potential contractionary impacts.