The role of IMF programs in aligning national economic policy with domestic preferences

Abstract

The International Monetary Fund (IMF) promotes reforms emphasizing individual economic freedom and market competition. However, IMF loan conditions face criticism for potentially undermining democracy by encouraging policy shifts that may not reflect citizens’ preferences. We examine how IMF lending impacts economic congruence—the alignment between government policies and public preferences for economic freedom and market competition. Lack of congruence can weaken government legitimacy and hinder development. We find that participation in IMF programs is associated with more liberal economic policies across all countries: greater economic congruence in autocracies but reduced congruence in democracies. These findings help explain the unpopularity of IMF programs, especially in democracies.