2024-06-27-IMF-The_Catalytic_Impact_of_IMF_Lending_on_Official_Development_Assistance_44页_1mb

Main Contributions:

1. This paper investigates the catalytic effect of IMF lending on Official Development Assistance (ODA) for low-income countries (LICs) using instrumental variable (IV) methods to address selection bias over 1990–2019. The first IV combines past IMF program participation and IMF liquidity variations. The second IV uses IMF's borrowing limits (access limits) to capture program size variations.

2. A dollar of IMF disbursements catalyzes approximately $27 cents of ODA from the total donor flow. Specifically, a 1 percentage point (pp) of GDP increase in IMF disbursements leads to an additional 2.7 pp of GDP in ODA.

3. Multilateral donors (largely the World Bank and the EU) provide the majority of the catalyzed ODA (1.3 pp of GDP increase), followed by traditional bilateral donors (0.6 pp). Grants exhibit stronger catalytic effects compared to concessional loans.

4. The catalytic effect is stable throughout the period. Larger disbursements lead to larger ODA inflows, but there is diminishing marginal returns for very large programs: larger programs catalyze more ODA, but each additional dollar of lending catalyzes slightly less ODA.