Conditionality and Withholding of Funds

The concept of conditionality in international finance emerged from a decision made by the Executive Board of the International Monetary Fund (IMF) in 1952, which was later integrated into the Articles of Agreement. This framework serves as a mechanism to enforce repayment obligations by linking the disbursement of funds to specific economic policy conditions that borrowing countries must meet. The theoretical foundation of conditionality is largely attributed to the work of economist Jacques Polak, who developed the monetary approach to the balance of payments. This approach emphasizes the importance of monetary factors in determining a country's balance of payments position and suggests that countries must implement certain economic reforms to stabilize their economies and ensure the effective use of financial assistance.