Conditionality

The quality of being conditional, or limited; limitation by certain terms.

Idea that external credit or funding should be advanced to a government only where a programme of economic or political reforms was to be implemented. The concept is associated with funding provided by the IMF, particularly since the 1970s, when conditionality was seen as a way of enhancing government credit without generating inflationary or foreign exchange pressures. Financial support would be forthcoming only with agreements on macro-economic policy and reform of trading policy, with the hope that such measures would enhance a government's economic credibility and credit-worthiness. Since the 1980s, as the IMF and World Bank have extended lending and funding programmes in the Third World and the post-communist states, the focus of conditionality has been on the establishment of open economies and other aspects of structural adjustment. Since conditionality is based on the existence of external constraints to ensure virtuous government behaviour in the long term, there are always likely to be tensions between short-term domestic incentives and the expectations of international funding bodies. Conditionality has been criticized for imposing the model of Western political liberalism on countries where it may not be appropriate or supported by the people; exposing poor countries to competition and exploitation from companies in wealthier countries; and for focusing on economic growth rather than promotion of social reform and equality. (See also development.)

— Alistair McMillan

The noun has one meaning:

Meaning #1: the state of being conditional

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