In Box

IMF for President

Scapegoating the International Monetary Fund (IMF) is a popular blood sport among governments in developing countries when their economies hit the skids. But a new study by economist Axel Dreher at Germany’s University of Mannheim, "The Influence of IMF Programs on the Re-election of Debtor Governments," suggests beleaguered politicos might actually score points with voters ...

Scapegoating the International Monetary Fund (IMF) is a popular blood sport among governments in developing countries when their economies hit the skids. But a new study by economist Axel Dreher at Germany’s University of Mannheim, "The Influence of IMF Programs on the Re-election of Debtor Governments," suggests beleaguered politicos might actually score points with voters if they instead openly embraced the fund.

In his paper, Dreher looked at election results in 96 countries over a period of two decades and found that governments that strike a deal with the IMF prior to facing reelection can reap a political windfall at the ballot box. That’s because, if economic times are tough, voters interpret the IMF’s involvement as a sign that happy days may be here again. In 1996, for instance, the IMF agreed to a $10.2 billion loan to Russia just five months before its presidential election. "Russians read [Boris] Yeltsin’s international creditworthiness as a signal of competence," Dreher says, so "they elected him again."

Dreher, however, offers an important caveat: If a country’s economy is performing fairly well, say just above a tipping point of 5.36 percent real growth per year, then the IMF halo effect grows dimmer. Under those circumstances, politicians who couldn’t obtain credit from anyone but the lender of last resort appear inept in the eyes of the voting public.

Scapegoating the International Monetary Fund (IMF) is a popular blood sport among governments in developing countries when their economies hit the skids. But a new study by economist Axel Dreher at Germany’s University of Mannheim, "The Influence of IMF Programs on the Re-election of Debtor Governments," suggests beleaguered politicos might actually score points with voters if they instead openly embraced the fund.

In his paper, Dreher looked at election results in 96 countries over a period of two decades and found that governments that strike a deal with the IMF prior to facing reelection can reap a political windfall at the ballot box. That’s because, if economic times are tough, voters interpret the IMF’s involvement as a sign that happy days may be here again. In 1996, for instance, the IMF agreed to a $10.2 billion loan to Russia just five months before its presidential election. "Russians read [Boris] Yeltsin’s international creditworthiness as a signal of competence," Dreher says, so "they elected him again."

Dreher, however, offers an important caveat: If a country’s economy is performing fairly well, say just above a tipping point of 5.36 percent real growth per year, then the IMF halo effect grows dimmer. Under those circumstances, politicians who couldn’t obtain credit from anyone but the lender of last resort appear inept in the eyes of the voting public.

More from Foreign Policy

coronavirus-vaccine-predictions-2021-foreign-policy-global-thinkers-brian-stauffer-illustration

The World After the Coronavirus

We asked 12 leading thinkers to predict what happens in 2021 and beyond.

Protesters prepare to burn an effigy of Chinese President Xi Jinping during an anti-China protest in Siliguri, India, on June 17, 2020.

Why Attempts to Build a New Anti-China Alliance Will Fail

The big strategic game in Asia isn’t military but economic.

china-bhutan-settlement-village-security-outpost-border-dispute

China Is Building Entire Villages in Another Country’s Territory

Since 2015, a previously unnoticed network of roads, buildings, and military outposts has been constructed deep in a sacred valley in Bhutan.