The fund's conditionality has little credibility around the world because the IMF has an institutional incentive to lend. It must provide credit in order to survive. The fund's virtually indiscriminate lending behavior has made that point abundantly clear to borrower countries, something that further undermines the agency's credibility. The recent report by the Meltzer Commission on international financial institutions confirms the problem. The IMF is most effective at promoting liberalization when it ceases to lend.
Economic reality tends to concentrate the minds of policymakers in developing countries.
Unfortunately, suspensions of IMF aid are rare, they occur usually in highly visible cases when countries grossly violate IMF agreements, and they are temporary. The Meltzer Commission has thus called on the fund to no longer provide long-term credit, a proposal with which U.S. Treasury Secretary Lawrence Summers agrees. In its role as aid agency and crisis manager, the IMF has been ineffective at promoting self-sustaining growth and market reforms. Countries that have reformed, such as Argentina or South Korea, have not done so because of IMF impositions. Crisis has been the determining factor for change.