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The influence of IMF bailouts on a country’s economic 

development and growth 

 

 

Konoto Queen Tsoai 

 

WITS Business School 

 

 

Thesis presented in partial fulfilment for the degree of Master of 

Business Administration to the Faculty of Commerce, Law, and 

Management, University of the Witwatersrand 

 

 

 

April 2021 

  

 



 

 

 

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DECLARATION 
 

I, Konoto Queen Tsoai, declare that this research report entitled ‘The influence of IMF 

bailouts on a country’s economic development and growth’ is my own unaided work. I have 

acknowledged, attributed, and referenced all ideas sourced elsewhere. I am hereby 

submitting it in partial fulfilment of the requirements of the degree of Master of Business 

Administration at the University of the Witwatersrand, Johannesburg. I have not submitted 

this report before for any other degree or examination to any other institution. 

 

 

 

 

 

 

Queen Tsoai 

 

Signed at Johannesburg on 30 April 2021  

Name of candidate Konoto Queen Tsoai 

 Academic journal Journal of Economics and International Finance 

 Student number 1969166 

 Telephone numbers 084 313 5713 

 Email address Queen.Lediga@gmail.com 

 First year of registration 2019 

 Date of final submission 30 April 2021 

 Name of supervisor Dr Bongani Munkuli 



 

 

 

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ABSTRACT 
 

This study investigates the influence of the IMF bailout on the country’s economic growth 

by evaluating the relationship the IMF bailout has with the country’s GDP, inflation, and 

currency exchange rate. The study reviewed the IMF operations to understand the nature of 

the bailout (facilities), its funding structure, and the associated conditions. The study 

undertook a quantitative research methodology, using panel data with cross-sectional data 

from five countries in the sub-Saharan region, with a time series of 20 years. Ordinary 

Leased Square and the Feasible Generalised Least Square were used in regressions and 

found that the model was a good fit for both the exchange rates and inflation but was not a 

good fit to model real GDP.  

The study found that the IMF bailout had a statistically insignificant negative relationship 

with real GDP, a statistically insignificant positive but weak correlation with the inflation, 

and a statistically significant negative relationship with the currency exchange rate. We 

conclude that IMF involvement in a country does not guarantee economic growth, improve 

the exchange rate, or help with managing inflation as promised in their purpose and 

objective. We recommend South Africa not to resort to the IMF bailout option and choose 

sovereignty over plausible atrocious IMF bailout. Instead, it must put all efforts to resolve its 

balance of payments issues. Should the South African government choose to opt for an IMF 

bailout, we recommend that they carefully consider suitable credit facilities and their 

conditionalities, specifically, Flexible Credit Line (FCL) and Stand-By Arrangement (SBA).   

 

Key words: IMF, Bailout, Sub-Sahara, Quantitative research, Panel data, OLS, 

Conditionalities 

 

 

 

 



 

 

 

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TABLE OF CONTENTS 
 

DECLARATION ......................................................................................................... 2 

Abstract 3 

Table of contents .......................................................................................................... 4 

List of tables 6 

List of figures 7 

ACKNOWLEDGEMENTS ......................................................................................... 8 

Definition of key terms and concepts ........................................................................... 9 

1 Introduction to the research ................................................................................. 10 

1.1 Context of and background to the study .................................................... 10 

1.2 Research conceptualisation ........................................................................ 11 

1.3 The research problem statement ................................................................ 12 

1.4 The research purpose statement ................................................................. 13 

1.5 The research objectives .............................................................................. 13 

1.6 Delimitations and assumptions of the study .............................................. 13 

1.7 Significance of the research study ............................................................. 13 

1.8 Preface to the research report .................................................................... 14 

2 Literature review ................................................................................................. 15 

2.1 Overview of the functions of the IMF ....................................................... 15 

2.2 Sources of funding ..................................................................................... 16 

2.3 Lending framework ................................................................................... 17 

2.3.1 Facilities granted under General Resource Arrangement (GRA) .. 19 

2.3.2 Facilities granted under Poverty Reduction and Growth Trust (PRGT) 20 

2.3.3 Financing packages ........................................................................ 21 

2.3.4 Structural reforms (conditionalities) .............................................. 21 

2.4 Theoretical Analysis .................................................................................. 23 

2.4.1 Theory of economic growth ........................................................... 23 

2.4.2 The classical theory of economic growth ...................................... 25 

2.4.3 The theory of unemployment ......................................................... 25 

2.4.4 Phillip curve theory, relationship between unemployment and inflation 26 

2.4.5 The BoP and the theory of exchange ............................................. 26 

2.5 Background of the countries in the study .................................................. 27 

2.6 Empirical review ........................................................................................ 27 

2.7 Research problem and Research knowledge gap analysis ......................... 32 

2.8 Hypotheses development ........................................................................... 33 

2.9 Summary and conclusion ........................................................................... 34 

3 RESEARCH STRATEGY, DESIGN, PROCEDURE AND METHODS.......... 36 

3.1 Research strategy ....................................................................................... 36 

3.2 Research design ......................................................................................... 37 



 

 

 

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3.3 Research procedure and methods .............................................................. 37 

3.3.1 Data collection instruments............................................................ 37 

3.3.2 Research target Population ............................................................ 38 

3.3.3 Data collection process .................................................................. 38 

3.4 Research data and information processing and analysis ............................ 39 

3.5 Estimation model for the study .................................................................. 39 

3.6 Research weaknesses—technical and administrative limitations .............. 42 

3.7 Ethical consideration ................................................................................. 42 

4 Presentation of research results ........................................................................... 43 

4.1 Descriptive statistics .................................................................................. 43 

4.2 Multivariate outliers to identify influencing cases .................................... 45 

4.3 Correlation matrix ...................................................................................... 45 

4.4 Multiple linear regressions ........................................................................ 47 

5 Discussion of research findings .......................................................................... 51 

5.1 Objective 1: The influence of the IMF bailout on the gross domestic product 51 

5.2 Objective 2: The influence of the IMF bailout on inflation rate ................ 52 

5.3 Objective 3: The innfluence of the IMF bailout on exchange rates........... 53 

6 Summary, conclusions, limitations, and recommendations ................................ 55 

6.1 Summary .................................................................................................... 55 

6.2 Conclusions ................................................................................................ 56 

6.3 Limitations ................................................................................................. 57 

6.4 Recommendations ...................................................................................... 57 

References 60 

Appendices 64 

Appendix 1:  One-page bio of the researcher including declaration of interest in the research 

and funders, if any .............................................................................. 65 

Appendix 2:  Background of the countries in the study ............................................. 66 

 



 

 

 

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LIST OF TABLES 
 

Table 2: Descriptive statistics of all variables ........................................................................ 43 

Table 3: Cook’s D for outliers ................................................................................................ 45 

Table 4: Pearson correlation of the economic indicators ....................................................... 45 

Table 5: Ordinary leased square model .................................................................................. 47 

Table 6: Feasible Generalised Least Square (FGLS) ............................................................. 50 

 



 

 

 

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LIST OF FIGURES 
 

Figure 1: Lending Framework................................................................................................ 18 
 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

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ACKNOWLEDGEMENTS 
 

I would like to firstly thank Wits Business School for accepting me into their MBA program 

to be part of the class of 2019. A special thanks to the school’s lecturers for maintaining the 

institution’s high standards and for bringing relevant case studies that shaped and critically 

challenged our perspectives. A big thank you to all my classmates for making the journey a 

memorable one.  

I would also like to take this opportunity to express my sincerest gratitude to my previous 

employer, Etion Limited, for funding my MBA studies – without which, my MBA dream 

would have remained a dream unrealised. A special thank you to the HR manager, 

Mmamoko Lamola, who made it possible for all employees to further their studies. I wish 

that she continues this cause throughout her career, setting an example for other HR 

leadership in corporate South Africa to follow. As Ernie Fletcher said, “Education is our 

greatest opportunity to give an irrevocable gift to the next generation.”  

I also wish to extend a special thank you to my supervisor, Dr Bongani Munkuli, who 

refused to give up on me. His thorough and meticulous supervisory work is the reason I can 

finally submit my research paper.  

Most importantly, I would like to thank my husband for holding the fort during this period. 

Thank you for attending to our children’s school needs, extramural activities, and homework 

during my absence. As they say, behind every successful woman, there is a strong man. I 

would not have done this without your support. To my children, Odirile and Letlotlo Tsoai, 

thank you for your understanding and making the journey easy. Your unconditional love is a 

pillar of my strength during challenging times.   

Lastly, to my mother Moloko Lediga and my sister Dipuo Mabala, thank you for 

representing me at family events that I could not attend, ensuring my presence is felt in my 

absence. 

 



 

 

 

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DEFINITION OF KEY TERMS AND CONCEPTS 
 

 

IMF International Monetary fund 

Non-concessional Loans offered by an international organisation at the 

market rate (IMF operations, 2018). 

Concessional loans Loans offered by an international organisation on generous 

terms, typically with longer repayment periods and very 

low interest rates, compared to the market rates and terms 

(OECD, 2003). 

Panel data A collection of data points across multiple variables over a 

period. It is also known as longitudinal data (Erica, 2021). 

GDP Gross domestic price is a measure of the country’s 

economy (StatsSA, 2013) 

BoP Balance of payments 

GRA General Resource Account – is an IMF non-concession 

financial support (IMF,2020) 

 

PRGT Poverty Reduction and Growth Trust - is an IMF non-

concession financial support (IMF,2020) 

Great depression  the financial and industrial slump of 1929 and subsequent 

years. 



 

 

 

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1 INTRODUCTION TO THE RESEARCH 
 

More generally, this research investigates the influence of the International Monetary Fund 

(IMF) bailout on the economic development of sub-Saharan countries. Section 1.1 

introduces the terms and concepts used in the research conceptualisation (Section 1.2), while 

Chapter 2 will provide more a specific and detailed discussion on the research context. The 

research conceptualisation section provides for the research problem statement (Section 

1.2.1), the purpose of the research (Section 1.2.2), as well as the research objectives (Section 

1.2.3). Section 1.3 provides the delimitations and assumptions of the study, and the 

significance of the study is discussed in Section 1.4. Lastly, the preface of the research 

report is provided in Section 1.5. 

1.1 Context of and background to the study 

Economic stability is critical for the prosperity of any country as it helps ensure that the 

country’s living standards are maintained and continuously improved (OECD, 2015). A 

country with weak economic growth, high inflation, and a high debt ratio suffers challenges 

that have an adverse impact on its people and their daily lives. South Africa is the second 

largest economy in Africa and holds some of the world’s most demanded minerals (Trade 

Portal, 2020). The country is the world’s largest producer and exporter of platinum, gold, 

manganese, and chrome - where platinum and coal are significant contributors to the mining 

output, suggesting a positive contribution to the country’s export market (Trade Portal, 

2020). It holds 60% of the world’s coal reserves (Trade Portal, 2020), making the industry 

critical to the employment market.  The country is also the globe’s second-largest producer 

of palladium, and the fourth-largest producer of diamonds amongst other resources (Trade 

Portal, 2020). This suggests that with all this mineral wealth, South Africa has the potential 

to grow its economy and be self-sustainable.  

Bogeti and Fedderke (2005) found that there is a direct link between investment in 

infrastructure, and economic growth. In their study, they reviewed the four sectors of 

infrastructure: electricity, water and sanitation, information communication technology 

(ICT), and transport - benchmarking South Africa to its peers. They found that South 

Africa’s utilities, overall, provide acceptable services at a realistic quality and, in some 

cases, at very competitive prices compared to the benchmark. The World Bank (2019) 

reported that South Africa’s transport infrastructure is one of the most advanced in the sub-

Saharan region. This further suggests that the country can grow its economy and maintain 

sovereignty.  



 

 

 

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Despite its mineral wealth, South Africa finds itself in an economic predicament after 26 

years of democracy, where the economy continues a declining trajectory, almost reaching 

unemployment rates of 29% - similar to the 30% in 2003. 56% of the country’s youth was 

unemployed, the highest world inequality levels were recorded with a Gini coefficient of 

0.63, and people living below the upper-bound poverty line were found to be 49.2% of the 

population (Statistics, 2019). Although South Africa has been a member of the IMF since 

1947 and has borrowed from IMF during apartheid years, the country managed to stay away 

from the IMF’s assistance. However, with the current trajectory of economic decline, it is 

becoming evident that the country may resort to the IMF for financial bailout (IMF Staff, 

2020). It is therefore necessary to understand how a financial institution like the IMF could 

potentially influence, negatively or positively, the state of the country if South Africa ends 

up seeking structural adjustment from the IMF. The study is therefore focused on 

understanding the attributes of the IMF bailouts, seeking to understand the relationship with 

economic growth variables.  

According to Trading Economics (Trading Economy, 2020), South Africa is rated number 

60 on the global competitiveness report, a significant drop from number 54 in 2011. South 

Africa also dropped to position 30 in the auditing standards, from holding the number one 

position for seven consecutive years. This can be attributed to weak leadership on the front 

of both government and business. The country is also confronted by persistent subdued 

growth performances, junk status ratings, high unemployment, high poverty and high 

inequalities, amongst other challenges that were exacerbated by the corona virus global 

pandemic. The political situation in the country is also taking a strain, which could mean 

that the country may be forced to look to IMF for a bailout for economic restoration. As 

such, the study sought to investigate the influence of the IMF bailout on the country’s 

prosperity by evaluating the relationship it has with the gross domestic product, inflation and 

currency exchange. The purpose of the study was to provide analytical insights on these 

relationships and make inferences to a plausible South Africa bailout situation. 

Five countries within the sub-Saharan region are reviewed for their relationship with the 

IMF, and observations on their economic growth during that funding period are made.  

1.2 Research conceptualisation 

Sequeira (2014) defines conceptualisation as a process of breaking and adapting research 

ideas into common senses to develop an agreement among the users. This practice leads to 

the framing of meaningful concepts, which ultimately lead to the creation of theories. This 



 

 

 

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section is divided into three sub-sections: the problem statement, current situations, and the 

consequences of not attending to this problem.  

1.3 The research problem statement 

Although South Africa’s economic outlook has improved, the country remains constrained 

by its slow growth (World Bank, 2018). World Bank, 2018 report argues that for South 

Africa to improve its economic potential, it will require breaking away from the equilibrium 

of slow growth and high inequalities, which the country has been trapped in for decades. 

They suggest it would require bold actions and intentional leadership to break away. This 

problem has attributes of a wicked problem because of its interconnectedness and its 

significant economic burden. The problem is that slow growth and inequality, poverty, and 

unemployment reinforce each other; hence, decisive leadership actions to resolve. 

“Inequality fuels the contestation of resources (through taxation, expropriation, corruption 

and crime), which discourages the investment needed to accelerate job creation and reduce 

inequality” (World Bank, 2018, P. viii). The authors further argue that the high inequality is 

driven mainly by the development in the labour market, which demands the skills that the 

country’s poor people lack, further demonstrating the interconnectedness of the economic 

situation in the context of South Africa. This articulation of the South African problems is 

also corroborated by (Malinga, 2019), who says that the country will need to improve its 

skills base, as it has insufficient skills for the labour market. He says that spatial inequality is 

a detractor to the country’s growth.   

Ultimately, the problem with the shrinking economy is that it leads to high unemployment, 

rising poverty levels, a deteriorating currency exchange rate, a high debt ratio, and credit 

downgrades, limiting the government’s access to finance, thereby further hindering the 

country’s growth (SARB, 2021). This situation further presents a negative economic 

outlook, a deteriorating state of government finance and reduced investor confidence 

(SARB, 2021).  

The problem with this economic trajectory is that South Africa may eventually turn to the 

IMF for a financial bailout, with consequential conditions that may lead to the loss of the 

country’s sovereignty.  The first consideration to uncover is whether the IMF bailout 

positively influences the country’s economic performance. The second consideration would 

be to uncover how the intervention from the IMF in other sub-Saharan nations fared. Lastly, 

consider how the IMF conditions attached to the financial bailout would improve the current 

economic distress experienced in the country. 



 

 

 

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1.4 The research purpose statement 

The purpose of this study is to provide analytical insights into the IMF bailout programs and 

the key economic growth measures, by evaluating the relationship between the IMF bailout 

and the Gross Domestic Product (GDP), inflation, and the exchange rate. 

1.5 The research objectives 

a) To determine the influence of the IMF bailout on African developing countries’ 

GDP. 

b) To determine the influence of the IMF bailout on African developing countries’ 

inflation rate. 

c) To determine the influence of the IMF bailout on African developing countries’ 

exchange rates. 

 

1.6 Delimitations and assumptions of the study 

This study focuses on the IMF’s financial bailout on Sub-Saharan countries, focusing on the 

five countries in Sub-Sahara; Ghana, Kenya, Zambia, Rwanda, and Mozambique, 

representing a sample of less than 3% of the IMF member population. Except for Rwanda, 

all the selected countries are mineral-rich (refer to appendix 2), but have high poverty, 

inequality and unemployment (World Bank, 2018). All these countries are still struggling 

with basic human needs such as access to clean water as well as inadequate education 

system. Most of these countries’ population is situated in rural areas limiting access to 

economic activity which simply means most of its citizens are excluded from the economic 

activities.  Although South Africa is considered a middle-income economy, it also has a 

persistent high level of poverty, inequality and unemployment levels like the studied 

countries (World Bank, 2018). Like the countries of study, South Africa is also facing 

serious challenges in the education and primary health sector where only few of its citizens 

can access the best education and health system. Except for Rwanda, these countries now 

have a democratic political system after gaining independence. All the selected countries 

scored less than 50 out of a scale of 100 on corruption perception index, including South 

Africa with Rwanda scoring marginally higher than 50 (TransparencyOrg, 2020). As such, 

we consider these countries to have similar dynamics as South Africa.   

1.7 Significance of the research study 

The problem with low economic growth is that it has a ripple effect on the country’s 

development. It is inevitable that South Africa will also resort to the IMF for financial 

assistance now that the country’s credit status has been downgraded, making it pertinent for 



 

 

 

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decision makers and governance to have a clear understanding of the implications of such an 

undertaking. With more and more Sub-Saharan countries seeking bailout from the IMF, it is 

important to understand the implication the bailout have to the economic growth in the 

context of Sub-Saharan countries. Moreover, the COVID19 pandemic increases the potential 

of countries looking to IMF for a bailout loan. As such, the study will contribute to the Sub-

Saharan governments in their decision making and help them be better prepared for an IMF 

bailout. 

The study will also contribute to formulation of monetary and fiscal policy makers about the 

IMF’s operations, its lending framework, the history of lending arrangements, and 

conditions attached to the bailout programme for the government to make informed decision 

on the option of going to IMF for the bailout. It will also inform governments of how well 

the IMF bailout contributed to the Sub-Saharan countries. Additionally, this study will 

contribute to academia by expanding on the current literature on the IMF and its operations, 

drawing from the successes and failures of the IMF bailout largely in sub-Saharan countries. 

Finally, the study will also contribute to the gap identified in South Africa, where the IMF 

bailout is imminent, but the country holds very little research on the implications of the 

bailout thereof.  

1.8 Preface to the research report 

To this end, the report has six chapters. Following this introductory chapter, Chapter 2 

provides a literature review covering the problem, past studies, the explanatory framework 

and the conceptual framework of the study undertaken. Chapter 3 discusses the research 

strategy, design, procedures, reliability and validity measures, as well as the limitations of 

the study. Chapter 4 and 5 respectively present and discusses the findings, to interrogate the 

research questions, while Chapter 6 summarises and concludes the research study. 

 



 

 

 

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2 LITERATURE REVIEW 
 

This chapter has six broad objectives, namely: to understand the research problem, identify 

the knowledge gap, investigate applicable management theories, and to develop a 

framework for interpreting the research findings. Specifically, in Section 2.1, the overview 

of the functioning and objectives of the International Monetary Fund is presented, while 

Section 2.2 explores the management theories to gain perspective. Section 2.3, 2.4 and 2.5 

presents a review on studies that attempted similar research, research problem and 

knowledge gap analysis and hypothesis development respectively. Section 2.6 provides the 

conclusion arrived at from the literature review presented. 

2.1 Overview of the functions of the IMF 

 

The IMF is an international financial institution established in Bretton Woods, New 

Hampshire, in 1945 with the intention of avoiding destructive policies that may start another 

conflict (IMF, 2019). It is headquartered in Washington D.C., with a member state 

complement of 190 countries, leaving only six countries in the globe not participating in the 

fund (IMF, Factsheet, 2021). IMF’s lending capacity is in the region of $1 trillion in loans 

(IMF, 2019). Its objective is to “encourage global monetary cooperation, secure financial 

stability, facilitate international trade, promote high employment and sustainable economic 

growth, and reduce poverty around the world” (IMF Financial Operations, 2018, p.2). The 

organisation aimed to stabilise the international monetary system that allows countries to 

transact with each other (IMF, 2019). IMF does this by keeping track of the global 

economies and extending loans to countries experiencing balance of payments difficulties 

and giving hands-on help to its member countries. Its activities include economic 

surveillance, lending, and capacity development. IMF lending instruments are designed to 

fulfil its members’ different balance of payment needs, and the specific situations of its 

diverse membership (IMF, 2019).  

Countries look to the IMF when they experience a balance of payment (BoP) crisis. BoP 

difficulties arise when a government is incapable of paying for its imports, services, or 

international debt (IMF, 2019), owing to various reasons, ranging from domestic factors to 

external factors. According to the (IMF, 2019), domestic factors may include unsuitable 

fiscal and monetary policies, weaknesses in managing the country’s exchange rate levels, 

and political instability, amongst other reasons. External factors include natural disasters and 



 

 

 

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large swings in the price of commodities, which was the case in Zambia with the copper 

price (Colclough, 1988), often affecting low-income countries because of their inability to 

better prepare for these factors (IMF, 2019). 

Li, Sy, and McMurray (2015) argue that the IMF creates a continuous dependency for its 

member countries, and the authors even proceed to questioning the organisation’s ethical 

compass. Countries look to the IMF often because if affected, their credit rating reduces the 

ability to lend from other institutions that may offer credit without being directly involved in 

the country’s policymaking (IMF, 2019).  Consequently — resorting to the IMF results in 

the countries compromising their sovereignty because the IMF bailout comes with 

conditionalities that may lead to austerity measures (Elliott, Inman, & Smith, 2013). The 

IMF requires countries to implement the economic reforms and implement policies that the 

organisation considers appropriate for the lending country, often leading to the compromise 

or loss of authority of a state to govern itself (Elliott, Inman, & Smith, 2013).  

2.2 Sources of funding 

 

The IMF has capacity of USD1 trillion to respond to its member’s needs, generated from 

two sources: quotas and multilateral (IMF Financial Operations, 2018). Quotas serve as the 

first line of defence generated from members’ contributions according to their relative 

position in the world economy; these generate a total of US$ 651 billion (SDR 477 billion) 

(IMF, 2019). Whereas, multilateral borrowings consist of two funding resources: New 

Arrangements to Borrow (NAB), and the Bilateral Borrowing Arrangements (BBA) (IMF, 

2020). NAB serve as a second line of defence from 40 participating member countries and 

institutions ready to lend, generating a total resource capacity of US$249 billion (SDR 182 

billion) (IMF, 2020). In contrast, the BBA serves as the third line of defence, generating a 

total resource capacity of US$434 billion (SDR 318 billion) from the 40 participating 

member countries (IMF, 2020). 



 

 

 

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Table 1: IMF resources summary 

 

 

Source: IMF Lending, (2020) 

2.3 Lending framework 

Li et al. (2015, p.893) defined the bailout as “a financial program that contains three 

inseparable elements, namely: financing packages, structural reforms, and macroeconomic 

policies forming a single offer of assistance, known as an IMF-supported program”.  The 

authors continued to note that, “while the effects of an IMF bailout are mostly documented, 

the empirical evidence is varied and inconsistent”, which further supports the need for 

further research investigations (Li et al., 2015, p.893). Figure 1 explains how the IMF 

lending framework is designed. The framework summarises the three inseparable 

components.  

The IMF issues loans in Special Drawing Rights (SDRs). The SDR was created in 1969 as 

an interest-bearing international reserve asset to supplement the official reserves of its 

member countries. The reserve utilises both gold and the USD to finance the growth of 

international trade and finance, with an intent to improve the fixed exchange rate system 

under the Bretton Woods regime, which did not support the growth. SDR formulation 

consists of five freely usable currencies: the USD, Euro, Chinese Renminbi, Japanese Yen, 

and the Pound Sterling (IMF Financial Operations, 2018). The SDR is therefore not a 

currency, nor is it a claim on the IMF. Instead, it is regarded as a “potential claim on freely 

usable currencies of IMF members” (IMF Financial Operations, 2018, p.92). The SDR 

cannot be used to buy goods and services, it can only be used to buy other currencies.  

 



 

 

 

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Figure 1: Lending Framework 

Source: Author’s summary adapted from IMF Lending (2020) 



 

 

 

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The IMF utilises different credit facility lines specifically designed to General Resource 

Account and Poverty Reduction Growth Trust objectives. The credit facilities have different 

purposes and are designed for different size economies and market conditions. The credit 

facilities as are defined below. 

2.3.1 Facilities granted under General Resource Arrangement (GRA) 

The Extended Fund Facility (EFF) is defined as a GRA facility, with strong focus on 

structural adjustments - designed for countries that are experiencing serious BoP needs as a 

result of slow growth and inherent weak BoP over medium- and longer-terms (IMF, 2020).  

Its main objective is to solve structural barriers through fundamental economic reform (IMF, 

2020).  

The Flexible Credit Line (FCL) is as a facility designed with the intention of preventing and 

mitigating crises for countries that have strong policies and adequately take record of their 

economic performances. The differentiating attribute of this facility is that it offers members 

flexibility and insurance, thereby increasing market confidence in their economy. Its key 

objective is to reduce the perceived stigma regarding IMF funding, thereby encouraging 

members to borrow before a full blown crisis hit them (IMF, 2016). The criteria used to 

assess the eligibility includes: an assessment of the country’s capital account, sound public 

finances, low and stable inflation and the absence of solvency problems amongst other 

variables (IMF, 2016).  

The Precautionary and Liquidity Line (PLL) facility is one that is accessed by member 

countries with sound policies, and it is intended to serve as an insurance measure. Those 

countries that are experiencing structural policy adjustments, an inability to access the 

international market, widespread insolvency and deposition of public debt during the 

approval process, cannot access the PLL facility (IMF, 2020).   

The Rapid Financing Instrument (RFI) credit facility is available to all members, 

irrespective of the size of the country, that are facing urgent BoP needs (IMF, 2020). It is 

designed as part of a broader reform with the intention of making financial support more 

flexible. Members do not have to have a fully-fledged program in place to qualify for this 

facility (IMF, 2020).  

The Stand-By Arrangement (SBA) is a GRA facility, dubbed a workhorse, because of the 

flexibility it offers, making it attractive to members (IMF, 2020). The conditionalities 

attached to this facility are ex-post with fewer conditions. The borrowing country agrees to 

implement specific policies after receiving the loan granted (IMF, 2020).  



 

 

 

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2.3.2 Facilities granted under Poverty Reduction and Growth Trust (PRGT)  

The Extended Credit Facility (ECF) is a highly concessional PRGT credit facility, designed 

to offer financial assistance to member countries facing BoP problems (IMF, 2020b). The 

fund carries a zero percent interest rate but has a pay availability fee on the undrawn portion, 

every six months. Member countries are expected to implement specific structural reforms, 

contained in their letter of intent, ex-post (IMF, 2020b).  

The Exogenous Shock Facility (ESF) was established in 2008 with the purpose of providing 

loans on a concessional basis, intended to help low-income member countries experiencing 

BoP needs caused by sudden and exogenous shocks (IMF, 2020b). This fund was envisioned 

to provide concessional financial assistance to low-income countries with no PRGT lending 

arrangement in place (IMF, 2020). 

The Standby Credit Facility (SCF) is a PRGT credit facility, offered to members projecting 

BoP needs in the short to medium term (IMF, 2020b). The fund only pays when the need 

arises and carries zero percent interest rates (IMF, 2020b). Members pay an availability fee 

levied at 0.15% per annum of the undrawn balance every six months (IMF, 2020b). The 

fund has a grace period of four years and also carries ex-post conditionality.  

The Structural Adjustment Facility (SAF) is offered to poor countries from the mid-1970s to 

December 1987. Eligible countries could borrow a maximum of 140% of its quota, with the 

flexibility of increasing the borrowings to 185% of the quota under special circumstances 

(IMF, 2020).    

The Rapid Credit Facility (RCF) was created under the PRGT and was tailored to resolve 

diverse BoP needs for Low Income Countries (LIC) (IMF, 2020). Countries accessing this 

credit line must demonstrate their policy emphasis on poverty reduction and growth 

objectives. Circumstances in which this credit facility is provided includes natural disasters, 

emergencies resulting from fragility and shocks, and it is provided as an absolute loan (IMF, 

2020). Members are allowed repeat use of this fund, however, it may trigger a transition to 

Extended Credit Facility (ECF) (IMF, 2020e).  



 

 

 

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2.3.3 Financing packages 

The IMF grants loans to support members with BoP needs, mainly through two financing 

streams: General Resource Account (GRA)1 and Poverty Reduction and Growth Trust 

(PRGT)2 (IMF, 2020b). GRA provides loans with a minimum duration of six months to a 

maximum of four years. Loans granted under this program are non-concessional3, the loans 

are also at the market rate with an intention of solving its member’s BoP problems within 

the program duration (IMF, 2020). In contrast, the PRGT offers concessional4 loans at low 

interest rates, currently at zero interest until June 2021, designed for low-income countries 

(IMF, 2020b). PRGT-support programs provide for a minimum of one year up to a 

maximum of four years, depending on the lending instruments. The objective is to resolve 

the member’s BoP problems over a longer period (IMF, 2020b).  

There are various lending instruments available to member countries, tailored to different 

IMF financial programs. For example, low-income countries can access IMF programs such 

as Poverty Reduction and Growth Trust (PRGT), which has three concessional lending 

windows (IMF, 2020b). Emerging and advanced economies are offered different credit 

facilities from the low-income countries, likewise for the strong policies members. 

2.3.4 Structural reforms (conditionalities)  

Dreher (2008) defines conditionality as a practice in which financial assistance5 (bailout) is 

granted on implementation of specific policies, stated in the country’s letter of intent to the 

IMF board. The IMF argues that conditionalities attached to the bailout are justified but says 

ownership of these structural adjustments is even more critical to the program success.  

Khan and Sharma (2001) define ownership as a firm commitment from the borrowing 

country’s government and its stakeholders to the program conditionalities. The authors posit 

that ownership aligns the incentives of both the lender and the borrower, resulting in the 

objective being achieved. IMF (2020) argues that it is the government’s responsibility to 

select, design and implement policies for a successful IMF supported program. Dreher 

(2008, p.235) contributed to the ownership discussion, stating that, “one of the most 

important insights regarding the concept (as well as the content) of conditionality is that 

 
1 General Resource Account (GRA – is an IMF non-concession financial support (IMF,2020) 
2 Poverty Reduction and Growth Trust (PRGT) - is an IMF non-concession financial support (IMF,2020) 
3 Non-concessional – loans offered by an international organisation on market rate  
4 Concessional loans – loans offered by an international organisation on generous terms, typically with longer 

repayment periods at a very low interest compared market rates and terms (OECD, 2003) 
5 Financial assistance – loan granted to IMF member countries 



 

 

 

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conditions cannot substitute for creditor ownership”. However, the author found that 

ownership is not increased substantially by the conditionalities.  

The IMF says the conditions are a critical part of the lending agreement because repayments 

would be at risk without it, thereby posing a risk to IMF resources (IMF, 2019). The 

organisation posits that conditionalities intend to strengthen the lending country’s BoP, to 

permit it to repay the loan granted, which thereby safeguards the IMF resources (IMF, 

2019).  Khan and Sharma (2001) oppose the view shared by Killick (1997), who presents 

that conditionality should be the exception, and not the rule. The authors present that 

instead, conditionality should be a rule rather than an exception, suggesting that having no 

conditions attached to the bailout is reckless lending (usually termed moral hazard) – which 

is not in line with the IMF’s objective of assisting countries to strengthen their BoP position. 

The authors also oppose the view shared by Diaz-Alejandro (1984), who allude that 

conditionality stems from “patron-beneficiary”. This is significant as it further justifies the 

cruciality of conditionalities attached to an IMF bailout, suggesting it to be a financial 

lending institution, and not a welfare organisation.  

Conditions are tailored according to different lending instruments (credit facilities), and are 

intended for different BoP needs. Different credit arrangements offer different benefits and 

different conditionalities. For example, the loans offered to low-income countries are offered 

at zero interest rates but may require more IMF involvement in terms of policy 

implementation and economic reform programs. With emerging and advanced economies, 

members may be eligible to credit arrangements that have limited oversight from the IMF, 

while members with stronger policies may be eligible for crisis prevention.    

Broad categories of conditionalities 

Conditionalities takes various forms: prior actions to be met before the IMF board approves 

the funding, quantitative performance criteria (QPC), indicative targets, and structural 

benchmark (IMF, 2020b). The QPC and indicative targets are measurable based on 

macroeconomic policy variables such as monetary aggregates, international reserves, fiscal 

balances, or external borrowing, which reflects the country’s program objectives (IMF, 

2020). Structural benchmark remains subjective, therefore unquantifiable (IMF staff, 2014). 

The overarching principle of IMF conditionalities is ex-post and ex-ante with variations 

specific to country needs delivered through credit facilities (IMF, 2019). In principle, ex-

post conditionalities requires the borrowing country to implement the agreed policies after 



 

 

 

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the loan bailout payment by the IMF (IMF, 2019). This conditionality is attached in both the 

GRA (SBA facility) and PRGT (SCF facility), with the purpose of assisting countries with 

present, prospective, or potential BoP needs (IMF, 2020). Another form of ex-post requires 

countries to implement structural reforms, financed through GRA and PRGT with the credit 

facilities EFF and ECF respectively. This form of financing is offered to countries that are 

experiencing protracted BoP needs, as a medium-term assistance.  

In contrast, ex-ante conditions refer to the conditionalities that require borrowing countries 

to meet certain conditions and most importantly, prove their ability to maintain those 

conditions before they can receive a bailout from the IMF. Ex-ante takes two forms: ex-ante 

with qualification criteria and annual reviews for two years, and through a blended approach 

that requires qualification criteria and ex-post conditionality. Ex-ante conditionality is 

financed only through GRA financing, through the FCL and PPL credit facilities.  

2.4 Theoretical Analysis 

A theory is a principle that is well established and fit to explain some aspect of the world 

(Cherry, 2020). It usually comes from recurrent testing of observation of facts, predictions, 

hypotheses, laws, and widely accepted behaviours (Cherry, 2020). A theory envisages 

events in a comprehensive general context and has been broadly tested and recognised 

among scholars (Cherry, 2020). Theories relate perspectives in which people make sense of 

past experiences of the world, providing an opportunity to test the assumptions included and 

applying it to the current conditions (Bacharach, 1989). Theories provide a focus for 

understanding what was experienced in the past to solve the current problems, it essentially 

a system constructs and its relationships (Bacharach, 1989). 

2.4.1 Theory of economic growth 

John Maynard Keynes developed Keynesian economics in 1930, done to understand the 

great depression6 that took place in 1929 (Chappelow, 2020). His theory supports 

expansionary fiscal policy as an intervention that says the government must increase the 

supply of money through tax reduction and increasing government spending, or through a 

combination the two that will result in a fiscal deficit defined as fiscal stimulus (Chappelow, 

2020). The expansionary fiscal policy uses the three main tools: government spending on 

infrastructure, unemployment benefits, and education (Amadeo, 2019a). Major doctrines in 

 
6 Great depression - the financial and industrial slump of 1929 and subsequent years. 



 

 

 

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Keynesian economics’  explanation of the economy are firstly concerned with various 

decisions, public and private, where influence is aggregated (Jahan, Mahmud, & 

Papageorgiou, 2014). As such, the Keynesian theory is in support of a mixed economy, 

which is led mainly by the private sector and supported by the government (Jahan et al., 

2014). Secondly, the author posits that “prices, and especially wages, respond slowly to 

changes in supply and demand, resulting in periodic shortages and surpluses, especially of 

labour” (Jahan et al., 2014, p.4 ). Thirdly, the Keynesian theory is concerned with the 

changes in aggregate demand, regardless of whether the changes were anticipated or not 

(Jahan et al., 2014). The authors posit that because prices are to some extent rigid, 

fluctuations lead to change in output (Jahan et al., 2014). 

 

The Keynesian theory promotes counter-cyclical fiscal policies; advocating deficit spending 

on labour intensive project to curb unemployment and soothe wages during the economic 

downturn (Jahan, 2014). Keynes further argues that government spending is imperative to 

maintaining full employment. The theory also promotes the use of monetary policies such as 

reduction of interest rate to stimulate investment (Jahan, 2014). He argues that inflation 

could be damaging, and a low inflationary environment is not conducive to strong economic 

growth (Jahan, 2014). However, in a liquidity trap, inflation is not a problem. The theory 

further advocates governments to solve market problems instead of waiting for market 

forces to self-correct, this proactive approach will avoid further damage to the economy 

(Jahan, 2014). Lastly, Keynes promotes deficit spending when the economy is in a 

contractionary phase of the business cycle (Jahan, 2014). 

 

Amadeo (2019) contrasts the flaws of the Keynesian theory, saying that the Keynesian 

policies increase inflation when overused, and that deficit spending is not appropriate during 

the expansionary phase (Amadeo, 2019). The theory advocates government deficits even 

during the recession. Milton Friedman (1997) criticises Keynes theory, arguing that this 

theory potentially causes stagflation (higher inflation and higher unemployment), as 

evidenced by the period in the seventies (Reisman, 2018).  This study derives relevance of 

the Keynesian theory when developing a framework for the evaluation of the relationship 

between IMF funding and the member country’s growth measured by GDP, as well as the 

relationship it has with inflation. The theory provides theorical assumptions that permit 

critical evaluation of the relationship between the country’s GDP, inflation and 

unemployment rates.  



 

 

 

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Though Keynes theory of economic growth postulates that government employ 

expansionary theory of reducing taxes, the applicability of this theory maybe limited in the 

context of South Africa due to its low tax base. For the government to spend money in 

infrastructure, education and unemployment benefits, the logical action would be for the 

government to increase taxes. Because of the reinforcement problem that exists between the 

country’s growth and unemployment, inequality and poverty, the implementation of Keynes 

theory may be difficult to implement suggesting the reason why the country may find itself 

seeking for bailout. Keynes further says that government spending is imperative to maintain 

full employment which can lead to South African government having to seek external 

financial assistance to stimulate the economy, stimulus Keynes theory of economic growth.   

2.4.2 The classical theory of economic growth 

The fundamental principle of the classical theory is that the economy is self-regulating. The 

classical economists uphold that when the economy’s resources are fully employed, the 

economy reaches equilibrium without the government’s intervention (Sadeghi and Alavi, 

2013). They say the only benefit to the economy with expansionary policies is the increase 

in prices, but the overall output does not change. Although new classical economists, like 

classical economists, believe that prices and wages are flexible, the new classical economists 

believe that only if people cannot predict the policy otherwise leads to inflation (Sadeghi 

and Alavi, 2013). South African policy development process includes consultation with the 

citizen, making it difficult for the policies not to be predictable. According to Say’s law, the 

economy produces a certain level of real GDP commensurate to the income needed to 

purchase at that level (Sadeghi and Alavi, 2013). This view was criticised by other 

economists, saying it is not always the case. The main difference with Keynes theory is that 

classical theorists believe that the economy is self-regulating while Keynes believe that the 

government needs to intervene. It would be challenging for South Africa to implement the 

classical theory in the South African context due to South Africa’s political history and 

landscape. Secondly, it would also be difficult to expect the economy to self-regulate when 

the country struggles with skills shortages and inadequacies and considers the country’s past 

of economic exclusion. 

 

2.4.3 The theory of unemployment 

Okun's law of unemployment offers a statistical relationship derived from the regressions 

between unemployment and economic growth. The theory states that when unemployment 



 

 

 

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falls, GDP rises (Noor et al., 2017), suggesting that the economy must continuously expand. 

They say high employment means the country is not utilising labour resources efficiently, 

suggesting that full employment must be every government's economic goal to maximise 

output. In summary, Okun's law states that a negative relationship exists between the 

unemployment rate and real GDP (Noor et al., 2017). Noor et al., 2017 found that Malaysia's 

GDP needs to grow by 8% to reduce unemployment. This theory applies to South Africa 

because the country has seen an unprecedented unemployment rate, with the country 

struggling to improve its GDP for several years. This theory further explains why the South 

African unemployment rate continues to rise at the back of weak economic growth. 

2.4.4 Phillip curve theory, relationship between unemployment and inflation 

After tracking Great Britain’s unemployment and wage changes from 1861 to 1957, Phillips 

found a negative relationship between unemployment and changes to wages (inflation), 

known as Phillip’s curve theory. Inflation measures the annual rate of general prices changes 

in the economy manifested in a continued increase in the average price level (Vogt, 2007). 

Essentially, consumer purchasing power reduces when the general price level increases. 

Typically, inflation is caused by strong economic growth, when demand is greater than 

supply (Vogt, 2007). 

2.4.5 The BoP and the theory of exchange 

The Balance of Payments theory pronounces that the country’s current account is affected 

by changes in a country’s national income (Chipman, 1984). Consequently, the exchange 

rate is adjusting in a new level in order to achieve a new balance of payments equilibrium 

(Chipman, 1984). The BoP is defined as a general account that records all payments and 

receipts resulting in either deficit or surplus, where payments more than receipts equals to a 

deficit; and if receipts exceed the payments, a surplus is recognised (Segal, 2019). These 

transactions vary from traded products and services, foreign investments income, new 

investments, inflow/outflow of capital between treasuries and central banks (Segal, 2019). 

The principle of the theory emphasises that the exchange rates relate to the position of the 

BoP of the concerned country, where an unfavourable balance results in depreciation in the 

external value of currency (Chand, 2001). Consequently, a favourable balance leads to an 

appreciation of the external value of the currency. It further says that free forces of demand 

and supply determines the price of foreign money, determined by free forces of demand and 

supply (Chand, 2001). Deficit balance is when demand for foreign exchange exceeds its 

supply which results in the price of domestic currency rising (Chand, 2001). 



 

 

 

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2.5 Background of the countries in the study 

The study undertook to investigate five countries in the sub-Saharan region, over twenty 

years, to make inferences to South Africa’s plausible IMF bailout effects. It was thought-

provoking to see that these countries, most of which are mineral-rich with some of the 

world’s high demand minerals/resources, still report high levels of poverty and inequality 

with not much growth, if any. All these countries are still faced with primary human needs 

challenges such as access to clean water and good education. The results show that growth 

was unstable in four of these countries. Ghana and Kenya both have a history of more than 

40 years with IMF. Ghana is the second-largest cocoa and gold producer globally, and its 

natural resources include iron ore, gold and gemstones, amongst other resources.  Zambia 

boasts of vast natural resources including silver, coal, cobalt, copper, lead, silver, uranium, 

emeralds and Zinc and also (Thomas, 2012). Mozambique boasts of important deposits such 

as high-quality coal, iron ore and gold and its mineral is largely untapped (Embassies, 2018). 

Moreover, Rwanda is the only country in this study projected to be in the top five fastest-

growing economies. It is important to note that Rwanda, unlike other countries in the study, 

does not have a long-standing IMF bailout relationship compared to Kenya and Ghana. 

However, it is the country that is forecasted to grow faster than Ghana and Kenya, which 

questions the whole purpose of the IMF. 

2.6 Empirical review 

Many scholars have written about the IMF and the role it plays in the global economy, 

assessing the positive and the adverse effects of its involvement. Assessing if the IMF is 

achieving its objectives of encouraging global monetary cooperation, securing financial 

stability, facilitating international trade, promoting high employment - most scholars found 

that the studies are mostly inconclusive. Li et al. (2015, p.893) assessed the usefulness of the 

IMF bailout, arguing that “for decades, the IMF assumed the role of a rescuer of financially 

distressed countries”, but it has not been able to bring convincing evidence of its impact in 

those countries. Conditionalities is one of the three inseparable components of the bailout 

and often leads to austerity measures, where countries suffer a significant financial crisis, for 

example, Greece IMF catastrophe. They say, IMF does not consider the country’s unique 

economic environment. According to IMF, Kenya is considered one of the IMF success 

stories (IMF, 2019). However, this success is due for questioning if Kenya is still not able to 

sustain itself many years after IMF bailout. Kenya consistently goes back to the IMF for 

bailout, reporting 19 agreements from 1975 to 2016, suggesting that Kenya is unable to 

independently manage its financial circumstances since 1975. 



 

 

 

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Killick (1993) found that not much impact or difference is derived from the IMF program, 

and instead, the program imposes large social costs such as urban labour force which is 

inconsistent with the expansionary theory. The author further says that ownership of the 

countries is critical to the success of the programs, a view corroborated by the World Bank’s 

adjustments programs, which found that there is a strong correlation between indicators of 

such governments that take ownership and the program success. This suggests that it is not 

really the actual program that produces positive results for economic indicators such as 

inflation, growth and foreign currency; but more the political will of the governments of 

those countries which may be interpreted to be a leadership issue. 

Cheelo and Mungomba (2019) recommended a possible pathway towards an IMF financial 

and technical support program, suggesting that the IMF still has a part to play in Zambia’s 

economic reform, but strongly recommended governments to take ownership of the reform 

and implement certain activities before inviting the IMF to rescue.  They concluded that 

there is an increased need for IMF support after their observation of the Zambian 

macroeconomic instability and downturn of 2015, with growth projected to slow down to 

2%, inflation to reach 8.9%, suggesting a relationship between the country's growth and the 

IMF support. In their investigation of their the effectiveness of the IMF programs, Atoyan 

and Conway (2005) find that in the short term, there is no evidence of growth.  

Heckman, Przeworski and Vreeland (2000) investigated the effect of the IMF programs on 

economic growth and found that participation in the IMF program lowers a country's 

growth. However, they found that economic growth is evident in countries that do not enter 

IMF programs, demonstrating a faster growth rate than those with participation. 

Furthermore, they found that various scholars arrived at different conclusions in assessing 

the relationship between the IMF program and the country's growth. For example, Killick 

(1995) found that adverse effects diminish as the program progresses, reversing the adverse 

impact it may have in the first year of programme implementation. Connors (1979), 

Gylfason (1987), Reichmann and Stillson (1978), and Pastor (1987) found little or no 

evidence of the effect of the IMF program on the country growth. They say that it is 

essential to consider other factors that may influence the program's success to yield growth, 

such as political will and ownership of the implementation. Lee and Barro (2003) 's findings 

inclined more to those of Przeworski and Vreeland (2000), concluding that a country would 

be better off without an IMF bailout programme; in fact, they say a country never to find 

itself in an IMF bailout commitment. The authors posit that the magnitude of the negative 



 

 

 

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effect increases after controlling for common effects such as interest rate and the 

endogeneity in IMF lending. What significant in their finding is that they found a strong 

inverse relationship between the country's economic growth and the contemporaneous IMF 

loan-GDP ratio. 

Using panel data for 130 countries over five-year periods from 1975 to 1999, Lee and Barro 

(2003) found a significant adverse effect on economic growth by participation in an IMF 

program. The authors posit that countries are better off without the IMF program, suggesting 

that countries should strive to solve their BoP problems without seeking assistance from the 

IMF. This further suggests that there are alternatives to resolving arising BoP challenges. 

Zulu and Nsouli (1985) investigated the before and after measures of the program in 22 

African countries, in a study that contained 35 IMF programs - and found that growth 

decreased with participation in IMF programs. Jarro (2012) also found that growth was not 

significant in the 57 countries that he assessed in his study; however, he did find that there 

was an improvement in the country’s BoP position. 

The Malaysian government opted out of IMF program during the Asian crisis that began in 

1997 (Buckley and Fitzgerald, 2004). This decision was taken regardless of the country 

being one of the more severely by the Asian economic meltdown (Buckley and Fitzgerald, 

2004). Buckley and Fitzgerald (2004) assessed this decision by the government, comparing 

the impact against those Asian countries that opted for the IMF bailout. The authors found 

that Malaysia recovered at the same rate as the participating countries that implemented the 

IMF policies, reporting economic growth much higher than those who opted for the IMF 

bailout. What is significant in this case is that Malaysia was able to protect the country’s 

social policies such as affirmative action strategies for its Bumiputra population, which the 

IMF program was unlikely to accommodate. The IMF is usually very aggressive on social 

policies and force participating countries to reduce the spending, as can be seen in South 

Korea.  However, South Korea “never simply accepted the IMF demands as originally 

dictated” (Dohyung, 1999, p. 509). The government implemented its own reforms, dubbed 4 

(IMF reforms) plus 1 (trade, investment and capital liberalization).  These findings are 

supported by Przeworski and Vreeland (2000), who also found that economic growth is 

faster for countries that opted not to request assistance from IMF, than those that did.  

Gyebi and Boafo (2013) contrasts the inflation episodes that took place between 1957–1972 

(first episode), and 1973-1982 (second episode). The first episode was driven mainly by the 

active involvement of the government in economic activities of the country, while the 



 

 

 

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second episode was driven by pursuance of expansionary theory by military interventions. 

This second episode is consistent with the Keynesian theory of economics, which supports 

the expansionary policy by government – however, the theory warns that over-using this 

policy may result in hyperinflation. Killick and Mwega (1990) observed that inflation was 

manageable during those periods, suggesting a positive relationship with the IMF – a view 

contradictory to that of Killick (1993), who posited very little effect, positive or negative, on 

inflation. Zulu and Nsouli (1985) also found that inflation worsens with IMF participation in 

over half of the countries with IMF programs in a pool of 22 countries. However, contrary to 

Zulu and Nsouli (1985), Edwards and Santaella (1993), Connors (1979), Bird (1996) and 

Gylfason (1987) found the program to not have any effects on a country’s inflation.  

Tsikata et al. (2017), in their IMF country report, “Assessing Zambia’s Fiscal Sustainability” 

contrast weak forex as the contributing factor to the Zambian 2015 economic crisis. Dreher 

and Walter (2008), in their assessment of whether IMF hurt or helped the countries, posit 

that contrary to other IMF critics, they found that the program indeed fulfils its function of 

promoting exchange rates and that it also reduces currency crises. The coffee export market 

dropped significantly during the period of 1987-88, a fact attributable to the effect of 

currency on the coffee prices (Killick & Mwega, 1990). This suggests a negative 

relationship between the IMF program and the country’s currency. Local currency being 

attached to another basket of currencies tends to improve stability and vice versa (King’ola, 

2018).  King’ola (2018) also found that there is a significant relationship between the 

exchange rate and the country’s GDP, implying that a decline in the rate of exchange results 

in an decrease in GDP - which supports the findings by Killick and Mwega (1990). These 

authors presented that the drop in Kenyan Shillings drove a decrease in the Kenyan coffee 

export market. This conclusion is consistent with the theory of exchange rates. The IMF 

staff complete review meeting held in 2017 reported that the Rwandan economy continues 

to perform well, which was attributed to the strong implementation of the IMF support 

programs (IMF, 2017). However, studying the monthly currency average of Rwanda from 

2003 to 2012, Zeleke (2015) found that the Rwandan exchange currency value showed a 

consistent decrease against the US dollar during that time, suggesting that the IMF 

interventions negatively influenced the value of Rwandan Francs. The author attributes this 

decrease to the decrease in exports, which was in conflict with one of the IMF objectives as 

the IMF claims that their programs help with broadening a country’s export market. Baloch, 

Khaliq, Bhatti, and Faqeer (2014) found that conditional standby arrangements imposed by 



 

 

 

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the IMF in Pakistan further deteriorated the country’s economic conditions, resulting in 

greater income inequality and higher inflation, which supports the view of Zeleke (2015).  

Cheelo (2018) contrasts some of the factors that led Zambia to resort to the IMF, citing 

copper prices, growing debt, overall balance of payment deficit, weak fiscal management, 

and exogenous shocks, amongst other factors. These factors consist of a combination of 

domestic and macroeconomic challenges. The author does note that there are benefits that 

Zambia could derive from the IMF PRGT support program, such as affordable interest rates, 

sizable financing, and an increase in foreign investment.  

Vreeland (2003, p.8) argues “…that governments enter IMF programs for economic and 

political reasons and find that the effects are negative on economic growth and income 

distribution” which they to be leading to the question of whether IMF hurts the growth of 

the economy. The author posits that countries accumulate extensive debt while their 

economies remain stagnant. This view is supported by Killick and Mwega (1990), who 

noted that in the case of Kenya, BoP remained a challenge with Kenya having to manage it 

with rapidly-increasing external debt – an action that threatens the self-sustainability of 

Kenya. However, the authors present that these loans were obtained on concessional debt, 

and the servicing burden has remained manageable (Killick & Mwega, 1990).  

Ose (2000) concluded that external debt represents a major constraint on the Ghanaian 

economy. The author insists that Ghana must rather take steps to attract foreign direct 

investments (FDI) and reduce its dependence on the IMF for financial assistance. Al-Sadiq 

(2015, p.7), using the treatment effect model, found that “the member country under an 

IMF-supported program attracts four times more FDI as a percentage of GDP than a 

country not under such program”. In comparison, they used the Fixed Effects (FE) model 

and system Generalised Method of Moments (GMM) and still found that IMF-supported 

programs have a positive effect on attracting or encouraging FDI inflows into participating 

countries. This finding is supported by  Killick and Mwega (1990), who found that Kenya 

has been able to attract a large amount of foreign direct investment, during the same period 

in which they participated in an IMF program, suggesting a positive relationship with the 

bailout.  

Breen and Egan (2019) contrasted the findings by Killick and Mwega (1990) and Al-Sadiq 

(2015). Breen and Egan (2019) present that the IMF has a substantial and negative effect on 

a country’s attraction of inflow FDI. The authors further present that investors are more 



 

 

 

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likely to use IMF lending as an escape hatch in countries where FDI is dependent on 

external capital and has low sunk costs. Jensen (2004) investigated more specifically, the 

impact of SBA and EFF facilities, and found that the presence of IMF agreements resulted 

in a lower FDI inflow.  The author found that countries that sign IMF agreements attract 

25% less FDI inflows than countries not under IMF agreements, suggesting a stigma 

attached to the countries that receive an IMF bailout. 

In summary, the literature review presents several gaps in various research studies, with the 

gaps ranging from the nature or mismatch of conditionalities to borrowing countries, 

political willingness or the so the so-called ownership over reforms. Overall, most 

researchers agree that IMF programs have very little or no effect on the country’s growth, 

inflation and currency or FDI - with some concluding that the results are inconclusive. Other 

researchers present evidence of growth in those countries that opted not to approach the IMF 

for bailout. Various findings and more specifically, the Malaysian case study (Buckley and 

Fitzgerald, 2004), demonstrate that the IMF bailout is not the only option for survival and 

that in most cases, it does not guarantee economic reform. Most importantly, those countries 

that do recover with an IMF bailout, do so at a cost that may be austere in nature. 

Furthermore, these findings signal a requirement of strong leadership in governance, 

indicating that the decisions should be more coherent with the people of the country and 

direction of the country.  

2.7 Research problem and Research knowledge gap analysis 

Many researchers looked at the impact of the IMF on the country’s economic prosperity. 

The studies vary from evaluating the relationship between the IMF and the country’s 

economic growth; to some evaluating the factors that determine a successful IMF bailout; to 

other researchers questioning the program’s ethical compass; while other researchers simply 

assess whether IMF operations are consistent with the organisation’s objectives of 

encouraging cooperation of global monetary systems, enabling international trade, reducing 

unemployment and improving sustainable economic growth, and reducing poverty around 

the world (IMF, 2019). However, there has not been a lot of attention on Sub-Saharan 

countries, which is significant because of the region’s position in the IMF quota 

membership, its political state and its economic development. There are also limited 

research studies evaluating whether the IMF bailout programs resulted in economic 

prosperity for the sub-Saharan region countries.  



 

 

 

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2.8 Hypotheses development 

Based on the theoretical and empirical review sections of the study, the conceptual model of 

the study present Inflation (IF); Gross Domestic Product (GDP); and the Exchange Rate 

(ER) as some of the critical measures of the state of the economy in a country. It is thus 

prudent to use them to understand the influence of the financial bailout on the country’s 

economic development. It is worth noting, however, that these economic measurements also 

have relationships with each other. For example, King’ola (2018) found that there is a strong 

correlation between the exchange rate and the country’s GDP, positing that a decrease in the 

exchange rate results in a decrease in GDP.  

Li et al. (2015) vouch for the effectiveness of the IMF bailout, arguing that for decades, the 

IMF assumed the role of a saviour for financially distressed countries, but the organisation 

has not been able to bring convincing evidence of its impact on those countries. Bird and 

Rowlands (2016) found that IMF programs in LICs are generally associated with significant 

increases in economic growth, subsequent to program implementation – this suggests a 

positive relationship. Cheelo and Mungomba (2019) indicated that economic growth has a 

relationship with IMF bailout or support. As a result, Hypothesis 1 has been derived as 

follows: 

H1: IMF bailout positively influences a country’s GDP growth 

Khan (1990) found that the empirical analysis indicates that an IMF bailout leads to an 

improvement in the current account and the BoP, lowering of inflation, and a decline in 

growth in the short run. Haque and Khan (1998) concluded that although it is becoming 

increasingly accepted that the IMF programs lead to an improvement on the overall BoP; the 

authors present that the results are inconclusive regarding inflation. Killick and Mwega 

(1990) observed that inflation in Kenya was manageable during the 1970s, suggesting a 

positive relationship with IMF funding as this was the period in which the country took up 

assistance from the organisation. Despite this, Baloch et al. (2014) found that conditional 

standby arrangements imposed by IMF in Pakistan further deteriorated the economic 

conditions, resulting in greater income inequality and higher inflation. As such, Hypothesis 

2 is derived as follows: 

H2: IMF financial bailout negatively influences a country’s inflation rate 

In answering a question of whether the IMF help or hurt a country’s exchange currency, 

Dreher and Walter (2008) found that the existence of IMF programs significantly decreased 



 

 

 

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the risk of foreign currency crises. However, the authors posit that the positive effect is 

realised only if the financial support is provided to reform-minded governments, suggesting 

that financial bail alone has little effect on its own. The authors further present that 

compliance on the conditionalities of the program does not have a statistically significant 

effect on the currency crisis risk, suggesting that the IMF program requires good intention 

and commitment from the borrowing governments to yield positive results (Dreher & 

Walter, 2008).  

This view is consistent with Zeleke (2015), who found that the Rwandan exchange currency 

value showed a consistent decrease against the US Dollar during the time when the 

Rwandan government received an IMF bailout, suggesting that IMF interventions did not 

positively influence the value of Rwandan Francs, which highlights a misalignment between 

the government and the IMF. As such, Hypothesis 3 is derived as follows: 

H3: IMF financial bailout negatively influences a country’s exchange rate 

2.9 Summary and conclusion 

This section reviewed literature from a combination of low-income countries (Rwanda and 

Mozambique) and Middle-Income Countries (Kenya, Ghana and Zambia). With the 

exception of Rwanda, these countries are all mineral rich. However, they all have high 

inequality levels, high poverty levels and unsustainable debt levels – which lead to BoP 

challenges amongst other economic issues. There was no direct link between the positive 

performance of the economic metrics under investigation in this study and the IMF funding. 

However, Muhumed and Gas (2016) directly noted that participation in the program lowers 

the economy’s growth. Some of these countries gained their sovereignty or independence 

over 40 years ago; Kenya gained their independence in 1957, Rwanda in 1962, Ghana in 

1963 and lastly Mozambique in 1957 (CIA, 2018). These facts beg to ask if these countries 

gained independence or if the IMF became the new coloniser.  

Some of the conditionalities imposed by the IMF, including the public wage cut, are 

inconsistent with the Keynesian economic theory. Cutting salary wages is a contractionary 

theory as opposed to expansionary theory. It can be argued that the IMF practices are also 

inconsistent with the BoP currency theory. The relationship of these five countries with IMF 

spans between 20 years and 50 years. However, there is no evidence attributing economic 

reforms in the context of the IMF objectives of encouraging “global monetary cooperation, 



 

 

 

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secure financial stability, sustainable economic growth and promoting high employment, 

reduce poverty facilitate international trade, around the world” (IMF, 2019).   

The literature suggests that these countries have instead become dependent on the IMF fund, 

as evidenced by numerous credit arrangements over a period of 20 years between Kenya and 

the organisation. This questions the lasting impact of the IMF bailout program, as countries 

tend to become more dependent instead of independent. Stals (1993) concluded that the BoP 

begins typically at home, suggesting that countries can resolve BoP without reaching out to 

the IMF. This then also highlights the importance of the effectiveness of the country’s 

microeconomic policies. 

In summary, the literature review concludes that there is no significant improvement or 

deterioration of variables in the five countries reviewed; thus, the economies of these 

countries remained the same with minimal economic change.  



 

 

 

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3 RESEARCH STRATEGY, DESIGN, PROCEDURE AND 

METHODS 

 

Section 1.2.3 details the three objectives that this research report intends to achieve were 

stated. Literature was reviewed and a conceptual framework was developed to guide the 

choices of techniques to be used. This chapter identifies and describes the research 

approach, design as well as procedure and methods employed in this study to collect, 

process, and analyse empirical evidence. Broadly, it has three objectives: to identify and 

describe the research strategy (Section 3.1), outline the research design (Section 3.2), as well 

as present the procedure and methods (Section 3.3) used in this study. The chapter also 

describes the reliability, weaknesses and validity measures that this research applies to make 

it credible, as well as the technical and administrative limitations of the choices made 

(Section 3.4). 

3.1 Research strategy 

The research strategy is critical as it provides the direction the research will take  

(Johannesson & Perjons, 2014). The selection of the strategy is guided by the adoption of 

the problem under investigation, articulated by the objectives of the study and/or the 

hypothesis that is being tested in the study.  

Zikmund, Babin, Carr and Griffith (2012) explain the three common types of research 

strategies, which Creswell and Creswell (2018) refer to as research approaches. These 

strategies are: qualitative, quantitative, and mixed research strategies. They differ based on 

focus, the qualitative research strategy is text-based and generally investigates the in-depth 

view of the research question, generally done through semi-structured interviews. The 

quantitative research strategy focuses on numeric analyses, where the investigation is 

typically done through statistical methods to understand the relationship that exists between 

a number of variables. The approach is based on the paradigm of positivism, where 

knowledge is developed objectively (Scotland, 2012).  

In line with the objectives of the study, a quantitative strategy was adopted. This approach is 

common when investigating existing relationships between the independent and dependent 

variables. Tariq, Sun, Haris, Javaid, Yushen (2018) investigated the relationship between 

economic growth and energy consumption in four countries in Asia by employing a 

quantitative research strategy, where instrumental variables were used in a regression 

analysis. This study aims to take a similar approach to achieve the research objectives.          



 

 

 

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3.2 Research design 

The research design generally explains the format of the research being conducted (Bryman, 

2012). There are five research designs that can be chosen, namely: experimental, 

comparative, case study, longitudinal and cross-sectional design (Bryman, 2012). The cross-

sectional, comparative and longitudinal research designs are generally descriptive (Leedy & 

Ormirod, 2010). As such, the study adopts the longitudinal research design. Sarantakos 

(1998) explains that a longitudinal study allows for the investigation of a sample to be 

conducted on more than one occasion for the researcher to understand the dynamics and the 

trends that are associated with the data over a period of time. This is thus a useful design in 

social science studies within a context of macro levels or industry or household studies. A 

longitudinal research design utilises panel data models. Dreher (2008) used panel data of 98 

countries with a time series 50 years (1975 to 1999) to investigate the relationship IMF 

program has with compliance to conditionality. Similarly, Lee and Barro (2003) employed 

panel data for 30 countries from 1975 to 1999 investigating the relationship between IMF 

bailout and economic growth.  

3.3 Research procedure and methods 

This section accounts for the actual procedure and the methods employed in this research to 

collect, collate, process, and analyse empirical evidence. Broadly, it details the data and 

information collection instruments (Section 3.3.1), the research target population and 

selection of respondents (Section 3.3.2), and the research data and information collection 

process (Section 3.3.3).  

3.3.1 Data collection instruments 

This study conducts a desktop research of existing sources from the IMF, World Bank and 

OECD databases. This approach is selected for the study as it is a low costs method of 

collecting data.  The study analyses secondary data on the IMF bailout and the country’s 

economic performance metrics: Gross Domestic Product (GDP); Exchange Rates and 

Inflation data over a 20-year period beginning in 2001.   

The IMF carries out an extensive collection and analysis of global and regional trends using 

various data collected through country surveys, financial surveys, and research conferences 

(IMF, 2019). The IMF has an Independent Evaluation Office (IEO) overseeing various IMF 

processes, including the assessment of data integrity on member countries and the office has 



 

 

 

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powers to request information directly from country authorities as part of their evaluation 

process (IMF, 2019).  

3.3.2 Research target Population  

The IMF is a member state-based organisation that consists of 189-member countries; 

however, the population of this research is drawn from countries in sub-Saharan Africa with 

various IMF bailout arrangements.  

Sample selection 

The sample covers five countries in the sub-Saharan region, countries with various IMF 

bailout arrangements. These are Ghana, Zambia, Kenya, Rwanda, and Mozambique.  

Historical Gross Domestic Product (GDP); Inflation (IF); and Exchange Rates (ER) data is 

collected for the period of 20 years. 

3.3.3 Data collection process  

This section outlines the research data to be used in this study from the selected countries, as 

well as the variable descriptions which are the independent and dependent variables that are 

used to investigate the existing relationships. 

Research data  

The data to be used in the study is collected from the repositories of the International 

Monetary Fund, Organisational Economic Cooperation Development, World Bank, as well 

as the Central Banks of the countries under investigation. The study utilises panel data that 

comprises of the IMF bailout, GDP percentages, inflation rates, and exchange rates across 

the five select countries in the sub-Saharan region.  These countries are generally in low- 

and middle-income clusters, and they show similar characteristics to other low- and 

medium-income countries like South Africa. As explained in the problem statement in 

Section 1.2.1, South Africa finds themselves with high levels of debt ratio to GDP with 

economists predicting that the country might have to approach the IMF for financial 

assistance. However, South Africa cannot be analysed because the last time they had a credit 

arrangement with the IMF was in 1982 (IMF, 2019).  

This data is collected on an annual basis from 1999 to 2018, which is equivalent to a 20-year 

period. The data for this period is recent and the collection instruments have improved 

during the same period, making the collected data reliable and trustworthy.  

 



 

 

 

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3.4 Research data and information processing and analysis 

Initially, the collected data was evaluated for outliers, using Cook’s D (Di >1), in line with 

the proposals of Cook (1997). These outliers were then be removed from the data as they 

create a bias in the data and estimation model. The data is used initially for descriptive 

statistics, which evaluates the frequency and percentage frequencies. This is followed by the 

descriptive statistics for central tendency and spread, which are the mean, median and 

standard deviation (Diamantopoulos et al, 2010). The correlation matrix follows, using the 

Pearson correlation, which determines the relationship between the independent and 

dependent variables. The correlation determines the significance of the relationship, the 

direction, as well as the strength. The strength is based on the guidelines of Pallant (2010), 

where: 

 

r= 0.09-0.29 (weak), r=0.30-0.49(Medium) and ≥5 (strong) 

 

For the estimation, the first model that is be employed is the Ordinary Least Square (OLS). 

The acceptance of the results of the model is dependent on the key assumptions of normality 

of the residual, whether the error variances are homoscedastic and whether there is no 

autocorrelation. The normality of the residual is conducted using Skewness and Kurtosis, 

with values of ±2, indicating that residuals are normally distributed (Hair et al, 2010). For 

the homoscedasticity, Durbin Watson is used with values between 1.5 and 2.5 indicating no 

serial correlation. This also be confirmed using the Breush-Pagan test. 

 

The study utilises the Fixed and Random Effects models that consider the differences among 

the countries as well as time effects (Williams, 2018). The Hausman test is used to decide 

between the fixed and random effects model. The significance of the relationship and the 

differences is determined at 95% confidence level (p<.05) and higher levels for the model. 

3.5 Estimation model for the study 

The estimation model is defined as the method of drawing statistical inference on data; thus, 

the testing of hypotheses and the inference are the most important factors involved in the 

estimation process. The model looks out for errors and infers the results. 



 

 

 

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Ordinary Least Square Model (OLS) 

For the estimation, the first model that is to be employed is the Ordinary Least Square 

(OLS). This is the base model and was estimated as follows: 

 

        (1) 

 

The variables are discussed below: 

 

Dependent variables 

In this study,  represents real the GDP, exchange rates, and inflation rate as the 

dependent variables, with i being the countries and t being the period.    

Gross domestic product (GDP) is a scorecard measuring the total market value of all 

finished goods and services produced in a country at the specific period, measured by 

overall local production (IMF, 2019).   

Inflation (IF) is a depreciation of purchasing power of domestic currency over items, 

ultimately, it refers to the fall of the purchasing power (Investopedia, 2020).  

Exchange rate (ER) is the worth of one country’s currency in another country (IMF, 2018). 

Independent variables 

Bailout (BO) is the variable of interest, representing the bailout facilities issued by the IMF. 

Bailout means support programs in a conditional credit facility and programs provided to 

member countries that are financially distressed. The credit facilities mainly include the 

following: Extended Credit Facility (ECF); Flexible Credit Line (FCL); Precautionary and 

Liquidity Line (PLL); Rapid Financing Instrument (RFI); Stand-By Arrangements (SBAs); 

Extended Credit Facility (ECF); Rapid Credit Facility (RCF); and the Standby Credit 

Facility (SCF) (IMF, 2019a). 

Control variables 

The study considered the following control variables: FD (foreign direct investment 

inflows), DG (debt to GDP), IR (interest rates), and UN (unemployment  

• Foreign Direct Investment (FD) is an investment by a foreign country which reflects 

a long-term relationship between the two economies. It involves both the initial 

investment and the initial transaction. A relationship is established between the 



 

 

 

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investor and the enterprise and all subsequent capital transactions between them and 

among the affiliated enterprises.  

 

• Debt Ratio (DR) is a financial ratio which measures the extent of the country’s 

leverage, expressed as a percentage and interpreted as a proportion of the country’s 

assets that are financed by debt (Ross, 2019). 

• Interest rate is the rate a bank or other lender charges to borrow its money, or the rate 

a bank pays its savers for keeping money in an account. In other words, the interest 

rate is the cost of borrowing money from a financial institution or organisation 

(OECD, 2019. 

• Unemployment rate is a rate used to measure the number of unemployed people, and 

it is expressed as a percentage of the labour force (OECD, 2019). 

Generalised Least Square Model (GLS) 

The study employed a panel data set which is commonly known as longitudinal data which 

comprises of both the cross-sectional and time series dimension.  

Xit = i = 1 ……………N, t = 1…..……..T                                          (2) 

Musau, Waititu and Wanjoya (2015) argue that the Generalised Least Square (GLS) can be 

used to model the panel data because of its capability of estimating the model when 

assumptions of OLS are violated.  

Feasible generalised least square (FGLS) 

Feasible generalised least square (FGLS) is used as a different estimator option that 

produces consistent and more efficient point estimates. It is useful for estimators of linear 

regression models with heteroskedastic errors or when there is serial correlation (Shrivastav 

& Kalsie, 2016; Liu, Okui & Yoshimura, 2016). The GLS i.i.d. assumption fails when: 1) 

the variance of the errors changes over the observations that are not identically distributed, 

2) when the errors are not independently distributed, meaning they are correlated with each 

other but not with the regressors (Shrivastav & Kalsie, 2016; Liu, Okui & Yoshimura, 

2016). The FGLS model is generated after the OLS estimation using the following equation: 

 

                                                       (3) 

 



 

 

 

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 and x' denotes a vector of dependent and explanatory variables respectively, with  the 

intercept, while i and t represent the country and period respectively. The  is a K x 1 vector 

of the slopes. The is the error term, and it varies over i and t.   

  

3.6 Research weaknesses—technical and administrative limitations  

The study uses secondary data gathered from existing databases. This data was initially 

collected for other purposes other than the purpose of this study, therefore data may not be 

entirely suited for such a purpose. This will therefore require the manipulation of data, 

which can disorientate the original form or structure of the data. 

The study further relies on the assumption of the authenticity and reputation of the 

institutions such as the IMF, World Bank and the OECD and their databases. However, the 

study cannot guarantee the reliability of the data. 

Lastly, the study assumes that the assumptions made about the authenticity and reliability of 

the data and databases will allow for acceptable estimates that can be used to make credible 

conclusions about the findings of the research. However, it must be highlighted that the data 

for certain metrics, particularly the bailout, might not be consistently available for all the 

years of the selected period for countries under investigation and this might be a weakness 

for this study. 

3.7 Ethical consideration 

A desktop study involves no interaction with human subjects due to the absence of 

interviews and surveys. Despite these considerations, there is still an ethical expectation that 

the research should adhere to. For this cause, the research ensures that the data for use in the 

analysis is collected from authentic databases. It has been stated that the study assumes 

authenticity of the IMF, World Bank, and OECD databases, as they belong to reputable 

organisations.  

The researcher further assures the highest standard of data protection and that the raw data 

used will be stored in password protected folders and is only accessible to the research 

officer. In addition, the researcher applied for permission to undertake the research and the 

Wits Business School Ethics Committee issued an ethical clearance to conduct the research 

study.  



 

 

 

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4 PRESENTATION OF RESEARCH RESULTS 
 

The purpose of the study is to provide analytical insights into the IMF Bailout key metrics, 

measuring the relationship between the bailout and economic indicators. A longitudinal 

study using the quantitative research approach was adopted for this study. This chapter 

presents the descriptive statistics, the correlation matrix analysis, multiple regressions and 

the estimate models to analyse the uncovered relationships of the economic indicators and 

the IMF bailout program.  

4.1 Descriptive statistics  

Descriptive statistics are used to visualise and present raw data in a more concise and 

meaningful way (Trochim, 2020). The data for five countries is used to evaluate the 

descriptive statistics for central tendency and spread: the mean, median and standard 

deviation (Diamantopoulos et al, 2010).  

 

Table 1: Descriptive statistics of all variables 

Variable  Mean Std. Dev. Min Max 

Country 

overall 3 1.421338 1 5 

between   1.581139 1 5 

within   0 3 3 

Year 

overall 2009 5.795331 1999 2018 

between   0 2008.5 2008.5 

within   5.795331 1999 2018 

Bailout~ ’000 (SDR) 

overall 178608 194359.4 0 709259 

between   150846.5 9611 350185 

within   139240.8 -136448 572811 

Loan Duration 

overall 2.26 1.521695 0 4 

between   .6513448 1.45 3.2 

within   1.404538 -.24 4.81 

Inflation 

overall 10.251 6.463737 -2.4 32.9 

between   4.056129 5.685 14.865 

within   5.337153 2.086 28.286 

Exchange rates per 

US Dollar 

overall 146.0704 241.5151 .353514 879.1009 

between   260.1733 1.868803 607.8828 

within   60.25315 -112.2822 417.2885 

Real GDP growth 

overall 6.221 2.716478 .2 17.4 

between   1.149399 4.485 7.56 

within   2.512306 .861 17.436 

Debt to GDP 

overall -3.451515 3.395927 -10.3 16.9 

between   1.404512 -5.205 -1.375 

within   3.150261 -9.962041 16.43796 

FDI inflows 

overall 1075.924 1338.024 1.5 6175.125 

between   750.8665 159.2804 1939.889 

within   1155.297 -756.1123 5311.159 

Interest rate 

overall 18.36328 7.478191 0 46.23333 

between   3.576753 15.375 23.92902 

within   6.751698 2.988281 40.6676 

Unemployment 

overall 5.0042 4.026264 .71 15.9 

between   4.224257 .99 11.7105 

within   1.338331 1.1437 9.1937 



 

 

 

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Table 1 presents the results of the descriptive statistics of all variables, with 100 

observations in over five countries of the study: Ghana, Zambia, Kenya, Rwanda, and 

Mozambique - over a twenty-year period (T=20) from 1999 to 2018. Overall facility 

duration is 2.26, with a standard deviation of 1.5years. The standard deviation between 

countries is 0.65 years and standard deviation within the country is 1.04years.  

The results show that the average facility amounts to 178608, a standard deviation of 

194359.4, and with a maximum value of 709259 for special drawing rights (SDR). The 

minimum facility value is zero for the years in which there was no withdrawal. Mozambique 

reported zero value for the years 2012 to 2018; Rwanda between 2011 and 2018, and 

Zambia for the years 2012 to 2018.  

Real GDP results show an overall mean value of 6.221% and an overall standard deviation 

of 2.171%. Real GDP reported a minimum of 0.86% and a maximum of 17.4% within the 

countries. The highest real GDP growth was observed in Rwanda in 2002 and Mozambique 

in 2001. The lowest real GDP growth was observed in Ghana in 2015, Kenya (2000, 2002 

and 2008), Mozambique in 2000, and Rwanda in 2003. The inflation rate ranged from a 

deflation of -2.4 to 32.9 overall. The inflation within countries ranged from 2.086 to 28.286; 

and between countries it ranged from 5.685 to 14.865. Ghana, Mozambique and Zambia 

show the highest inflation rate while Kenya shows the lowest inflation rate.  

The FDI inflows ranged from $1.5m to $6 175m. Mozambique shows the highest FDI 

inflows in the year 2013, while Rwanda shows the lowest FDI inflows that seem to be 

constant for all the years. The interest rate ranged from 0 to 46.23% overall, 2.988281 to 

40.6676 within the countries and 15.38% to 23.92% between the countries. Ghana shows an 

increase in interest rate in 2002 and in 2015 while Zambia shows a decrease in interest rate. 

Rwanda shows some form of constant with the increase in years. The unemployment rate 

ranged from 0.71% to 15.9%, while the in between ranged from 0.99% to 11.71% and 

within countries, 1.14% to 9.19%. Ghana and Zambia showed the highest unemployment 

rate over the periods, with Rwanda, Kenya and Mozambique having lower levels of 

unemployment.   



 

 

 

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4.2 Multivariate outliers to identify influencing cases  

The mutivariate outliers to identify extreme variables that could influence the intepretation 

of results was conducted using Cook’s D (Cook & Weisberg, 1982).  

 

Table 2: Cook’s D for outliers 

 

Observations Mean Std. Dev. Min Max 

99 .00781 .0166 2.91x10-7 .1478 

  

Cook’s D results  show the maximum Cook’s difference ( Di < 1 ), implying that there are 

no outliying variables that would affect the accuracy of the regression results.  

4.3 Correlation matrix   

A correlation matrix is used to summarise data to be used