Examples of IMF stabilization policies include:
- Monetary Restraint: to reduce the growth of domestic absorption (demand) and the rate of inflation (e.g., credit ceilings to government and private sector).
- Interest Rate Policies: set to positive real levels to encourage domestic savings and promote investment.
- Reduction in Fiscal Deficit: cuts in government expenditure and/or increases in taxation to reduce aggregate demand.
- Reduction in External Debt: to achieve a debt sustainable level of foreign borrowing and avoid a debt crisis e.g. Barbados Economic Recovery and Transformation Plan (BERT) and the Grenada Home-Grown Structural Adjustment Program (HGSAP).
- Structural Reforms: financial sector reforms, producer-pricing policies, trade liberalization tax reforms, etc. to make the economy more flexible and efficient.
IMF reform policies are usually accompanied by World Bank adjustment policies. Examples of the latter include:
- Trade Policy: removal of import quotas; cut in tariffs; improved export incentives.
- Resource Mobilization: tax and budget reform; interest rate policy reform; strengthening external debt management; improving the financial performance of public enterprises.
- Efficient Use of Resources: revise public sector investment priorities; raise agricultural prices; reduce state intervention; reduce or eliminate agricultural input subsidies; raise energy prices; revise industry incentive system.
- Institutional Reform: remove price controls; strengthen capacity to formulate and implement public investment programmes; increase the efficiency of public enterprises.
