The International Monetary Fund lends hard currency to foreign governments for short-term adjustment of balance of payments imbalances. While this is well-known, few understand the process through which the IMF decides what will be the conditions of receipt of those loans in each case. In this paper, it is proposed that such decisions are arrived at through a complex and convoluted process of bargaining and exchange between a variety of actors, rather than through imposition of rules or political power.

This counter-intuitive proposition is supported by a description of the decision-making process involved in a typical IMF loan -- the stand-by arrangement. such a process involves several distinct “phases”: 1) initiation by either Fund officials or the member country government, 2) staff preparations for formal negotiations with the government, 3) direct negotiations between Fund “mission” and member country officials, 4) internal IMF discussion of results of negotiations, and 5) disbursement and review of compliance to conditions of loan. At each phase, which can be consolidated into three “bargaining fora,” a unique set of exchanges occurs between the actors. Of special interest is the bargaining that takes place on a regular basis among Fund staff.

This perspective on IMF decision-making gives rise to a new set of opportunities and constraints on those, especially debtor nations, interested in maximizing the outcome of their interactions with the Fund