IMF Tariff Conditionality, Aid for Trade and Trade: Evidence from Sub-Saharan Africa
IMF Tariff Conditionality, Aid for Trade and Trade: Evidence from Sub-Saharan Africa

Summary/Abstract: Recently, world tariff rates based on the Most Favoured Nation have declined with more significant drops observed in Sub-Saharan Africa (SSA) particularly on agricultural products. However, the IMF conditions tied to aid for aid-receiving countries during the economic crisis are criticised for biased decision-making and their ineffectiveness in trade reform policies in relation to the Sustainable Development Goals. The purpose of this study is to investigate how IMF-tariff conditions tied to aid for trade impact agricultural product trade in SSA through Structural Adjustment Programmes (SAPs). Precisely, it seeks to determine whether conditions linked to Aid for Trade (AfT) foster agricultural trade growth in SSA while reducing tariffs. I hypothesised that IMF tariff conditionality impacts SSA agricultural product trade through intricate channels encompassing trade systems, pricing and marketing policies, and tax reforms. The study uses panel data from 2011-2023, covering 26 SSA countries, at the disaggregated HS-6-digit product level, using 832 agricultural products. The panel data fixed effect model estimation results indicate that IMF conditionality and ODA-AfT had a negative association with agricultural product trade growth. This suggests that ODA AfT is potentially counterproductive in promoting agricultural trade growth of SSA countries. The study reveals that IMF tariff conditionality, IMF SAPs pricing and marketing policies, and the interactions between SAPs trade system reforms and ODA-AfT are negatively associated with tariff binding overhang. Conversely, there is a positive relationship between binding overhang and SAPs in tax and trade system reforms.

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