By: Udaibir Das
The International Monetary Fund (IMF) appears to have recognized that communication is no longer subordinate to economic design — it can make or break reform and change, especially where trust in institutions is thin and fiscal room is limited. The IMF's latest Fiscal Monitor dedicates a chapter to public consent as a precondition for good policy. Whether governments seek to phase out energy subsidies, reform pensions, or expand tax bases, success now hinges on how well reforms are explained, sequenced, and backed by credible commitments.
The report uses large language models to build a new Reform Sentiment Index, analyzing over two million news articles from 170 countries since 1990. The results highlight four enduring patterns. First, macroeconomic conditions matter: reforms are more likely to succeed during stable growth and low inflation periods. Second, communication quality is decisive: policies land better when governments clearly explain why changes are needed and how they will unfold. Third, targeted compensation works: well-communicated transfers for affected households can soften resistance; diffuse or opaque benefits often fail. Finally, timing and trust are central: reforms implemented outside election cycles and in settings with higher institutional credibility enjoy greater public acceptance.
These findings are not academic abstractions. They reflect lessons from dozens of contested reforms in the Global South. In Indonesia and the Philippines, phased implementation and public dialogue helped anchor energy subsidy reforms. In Ecuador (2019) and Sudan (2022), abrupt price increases without adequate preparation triggered street protests and reversals. In Pakistan and Ghana, repeated program breakdowns are as much a function of eroded public legitimacy as fiscal mismanagement. Reforms now live or die on spreadsheets and in the contested terrain of public perception. For policymakers, this means treating communication not as a postscript but as core infrastructure.
The Global Financial Stability Report (GFSR) takes this further. It links policy ambiguity and weak signaling directly to financial stress. Using measures of geopolitical risk and economic policy uncertainty, the IMF shows how unclear or inconsistent communication widens risk premia, drives capital flight, and exacerbates volatility. These effects are especially pronounced in emerging markets with thin buffers and open capital accounts. Financial markets, like citizens, respond to coherence. Vague central bank guidance, unclear fiscal frameworks, or opaque debt restructuring plans now generate market reactions well before any data release or budget vote. Sovereign spreads, currency pressures, and investment decisions increasingly reflect what governments do and how credibly they are seen doing it. In that environment, expectation management is no longer optional but macro-critical.
The World Economic Outlook (WEO) adds a longer-term lens, focusing on the demographic transitions confronting many middle-income economies. Aging populations will place a growing strain on pensions and public healthcare. Structural reforms — longer working lives, pension eligibility changes, expanded labor participation — are fiscally necessary but politically unpopular. These are intertemporal trade-offs: today's costs in exchange for tomorrow's sustainability. However, reforms will be cast as austerity, not solvency, unless that bargain is made clear. The WEO underscores that political acceptance depends on a credible narrative. Where communication fails, reforms do not stick. That lesson is consistent across the Fund's work.
A single through-line emerges across the April 2025 flagship reports: communication failure is now a structural policy risk. Moreover, the costs are compounding. When reforms collapse repeatedly, a deeper erosion sets in. Citizens grow cynical. Expectations shift from reform to reversal. This "reform fatigue" weakens state capacity, narrows the scope for action, and raises markets' premium on policy continuity.
The implications go beyond national governments. Global convenings, including the IMF–World Bank Spring Meetings, are intended to coordinate and communicate. However, for many developing countries, these gatherings can feel like set pieces — complex, hierarchical, and difficult to engage meaningfully. If policy legitimacy depends on communication, then institutional platforms must also evolve. Dialogue must move from performance to participation. Institutions, too, must speak clearly — and listen more.
The stakes are high for developing economies, especially. Reforms in these contexts are often externally financed, technically guided, and politically fragile. If sentiment turns, the window for action closes fast. Therefore, the quality of communication is not an accessory — it is the very ground on which fiscal, monetary, and structural reforms stand. In short, public sentiment has become a binding constraint — not because democracy has intruded on policy — but because, without legitimacy, there is no policy. Without clarity, there is no legitimacy. In a fragmented world, communication is no longer the last mile of policy. It is the first.
Udaibir Das is a Distinguished Fellow at ORF America, Visiting Professor at NCAER, Senior Non-Resident Adviser at the Bank of England, Senior Adviser to the International Forum for Sovereign Wealth Funds, Distinguished Visiting Faculty at the Kautilya School of Public Policy, and Senior Advisor at the Toronto Centre. He previously held roles at the BIS, IMF, Reserve Bank of India, and Bank of Guyana.