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This article aims to explain the effects of International Monetary Fund (IMF) programs on central government’s budget balance, expenditure, and revenue. Previous works in the literature largely ignored the mechanisms by which IMF programs have effects on economic outcomes. Furthermore, earlier studies on the relationship between IMF programs and budget balance suffer from inaccurate measures of budget balance and do not control for the selection bias that is commonly associated with the studies of program participation. This article employs improved measures of budget balance and methods that correct for selection bias in order to analyze the micro-level policy impacts of the IMF through conditionality. Using the data of 93 developing countries from 1951 to 2000, this article finds that IMF programs are effective in reducing government expenditure but fail to increase revenue. Therefore, IMF program participation does not influence overall budget deficits.