Person Perceptionyour First Name Your Last Name Essay Samples
International Monetary Fund
International Monetary Fund (IMF) is an international organization with the headquarter in Washington D.C. which consists of 188 countries, which aim is to promote global monetary cooperation, secure financial stability and obtain sustainable economic growth, maintain fair international trade, develop high employment together with reducing poverty all over the world. Together with the World Bank, the IMF is the largest public fund in the whole world
It was founded at the End of World War II, in July 1944 at a Bretton Woods’ conference of UN by the decision of 44 countries in order to avoid the same devaluations, as those, which were caused by the Great Depression of the 1930s and by this provide financial stability all over the world.
The primary goal of the IMF is to ensure the proper maintenance and the stability of the international monetary system, which was created in order to make international payments among countries and give the ability to all the countries, as well as their citizens, to transact with each other. In order to control all the issues in the field macroeconomic and financial sector, which have the impact on global stability, the IMF uploaded its mandate in 2012.
The IMF use several areas of the implementation of these goals: crediting countries that faced with payments difficulties; keeping track of the state of the economies of all members and global economy as a whole; and giving technical help to members.
According to IMFC (2009), one of the main tasks of The International Monetary Fund is to give loans to the Member States, who faced with the balance of payments deficit. Such an assistance is highly important, because it helps countries to stabilize their monetary system, to rebuild the structure of their international stockpiles, not to stop import payments and provide the conditions for sustainable economic growth, in case if correct policies would be undertaking to solve the current problems. It is important to mention, that the loans of the IMF can’t be used for any other purposes. From this fact follows pros and cons of borrowing from the IMF. On the one hand, such a loan helps to prevent crisis and to maintain world’s financial stability. But on the other head the cooperation with the IMF can lead to the poverty, because this organization cares only about the GDP growth, not about the welfare of people and usually demand to cut social spending and frozen wages.
According to the Center for Financial Studies (2009) the IMF monitors the economic and, especially, financial policies of all the 188 Member States and overseas the situation of international monetary system as a whole. While doing this both at the individual and the global level, the IMF emphasizes possible problems and risks, which could have a huge impact on the global monetary system. In order to avoid financial troubles the IMF provide recommendation, relating to the regulations of policies.
As well as providing recommendations, the IMF also helps countries to develop their economic and financial policies. They try to do so, by providing appropriate training and technical maintenance. They called such a process as a “capacity development”, because it helps to maximize the use of human and institutional resources.
The Head of the IMF is a Managing Director is appointed on the term of five years by the Executive Board. The IMF has a management team, which consists of 17 departments members of which are hired from all the Member States.
The IMF gets resources from the payments of the Member States, which are presented in the form of quota. The size of quotas depends on the size of the country’s economy. On the other hand quota determines the rights of each country in the IMF and it determines the size of the financial help, which the Member State can receive from this organization.
The IMF provides quite a lot of loans to all the Member States. To the biggest borrowers belong: Greece, Portugal, Ireland and Ukraine. To the biggest precautionary loans belong: Mexico, Poland, Colombia and Morocco.
Ghosh (2010) studied, that in most of the cases the IMF’s loans have a positive effect on the economy of the borrowing country. The Great Britain can be provided as an example. In March 1976 the Great Britain faced with the sterling devaluation and huge temps of inflation. As a result the Great Britain was forced to take the loan from the IMF at the rate of 3.9 billion dollar, which was the largest amount ever borrowed of the Fund. At about a year, the economic and financial situation stabilized. The reduction of interest rates was soon observed and the sterling quickly returned its value. By the end of 1977, thanks to the loan of the IMF, there were ameliorations in the trade balance.
The IMF in the financial crises
As we mentioned before, the IMF plays an enormously huge role on the world’s economic scene. That is why the problems caused by crises couldn’t pass by this organization. First of all, the IMF has already provided countries affected by crises with assistance of billions of dollars. Xafa (2007) studied, that the basic instruments, which were used by the IMF in all the crises, including the crisis in Africa, Europe and South Africa, included typical Stand-by Arrangement (SBA) and Extended Fund Facility (EFF), which provided long-term financing for facing financial problems – and Supplemental Reserve Facility (SRF), which provided short-term loans. Moreover, the activity of the Fund has led to the appearance of the financial packaging within which the fund is able to take financial help from other public and private institutions, which lead to the increase of the final volume of assistance. What is more the aim of the Fund is to monitor and prevent financial crises and crashes. For example, the IMF provided advises for the G8 and G20 about the policy decisions at the global level.
Protests again the IMF
Schnabl (2009) studied, that there are several reasons why there have been so many protests against the IMF: the first reason is anti-globalization. It means, that people where against the loss of sovereignty of their countries and against of intervention of the IMF in their economy. Example of such a protest can be anti-globalization protests in Prague in September 2000.
The second reason is that the activities of the IMF can lead to the destabilization of the economy of the country. (e.g. Argentina).
And the last reason is that the intervention of the IMF in the economy of the country can even lead to its destruction and can decrease the level of the welfare. (e.g. Mongolia).
In all the cases people protested against the activities of the IMF, because, they promoted global inequality between nations and caused poverty in developing nations.
Should the IMF forgive loans to the developing countries?
In my opinion not all the developing countries should be relieved from their debts but only the Heavily Indebted Poor Countries (HIPC). Actually, the IMF acts according to such a policy. Such an Initiative was promoted by the IMF together with the World Bank in order to ensure, that no poor country faces a debt drag it cannot deal with. That is why, I think, that only those countries, which meet the criteria of being HIPC, should have the 100% relief, just because they is no other ways in handling their financial burden. Such will help to improve the situation in social sectors of these countries. To such countries belong, for example, Uganda, Chad, Mali etc.
Center for Financial Studies: New Financial Order Recommendations (2009) Economy Watch: The IMF.
Ghosh, R. (2010) “Exchange Rate Regimes and the Stability of the International Monetary System.” IMF Occasional Paper 270.
IMFC (2009) “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the IMF.” Washington: IMF (4 October). Retrieved from www.imf.org/external/np/sec/pr/2009/pr09347.htm.
Schnabl, P. (2009) “Do Global Banks Spread Global Imbalances? The Case of Asset-Backed Commercial Paper during the Financial Crisis of 2007–09.” Paper presented at the 10th Jacques Polak Annual Research Conference hosted by the IMF, Washington, November 5–6.
Xafa, M. (2007) “Global Imbalances and Financial Stability.” Journal of Policy Modeling 29 (4): 783–96. Retrieved from www.imf.org/external/pubs/ft/wp/2007/wp07111.pdf.