Controversies Surrounding The IMF

IMF stands for the International Monetary Fund, an international organizations that offers both loans and bailout packages, and that has been subjected to extensive debate and controversy over the past years. Initially designed to ensure the stability of the worldwide financial system after World War III, the IMF has become one of the most important financial institutions of its kind, with a great influence over many countries. The policies of the International Monetary Fund has changed, and while many agree with them, others claim that they bring a lot of damage not only to the economy, but also to the surrounding environment. That being said, here is a deeper insight into some of the most important and controversial aspects related to the IMF:

1. Some Say Its Policies Hurt The Surrounding Environment

Many environmentalists and other environmentally-conscious people claim that the International Monetary Fund offers loans that are paving the way for the exploitation of the natural resources, which are depleting at a very fast pace. Apparently, the IMF does not take into account the impact of its lending policies on nature, and environmental aspects are not included in the policy making process. Some people also claim that the struggle to pay back the loans granted by the International Monetary Fund has lead to an unsustainable and damaging liquidation of some of the world’s most valuable natural resources, such as cocoa. The cocoa exports have soared in the Ivory Coast, and this has led to the loss of approximately 70% of the forests found here.

2. Some Critics Consider The Lending Conditions To Be Too Harsh

The lending conditions imposed by the International Monetary Fund are by far the most controversial and most commonly debated topic, and for a good reason given the fact that the IMF primarily lends money to poorer countries and then it applies severe financial restrictions. The problem is not the fact that it helps poor countries re-stabilize their economy as it did after the recession that hit the entire world a few years back, as this is a very good and helpful thing for the countries in question, but the fact that the conditions attached to these loans are very difficult to meet, and often with great sacrifices.

With that in mind, it must be said that in order for a country to repay its loans (usually millions or billions of dollars), its economy must be liberalized and there must be some serious government spending cuts involved, which can take their toll on the country’s economy in the long run. Besides this, the overall social structure of the country can be impacted as well, given the fact that the conditions imposed by the IMF often reflect the finance-related beliefs of Western nations, which may not always be in the best interests of the borrower.

Many people claim that these conditions are often designed to compromise not only the economic sovereignty of the receiving countries, but also their political structure. The fact that the conditions are too intrusive has generated a lot of backlash from other countries, and so did the so-called “structural adjustments” that the receiving countries had to meet in order to be eligible for the loan.

In addition to the government spending cuts imposed by the International Monetary Fund, the IMF also implies strict banking regulations, addressing various government deficits as well as a regulated pension policy. All these changed have caused a severe domestic opposition in most of the receiving countries, over the years.

3. The Policies Are Imposed All At Once, Which Leads To Privatization And An Increased Unemployment Rate

Besides the fact that these policies are severe enough and likely to cause domestic opposition, the IMF did not even impose them in an appropriate sequence, but rather all at once, which leads to a serious of consequences including the privatization of government services in a very rapid manner (for instances, selling utilities companies to private investors).

In turn, given the fact that private owners aim to make a company as efficient and as cost-effective as possible, the chances are that the new owners of such companies (which, as stated above, are often either utilities or water supply companies) are very likely to let go a significant part of the staff, which leads to an increased rate an unemployment. The reduced government salaries and pensions coupled with an increased unemployment rate can destabilize the financial and social structure of a country even more than the financial crisis itself.

In some cases, the borrowing countries do not have a properly developed unemployment management program, neither does it have social safety programs or other plans to support families who have lost one or more primary sources of income. In other words, those people who were fired when the company they worked for was sold will be unable to financially support their families.

This is why privatization must be introduced as part of a larger, more comprehensive and thoroughly designed program that involves creating new jobs designed to replace the lost ones. These programs should include low interest rates for mortgages and other loans, along with other more specific macroeconomic policies.

4. The IMF Accepts Little To No Public Criticism

Those who oppose the policies of IMF claim that the International Monetary Fund was not even open to public criticism when it came out with these severe policies, and in many cases the agreements that took place between the receiving countries and the IMF were often kept secret until the papers were signs and the loan was already taken out. In many times,this led to a severe backlash from the general public in the borrowing countries.

5. The Policies Of The Washington Consensus Are Universally Imposed

Last, but certainly not least, the critics of the International Monetary Fund also claims that the institution imposes the policies of the Washington Consensus on all the borrowing countries, without understanding the distinct and primary financial and social characteristics (and differences) of the borrowing countries, which in turn makes these policies very difficult to carry out and, as mentioned earlier, often very counter-productive for the general economy of the receiving countries.

In order for an international monetary organization such as the IMF to be able to impose generally applicable rules, regulations and policies, it must firstly study and specialize in the economies and the political climate of the borrowing countries, economies that the International Monetary Fund often oversees.


IMF Objectives Simplified

The International Monetary Fund (IMF), conceived in July 1944 at a UN’s conference held in Bretton, New Hampshire, U.S.A is a leading global financial organization made up of 188 countries. Its main goals concentrate on securing financial stability, facilitating international trade, alleviating high rates of unemployment and reducing poverty around the world. During its establishment, the 44 governments, which were represented in the conference, created a credible framework that would eradicate competitive devaluations that were witnessed after the First World War that caused 1930s Great Depression. This is an international organization whose functions keeps on expanding year by year owing to various economic, social and political factors. But still its core functions will always stand out and they include the following.

Providing Financial Assistance

The primary objective of IMF is to provide financial assistance to poor countries that are experiencing difficult economic times due to civil wars, natural disasters etc. Member countries who would want to boost their economies through infrastructural development and other things that help to create a good investing environment may also solicit funds from IMF. This organization lends out money through loans that are given under certain conditions.
Preventing Possible Financial Crisis

Countries are required to launch certain reforms that will regulate how the borrowed funds will be utilized to prevent fraudulent individuals from embezzling the funds. Also, these reforms are meant to cushion those countries which have fixed exchange rates policies from a crisis resulting from monetary, fiscal and various political practices. The risk of a possible staggering balance of payments in future may arise due to under/over-valued currencies, inflation and budget deficits if these reforms aren’t put in place. Therefore, IMF not only assists member states to develop economically by lending them loans but they also provide measures that cushion them from experiencing a possible financial crisis.

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History Of The International Monetary Fund

During the early years of the 20th century, the world suffered through the Great Depression. This happened during the 1930s. In addition to this, there were also two world wars. Due to this, the global economic system collapsed quickly. This had a major impact on international trade.

As a result, countries were witnessing the plummeting living standards caused by unemployment. During World War II, Anglo-American discussions focused on the increasing demand for an institution that could take care of international finances, cooperation, and even promote international trade.

The Bretton Woods Conference

From 1st July to 22nd July 1944, 730 delegates from 44 allied nations met at the Mount Washington Hotel. The hotel is located in Bretton Woods, State of New Hampshire, United States. The issue at hand was the regulation of post war global monetary, and restoring financial order. The primary debate was between the United Kingdom and the United States delegations. The debate was about the nature of the considered organization.
The British delegation wanted a fund that could help all the member nations economically, but only during emergencies or times of crisis. On the other hand, the United States delegation wanted an institution that could function like a bank.

It wanted permission for member countries to borrow money for all kinds of purposes. Ofcourse, the money would be borrowed as a loan, and would have to be repaid in a specified time frame. Finally, the United States motion was accepted.

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IMF Overview

The International Monetary Fund (IMF) is an organization that operates internationally with the main purpose of providing advice and financial assistance. This organization has already played an integral role in the growth of developing countries and the creation of financial markets all over the world. The rest of the article is going to serve as an overview of the International Monetary Fund.

What Does IMF Do?

The IMF was founded around the time World War II ended. The year was 1945 and it came out of the Bretton Woods Conference. It has a sister organization known as the World Bank. As of now, The IMF is considered to be one of the largest lender of money on the planet. At the core, the IMF is a specialized agency of the United State, but it is operated by 186 countries. Any country is welcome to join the organization as long as they accept IMF’s organization statuses and they must conduct a foreign policy.

The IMF is not only responsible for the creation of the international monetary system, but it also plays a vital role in maintaining it. This international monetary system handles the monetary exchange between many countries. The monetary system serves as a platform for many foreign exchange transactions and the same time promoting a balanced economic trade and fostering investments worldwide.

To achieve the main goals of the IMF, the organization focuses on advising the macroeconomic policies of its member countries, mainly focusing on credit management, money, budget and exchange rate. In addition to that, the IMF will assess the financial sector of a country, together with its regulatory policies. The IMF also appraises the country’s employment and labor market in a macroeconomic level. Furthermore, as it is still considered as a “fund organization”, the IMF provides financial assistance to countries to cover the balance of payment discrepancies. As a result, the IMF plays a vital role in nurturing the economic growth of a country and maintaining its levels of employment.

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