The role of the International Monetary Fund
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Some of the questions that I will be focusing on include: What do the reforms include? What are the problems the reforms are designed to solve? Will they succeed? What are the obstacles to reform? The IMF was created in 1944 as an organization to promote international monetary cooperation through exchange rate stability and to facilitate the expansion of international trade by addressing balance of payment problems among the initial twenty nine member countries. In recent decades the IMF members have grown significantly. From its first twenty nine members, to now one hundred and eighty three members are now apart of the IMF. Form its original mandate in 1944- to coordinate national currencies- the IMF mandates has significantly expanded. Now the IMF offers financial support and credit to countries in need of financial assistance. The IMF provides fiscal and monetary advice to governments and local economies. In recent years the IMF has received backlash for its policies. Some have argued that the IMF policies and the conditions that the IMF attaches to its loans do more damage than good.
People also claim that the IMF is generally apathetic or hostile to their views of democracy, human rights, and labor rights (Lee, 2002). These criticisms generated a controversy that helped spark the anti-globalization movement. Others claim the IMF has little power to democratize sovereign states, nor is that its stated objective: to advise and promote financial stability. Arguments in favor of the IMF say that economic stability is a precursor to democracy (Cowley, 2000). Two criticisms from economists have been that financial aid is always bound to conditionalities, including Structural Adjustment Programs. Some say that conditionalities retard social stability and hence inhibit the stated goals of the IMF. Some people disagree with the IMF because the IMF frequently supports currency devaluation, which is criticized as inflationary. Also, the IMF puts higher taxes under austerity programs with economic reduction (Danaher, 2001). Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity, although many other economists disagree.
in what came to be known as the Goldenberg scandal, leaving the country in a state worse than that which it was in before the IMF reforms were implemented. The IMF intervenes only in countries that experience years of bad economic conditions. This has certainly hurt its reputation. The economic collapses tend to lead to years of economic difficulty that can be addressed in various ways. IMF Stuctural Adjustment Policies consistently serve to open up or liberalize economies to foreign capital rather than provide for economic recovery through statist policies such as government financed projects to achieve full employment. Thus, IMF policies further the notion that economic development in developing countries is dependent on attracting foreign investment instead of through a state-managed approach centered on full employment and progressive taxation. Overall the IMF success record is limited. While it was created to help stabilize the global economy, since 1980 over 100 countries have experienced a banking collapse that reduced their GDP. The considerable delay in IMF response to a crisis, and the fact that it tends to only respond to problems rather than prevent them, has led many people to argue for reform.
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