The IMF’s Controversy
The International Monetary Fund periodically develops programs to "rescue" countries from debt default. However, many developing countries argue that IMF policies often hurt the poorest of the poor, and sometimes to the advantage of rich countries and global corporations.
From time to time the economic growth of developing countries finds itself on a decline due to poor government policies or outdated reforms that undermine the possible promotion of the economy. In any case the IMF (International Monetary Fund) is often described as a “heartless” moneylender which provides developing countries with the option to adopt the IMF’s agenda and policies in order to provide a “solution” for economic growth.
Although most developing countries are already facing an economic distress and in need of fundamental reforms, the IMF’s primary goal is to provide short term loans to solve the balance of payment problems that a developing countries have along with special aids and technical advice on how to solve their economic problems.
The IMF currently controls approximately 60 country's economies by offering financial assistance during a debt crisis or loans for emergency conditions. The types of loans that the IMF administrates are often very particular in their policies and are called structural adjustment policies (SAPs). SAP loans are structured to help lift an economy out their debt by cutting funds to public services such education, transportation, waste management, environmental services, health and food assistance programs. In addition, SAP loans are designed for the IMF to help control the spending and the money flow throughout the respective countries.
According to Taner Berksoy, who serves as the d...
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The World Bank and the International Monetary Fund are two organizations that are used interchangeably, but are function very differently from one another. Both the World Bank and the International Monetary Fund were created during the post-World War II era to help stabilize the international economy. The IMF focuses mainly on international affairs and finance of the whole world, where the World Bank directs its attention toward developing countries. The United States and The People’s Republic of China are two of major members of both the IMF and the World Bank, which contribute their efforts on expanding and solidifying the economies of the other member nations.
After describing how each IGO was founded and what their main purpose was it was clear to see that while their intentions seemed to come off as good the reality was that their efforts only corrupted and demoralized third world countries and their citizens even more. For example, when qualifying for, “the HIPC debt reduction or rescheduling, countries had to agree to follow IMF and World Bank measure for achieving creditworthiness,” which are also known as SAPs. Grigsby 301) “To accord with SAP requirements, for example, countries may be required to sell government-owned facilities (such as water delivery systems) or to initiate fees for using public schools or public health clinics. If a country refuses to introduce SAPs, it risks losing the loan.” (Grigsby 302) Therefore, this creates a double edged sword for the countries who are considering a loan from IGOs. Either take the loan and allow it to increase poverty within its borders because individuals cannot afford things that were originally free, or take the loan as well as agree to the requirements and allow their countries main form of income to be demolished and sent to other countries without seeing any of the profit. The catch is that IGO loans say they will help your country become debt free but so far there has only been proof that these loans only increase the amount of poverty and debt. IGOs are only creating false
In this age of change, the international financial is progressing promptly on various fronts, such as the International Monetary Fund (IMF) play a pivotal role in international financial system. Yet at the same time, many criticisms point out that IMF are not efficient enough to react to settle the problems that have accompanied with this trend. This issue has drawn widespread attention in recent decades. This essay will give an overview about what the IMF it is first, and then put forward by some examples that what kind of role the IMF has done to address financial issues, good or bad. Finally, this essay will propose some solutions about the IMF how could it be more useful to solve the financial crisis.
the effect that the work of the IMF and the World Bank have had on the
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Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)
Velde,D.K (2008). The global financial crisis and developing countries. Available at: http://www.odi.org.uk/resources/download/2462.pdf (Accessed: 5th August 2010).
Onimode, Bade. The IMF, The World Bank and The African Debt: The Economic Impact. London ; Atlantic Highlands, N.J., USA : Zed Books, 1989.
Poor countries have been receiving aid from the international community for over a century now. While such aid is supposed to be considered an act of kindness from the donor nations or international bodies, it has led to over dependence among the developing countries. They have adopted the habit of estimating and including international aid in their national budgets to reduce their balance of trade deficits. It is believed that foreign aid is necessary for poor nations in order to break the cycle of poverty that ties their citizens in low productivity zones and so their economy will not be weak. However, some critics view the extension of aid to poor countries as means of keeping the nations in economic slumber so that they can wake up from only by devising ways of furthering self-sustainability. Because of these two schools of thought concerning the topic, debate has arisen on which side is more rational and factual than the other. The non-sustainable nature of international aid, however, leaves the question of what may happen in the event that foreign aid is unavailable for the poor nations. After thorough consideration on the effects of the assistance to poor countries, it is sufficient to state that giving international aid to the poor nations is more disadvantageous than beneficial to the nations. This point is argued through an analysis of the advantages and disadvantages of giving international aid to the poor countries with appropriate examples drawn from various regions of the world to prove the stance.
“…increasing international trade and financial flows since the Second World War have fostered sustained economic growth over the long term in the world’s high-income states. Some with idle incomes have prospered as well, but low-income economies generally have not made significant gains. The growing world economy has not produced balanced, healthy economic growth in the poorer states. Instead, the cycle of underdevelopment more aptly describes their plight. In the context of weak economies, the negative effects of international trade and foreign investments have been devastating. Issues of trade and currency values preoccupy the economic policies of states with low-income economies even more than those with high incomes because the downturns are far more debilitating.1”
Shaw, W. H., & Barry, V. (2011). Moral Issues in Business (Eleventh ed., pp. 230-244).