Professional Documents
Culture Documents
Eco IInd Sem
Eco IInd Sem
TOPIC
SUBMITTED BY:
Asif Shaikh
Roll no. 61
SUBMITTED TO:
UNIVERSITY OF MUMBAI
PROJECT GUIDE:
Prof: Madhavi Nighoskar
DECLARATION
Date:
Signature of student
CERTIFICATE
Principal
Date:
Project Co-coordinator:
College Seal
Acknowledgement
Well to say this is my project would be totally untrue. At best this was my effort.
There are people in this world, some of them so wonderful that made this effort
become a project. I would like to thank all of them, and in particular:
Prof: Madhavi who gave her guidance very conveniently in the completion of our
project.
And also my Parents who always encouraged and motivated me for every issues
relating to my studies.
As well as Our Librarian who helped us by providing books according to our
topics.
Last but not the least it is only when one writes and realizes the true power of MS
word 2007, from grammar checks to replace-alls. It is simple. And the power of
Windows 7 the OS where MS Office is . Thank you Mr. Bill Gates and
Microsoft Corp!
Contents
International Monetary Fund....................................................................................... 7
Introduction................................................................................................................ 7
Overview.................................................................................................................... 7
Key IMF activities........................................................................................................ 8
Original aims.............................................................................................................. 8
An adapting IMF.......................................................................................................... 8
Surveillance................................................................................................................ 9
Technical assistance and training............................................................................. 10
Lending................................................................................................................. 10
Research and data.................................................................................................... 10
History...................................................................................................................... 11
Since 2000......................................................................................................... 12
Functions.................................................................................................................. 13
Surveillance of the global economy..........................................................................14
Conditionality of loans.............................................................................................. 15
Structural adjustment............................................................................................... 15
Benefits.................................................................................................................... 16
Member Countries.................................................................................................... 17
Collaborations.......................................................................................................... 18
Qualifications............................................................................................................ 20
Benefits................................................................................................................. 20
Leadership................................................................................................................ 20
Board of Governors............................................................................................... 20
Executive Board.................................................................................................... 21
Managing Director................................................................................................. 21
Staff of international civil servants........................................................................22
Voting power............................................................................................................ 24
IMF Quotas............................................................................................................... 24
Quotas play several key roles in the IMF...............................................................24
How quota reviews work....................................................................................... 25
Doubling of quotas and major realignment of quota shares..................................25
5
Overview
The IMF works to foster global growth and economic stability. It provides
policy advice and financing to members in economic difficulties and also
works with developing nations to help them achieve macroeconomic stability
and reduce poverty. The IMF promotes international monetary cooperation
and exchange rate stability, facilitates the balanced growth of
internationaltrade, and provides resources to help members in balance of
payments difficulties or to assist with poverty reduction.
Original aims
The IMF was founded more than 60 years ago toward the end of World War
II (see History). The founders aimed to build a framework for economic
cooperation that would avoid a repetition of the disastrous economic
policies that had contributed to the Great Depression of the 1930s and the
global conflict that followed.
Since then the world has changed dramatically, bringing extensive
prosperity and lifting millions out of poverty, especially in Asia. In many
ways the IMF's main purposeto provide the global public good of
8
financial stabilityis the same today as it was when the organization was
established. More specifically, the IMF continues to
An adapting IMF
The IMF has evolved along with the global economy throughout its 65-year
history, allowing the organization to retain its central role within the
international financial architecture
As the world economy struggles to restore growth and jobs after the worst
crisis since the Great Depression, the IMF has emerged as a very different
institution. During the crisis, it mobilized on many fronts to support its
member countries. It increased its lending, used its cross-country
experience to advise on policy solutions, supported global policy
coordination, and reformed the way it makes decisions. The result is an
institution that is more in tune with the needs of its 188 member
countries.
Surveillance
The IMF promotes economic stability and global growth by encouraging
countries to adopt sound economic and financial policies. To do this, it
regularly monitors global, regional, and national economic
developments. It also seeks to assess the impact of the policies of
individual countries on other economies.
This process of monitoring and discussing countries economic and
financial policies is known as bilateralsurveillance. On a regular basis
usually once each yearthe IMF conducts in depth appraisals of each
member countrys economic situation. It discusses with the countrys
authorities the policies that are most conducive to a stable and
prosperous economy, drawing on experience across its membership.
Member countries may agree to publish the IMFs assessment of their
economies, with the vast majority of countries opting to do so.
The IMF also carries out extensive analysis of global and regional
economic trends, known as multilateral surveillance. Its key outputs are
three semiannual publications, the World Economic Outlook, the Global
Financial Stability Report, and the Fiscal Monitor. The IMF also publishes
a series of regional economic outlooks.
The IMF recently agreed on a series of actions to enhance multilateral,
financial, and bilateral surveillance, including to better integrate the
three; improve our understanding of spillovers and the assessment of
emerging and potential risks; and strengthen IMF policy advice.
10
Lending
IMF financing provides member countries the breathing room they need
to correct balance of payments problems. A policy program supported
by financing is designed by the national authorities in close cooperation
with the IMF. Continued financial support is conditional on the effective
implementation of this program.
In the most recent reforms, IMF lending instruments were improved
further to provide flexible crisis prevention tools to a broad range of
members with sound fundamentals, policies, and institutional policy
frameworks.
In low-income countries, the IMF has doubled loan access limits and is
boosting its lending to the worlds poorer countries, with loans at a
concessional interest rate.
11
History
The IMF was originally laid out as a part of the Bretton Woods
system exchange agreement in 1944.[20] During the Great Depression,
countries sharply raised barriers to trade in an attempt to improve their
failing economies. This led to the devaluation of national currencies and a
decline in world trade.[21]
This breakdown in international monetary co-operation created a need for
oversight. The representatives of 45 governments met at theBretton Woods
Conference in the Mount Washington Hotel in Bretton Woods, New
Hampshire, in the United States, to discuss a framework for postwar
international economic coperation and how to rebuild Europe.
There were two views on the role the IMF should assume as a global
economic institution. British economist John Maynard Keynesimagined that
the IMF would be a coperative fund upon which member states could draw
to maintain economic activity and employment through periodic crises. This
view suggested an IMF that helped governments and to act as the U.S.
government had during the New Dealin response to World War II. American
delegate Harry Dexter White foresaw an IMF that functioned more like a
bank, making sure that borrowing states could repay their debts on time.
[22] Most of White's plan was incorporated into the final acts adopted at
Bretton Woods.
12
The IMF formally came into existence on 27 December 1945, when the first
29 countries ratified its Articles of Agreement.[23] By the end of 1946 the
IMF had grown to 39 members.[24] On 1 March 1947, the IMF began its
financial operations,[25] and on 8 May France became the first country to
borrow from it.[24]
The IMF was one of the key organisations of the international economic
system; its design allowed the system to balance the rebuilding of
international capitalism with the maximisation of national economic
sovereignty and human welfare, also known as embedded liberalism.
[26] The IMF's influence in the global economy steadily increased as it
accumulated more members. The increase reflected in particular the
attainment of political independence by many African countries and more
recently the 1991 dissolution of the Soviet Unionbecause most countries in
the Soviet sphere of influence did not join the IMF.[21]
The Bretton Woods system prevailed until 1971, when the U.S. government
suspended the convertibility of the US$ (and dollar reserves held by other
governments) into gold. This is known as the Nixon Shock.[21]
Since 2000
In May 2010, the IMF participated, in 3:11 proportion, in the first Greek
bailout that totalled 110 billion.[27] This bailout was notable for several
reasons: the funds were funnelled directly to the (largely European) private
bondholders, which endured no haircuts, to the chagrin of the Swiss,
Brazilian, Indian, Russian, and Argentinian Directors; the Greek authorities
(at the time, George Papandreou andGiorgos Papakonstantinou) themselves
ruled out a haircut of the private bondholders; the Greek private sector was
happy to curtail the 13th and 14th month civil service pay scheme, because
the Greek government was otherwise impotent.[28]
A second bailout package of more than 100 billion was agreed over the
course of a few months from October 2011, during which time Papandreou
was forced from office. The so-called Troika, of which the IMF is part, are joint
managers of this programme, which was approved by the Executive
Directors of the IMF on 15 March 2012 for SDR23.8 billion,[29] and which saw
private bondholders take ahaircut of upwards of 50%. In the interval between
May 2010 and February 2012 the private banks of Holland, France and
13
14
The U.S. executive board veto was brought up again by IMF junior members
in April 2014. The countries were fed up with the failure to ratify a four-year
old agreement to restructure the lender. Singaporean Finance Minister and
IMF steering committee chairman Tharman Shanmugaratnam said it could
cause "disruptive change" in the global economy: "We are more likely over
time to see a weakening of multilateralism, the emergence of regionalism,
bilateralism and other ways of dealing with global problems", and that would
make the world a "less safe" place.[
Functions
The IMF works to foster global growth and economic stability by providing
policy advice and financing to members, by working with developing
nations to help them achieve macroeconomic stability, and by reducing
poverty.[6] The rationale for this is that private international capital markets
function imperfectly and many countries have limited access to financial
markets. Such market imperfections, together with balance-of-payments
financing, provide the justification for official financing, without which many
countries could only correct large external payment imbalances through
measures with adverse economic consequences.[7] The IMF provides
alternate sources of financing.
Upon initial IMF formation, its two primary functions were: to oversee
the fixed exchange rate arrangements between countries,[8] thus helping
national governments manage their exchange rates and allowing these
governments to prioritise economic growth,[9] and to provide short-term
capital to aid balance of payments.[8] This assistance was meant to prevent
the spread of international economic crises. The IMF was also intended to
help mend the pieces of the international economy post the Great
Depression and World War II.[10]
The IMF's role was fundamentally altered after the floating exchange
rates post 1971. It shifted to examining the economic policies of countries
with IMF loan agreements to determine if a shortage of capital was due
to economic fluctuations or economic policy. The IMF also researched what
types of government policy would ensure economic recovery.[11] The new
15
Conditionality of loans
IMF conditionality is a set of policies or conditions that the IMF requires in
exchange for financial resources.[8] The IMF does require collateral from
17
countries for loans but also requires the government seeking assistance to
correct its macroeconomic imbalances in the form of policy reform. If the
conditions are not met, the funds are withheld.[8]Conditionality is perhaps
the most controversial aspect of IMF policies.[17] The concept of
conditionality was introduced in a 1952 Executive Board decision and later
incorporated into the Articles of Agreement.
Conditionality is associated with economic theory as well as an enforcement
mechanism for repayment. Stemming primarily from the work of Jacques
Polak, the theoretical underpinning of conditionality was the "monetary
approach to the balance of payments".[10]
Structural adjustment
Some of the conditions for structural adjustment can include:
Devaluation of currencies,
18
Benefits
These loan conditions ensure that the borrowing country will be able to repay
the IMF and that the country will not attempt to solve their balance-ofpayment problems in a way that would negatively impact the international
economy.[18][19] The incentive problem of moral hazardwhen economic
agents maximize their own utility to the detriment of others because they do
not bear the full consequences of their actionsis mitigated through
conditions rather than providing collateral; countries in need of IMF loans do
not generally possess internationally valuable collateral anyway.[19]
Conditionality also reassures the IMF that the funds lent to them will be used
for the purposes defined by the Articles of Agreement and provides
safeguards that country will be able to rectify its macroeconomic and
structural imbalances.[19] In the judgment of the IMF, the adoption by the
member of certain corrective measures or policies will allow it to repay the
IMF, thereby ensuring that the resources will be available to support other
members.[17]
As of 2004, borrowing countries have had a very good track record for
repaying credit extended under the IMF's regular lending facilities with full
interest over the duration of the loan. This indicates that IMF lending does
not impose a burden on creditor countries, as lending countries receive
market-rate interest on most of their quota subscription, plus any of their
own-currency subscriptions that are loaned out by the IMF, plus all of the
reserve assets that they provide the IMF.[7]
Member Countries
The IMF currently has a near-global membership of 188 countries. To
become a member, a country must apply and then be accepted by a
majority of the existing members. In April 2012, Republic of South Sudan
joined the IMF, becoming the institution's 188th member.
Upon joining, each member country of the IMF is assigned a quota, based
broadly on its relative size in the world economy. The IMF's membership
agreed in November 2010 on a major overhaul of its quota system to
19
Subscriptions
A member country's quota subscription determines the maximum amount
of financial resources the country is obliged to provide to the IMF. A
country must pay its subscription in full upon joining the IMF: up to 25
percent must be paid in the IMF's own currency, calledSpecial Drawing
Rights (SDRs) or widely accepted currencies (such as the dollar, the euro,
the yen, or pound sterling), while the rest is paid in the member's own
currency.
Voting power
The quota largely determines a member's voting power in IMF decisions.
Each IMF member's votes are comprised of basic votes plus one additional
vote for each SDR 100,000 of quota. The number of basic votes attributed
to each member is calculated as 5.502 percent of total votes. Accordingly,
the United States has 421,965 votes (16.76 percent of the total), and
Tuvalu has 759 votes (0.03 percent of the total).
Access to financing
The amount of financing a member country can obtain from the IMF is
based on its quota. For instance, under Stand-By and Extended
Arrangements, which are types of loans, a member country can borrow up
to 200 percent of its quota annually and 600 percent cumulatively.
SDR allocations
SDRs are used as an international reserve asset. A member's share of
general SDR allocations is established in proportion to its quota. The most
recent general allocation of SDRs took place in 2009.
20
Not all member countries of the IMF are sovereign states, and therefore not
all "member countries" of the IMF are members of the United Nations.
[46] Amidst "member countries" of the IMF that are not member states of the
UN are non-sovereign areas with special jurisdictions that are officially under
the sovereignty of full UN member states, such asAruba, Curaao, Hong
Kong, and Macau, as well as Kosovo.[47][48] The corporate members
appoint ex-officio voting members, who are listed below. All members of the
IMF are also International Bank for Reconstruction and Development (IBRD)
members and vice versa.[citation needed]
Former members are Cuba (which left in 1964)[49] and the Republic of
China, which was ejected from the UN in 1980 after losing the support of
then U.S. President Jimmy Carter and was replaced by the People's Republic
of China.[50]However, "Taiwan Province of China" is still listed in the official
IMF indices.[51]
Apart from Cuba, the other UN states that do not belong to the IMF
are Andorra, Liechtenstein, Monaco, Nauru, andNorth Korea.
The former Czechoslovakia was expelled in 1954 for "failing to provide
required data" and was readmitted in 1990, after the Velvet
Revolution. Poland withdrew in 1950allegedly pressured by the Soviet
Unionbut returned in 1986.[52]
Collaborations
The IMF collaborates with the World Bank, regional development banks,
the World Trade Organization(WTO), UN agencies, and other international
bodies. While all of these organizations are involved in global economic
issues, each has its own unique areas of responsibility and specialization.
The IMF also works closely with the Group of Twenty (G-20) industrialized
and emerging market economies and interacts with think tanks, civil
society, and the media on a daily basis.
21
The IMF and the World Bank are different, but complement each other's
work. While the IMF's focus is chiefly on macroeconomic and financial
sector issues, the World Bank is concerned mainly with longer-term
development and poverty reduction. Its loans finance infrastructure
projects, the reform of particular sectors of the economy, and broader
structural reforms. IMF loans assist countries in continuing to pay for
imports, stabilizing their currencies, and restoring conditions for strong
economic growth. Countries must join the IMF to be eligible for World Bank
membership.
Given the World Bank's focus on antipoverty issues, the IMF collaborates
closely with the Bank in the area of poverty reduction. Other areas of
collaboration include assessments of member countries' financial sectors,
development of standards and codes, and improvement of the quality,
availability, and coverage of data on external debt.
conferences and events. In recent years, the IMF has worked with the
International Labor Office on issues related to employment, as well as
social protection floors; the UN Children's Fund on fiscal issues and social
policy; the UN Environment Program on the green economy; and the World
Food Program on social safety nets and early assessments of vulnerability.
IMF staff at all levels frequently meet with members of the academic
community to exchange ideas and receive new input. The IMF also has an
active outreach program involving CSOs.
IMF management and senior staff communicate with the media on a daily
basis. Additionally, a biweekly press briefing is held at the IMF
headquarters, during which a spokesperson takeslive questions from
journalists.
Qualifications
Any country may apply to be a part of the IMF. Post-IMF formation, in the
early postwar period, rules for IMF membership were left relatively loose.
Members needed to make periodic membership payments towards their
quota, to refrain from currency restrictions unless granted IMF permission, to
abide by the Code of Conduct in the IMF Articles of Agreement, and to
provide national economic information. However, stricter rules were imposed
on governments that applied to the IMF for funding.[53]
The countries that joined the IMF between 1945 and 1971 agreed to keep
their exchange rates secured at rates that could be adjusted only to correct a
"fundamental disequilibrium" in the balance of payments, and only with the
IMF's agreement.[54]
Some members have a very difficult relationship with the IMF and even when
they are still members they do not allow themselves to be monitored.
Argentina, for example, refuses to participate in an Article IV Consultation
with the IMF.[55]
Benefits
Member countries of the IMF have access to information on the economic
policies of all member countries, the opportunity to influence other
members economic policies,technical assistance in banking, fiscal affairs,
and exchange matters, financial support in times of payment difficulties, and
increased opportunities for trade and investment.[56]
24
Leadership
Board of Governors
The Board of Governors consists of one governor and one alternate governor
for each member country. Each member country appoints its two governors.
The Board normally meets once a year and is responsible for electing or
appointing executive directors to the Executive Board. While the Board of
Governors is officially responsible for approving quota increases, Special
Drawing Right allocations, the admittance of new members, compulsory
withdrawal of members, and amendments to the Articles of Agreement and
By-Laws, in practice it has delegated most of its powers to the IMF's
Executive Board.[57]
The Board of Governors is advised by the International Monetary and
Financial Committee and the Development Committee. The International
Monetary and Financial Committee has 24 members and monitors
developments in global liquidity and the transfer of resources to developing
countries.[58] The Development Committee has 25 members and advises on
critical development issues and on financial resources required to promote
economic development in developing countries. They also advise on trade
and environmental issues.[58]
Executive Board
24 Executive Directors make up Executive Board. The Executive Directors
represent all 188 member countries in a geographically based roster.
[59] Countries with large economies have their own Executive Director, but
most countries are grouped in constituencies representing four or more
countries.[57]
Following the 2008 Amendment on Voice and Participation which came into
effect in March 2011,[60] eight countries each appoint an Executive Director:
the United States, Japan, Germany, France, the UK, China, the Russian
Federation, and Saudi Arabia.[59] The remaining 16 Directors represent
constituencies consisting of 4 to 22 countries. The Executive Director
representing the largest constituency of 22 countries accounts for 1.55% of
the vote.[citation needed] This Board usually meets several times each
25
Managing Director
The IMF is led by a managing director, who is head of the staff and serves as
Chairman of the Executive Board. The managing director is assisted by a First
Deputy managing director and three other Deputy Managing Directors.
[57] Historically the IMF's managing director has been European and the
president of the World Bank has been from the United States. However, this
standard is increasingly being questioned and competition for these two
posts may soon open up to include other qualified candidates from any part
of the world.[62][63]
In 2011 the world's largest developing countries, the BRIC nations, issued a
statement declaring that the tradition of appointing a European as managing
director undermined the legitimacy of the IMF and called for the appointment
to be merit-based.
Previous managing director Dominique Strauss-Kahn was arrested in
connection with charges of sexually assaulting a New York hotel room
attendant and resigned on 18 May.[65] On 28 June 2011 Christine
Lagarde was confirmed as managing director of the IMF for a five-year term
starting on 5 July 2011.[66][67] In 2012, Lagarde was paid a tax-exempt
salary of US$467,940, and this is automatically increased every year
according to inflation. In addition, the director receives an allowance of
US$83,760 and additional expenses for entertainment.
27
The IMF's five area, or regional, departments are responsible for advising
member countries on macroeconomic policies and the financial sector,
and for putting together, when needed, financial arrangements to support
economic reform programs.
28
Voting power
Voting power in the IMF is based on a quota system. Each member has a
number of basic votes (each member's number of basic votes equals 5.502%
of the total votes),[69] plus one additional vote for each Special Drawing
Right (SDR) of 100,000 of a member country's quota.[70] The Special
Drawing Right is the unit of account of the IMF and represents a claim to
currency. It is based on a basket of key international currencies. The basic
votes generate a slight bias in favour of small countries, but the additional
votes determined by SDR outweigh this bias.[70]
IMF Quotas
When a country joins the IMF, it is assigned an initial quota in the same
range as the quotas of existing members of broadly comparable economic
size and characteristics. The IMF uses a quota formula to help assess a
members relative position.
29
31
Developing countries
Quotas are normally reviewed every five years and can be increased when
deemed necessary by the Board of Governors. Currently, reforming the
representation of developing countries within the IMF has been suggested.
[70] These countries' economies represent a large portion of the global
economic system but this is not reflected in the IMF's decision making
process through the nature of the quota system. Joseph Stiglitz argues,
"There is a need to provide more effective voice and representation for
developing countries, which now represent a much larger portion of world
economic activity since 1944, when the IMF was created."[74] In 2008, a
number of quota reforms were passed including shifting 6% of quota shares
to dynamic emerging markets and developing countries.[75]
Use
A recent source reveals that the average overall use of IMF credit per decade
increased, in real terms, by 21% between the 1970s and 1980s, and
increased again by just over 22% from the 1980s to the 19912005 period.
Another study has suggested that since 1950 the continent of Africa alone
has received $300 billion from the IMF, the World Bank, and affiliate
institutions.[78]
A study by Bumba Mukherjee found that developing democratic
countries benefit more from IMF programs than developing autocratic
countries because policy-making, and the process of deciding where loaned
money is used, is more transparent within a democracy.[78] One study done
by Randall Stone found that although earlier studies found little impact of
IMF programs on balance of payments, more recent studies using more
sophisticated methods and larger samples "usually found IMF programs
improved the balance of payments".[20]
35
Criticisms
Overseas Development Institute (ODI) research undertaken in 1980 pointed
to five main criticisms of the IMF which support the analysis that it is a pillar
37
38
Argentina, which had been considered by the IMF to be a model country in its
compliance to policy proposals by the Bretton Woods institutions,
experienced a catastrophic economic crisis in 2001,[88] which some believe
to have been caused by IMF-induced budget restrictionswhich undercut the
government's ability to sustain national infrastructure even in crucial areas
such as health, education, and securityand privatisation of strategically
vital national resources.[89] Others attribute the crisis to Argentina's
misdesigned fiscal federalism, which caused subnational spending to
increase rapidly.[90] The crisis added to widespread hatred of this institution
in Argentina and other South American countries, with many blaming the IMF
for the region's economic problems. The currentas of early 2006trend
toward moderate left-wing governments in the region and a growing concern
with the development of a regional economic policy largely independent of
big business pressures has been ascribed to this crisis.
In an interview, the former Romanian Prime Minister Clin PopescuTriceanu claimed that "Since 2005, IMF is constantly making mistakes when
it appreciates the country's economic performances".
[91] Former Tanzanian President Julius Nyerere, who claimed that debt-ridden
African states were ceding sovereignty to the IMF and the World Bank,
famously asked, "Who elected the IMF to be the ministry of finance for every
country in the world?"[92][93]
Conditionality
The IMF has been criticised for being "out of touch" with local economic
conditions, cultures, and environments in the countries they are requiring
policy reform.[8] The economic advice the IMF gives might not always take
into consideration the difference between what spending means on paper
and how it is felt by citizens.[94]
For example, some people believe that Jeffrey Sachs' work shows that the
IMF's "usual prescription is 'budgetary belt tightening to countries who are
much too poor to own belts'".[94] It has been said that the IMF's role as a
generalist institution specialising in macroeconomic issues needs
reform. Conditionality has also been criticised because a country can pledge
collateral of "acceptable assets" to obtain waiversif one assumes that all
countries are able to provide "acceptable collateral".[19]
39
Reform
The IMF is only one of many international organisations and it is a generalist
institution for macroeconomic issues only; its core areas of concern
in developing countries are very narrow. One proposed reform is a movement
towards close partnership with other specialist agencies such as UNICEF,
the Food and Agriculture Organization (FAO), or the United Nations
Development Program (UNDP).[94]
Jeffrey Sachs argues in The End of Poverty that the IMF and the World Bank
have "the brightest economists and the lead in advising poor countries on
how to break out of poverty, but the problem is development economics".
[94] Development economics needs the reform, not the IMF. He also notes
that IMF loan conditions should be paired with other reformse.g., trade
reform in developed nations, debt cancellation, and increased financial
assistance for investments in basic infrastructure.[94] IMF loan conditions
cannot stand alone and produce change; they need to be partnered with
other reforms or other conditions as applicable.
Reforms to give more powers to emerging economies were agreed by
the G20 in 2010; however, as of April 2014, the U.S. Congress has not agreed
to these reforms.
42
Impact on environment
IMF policies have been repeatedly criticised for making it difficult for
indebted countries to say no to environmentally harmful projects that
nevertheless generate revenues such as oil, coal, and forest-destroying
lumber and agriculture projects. Ecuador for example had to defy IMF advice
repeatedly to pursue the protection of its rain forests, though paradoxically
this need was cited in IMF argument to support that country. The IMF
acknowledged this paradox in the 2010 report that proposed the IMF Green
Fund, a mechanism to issue special drawing rights directly to pay for climate
harm prevention and potentially other ecological protection as pursued
generally by other environmental finance.[109]
While the response to these moves was generally positive[110] possibly
because ecological protection and energy and infrastructure transformation
are more politically neutral than pressures to change social policy. Some
experts voiced concern that the IMF was not representative, and that the IMF
proposals to generate only US$200 billion a year by 2020 with the SDRs as
seed funds, did not go far enough to undo the general incentive to pursue
destructive projects inherent in the world commodity trading and banking
systemscriticisms often levelled at the World Trade Organization and large
global banking institutions.
In the context of the European debt crisis, some observers noted that Spain
and California, two troubled economies within Europe and the United States,
and also Germany, the primary and politically most fragile supporter of
a euro currency bailout would benefit from IMF recognition of their leadership
in green technology, and directly from Green Fundgenerated demand for
their exports, which could also improve their credit ratings.
Conclusion
43
The IMF oversees the international monetary system and monitors the
financial and economic policies of its members. It keeps track of
economic developments on a national, regional, and global basis,
consulting regularly with member countries and providing them with
macroeconomic and financial policy advice.
To assist mainly low- and middle-income countries in effectively
managing their economies, the IMF provides practical guidance
and training on how to upgrade institutions, and design appropriate
macroeconomic, financial, and structural policies.
The IMF provides loans to countries that have trouble meeting their
international payments and cannot otherwise find sufficient financing
on affordable terms. Thisfinancial assistance is designed to help
countries restore macroeconomic stability by rebuilding their
international reserves, stabilizing their currencies, and paying for
importsall necessary conditions for relaunching growth. The IMF also
provides concessional loans to low-income countries to help them
develop their economies and reduce poverty.
44
Bibliography
www.google.com
www.wiipedia.org
http://www.imf.org
en.wikipedia.org/wiki/International Monetary Fund
45