International Monetary Fund

The International Monetary Fund (IMF) is an international organization headquartered

in Washington, D.C., of "188 countries working to foster global monetary cooperation, secure
financial stability, facilitate international trade, promote high employment and sustainable
economic growth, and reduce poverty around the world."1 Formed in 1944 at the Bretton
Woods Conference, it came into formal existence in 1945 with 29 member countries and the
goal of reconstructing the international payment system. Countries contribute funds to a pool
through a quota system from which countries experiencing balance of payments difficulties
can borrow money. As of 2010, the fund had SDR476.8 billion, about US$755.7 billion at
then-current exchange rates.4

Through the fund, and other activities such as statistics-keeping and analysis, surveillance of
its members' economies and the demand for self-correcting policies, the IMF works to

1
improve the economies of its member countries.5 The organization's objectives stated in the
Articles of Agreement are:6 to promote international monetary cooperation, international
trade, high employment, exchange-rate stability, sustainable economic growth, and making
resources available to member countries in financial difficulty

Functions:

According to the IMF itself, it 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 reduce poverty.8 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.9 The IMF provides alternate sources of financing.

Upon the founding of the IMF, its three primary functions were: to oversee the fixed
exchange rate arrangements between countries,10 thus helping national governments manage
their exchange rates and allowing these governments to prioritise economic growth,11 and to
provide short-term capital to aid balance of payments.10 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 after the Great Depressionand World War II.12 As well, to
provide capital investments for economic growth and projects such as infrastructure.

The IMF's role was fundamentally altered by 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.13 The new
challenge is to promote and implement policy that reduces the frequency of crises among the
emerging market countries, especially the middle-income countries that are vulnerable to
massive capital outflows.14 Rather than maintaining a position of oversight of only exchange
rates, their function became one of surveillance of the overall macroeconomic performance of

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member countries. Their role became a lot more active because the IMF now manages
economic policy rather than just exchange rates.

In addition, the IMF negotiates conditions on lending and loans under their policy
of conditionality,10 which was established in the 1950s.12 Low-income countries can borrow
onconcessional terms, which means there is a period of time with no interest rates, through
the Extended Cr: Facility (ECF), the Standby Cr: Facility (SCF) and the Rapid Cr: Facility
(RCF). Nonconcessional loans, which include interest rates, are provided mainly
through Stand-By Arrangements (SBA), the Flexible Cr: Line (FCL), the Precautionary and
Liquidity Line (PLL), and the Extended Fund Facility. The IMF provides emergency
assistance via the Rapid Financing Instrument (RFI) to members facing urgent balance-of-
payments needs.15

Surveillance of the global economy:

The IMF is mandated to oversee the international monetary and financial system and monitor
the economic and financial policies of its member countries.16 This activity is known as
surveillance and facilitates international cooperation.17 Since the demise of the Bretton Woods
system of fixed exchange rates in the early 1970s, surveillance has evolved largely by way of
changes in procedures rather than through the adoption of new obligations.16 The
responsibilities changed from those of guardian to those of overseer of members policies.

The Fund typically analyzes the appropriateness of each member countrys economic and
financial policies for achieving orderly economic growth, and assesses the consequences of
these policies for other countries and for the global economy.16

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IMF Data Dissemination Systems participants:

IMF member using SDDS

IMF member using GDDS

IMF member, not using any of the DDSystems

non-IMF entity using SDDS

non-IMF entity using GDDS

no interaction with the IMF

In 1995 the International Monetary Fund began work on data dissemination standards with
the view of guiding IMF member countries to disseminate their economic and financial data
to the public. The International Monetary and Financial Committee (IMFC) endorsed the
guidelines for the dissemination standards and they were split into two tiers: The General
Data Dissemination System (GDDS) and the Special Data Dissemination Standard (SDDS).

The executive board approved the SDDS and GDDS in 1996 and 1997 respectively, and
subsequent amendments were published in a revised Guide to the General Data
Dissemination System. The system is aimed primarily at statisticians and aims to improve
many aspects of statistical systems in a country. It is also part of the World Bank Millennium
Development Goals and Poverty Reduction Strategic Papers.

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The primary objective of the GDDS is to encourage member countries to build a framework
to improve data quality and statistical capacity building in order to evaluate statistical needs,
set priorities in improving the timeliness, transparency, reliability and accessibility of
financial and economic data. Some countries initially used the GDDS, but later upgraded to
SDDS.

Some entities that are not themselves IMF members also contribute statistical data to the
systems:

Palestinian Authority GDDS

Hong Kong SDDS

Macau GDDS18

EU institutions:

the European Central Bank for the Eurozone SDDS

Eurostat for the whole EU SDDS, thus providing data from Cyprus (not
using any DDSystem on its own) and Malta (using only GDDS on its own)

Conditionality of loans:

IMF conditionality is a set of policies or conditions that the IMF requires in exchange for
financial resources.10 The IMF does require collateral from 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.10Conditionality is
perhaps the most controversial aspect of IMF policies.19weasel words The concept of conditionality
was introduced in a 1952 Executive Board decision and later incorporated into the Articles of
Agreement.

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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".12

Structural adjustment:
Further information: Structural adjustment

Some of the conditions for structural adjustment can include:

Cutting expenditures, also known as austerity.

Focusing economic output on direct export and resource extraction,

Devaluation of currencies,

Trade liberalisation, or lifting import and export restrictions,

Increasing the stability of investment (by supplementing foreign direct

investment with the opening of domestic stock markets),

Balancing budgets and not overspending,

Removing price controls and state subsidies,

Privatization, or divestiture of all or part of state-owned enterprises,

Enhancing the rights of foreign investors vis-a-vis national laws,

Improving governance and fighting corruption.

These conditions have also been sometimes labelled as the Washington Consensus.

Benefits:

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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-of-payment problems in a way that
would negatively impact the international economy.2021 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.21

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.21 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.19

As of 2004, borrowing countries have had a very good track record for repaying cr: 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 cr:or 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.9

History:

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IMF "Headquarters 1" in Washington, D.C.

The IMF was originally laid out as a part of the Bretton Woods system exchange agreement
in 1944.22 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.23

The Gold Room within the Mount Washington Hotel where the Bretton Woods
Conference attendees signed the agreements creating the IMF andWorld Bank

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

8
Washington Hotel in Bretton Woods, New Hampshire, in the United States, to discuss a
framework for postwar international economic cooperation 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 cooperative 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.24 Most of White's plan was incorporated
into the final acts adopted at Bretton Woods.

First page of the Articles of Agreement of the International Monetary Fund, 1 March 1946.
Finnish Ministry of Foreign Affairs archives

The IMF formally came into existence on 27 December 1945, when the first 29
countries ratified its Articles of Agreement.25 By the end of 1946 the IMF had grown to 39

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members.26 On 1 March 1947, the IMF began its financial operations,27 and on 8 May France
became the first country to borrow from it.26

Plaque Commemorating the Formation of the IMF in July 1944 at the Bretton Woods
Conference

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.28 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.23

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.23

Since 2000:

In May 2010, the IMF participated, in 3:11 proportion, in the first Greek bailout that totalled
110 billion, to address the great accumulation of public debt, caused by continuing large
public sector deficits. As part of the bailout, the Greek government agreed to adopt austerity
measures that would reduce the deficit from 11% in 2009 to "well below 3%" in 2014.29 The
bailout did not include debt restructuring measures such as a haircut, to the chagrin of the

10
Swiss, Brazilian, Indian, Russian, and Argentinian Directors of the IMF, with the Greek
authorities themselves (at the time, PM George Papandreou and Finance
Minister GiorgosPapakonstantinou) ruling out a haircut.30

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,31 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 Germany reduced exposure
to Greek debt from 122 billion to 66 billion.3032

As of January 2012, the largest borrowers from the IMF in order were Greece, Portugal,
Ireland, Romania, and Ukraine.33

On 25 March 2013, a 10 billion international bailout of Cyprus was agreed by the Troika, at
the cost to the Cypriots of its agreement: to close the country's second-largest bank; to impose
a one-time bank deposit levy on Bank of Cyprus uninsured deposits.3435 No insured deposit of
100k or less were to be affected under the terms of a novel bail-in scheme.3637

The topic of sovereign debt restructuring was taken up by the IMF in April 2013 for the first
time since 2005, in a report entitled "Sovereign Debt Restructuring: Recent Developments
and Implications for the Funds Legal and Policy Framework".38 The paper, which was
discussed by the board on 20 May,39 summarised the recent experiences in Greece, St Kitts
and Nevis, Belize, and Jamaica. An explanatory interview with Deputy Director Hugh
Bredenkamp was published a few days later,40 as was a deconstruction by MatinaStevisof
the Wall Street Journal.41

In the October 2013 Fiscal Monitor publication, the IMF suggested that a capital levy capable
of reducing Euro-area government debt ratios to "end-2007 levels" would require a very high
tax rate of about 10%.42

The Fiscal Affairs department of the IMF, headed at the time by Acting Director Sanjeev
Gupta, produced a January 2014 report entitled "Fiscal Policy and Income Inequality" that
stated that "Some taxes levied on wealth, especially on immovable property, are also an

11
option for economies seeking more progressive taxation ... Property taxes are equitable and
efficient, but underutilized in many economies ... There is considerable scope to exploit this
tax more fully, both as a revenue source and as a redistributive instrument."43

At the end of March 2014, the IMF secured an $18 billion bailout fund for the provisional
government of Ukraine in the aftermath of the 2014 Ukrainian revolution.4445

Member countries:

IMF member states

IMF member states not accepting the obligations of Article VIII, Sections 2, 3, and 446

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.47 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.4849 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)50 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.51However, "Taiwan Province of China" is
still listed in the official IMF indices.52

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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 1986.53

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.54

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.55

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.56

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.57

Leadership:

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1] 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.58

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.59 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.59

2] Executive Board:
24 Executive Directors make up Executive Board. The Executive Directors represent all 188
member countries in a geographically based roster.60 Countries with large economies have
their own Executive Director, but most countries are grouped in constituencies representing
four or more countries.58

Following the 2008 Amendment on Voice and Participation which came into effect in March
2011,61 eight countries each appoint an Executive Director: the United States, Japan,
Germany, France, the UK, China, the Russian Federation, and Saudi Arabia.60 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 week.62 The Board membership and
constituency is scheduled for periodic review every eight years.

3] Voting power:

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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),70 plus one
additional vote for each Special Drawing Right (SDR) of 100,000 of a member country's
quota.71 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.71

Effects of the quota system:

The IMF's quota system was created to raise funds for loans.74 Each IMF member country is
assigned a quota, or contribution, that reflects the country's relative size in the global
economy. Each member's quota also determines its relative voting power. Thus, financial
contributions from member governments are linked to voting power in the organisation.71

This system follows the logic of a shareholder-controlled organisation: wealthy countries

have more say in the making and revision of rules.75 Since decision making at the IMF
reflects each member's relative economic position in the world, wealthier countries that
provide more money to the IMF have more influence than poorer members that contribute
less; nonetheless, the IMF focuses on redistribution.71

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.71 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."76 In 2008, a number of quota reforms were passed including shifting 6% of quota
shares to dynamic emerging markets and developing countries.77

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Overcoming borrower/cr:or divide:

The IMF's membership is divided along income lines: certain countries provide the financial
resources while others use these resources. Both developed country "cr:ors" anddeveloping
country "borrowers" are members of the IMF. The developed countries provide the financial
resources but rarely enter into IMF loan agreements; they are the cr:ors. Conversely, the
developing countries use the lending services but contribute little to the pool of money
available to lend because their quotas are smaller; they are the borrowers. Thus, tension is
created around governance issues because these two groups, cr:ors and borrowers, have
fundamentally different interests.71

The criticism is that the system of voting power distribution through a quota system
institutionalises borrower subordination and cr:or dominance. The resulting division of the
IMF's membership into borrowers and non-borrowers has increased the controversy around
conditionality because the borrowers are interested in increasing loan access while cr:ors
want to maintain reassurance that the loans will be repaid.78

Use:

A recentwhen? source revealed that the average overall use of IMF cr: 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.79

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.79 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".22

Exceptional Access Framework Sovereign Debt:

The Exceptional Access Framework was created in 2003 when John B. Taylor was Under
Secretary of the U.S. Treasury for International Affairs. The new Framework became fully

16
operational in February 2003 and it was applied in the subsequent decisions on Argentina and
Brazil.80 Its purpose was to place some sensible rules and limits on the way the IMF makes
loans to support governments with debt problemespecially in emerging marketsand
thereby move away from the bailout mentality of the 1990s. Such a reform was essential for
ending the crisis atmosphere that then existed in emerging markets. The reform was closely
related to, and put in place nearly simultaneously with, the actions of several emerging
market countries to place collective action clauses in their bond contracts.

In 2010, the framework was abandoned so the IMF could make loans to Greece in an
unsustainable and political situation.8182

The topic of sovereign debt restructuring was taken up by IMF staff in April 2013 for the first
time since 2005, in a report entitled "Sovereign Debt Restructuring: Recent Developments
and Implications for the Fund's Legal and Policy Framework".38 The paper, which was
discussed by the board on 20 May,39 summarised the recent experiences in Greece, St Kitts
and Nevis, Belize and Jamaica. An explanatory interview with Deputy Director Hugh
Bredenkamp was published a few days later,40 as was a deconstruction by MatinaStevis of
the Wall Street Journal.41

The staff was directed to formulate an updated policy, which was accomplished on 22 May
2014 with a report entitled "The Fund's Lending Framework and Sovereign Debt: Preliminary
Considerations", and taken up by the Executive Board on 13 June.83 The staff proposed that
"in circumstances where a (Sovereign) member has lost market access and debt is considered
sustainable ... the IMF would be able to provide Exceptional Access on the basis of a debt
operation that involves an extension of maturities", which was labelled a "reprofiling
operation". These reprofiling operations would "generally be less costly to the debtor and
cr:orsand thus to the system overallrelative to either an upfront debt reduction operation
or a bail-out that is followed by debt reduction ... (and) would be envisaged only when both
(a) a member has lost market access and (b) debt is assessed to be sustainable, but not with
high probability ... Cr:ors will only agree if they understand that such an amendment is
necessary to avoid a worse outcome: namely, a default and/or an operation involving debt
reduction ... Collective action clauses, which now exist in mostbut not allbonds, would
be relied upon to address collective action problems."83

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 IMF and globalization:

Globalization encompasses three institutions: global financial markets and transnational

companies, national governments linked to each other in economic and military alliances led
by the United States, and rising "global governments" such as World Trade
Organization (WTO), IMF, and World Bank.84 Charles Derber argues in his book People
Before Profit, "These interacting institutions create a new global power system where
sovereignty is globalized, taking power and constitutional authority away from nations and
giving it to global markets and international bodies".84 Titus Alexander argues that this system
institutionalises global inequality between western countries and the Majority World in a
form of global apartheid, in which the IMF is a key pillar.85

The establishment of globalised economic institutions has been both a symptom of and a
stimulus for globalization. The development of the World Bank, the IMF regional
development banks such as the European Bank for Reconstruction and
Development (EBRD), and multilateral trade institutions such as the WTO signals a move
away from the dominance of the state as the exclusive unit of analysis in international affairs.
Globalization has thus been transformative in terms of a reconceptualising of state
sovereignty.86

Following U.S. President Bill Clinton's administration's aggressive

financial deregulation campaign in the 1990s, globalisation leaders overturned longstanding
restrictions by governments that limited foreign ownership of their banks, deregulated
currency exchange, and eliminated restrictions on how quickly money could be withdrawn by
foreign investors.84

Fund report in May 2015, the world's governments indirectly subsidize fossil fuel companies
with $5.3tn (3.4tn) a year. Most this is due to polluters not paying the costs imposed on
governments by the burning of coal, oil and gas: air pollution, health problems, the floods,
droughts and storms driven by climate change.87

Criticisms

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Overseas Development Institute (ODI) research undertaken in 1980 included criticisms of the
IMF which support the analysis that it is a pillar of what activist Titus Alexander callsglobal
apartheid.88

Developed countries were seen to have a more dominant role and control over less
developed countries (LDCs).

Secondly, the Fund worked on the incorrect assumption that all

payments disequilibria were caused domestically. The Group of 24 (G-24), on behalf of
LDC members, and the United Nations Conference on Trade and
Development (UNCTAD) complained that the IMF did not distinguish sufficiently
between disequilibria with predominantly external as opposed to internal causes. This
criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs found themselves
with payments deficits due to adverse changes in their terms of trade, with the Fund
prescribing stabilisation programmes similar to those suggested for deficits caused by
government over-spending. Faced with long-term, externally generated disequilibria, the
G-24 argued for more time for LDCs to adjust their economies.

Some IMF policies may be anti-developmental; the report said

that deflationary effects of IMF programmes quickly led to losses of output and
employment in economies where incomes were low and unemployment was high.
Moreover, the burden of the deflation is disproportionately borne by the poor.

Lastly is the suggestion that the IMF's policies lack a clear economic rationale. Its
policy foundations were theoretical and unclear because of differing opinions and
departmental rivalries whilst dealing with countries with widely varying economic
circumstances.

ODI conclusions were that the IMF's very nature of promoting market-oriented approaches
attracted unavoidable criticism. On the other hand, the IMF could serve as a scapegoat while
allowing governments to blame international bankers. The ODI conceded that the IMF was
insensitive to political aspirations of LDCs, while its policy conditions were inflexible.89

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

19
crisis in 2001,90 which some believe to have been caused by IMF-induced budget restrictions
which 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.91 Others attribute the crisis to Argentina's misdesigned fiscal federalism, which
caused subnational spending to increase rapidly.92 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 ClinPopescu-Triceanu claimed that

"Since 2005, IMF is constantly making mistakes when it appreciates the country's economic
performances".93 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?"9495

Former chief economist of IMF and current Reserve Bank of India (RBI)
Governor RaghuramRajan who predicted Financial crisis of 200708 criticized IMF for
remaining a sideline player to the Developed world. He criticized IMF for praising monetary
policies of USA which are wreaking havoc in emerging markets.96 He had been critical of the
ultra-loose money policies of the Western nations and IMF.

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.10 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.99

Jeffrey Sachs argues that the IMF's "usual prescription is 'budgetary belt tightening to
countries who are much too poor to own belts'".99 SachsOr who says it? wrote that the IMF's role as
a generalist institution specialising in macroeconomic issues needs reform. Conditionality has

20
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".21

One view is that conditionality undermines domestic political institutions.100 The recipient
governments are sacrificing policy autonomy in exchange for funds, which can lead to public
resentment of the local leadership for accepting and enforcing the IMF conditions. Political
instability can result from more leadership turnover as political leaders are replaced in
electoral backlashes.10 IMF conditions are often criticised for reducing government services,
thus increasing unemployment.12

Another criticism is that IMF programs are only designed to address poor governance,
excessive government spending, excessive government intervention in markets, and too much
state ownership.99 This assumes that this narrow range of issues represents the only possible
problems; everything is standardised and differing contexts are ignored.99A country may also
be compelled to accept conditions it would not normally accept had they not been in a
financial crisis in need of assistance.19

On top of that, regardless of what methodologies and data sets used, it comes to same
conclusion of exacerbating income inequality. With Gini coefficient, it became clear that
countries with IMF programs face increased income inequality.101

It is claimed that conditionalities retard social stability and hence inhibit the stated goals of
the IMF, while Structural Adjustment Programs lead to an increase in poverty in recipient
countries.102 The IMF sometimes advocates austerity programmes, cutting public spending
and increasing taxes even when the economy is weak, to bring budgets closer to a balance,
thus reducing budget deficits. Countries are often advised to lower their corporate tax rate.
In Globalization and Its Discontents, Joseph E. Stiglitz, former chief economist and senior
vice-president at the World Bank, criticizes these policies.103 He argues that by converting to a
more monetarist approach, the purpose of the fund is no longer valid, as it was designed to
provide funds for countries to carry out Keynesian reflations, and that the IMF "was not
participating in a conspiracy, but it was reflecting the interests and ideology of the Western
financial community".104

International politics play an important role in IMF decision making. The clout of member
states is roughly proportional to its contribution to IMF finances. The United States has the

21
greatest number of votes and therefore wields the most influence. Domestic politics often
come into play, with politicians in developing countries using conditionality to gain leverage
over the opposition in order to influence policy.105

Reform:

Function and policies

The IMF is only one of many international organisations, and it is a generalist institution that
deals only with macroeconomic issues; 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), and the
United Nations Development Program (UNDP).99

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".99 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.99 IMF loan conditions cannot stand alone and produce
change; they need to be partnered with other reforms or other conditions as applicable.

U.S. dominance and voting reform

The scholarly consensus is that IMF decision-making is not simply technocratic, but also
guided by political and economic concerns.106 The United States is the IMF's most powerful
member, and its influence reaches even into decision-making concerning individual loan
agreements.107 The North American giant is openly opposed to losing what Treasury
Secretary Jacob Lew describes as its "leadership role" at the IMF, "our ability to shape
international norms and practices".108

Reforms to give more powers to emerging economies were agreed by the G20 in 2010;
however, they are yet to be ratified by the U.S. Congress.109110111 The 2010 reforms cannot

22
pass without American approval, since 85% of the Fund's voting power is required,112 and the
Americans hold more than 16% of voting power.113 The U.S. executive board veto was
brought up again by IMF junior members in April 2014, who also expressed their ongoing
frustration with U.S. failure to ratify the 2010 reforms. Singapore's 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.114 In May 2015, the
Obama administration made clear it would not sacrifice its IMF veto, in order to assure
Congressional approval.115

Support of military dictatorships:

The role of the Bretton Woods institutions has been controversial since the late Cold War,
because of claims that the IMF policy makers supported military dictatorships friendly to
American and European corporations and other anti-communist regimes. Critics also claim
that the IMF is generally apathetic or hostile to human rights, and labour rights.citation needed The
controversy has helped spark the anti-globalization movement.

An example of IMF's support for a dictatorship was its ongoing support for Mobutu's rule
in Zaire, although its own envoy, Erwin Blumenthal, provided a sobering report about the
entrenched corruption and embezzlement and the inability of the country to pay back any
loans.116

Arguments in favour of the IMF say that economic stability is a precursor to democracy;
however, critics highlight various examples in which democratised countries fell after
receiving IMF loans.117

Impact on access to food:

A number of civil society organisations118 have criticised the IMF's policies for their impact
on access to food, particularly in developing countries. In October 2008, former U.S.
president Bill Clinton delivered a speech to the United Nations on World Food Day,
criticizing the World Bank and IMF for their policies on food and agriculture:

23
We need the World Bank, the IMF, all the big foundations, and all the governments to admit
that, for 30 years, we all blew it, including me when I was president. We were wrong to
believe that food was like some other product in international trade, and we all have to go
back to a more responsible and sustainable form of agriculture.

Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October
16, 2008119

Impact on public health:

A 2009 study concluded that the strict conditions resulted in thousands of deaths in Eastern
Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which
the IMF had given loans, tuberculosis deaths rose by 16.6%.120

In 2009, a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the IMF has
Undermined Public Health and the Fight Against AIDS, claimed that the IMFs monetarist
approach towards prioritising price stability (low inflation) and fiscal restraint (low budget
deficits) was unnecessarily restrictive and has prevented developing countries from scaling
up long-term investment in public health infrastructure. The book claimed the consequences
have been chronically underfunded public health systems, leading to demoralising working
conditions that have fuelled a "brain drain" of medical personnel, all of which has
undermined public health and the fight against HIV/AIDS in developing countries.121

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.122

While the response to these moves was generally positive123 possibly because ecological
protection and energy and infrastructure transformation are more politically neutral than

24
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 systems
criticisms 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 cr:ratings.citation needed

Alternatives:

In March 2011 the Ministers of Economy and Finance of the African Union proposed to
establish an African Monetary Fund.124

At the 6th BRICS summit in July 2014 the BRICS nations (Brazil, Russia, India, China,
and South Africa) announced the BRICS Contingent Reserve Arrangement (CRA) with an
initial size of US$100 billion, a framework to provide liquidity through currency swaps in
response to actual or potential short-term balance-of-payments pressures.125

In 2014, the China-led Asian Infrastructure Investment Bank was established as a rival to the
IMF and World Bank.108

In the media:

Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica and its
economy from a critical point of view. Debtocracy, a 2011 independent Greek documentary
film, also criticizes the IMF. Portuguese musician Jos MrioBranco's 1982 album FMI is
inspired by the IMF's intervention in Portugal through monitored stabilization programs in
197778.Can The IMF Solve Global Economic ProblemsThe International Monetary
Fund (IMF) was founded in 1944 with a primary mission to watch over the monetary system,
guarantee exchange rate stability and eliminate restrictions that prevent or slow trade. This
came about because many countries were economically devastated by the Great Depression

25
and World War II. Over the years, the IMF has helped countries move through many different
challenging economic situations. The organization is also continuing to evolve and adapt to
the ever-changing world economy. We'll look at the role the IMF has played, as well as
economic issues, the levels of influence some countries have over this organization, and its
successes and failures.

Role in Global Economic Issues

For many countries, the IMF has been the organization to turn to during difficult economic
times. Over the years this organization has played a key role in helping countries turn around
through the use of economic aid. However, this is only one of the many roles that the IMF
plays in global economic issues.How it's Funded The IMF is funded by a quota system where
each country pays based on the size of its economy and its political importance in world trade
and finance. When a country joins the organization, it usually pays a quarter of its quota in
the form of U.S. dollars, euros, yen or pound sterling. The other three quarters can be paid in
its own currency. Generally, these quotas are reviewed every five years. The IMF can use the
quotas from the economically-sturdy countries to lend as aid to developing nations.

The IMF is also funded through contribution trust funds where the organization acts as
trustee. This comes from the contributions from members as opposed to quotas, and is used to
provide low-income countries with low-interest loans and debt relief.

Lending When a country requests a loan, the IMF will give the country the money needed to
rebuild or stabilize its currency, re-establish economic growth and continue buying imports.
Several of the types of loans offered include:

Poverty Reduction and Growth Facility (PRGF) loans. These are low-interest loans
for low-income countries to reduce poverty and improve growth for these countries.

Exogenous Shocks Facility (ESF) loans. These are loans to low-income countries that
provide lending for negative economic events that are outside the control of the
government. These could include commodity price changes, natural disasters and
wars that can interrupt trade.

Stand By Arrangements (SBA). These are used to help countries with short-
term balance of payment issues. (Refresh your understanding of balance of payments

26
 with our article: Understanding Capital And Financial Accounts in The Balance Of
Payments.)

Extended Fund Facility (EFF). This is used to assist countries with long-term balance
of payment issues that require economic reforms.

Supplemental Reserve Facility (SRF). This is provided to meet short-term financing

on a large scale, like the loss of investor confidence during the Asian Financial
Crisis that caused enormous outflows of money and led to massive IMF financing.

Emergency Assistance loans. These are designed to provide assistance to countries

that have had a natural disaster or are emerging from war.

Surveillance The IMF watches the economics and economic policies of its members. There
are two main components of surveillance, country surveillance and multilateral surveillance.
Through country surveillance, the IMF visits the country once a year to assess its economic
policies and where they are headed. It reports its findings in the Public Information Notice.
The second way, multilateral surveillance, is when the IMF surveys global and regional
economic trends. It reports these twice a year in the World Economic Outlook and Global
Financial Stability Report. These two reports point out problems and potential risks to the
world economy and financial markets. The Regional Economic Outlook Report gives more
details and analysis

Technical Assistance
The IMF helps countries to administer their economic and financial affairs. This service is
provided to any membership country that asks for assistance, and is typically provided to
low- and middle-income countries. Through the use of technical assistance, the IMF can
perform useful surveillance and lending to help the country avoid economic pitfalls which
creates sustainable economic growth. Technical assistance helps countries strengthen their
economic policy, tax policy, monetary policy, exchange rate system and financial system
stability.

27
Levels of InfluenceWith over 185 members, some members of the IMF may have more
influence over its policies and decisions than others. The United States and Europe are the
major influences within the IMF.

The United States - The United States has the largest percentage of voting rights in
the IMF with a 16.8% share, and contributes the largest quota of any single country. Over the
years there have been many complaints that the U.S. uses the IMF as a way to support
countries that are strategically important to them, rather than based on economic need. Many
members feel that they should have more of a stake in what the organization does when it
determines how and in what ways to help out the different countries.

Europe - Many European countries have resisted the efforts for a readjustment in voting
rights and influence at the IMF. In the past, a European has generally held the managing
director position of this organization. However, as the world continues to change there is
greater demand to give more of a voice to new emerging economic countries. There has been
talk that Europe could pool its quotas and maintain a strong voice going forward. However, if
the countries try to individually maintain the levels they have, their voice of influence could
continue to diminish.Successes and Failures of the IMF
The IMF has had many successes and failures. Below we will highlight examples of a
previous success and failure.

Jordan -Jordan had been impacted by its wars with Israel, civil war and a major economic
recession. In 1989 the country had a 30-35% unemployment rate and was struggling with its
inability to pay its loans. The country agreed to a series of five-year reforms that began with
the IMF. The Gulf war and the return of 230,000 Jordanians because of Iraq's invasion of
Kuwait put strain on the government, as unemployment continued to increase. In the period
from 1993 to 1999, the IMF extended to Jordan three extended fund facility loans. As a result
the government undertook massive reforms of privatization, taxes, foreign investment and
easier trade policies. By 2000 the country was admitted to theWorld Trade
Organization (WTO), and one year later signed a free trade accord with the United States.
Jordan was also able to bring down its overall debt payment and restructure it at a
manageable level. Jordan is an example of how the IMF can foster strong, stable economies
that are productive members of the global economy. (For an interesting perspective on the
WTO, take a look at The Dark Side Of The WTO.)

28
Tanzania - In 1985 the IMF came to Tanzania with the aim of turning a broke, indebted
socialist state into a strong contributor to the world economy. Since that time the organization
has run into nothing but roadblocks. The first steps taken were to lower trade barriers, cut
government programs and sell the state-owned industries. By 2000 the once-free healthcare
industry started charging patients and the AIDS rate in the country shot up to 8%. The
education system that was once free started to charge children to go to school, and school
enrollment, which was at 80%, dropped to 66%. As a result, the illiteracy rate of the country
shot up by nearly 50%. Also, In the period from 1985 to 2000 the per capita GDP income
dropped from $309 to $210. This is an example of how the organization failed to understand
that a one-size-fits-all strategy does not apply to all countries.

The Changing Role of the IMF in the Governance of the Global

Economy

Introduction

Since the collapse of the Bretton Woods system in the mid-1970s the International
Monetary Fund (IMF) and the World Bank, have helped the world avoid the horrors of a
systemic collapse. However, when we look at the volatility in financial markets, the growing
imbalances in the global economy, the increasing income inequality both within and between
countries, the facts that nearly half the worlds population lives on less than $2 per day and
about 22% live on less than $1 per day, and that hundreds of millions of people live without
safe sources of running water, shelter, education or health care, it is clear that they are failing
in their mandate to reduce poverty, promote and maintain high levels of employment and real

29
income, a stable international monetary system, and shorten the duration and lessen the
degree of payments disequilibria3.
Unfortunately, they are failing us at a time when we badly need them to be functioning
effectively. The increasingly integrated global financial system, with its apparently endemic
volatility and uncertainties and unbalanced allocation of resources desperately needs some
form of effective global governance.
In this paper I explore the reasons for the IMFs failure to adequately carry out its
mandate I argue that, while the suitability of the IMFs policies and the appropriate scope of
its Paper prepared for the Annual Banking Law Update, University of Johannesburg, May 3,
2006. The author wishes to thank Elizabeth Canty for her research
assistance. This paper is an updated version of an earlier paper by the author published as
Stuffing New Wine Into Old Bottles: The Troubling Case of the IMF, 3
Journal of International Banking Regulation 9 (2001).
2Professor of Law and Director, International Legal Studies Program, American University,
Washington College of Law, Washington D.C. and Research Associate,
Centre for Human Rights, Faculty of Law, University of Pretoria, Tel: (202)274-4205, email:
bradlow@wcl.american.edu
3 See generally, The World Bank, World Development Report: Attacking Poverty 2000-2001;
International Monetary Fund, World Economic Outlook (April 2005);
The World Bank, Global Development Finance (2005). See also IMF, Articles of Agreement,
art. I; IBRD, Articles of Agreement, art. I.
activities are certainly open to debate, an important and often under-emphasized cause of its
unsatisfactory performance is its failure to adapt its structure and operating practices to its
changing functions. In fact, without correcting this latter set of problems it will never be able
to effectively perform its responsibilities. My thesis is that since the collapse of the Bretton
Woods system of relatively fixed exchange rates, the IMF has lost influence over its richest
member states, particularly the G-7, and has steadily gained influence over its developing
country member states. This process has resulted in the IMF slowly mutating from a
monetary organization into a macro-economically
oriented development financing institution. These developments have important implications
for the IMFs relations with its member states, the citizens of those member states and other
international organizations. Unfortunately the IMF has not yet adequately acknowledged
these implications. Consequently, the IMF is experiencing serious problems that are caused
by the distortions that arise from it trying to squeeze its new functions and relations into its
old structures. These problems are calling into question its legitimacy and undermining its

30
ability to function effectively. They are leading many in the developing world and in
international civil
society to view the IMF as an uncaring bully that is more responsive to the concerns of its
richest
member countries than to the real problems of the citizens of the countries in which it
operates4.
They are also leading some in the rich countries to question the IMFs current ability to
effectively manage the international monetary and fiscal problems of most interest to the rich
countries.5
4 There is an extensive literature, from may different political perspectives on the problems
with the IMF. See, for example, See generally Joseph E. Stiglitz,
GLOBALIZATION AND ITS DISCONTENTS
(W.W. Norton & Company, 2002); Paul Blustein, THE CHASTENING: INSIDE THE
CRISIS THAT ROCKED THE GLOBAL FINANCIAL SYSTEM
AND HUMBLED THE IMF (PublicAffairs, 2001) (exploring the Asian financial crisis of
1997 and the IMFs role in that crisis); Paul Blustein, AND THE MONEY KEPT ROLLING
IN (AND OUT) (PublicAffairs, 2005) (looking at the interconnectedness and causal
relationships among Wall Street, the IMF, and Argentinas bankruptcy in 2001).
INTERNATIONAL MONETARY FUND, EXTERNAL EVALUATION OF IMF
SURVEILLANCE (1999), at http://www.imf.org/external/pubs/ft/extev/surv/eval.pdf
hereinafter
EVALUATION OF SURVEILLANCE; EXTERNAL EVALUATION OF THE ESAF, Report
by a Group of Independent Experts (June 1998), at
http://www.imf.org/external/pubs/ft/extev/index.htm hereinafter EXTERNAL EVALUATION
ON ESAF; Jeffrey D. Sachs, The IMF and the Asian Flu, THE AMERICAN
PROSPECT, Mar.-Apr. 1998, at 16-21; Anna J. Schwartz, Time to Terminate the ESF and the
IMF, FOREIGN POLICY Briefing No. 48, Washington, D.C.: Cato Institute
(Aug. 26, 1998); Martin Feldstein, Refocusing the IMF, FOREIGN AFFAIRS 77(2), at 20-33
(1998); MELTZER COMMISSION, REPORT OF THE INTERNATIONAL FINANCIAL
INSTITUTION ADVISORY COMMISSION (2000); J.M. Griesgraber and B. Gunther, THE
WORLDS MONETARY SYSTEM (1996); FIFTY YEARS IS ENOUGH: THE
CASE AGAINST THE WORLD BANK AND THE INTERNATIONAL MONETARY
FUND, (Kevin Danaher, ed., 1994).
5 King, Mervyn, Reform of the International Monetary Fund, at 2 (speech given at the Indian
Council for Research on International Economic Relations in New
Delhi, India) (Feb. 20, 2006) (warning that the IMF could slip into obscurity); Dodge, David,
The Evolving Monetary Order and the Need for an Evolving IMF,

31
Lecture to the Woodrow Wilson School of Public Affairs, Princeton, March 30, 2006,
available at www.bankofcanada.ca/en/speeches/2006/sp06-6.html (Mr. Dodge
is the Governor of the Bank of Canada) (arguing for reforms in the IMFs functions and
governance so that it can more effectively fulfill its role in the global
3
The paper also proposes a reform program for the IMF that is designed to adapt its
existing structures to its new functions. The reforms will also make it more accountable,

ACCOUNTABILITY OF THE INTERNATIONAL MONETARY

FUND

at 40 (Barry Cairn & Angela Wood, eds.) (Ashgate Publishing, 2005); Eldar, Ofer. Reform
of IMF Conditionality: A Proposal for
Self-Imposed Conditionality. 8 Journal of Intl Econ. Law 509 (2005).
8
political reasons, have no intention of using the IMFs services in the foreseeable future20.
These
countries do not need to pay particular attention to the views of the IMF21. For these
countries,
the most important of which are the G-7 countries, the Second Amendment meant that they
regained their monetary sovereignty from the IMF and escaped from its control. These
countries,
in fact, do not seem to pay much attention to the IMFs advice. For example, since 2000 the
IMF
has consistently and ineffectively called for the US to reduce its budget and trade deficits22.
Similarly, its advice on such issues as interest rates and exchange rates in the G-7 countries
do
not appear to have had any real influence over the policies these countries adopt. Instead,
these
countries rely on their own judgments and the discussions that take place among themselves
in
making policies on these issues.
The second group, which consists of those member states that need or know they may

32
need IMF financing in the foreseeable future can be called the IMF consumer countries.
These
states must pay careful attention to the views of the IMF because they will influence the
conditions that the IMF will attach to the funds it provides the state. The IMF can also
influence
these countries access to other sources of funds.
In recent years, a third group of states may be emerging. This group consists of
developing countries that have accumulated sufficiently large reserves that they can
effectively

Conclusion
The IMF does serve a very useful role in the world economy. Through the use of lending,
surveillance and technical assistance, it can play a vital role in helping identify potential
problems and being able to help countries to contribute to the global economy. However,
countries like the UnitedState and Europe have historically dominated the governing body,
and the IMF has had successes and failures. While no organization is perfect, the IMF has
served the purposes that it was established to do and continues to keep evolving its role in an
ever-changing world. (If you're interested in learning about another important international

The IMF is suffering from serious structural distortions that have slowly developed since
the Second Amendment to the Articles of Agreement. These problems create a substantial
barrier to the effective functioning by the IMF. They can only be corrected through a broad
ranging reform program that will overhaul the structure and operating principles of the IMF.
Without undertaking this reform program, it is unclear if the IMF will ever be able to
effectively make any useful contributions to solving the complex problems of poverty,
inequality and inadequate governance which plague developing countries today.
Unfortunately the problems that exist in the IMF are only the most extreme version of
aproblem that exists in all international organizations. All those organizations that have
greateconomic power in the developing world -- the World Bank, the regional development
banks and the WTO -- share, although maybe in less extreme forms, the same problems.
Those UN specialized agencies that lack adequate resources, influence and power-- such as
UNESCO, FAO, UNICEF, WHO -- often suffer from the reverse problem. They lack
influence and power because they are deemed to be too sensitive to developing countries. The
result is that industrialized countries loose interest in them. If international organizations are
to perform the global governance functions that were envisaged for them and if they are to

33
play an effective role in dealing with the complex problems that exist in the developing
countries and the extreme inequalities of power and wealth that exist between developing and
developed countries, they will need to undergo their own reform programs, that will be
complimentary to the one this paper proposes for the IMF.

Bibliography

1) Text Book
2) Google.com
3) Wikipedia.com

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