International Monetary Fund - Essay Example

International Monetary Fund Introduction The study captures an overview of the International Monetary Fund (IMF). The overview consists of the establishment reports of the IMF. It follows with the merits and the demerits of the International Monetary Fund (IMF) along with the major roles being played by it. The study also includes the major criticisms of the International Monetary Fund (IMF) (The World Economy, “The International Monetary Fund”). The International Monetary Fund (IMF) is an inter-governmental organization which was established to endorse international money cooperation, systematic exchange arrangements and exchange stability. The International Monetary Fund (IMF) offers the technical and financial assistance to its members in different areas of economic policy–basically in the field of exchange rates, fiscal, monetary and financial sector policies (The World Economy, “The International Monetary Fund”). Overview of the International Monetary Fund (IMF) The International Monetary Fund (IMF) was established in July 1944, under the ‘Bretton Woods System’ which comprised of three international organizations, those were: The International Monetary Fund (IMF): It was established with a purpose of developing International Monetary Cooperation. The International Bank of Reconstruction and Development: This was established with a motive of International Development Assistance and Investment. The International Trade Organization: It was established with a motive to develop International Trade. The above three components of The Bretton Woods System were entertained in the context of war, high unemployment, depression, hyper inflation and high fluctuating exchange rates which effected the global economy in the 1930s (Sykes, “Organisational Information”). A Brief Overview of The International Monetary Fund (IMF): Membership Currently: 187 countries Managing Director: Madame Christine Lagarde, from Germany Staff: 2,470, from 141 different countries Total Quotas: US$383 Billion as on 18/08/2011. Loans Outstanding: US$282 Billion Technical assistance provided: Field delievery in FY 2010 – 192.5 person years. Surveillance Consultations: Consultations concluded for 120 countries in FY 2010 and for 88 countries in FY 2011 as on 11/02/2011 (The International Monetary Fund, “The IMF at a Glance”). The IMF’s governing body essentially, is the board of governors. Each state is being represented by their respective elected governor (member of the Board of Governor, IMF). The IMF’s executive board is its executive body, and is comprised of 24 Executive Directors; each of them is either elected or appointed by the members. The executive board of the IMF is responsible for regulating the smooth flow of business of the organization. There are two committees, the International Monetary and Financial Committee and the Development Committee which are appointed by the Board of Governors (Sykes, “Organisational Information”). Merits and De–Merits The IMF has executed many reforms till date, it has been designed to strengthen its network and improve its capability to perform well and serve its membership efficiently. The IMF has rapidly become an open and transparent organization; it has also inculcated transparency among its membership. Moreover, it is also working to strengthen its economic governance. These aspects have been undertaken through promoting the use of codes and standards as a medium for better financial management, economic and corporate governance. The IMF is also working to safeguard the integrity and stability of the International Financial System globally. More specifically, the IMF, the World Bank along with the Financial Sector Assessment Program (FSAP) perform together to strengthen the combat money laundering sectors along with the financial sectors in member countries. The International Monetary Fund (IMF) is an organization, which provides high preference to the feedbacks and the complaints they receive from its member governments. It honors and values the functions of civil society organizations which provide grass roots support to general public. The IMFs executes certain ways to heal out the negative effects of globalization in the world economy and these include by strengthening the stability of the International Financial System, and through assisting the individual countries to avail the advantages of the investment opportunities in the international capital markets (The International Monetary Fund, “The Role of the Bretton Woods Institutions”). There are many poor countries that do not have enough resources to participate and avail the advantages of a global economy. They should be assisted by the international community. Hence, being a universal institution, the IMF has stepped forward to assist and develop these poor countries. The International Monetary Fund (IMF) has joined the international institutions over different countries which are established to provide help to the poor countries and reduce world poverty ((The International Monetary Fund, “The Role of the Bretton Woods Institutions”). De–Merits During the Asian Crisis of the year 1997, the IMF had transformed the trivial financial crisis into a major economic recession by shooting the unemployment rates up in the countries like Indonesia, Thailand and Malaysia among others. This threat occurred due to the insistence of IMF to adapt the Deflationary Fiscal Policy and higher interest rates. Moreover, the countries like Jamaica have stated that the IMF has snatched away their authority to decide the national policy of their country. The major criticism against the IMF came from the free economists. They have stated that, IMF influences the countries to become unstable in order to make them rely on loans. Moreover, even while approving those loans, the customer faces the problem of inadequate information about the loan conditions. There are accusations that IMF mostly serves the interests of the wealthy countries. In the year 2001, IMF had forced Argentina to adapt a similar policy of fiscal restraint which had led Argentina to face the diminution in investment in public services. The IMF had also once intervened in Kenya in the year 1990. There, they had restricted the control of the Central Bank over the capital flows. However, these problems can be solved, by being alert while approving any deal with IMF. The offeree can avoid such loses that have been witnessed by them till date, by ensuring effective awareness and complete knowledge regarding the set of policies and rules framed by IMF (Sykes, Benjamin. “Organisational Information”). Conclusion On the basis of the facts and figures mentioned above, the study can be concluded with the result that, the IMF considers the economic growth, as the only way to develop the living standards in the developing countries, which can be best accomplished through globalization. The IMF and the World Bank have a significant role to play in global economy and to serve better the international business participants. The IMF was created in 1944 to promote the international economic cooperation and maintain the advantages of global integration. Hence, it would not be wrong to conclude that despite certain limitations the International Monetary Fund (IMF) is advantageous to the international business markets as well as the domestic markets (The International Monetary Fund, “The Role of the Bretton Woods Institutions”). Works Cited Sykes, Benjamin. “Organisational Information”. October 31, 2011. International Monetary Fund, 2004. The International Monetary Fund. “The Role of the Bretton Woods Institutions”. October 31, 2011. IMF, 2002. The World Economy. “The International Monetary Fund”. October 31, 2011. Ereport, 2011. The International Monetary Fund. “The IMF at a Glance”. October 31, 2011. IMF, 2011. Read More