International Monetary Fund And The World Bank

Consider the goals and the criticisms of the IMF and the World Bank. Do you feel that their practices are required for accountability purposes, or do you believe that they unfairly threaten the sovereignty of certain nations? Justify and explain your opinion. Your response should be a minimum of 300 words.

Angry protesting, political upset, governments falling, privatization failing, and money lost are a few outcomes that influence the public opinion on the World Bank, and its involvement in many underdeveloped countries. While the World Bank claims that reducing poverty across the globe is its foremost priority, many opponents believe that it is responsible for increasing poverty. The World Bank is a multifaceted organization that loans money to government around the world for development.

Developing countries want to gain wealth and stability, in order to do so they ask wealthy developed countries for financial assistance in the form of loans. They then can use these loans to increase their countries output by more than what it takes to repay their debt (FLS, 322). Many times they have to go through international financial organizations such as the IMF in order to gain these funds. The incentives for both sides is the high probability of the projected outcomes out-way the projected costs. However, maintaining payments of loans can be very difficult and can weaken the domestic economy in order to pay off the loans. If the government does not invest the money in social programs and just uses the money to help large corporations then there will be public outcry because the citizens will be negatively effected and feel like they did not benefit from the loans so should not have to pay the consequences. Thus loans can have both positive and negative outcomes for both lenders and borrowers.

far from being the solution to global economic instability and poverty, these two international institutions are a major problem. For one thing, their lending practice deters growth because the money they loan removes incentives for governments to advance economic freedom, and breeds corruption. For these reasons, the vast majority of recipient countries have been unable to develop fully after depending on these institutions for over 40 years.2

World Bank was mandated to help in reconstruction of Europe after the devastation of Second World War while IMF was intended to improve economic status of countries through applying pressure on them to carry out economic reforms that would increase expenditure, reduce taxes, and lower interest rates in order to stimulate growth (Stiglitz, 2002; Mudida, 2003). They have both evolved to become leading international lenders. They are also at the front line in campaign for trade liberalization across the globe.

The International Monetary Fund (IMF or The Fund) began its conception in July 1944. "The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other" ("About the IMF"). Given that the nature of the IMF is to ensure the stability of the international monetary system one would assume that given the level of public exposure and level of participating countries that it would be immune to adversity. The purpose of this paper is to present one instance where the IMF failed in its initial and ongoing responsibilities causing greater financial duress for the recipient of assistance.

Critics of neocolonialism portray the choice to grant or to refuse granting loans (particularly those financing otherwise unpayable Third World debt), especially by international financial institutions such as the International Monetary Fund, and the World Bank, as a decisive form of control. They argue that in order to qualify for these loans (as well as other forms of economic aid), weaker nations are forced to take steps (structural adjustments) favourable to the financial interests of the IMF/WB, but detrimental to their own economies and often safety, increasing rather than alleviating their poverty.

Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs.

As the world economy begins to grow and develop, systems have been put in place to ensure a standardized unit of monetary measure to ensure fair trade between developing nations. The IMF or international monetary fund, is an organization that manages the exchange rate of currencies utilized in the international market, offers policy advice and gives loans to promote the countries prospering in the global economy; by the World Bank was “established to promote long-term Economic Development” and promote a better standard of living by “providing Technical and financial support” to Affiliated countries ("The IMF and the World Bank"). Together these facilities frequently collaborate to promote global economic success by promoting and

The International Monetary Fund (IMF) seeks to "…foster global growth and economic stability," according to its Overview in the IMF web site. The IMF doesn't just loan money, it also provides "policy advice" along with financing to those members (among its 188 member countries) that are experiencing "economic difficulties" (www.IMF.org). Cooperation between IMF and its member nations is the key to being able to reduce poverty and stabilize economies, the IMF explains. Though the IMF is a "specialized agency of the United Nations," it has its own structure, policies and charter, and one of its most important tasks is to alert any of those within its 188-country membership about potential "…risks on the horizon" that could create financial problems down the road (www.IMF.org).

There is a distinct ineffectiveness on the part of the World Bank and IMF to effectively utilize their plethora of economic intelligence, strategic relationships, and technical and industrial knowledge to help a country to an improved economic state. Uganda received as much as $650 million in US dollars for the purposes of debt relief back in 1998. The relief was to provide assistance in several ways to include an educational program, “the purchase and cancellation by HIPC Trust Fund of outstanding IDA credits” “the payment of debt service by HIPC Trust Fund”, “savings on IDA charges associated with these instruments”, (Press Release 1998). In short the World Bank was to cover as much as half of Uganda’s annual debt. They were awarded this because they had met the “requirements”, and Uganda was said to have “the strongest performing economies in Africa”. (Press Release 1998)

Is there any harder job than regulating all of the international markets money? Probably not, the topic being discussed throughout this essay will be the international monetary fund and its involvement in the international market. Much has been said about the I.M.F whether it is positive or negative, neo-Marxist Che Guevara said “The interests of the IMF represent the big international interests that seem to be established and concentrated in Wall Street.” Here he criticizes how the IMF is considered to be run by the United States which occupies a veto power in the decision making at the IMF, this is important to see because it brings up the other side to the IMF, the side that is not so positive and the

Global funding institutions such the World Bank and the IMF play a significant role in the economic and business enhancement of developing countries. These organizations provide funds to assist developmental programs and projects in developing and already developed countries. The World Bank, along with IMF funds vital and fundamental projects in crucial areas. They funds things like free education, subsidized health care through insurance covers and provide relief for these nations in times of great economic crisis (Tulchinsky & Varavikova, 2009). However, researchers have listed a lot of disadvantages associated with these two international funding institutions.

An examination of the record of IMF and World Bank performance in developing countries shows that, far from being the solution to global economic instability and poverty, these two international institutions are a major problem. For one thing, their lending practice deters growth because the money they loan removes incentives for governments to advance economic freedom, and breeds corruption. For these reasons, the vast majority of recipient countries have been unable to develop fully after depending on these institutions for over 40 years.

In the last chapter we looked at how incompetent and politically driven economic policy making drove Europe into prolonged recession and high unemployment. The financial crises and fear of a meltdown slowed world economic growth considerably. In October 2010, the International Monetary Fund (IMF) projected 4.6 percent growth for the global economy in 2013; it ended up being just 3 percent. This difference may not seem like much, but in terms of lost output it is more than $800 billion, and it is not only in the rich countries. This meant that tens of millions of people worldwide were pushed into poverty and unemployment, including in developing countries – despite the fact that the big policy mistakes were being made in Europe. To most of the people who write about these issues, and most of the media, there was not much that could have been done differently, that would have assured a speedy and robust recovery. But they are wrong.