Sunk In Debt And Poverty

Neoliberal globalization is an economic system that promotes free market policies of liberalization, deregulation, privatization, and the cutting of social support systems. The International Monetary Fund and the World Bank help promote these policies by making structural adjustment programs conditions for any aid or support. Unfortunately, once structural adjustment programs are put into place they tend to disrupt developing countries’ economies and end up making them even worse off than before. Before the 1980s, developing countries had a per capita growth rate of more than 3%, once these policies were put into place growth rates dropped to 1.7% (Hickel 2012: 7). This provides evidence that these programs are pushed at developing countries

The first locomotive aspect of contemporary globalization, offered by the IMF, is the movement of capital. The economies of nations have become increasingly interlinked due to the free flow of capital, and semi-unrestricted global trade via a reduction in protectionist measures (birdsall 2003). However, this movement of capital occurs in a highly asymmetric fashion across international borders. The post-colonial reality of countries of the Global South, which saw their resources plundered, has a profound effect on the ability of these countries to freely engage with and benefit from globalization in the same way as countries of the Global North. The wealth accumulated by highly industrialized nations from historical imperialism, has allowed them to produce a wealth of institutions which in-turn creates a reputation of stability and reliability for them. These institutions and reputation allow them to benefit

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.

The continued indebtedness of developing countries results in the inability to address the growing poverty and inequality problem within these countries. The policies these developing countries are forced to implement keep them poor and powerless in the global economy (Odutayo, 2015, 88). These programs produce a vicious cycle where these indebted countries are forced to implement detrimental neo liberal economic policies that result in poverty and debt being a permanent condition of the developing world (Manji, Fiorze, Burnett, 2010, 10). In 2002, the North received around $200 billion American dollar from the South in debt repayment (Odutayo, 2015, 88). In Ghana one third of its export revenue goes to the IMF and the reaming profits go to the the Bretton Woods Institution and G7 members (Harrigan & Younger, 2000, 198). With developing countries contributing their export revenue to loan repayments, they are unable to address any

The third world countries debt is only going to increase if the first world countries do not cancel the debt. The main reason that the debt is going to increase is that the third world countries had made loans with the first world countries and the loans continue to increase. According to Vanessa Baird, “Most loans to the third world have to be repaid in hard currencies; and hard currencies are stable currencies: that means their value does not change much.” (1) This makes it difficult for developing

The World Bank is the largest public development institution in the world, lending around US $25 billion a year to developing countries. (The World Bank and IMF) The World Bank is designed to provide financial and long-term loans to support the underdeveloped countries to build big, financially intensive infrastructure projects. The main purposes of the Bank are to assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes. As with any loan, there are conditions upon the borrower that must be met. The World Bank promotes the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international

Since many borrowings of those Third World countries are indexed to short-term interest, the rapid speed of rising in the world interest rate in 80s enlarged the interest margin of those countries debt. In an ordinary sense, the loans from governments and international lending organizations were considered priorities when it comes to returning the debt. However, the private banks are the one who keeps pressing on Third World countries to return debts. Meanwhile, Organizations like IMF (International Monetary Fund) acted like the world’s debt enforcers to step in to insist that those developing countries must pay the debts and impose

The stagnation of the global Southern countries in Latin America, Eastern Europe and Africa occurred in the 1970s and 80s when these countries “found themselves trapped by levels of debt to international public and commercial banks” (Williams, 1994:214). Fearing another global depression, large banks and organisations such as the International Monetary Fund (IMF) embarked upon structural adjustment programs (SAPs) in these heavily indebted countries with the aim of restructuring their ‘traditional economies’-- seen in the global North as ‘symptoms of backwardness’ (Moser, 1994). The ability to qualify for monetary aid from the global North was “conditional on the adoption of a range of policies” (Craig and Porter, 2003:60) set out by these organisations believed to be necessary for debt sustainability; central to which was the theory of ‘neoliberalism’. The first main condition was the devaluing of the local currency, intended to encourage exports and limit imports (Williams, 1994), with the second policy agreement being the reduction in the size of the government bureaucracy. The initial reason for the debt pile-up in these countries was seen as being due to governmental mismanagement, and therefore money was allocated for the restructuring of the state governments in order to correct their inefficiency. As a result of the withdrawing

This essay aims to explore and critically analyze the impact of the global financial institutions such as the World Bank and International Monetary Fund (IMF). There was a discussion on reasons for the establishment of the institutions. An examination using various illustrations of the conditions these institutions impose on borrowing countries. Developing countries in the sub-Sahara Africa and, in particular, Senegal will be used to explore dealing with above institutions and their outcomes. It will also highlight reasons leading to the selected country applying for loan assistance. The identified conditions attached to loans provided and its impact on health, economic, environmental, political and cultural determinants. A conclusion will follow this.

nternational Monetary Fund and The World Bank, though has a good purpose of their existence, they have come under lots of criticisms as to how they use the leverage of being in a position of helping poor countries to either recover from economic collapse or give them debt relief and economic boost from loans they give out to them to impose policies and condition that those poor countries has to implement. These loan conditions and policies structured by these international financial power institutions are geared towards moving resources from the poor countries to the rich western countries. The end result is creating a situation where the poor countries sunk into more economic suicidal condition in which they have to still depend on more loans or aids to survive and they would have to comply with any condition attached to the help, due to the urgent need of support.

Many governmental and non-governmental organizations argued that external constraint like high inherited levels of foreign debt have crippled in the capacity of low income countries to overcome poverty and that concessional lending’s are not enough. This lead to the ‘Enhanced Heavily Indebted Poor Country (HIPC)’ initiative in 1996 in collaboration with world bank to eliminate unsustainable debt in the world’s poorest and most heavily indebted countries.

Critics of the World Bank and IMF have argued that policies implemented by African Countries, intended to control inflation and generate foreign exchange to help pay off the IMF debts, often result in increased unemployment, poverty and economic polarization thereby impeding sustainable development.

The World Bank consists of two related institutions, the International Bank for Reconstruction and Development and the International Development Association. These bodies provide financing to poor countries with the objective of eliminating poverty in the world. The Bank provides financial products and services where they are needed most, and also contributes to knowledge sharing around the world. World Bank development projects for example include the development of water projects. By helping to ensure water and food security, and to provide increased economic opportunity, in the world's most challenged areas, the World Bank can contribute to broader missions of promoting peace and prosperity (Askari & Brown, 2001).

The International Monetary Fund (IMF) was one of the many international organizations that emerged after the end of World War II. The primary function of the IMF is to promote the international financial stability and spur monetary cooperation. Many countries see the IMF as a “lender of last resort” (Thacker, 1999:38), meaning countries borrow money from the Fund for “short-term balance of payment support” (Steinwand and Stone, 2007:11) in order to avert the collapse of their domestic economies. Many of the loan programs offered by the IMF are accompanied by the terms commonly known as conditionality. IMF conditionality is a set of intensive fiscal and monetary policy reforms that must be implemented by the borrowing country. An important question often raised in connection with IMF imposed conditionality is whether such programs are effective and they work to enhance the economic situation of the developing country. In this paper, I argue that there are mixed results regarding the IMF program effectiveness, and the success of IMF lending program does depend on domestic factors of the borrowing country.

The international financial institutions (IFIs) are central pillars and the architects of the global economy. The world bank and IMF were founded and funded by the United Nations at that time towards the end of the second world war to build devastated world economy after the war and great economy collapse of the 1930s. The IFIs were to help the economy of the less developing countries (LDCs) to bring about growth, development and integration. In the scope of this paper, I have picked Zimbabwe to shine some light on what these global economic pillars are capable of doing.