IMF

Time to Reform/Abolish the IMF?

Time to Reform/Abolish the IMF?

Outline

Introduction

Discussion

The IMF's Structure

Common Criticism of IMF

Time to reform/abolish the IMF?

The Debate Surrounding IMF Crisis Lending

IMF and World Economic Crisis

Conclusion

Introduction

The International Monetary Fund (IMF) is an agency of the United Nations. The IMF was established by treaty in 1945 to help promote the world economy following the Great Depression of the 1930s and the end of World War II in 1945. The IMF comprises more than 180 countries that are each represented on the board of directors, which makes the policy decisions of the IMF. The day-to-day operations of the IMF are run by the executive committee, which is composed of the United States, the United Kingdom, Japan, Germany, France, China, Russia, and Saudi Arabia, and 16 other elected countries other than those already named. The IMF is funded by monetary contributions of member nations, assessed based on the size of each nation's economy. The IMF's headquarters is located in Washington, DC (Stiglitz 2002, 10). This paper discusses if time has come to reform/abolish the IMF or not and IMF needs to be reformed then how will be possible.

Discussion

The primary function of the IMF is to promote sound monetary, fiscal, and macroeconomic policies worldwide by providing assistance to needy countries. The IMF examines a country's economy as a whole, its currency accounts, inflation, balance of payments with other countries, employment, consumer and business spending, and other factors to determine whether the country needs assistance. The IMF responds to financial crises around the globe. It does so by providing short-term loans to member countries to help them weather problems caused by unstable currencies, to balance payment problems, and to recover from the economic policies of past governments. For example, the IMF played a financial role in helping eastern and central European countries recover after the collapse of the Soviet Union. In return for the financial assistance, a country must agree to meet certain monetary, fiscal, employment, inflation, and other goals established by the IMF. (Stiglitz 2002 70-72)

Nowadays there is a widespread debate that the IMF must be reformed or abolish ed. A major criticism of the IMF had been its general failure to identify and warn of potential crises before they reached dangerous levels. A new, multilateral surveillance procedure was proposed that would require the Fund to assess the systemic implications of national policies and to make the world's largest economies accountable to each other for the consistency of their economic policies. That touched a key and chronic problem: namely, that the Fund had little or no leverage over large countries with large imbalances and with no need to borrow from it, be they large reserve-issuing countries or countries enjoying a temporary boom in capital inflows. In November the Fund staff produced a first report on the G-20's progress in achieving a collectively consistent set of policies to sustain a balanced growth of the world economy. This was a work in progress and nobody pretended that progress would be ...