SamplesEconomicsInternational Monetary Fund Buy essay
← Economics and Ethics Outsourcing →

Custom International Monetary Fund Essay

The International Monetary Fund is an organization that comprises 187 countries across the world. The countries work together towards better monetary cooperation across the globe and financial stability; this cooperation is also aimed at facilitating international trade, providing employment to the unemployed, and ensuring sustainable economic growth and development. The fund also works towards alleviation of poverty in the world. The organization was started in 1944 with an original membership of 45. It has risen through years to the current figure of 1987. The organization was started mainly so as to stabilize the exchange rates in the world as well as reconstruct the world’s international payment system. Countries with imbalances in payments would seek help from IMF so as to settle this (Woods, 2007).

Little Attention in Improving Financial Structures of Developing Nations

The International Monetary Fund helps to improve the financial situation in developing nations. This is in order to help the countries restore sanity to their economies so as at least to make reasonable progress. The fund provides finance to countries that are in debt crisis so as to relieve them of the huge debt repayment processes. This is usually done at low interest rates which are affordable. However, experts argue that the international monetary fund has given too little attention to this. This is the reason why developing countries have continued to languish from debt crisis. Most of these debts were taken immediately after the independence of these states. The debts were supposed to be repaid with a certain amount of interest in addition to the principal amount. Accumulative debts have led to problems, since the countries are unable to pay these debts. The IMF provides funds to very few countries to handle this crisis. Those paid are also not given enough allocation to help them sort the debt crisis problem amicably (Vines, 2004).

The countries have continually suffered from the exchange rate crisis with little being done by the IMF. This is when the currencies in these countries are too weak compared to such strong currencies as the American Dollar. This has made the cost of imports increase over the years to such an extent that the exports figure is nowhere near this. The countries, thus, suffer from an imbalance in payments, which has to be solved through more borrowing. This further worsens the already present debt crisis issues. The IMF, according to experts, has failed in its mandate to streamline exchange rates.

Expensive Rescue Management Procedures

The World Bank has also engaged in schemes that are aimed at maximizing profits, while initially, it was not started as a business. They engage in paying for very expensive rescue operations. These include operations aimed at restoring economies of states following a period of war or political instability. This mechanism has proved difficult for the affected states, since they suffer from repayment of the debts owed to the International Monetary Fund. This is also risky for the organization in case a state defaults in payment. The Mexican bailout of 1995 was an extremely expensive rescue operation. It saw the state spending a significant portion of finance to help sort the crisis. This engagement was not worth considering; there were other scenarios in developing countries that called for quick reactions (Ainley, 1979).

Short Term Crisis Management Systems

The IMF system of short term crisis is also too costly for the affected states. Countries are sometimes faced with emergency situations that call for stringent measures. Drought and famine is common in developing countries. At one point, it has forced the affected states to seek help from IMF. Unfortunately, the program comes in at such a high cost that it results into a debt crisis for some of the developing countries. Other emergency cases include floods, internal displacements, especially in countries that have experienced war, earthquakes in certain parts of the world, etc. The crisis management programs are too expensive, and experts argue that IMF should try to make this affordable, at least for the affected states.

Slow Responses

What is more, IMF responses are said to be too slow. Developing countries are faced with numerous challenges. These include famine, which leads to death of people and animals as well as suffering among those affected. The states also suffer from high population menace, when the population is too high to be supported by the available resources. Certain states have been through periods of civil war and political instability, which has significantly affected the economies of these countries. All this has had negative impacts on the social institutions, such as schools, hospitals, etc. Infrastructure is also underdeveloped. The developing states, thus, turn to the International Monetary Fund for financial assistance so that they can solve these challenges they are facing. They, however, face challenges in their quest to obtain finances since IMF reacts too slowly to their predicament. It also slows down projects and leads to continued suffering of the population, which has to wait for government aid.

Incorrect Advice

The international Monetary Fund is also charged with the responsibility of advising states on financial matters. The organization advises states on how to stabilize their economies and progressively leads them into development. They are also supposed to advise states on issues pertaining to debts and imbalance in payments and how this can be solved once and for all. It is also the role of IMF to advise member states on how to solve exchange rate crisis. The IMF, however, according to experts, has failed in this since it does not provide solutions to problems facing the countries. Instead, some of the advice given has proved too futile for affected states. It has landed some states into cases of more debts and, thus, debt crisis. Exchange rates have also worsened in these states instead of improving. Lending goes to countries that do not deserve as much. Repayment has become a problem to certain states, resulting into an unending debt crisis. It has resulted into more unemployment in the countries. Drought and famine has continuously loomed in the states, since the government in these states cannot afford to feed the growing population.

Influencing Policy

The International Monetary Fund also engages in very intrusive policies regarding states where they have influence. It is the influence that comes as a result of the countries asking for financial aid from the organization. The IMF has been notorious for meddling with administrative issues in countries, especially developing countries. They give conditions regarding money before lending it. Such conditions include how the money is going to be spent. They also give directions on the way development projects that they fund will be done. Some of these conditions are too impractical to be effective for the states. This has brought wrangles between IMF and some of its members, who take it that IMF is being too controlling (Vreeland, 2003).

Conclusion

Experts argue that although IMF tries to improve financial systems of developing nations, it has failed in its mandate in certain states around the world. Some countries depend on it in terms of financial aid and advice regarding finance and balance of payments, etc. The organization has found its way digging deeper into the pockets of these poor states by providing expensive rescue operation mechanisms, among other issues.

Custom International Monetary Fund Essay

Code: Sample20

Related essays

  1. Outsourcing
  2. Financial Crises and Bank Regulation
  3. Economics and Ethics
  4. Pure Competition
On your first order you will receive 15% discount
Order now PRICES from $12.99/page ×
Live chat