international monitory fund

INTERNATIONAL MONITORY FUND
1. INTRODUCTION TO IMF:
International Monetary Fund:
The International Monetary Fund (IMF) is an international organization that provides
financial assistance and advice to member countries. The International Monetary Fund (IMF)
is the international organization that oversees the global financial system by following the
macroeconomic policies of its member countries; in particular those with an impact on
exchange rate and the balance of payments. It is an organization formed with a stated
objective of stabilizing international exchange rates and facilitating development through the
enforcement of liberalizing economic policies on other countries as a condition for loans,
restructuring or aid. It also offers loans with varying levels of conditionality, mainly to
poorer countries. Its headquarters are in Washington, D.C., United States. The IMF's
relatively high influence in world affairs and development has drawn heavy criticism from
some sources.
The IMF works to foster global growth and economic stability. It provides policy advice and
financing to members in economic difficulties and also works with developing nations to
help them achieve macroeconomic stability and reduce poverty. The International Monetary
Fund was conceived in July 1944 originally with 45 members and came into existence in
December 1945 when 29 countries signed the agreement, with a goal to stabilize exchange
rates and assist the reconstruction of the world's international payment system. Countries
contributed to a pool which could be borrowed from, on a temporary basis, by countries with
payment imbalances. The IMF was important when it was first created because it helped the
world stabilize the economic system. The IMF works to improve the economies of its
member countries. The IMF describes itself as "an organization of 187 countries, working to
foster global monetary cooperation, secure financial stability, facilitate international trade,
promote high employment and sustainable economic growth, and reduce poverty".

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History:
The International Monetary Fund was conceived in July 1944 during the United Nations
Monetary and Financial Conference. The representatives of 45 governments met in the
Mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with
the delegates to the conference agreeing on a framework for international economic
cooperation. The IMF was formally organized on December 27, 1945, when the first 29
countries signed its Articles of Agreement. The statutory purposes of the IMF today are the
same as when they were formulated in 1943.
The IMF's influence in the global economy steadily increased as it accumulated more
members. The number of IMF member countries has more than quadrupled from the 44
states involved in its establishment, reflecting in particular the attainment of political
independence by many developing countries and more recently the collapse of the Soviet
bloc. The expansion of the IMF’s membership, together with the changes in the world
economy, has required the IMF to adapt in a variety of ways to continue serving its purposes
effectively.
At the 2009 G-20 London summit, it was decided that the IMF would require additional
financial resources to meet prospective needs of its member countries during the ongoing
global financial crisis. As part of that decision, the G-20 leaders pledged to increase the
IMF's supplemental cash tenfold to $500 billion, and to allocate to member countries another
$250 billion via Special Drawing Rights. On October 23, 2010, the Ministers of Finance of
G-20, governing most of the IMF member quotas, agreed to reform IMF and shift about 6%
of the voting shares to major developing nations and countries with emerging markets. As of
August 2010 Romania ($13.9 billion), Ukraine ($12.66 billion), Hungary ($11.7 billion) and
Greece ($30 billion) are the largest borrowers of the fund.

Organization & Finances
The IMF has a management team and 17 departments that carry out its country, policy,
analytical, and technical work. One department is charged with managing the IMF's
resources. This section also explains where the IMF gets its resources and how they are used.
The IMF is led by a Managing Director, who is head of the staff and Chairman of the
Executive Board. He is assisted by a First Deputy Managing Director and two other Deputy
Managing Directors. The Management team oversees the work of the staff, and maintains
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high-level contacts with member governments, the media, non-governmental organizations,
think tanks, and other institutions.
The IMF's resources come mainly from the money that countries pay as their capital
subscription when they become members. Quotas broadly reflect the size of each member's
economy: the larger a country's economy in terms of output and the larger and more variable
its trade, the larger its quota tends to be. For example, the world's biggest economy, the
United States, has the largest quota in the IMF. Quotas, together with the equal number of
basic votes each member has, determine countries' voting power. They also help determine
how much countries can borrow from the IMF and their share in allocations of special
drawing rights or SDRs (the reserve currency created by the IMF in 1969).Countries pay 25
percent of their quota subscriptions in SDRs or major currencies, such as U.S. dollars, Euros,
pounds sterling, or Japanese yen. They pay the remaining 75 percent in their own currencies.
Quotas are reviewed every five years and can be increased when deemed necessary by the
Board of Governors. In 2009, the G-20 agreed that the Fund should bring forward the
timetable for the next general quota increase. The next general review was originally
scheduled to be completed by 2013. The agreement now is that it would be completed by
January 2011, two years ahead of schedule. The general quota review provides an
opportunity to increase the Fund’s general resources and would also provide scope for a
further rebalancing of quota and voting shares toward dynamic emerging markets and other
economies.

Membership
The IMF currently has a near-global membership of 187 countries. To become a member, a
country must apply and then be accepted by a majority of the existing members. In June
2009, the former Yugoslav republic of Kosovo joined the IMF, becoming the institution's
186th member. Upon joining, each member of the IMF is assigned a quota, based broadly on
its relative size in the world economy. The IMF's membership agreed in May 2008 on a
rebalancing of its quota system to reflect the changing global economic realities, especially
the increased weight of major emerging markets in the global economy.
Members of the IMF are 186 of the UN members and Kosovo. Former members are: Cuba
(left in 1964), Taiwan (expelled in 1980 due to political reasons). The other non-members
are: North Korea, Andorra, Monaco, Liechtenstein, Nauru, Cook Islands, Niue, Vatican City
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and the rest of the recognition. All member states participate directly in the IMF. Member
states are represented on a 24-member Executive Board (five Executive Directors are
appointed by the five members with the largest quotas, nineteen Executive Directors are
elected by the remaining members), and all members appoint a Governor to the IMF's Board
of Governors. All members of the IMF are also IBRD members, and vice versa.

IMF member states
IMF member states not accepting the some obligations of IMF

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2. GOVERNANCE:
The IMF is accountable to the governments of its member countries.

Governance Structure
The IMF's mandate and governance have evolved along with changes in the global economy,
allowing the organization to retain a central role within the international financial
architecture. The diagram below provides a stylized view of the IMF's current governance
structure.
Board of Governors
The Board of Governors is the highest decision-making body of the IMF. It consists of one
governor and one alternate governor for each member country. The governor is appointed by
the member country and is usually the minister of finance or the head of the central bank.
While the Board of Governors has delegated most of its powers to the IMF's Executive
Board, it retains the right to approve quota increases, special drawing right (SDR)
allocations, the admittance of new members, compulsory withdrawal of members, and
amendments to the Articles of Agreement and By-Laws.
The Board of Governors also elects or appoints executive directors and is the ultimate arbiter
on issues related to the interpretation of the IMF's Articles of Agreement. Voting by the
Board of Governors usually takes place by mail-in ballot.
The Boards of Governors of the IMF and the World Bank Group normally meet once a year,
during the IMF-World Bank Spring and Annual Meetings, to discuss the work of their
respective institutions. The Meetings, which take place in September or October, have
customarily been held in Washington for two consecutive years and in another member
country in the third year.
Governance Reform
Important progress was made in the reform of the Fund's governance in 2006-08, including
the initiation of a process to realign members' voting power (see Country Representation).
However, enhancing the Fund's legitimacy and effectiveness must also deal with the
question of whether the significant changes since the establishment of the Fund require
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reform of the institutional framework through which members' voting power is actually
exercised. Among other things, this requires careful consideration of the respective roles and
responsibilities of the Board of Governors, the IMFC, the Executive Board, and IMF
management. Governance reform is currently being accelerated.
In April 2009, the International Monetary and Financial Committee (IMFC), which advises
on IMF policies, called for a prompt start to a fresh review of quotas (the Fourteenth General
Review), and in April 2010 the IMFC requested completion of the review before January
2011—some two years ahead of the original schedule. The Fourteenth General Review is
now underway and will address the realignment of quota shares and the size of the overall
quota increase. In October 2009, the IMFC endorsed a call by G-20 leaders for a shift in
quota share to dynamic emerging market and developing countries of at least five percent
from over-represented to under-represented countries using the current quota formula as the
basis to work from. In addition, there is a commitment to protecting the voting share of the
poorest members.

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3. ROLE OF IMF:

The International Monetary Fund is a global organisation founded in 1944. It aims was to
help stabilise exchange rates and provide loans to countries in need. Nearly all members of
the United Nations are members of the IMF with a few exceptions such as Cuba,
Lichtenstein and Andorra. The IMF is independent of the World Bank although both are
United Nations agencies and both are aiming to increase living standards. The World Bank
concentrates on long term loans to developing countries. Some Main Functions of IMF
are:

Functions of IMF
•

International Monetary Cooperation

•

Promote exchange Rate stability

•

To help deal with Balance of Payments adjustment

•

Help Deal With Economic Crisis by providing international coordination

What the IMF does

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With its near-global membership of 187 countries, the IMF is uniquely placed to help
member governments take advantage of the opportunities—and manage the challenges—
posed by globalization and economic development more generally. The IMF tracks global
economic trends and performance, alerts its member countries when it sees problems on the
horizon, provides a forum for policy dialogue, and passes on know-how to governments on
how to tackle economic difficulties. The IMF provides policy advice and financing to
members in economic difficulties and also works with developing nations to help them
achieve macroeconomic stability and reduce poverty.
Marked by massive movements of capital and abrupt shifts in comparative advantage,
globalization affects countries' policy choices in many areas, including labour, trade, and tax
policies. Helping a country benefit from globalization while avoiding potential downsides is
an important task for the IMF. The global economic crisis has highlighted just how
interconnected countries have become in today’s world economy.

Key IMF activities: The IMF supports its membership by providing
•

policy advice to governments and central banks based on analysis of economic trends
and cross-country experiences;

•

research, statistics, forecasts, and analysis based on tracking of global, regional, and
individual economies and markets;

•

loans to help countries overcome economic difficulties;

•

concessional loans to help fight poverty in developing countries; and

•

Technical assistance and training to help countries improve the management of their
economies.

Original aims:

The IMF was founded more than 60 years ago toward the end of World

War II. The founders aimed to build a framework for economic cooperation that would avoid
a repetition of the disastrous economic policies that had contributed to the Great Depression
of the 1930s and the global conflict that followed.
Since then the world has changed dramatically, bringing extensive prosperity and lifting
millions out of poverty, especially in Asia. In many ways the IMF's main purpose—to

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provide the global public good of financial stability—is the same today as it was when the
organization was established. More specifically, the IMF continues to
•

provide a forum for cooperation on international monetary problems

•

facilitate the growth of international trade, thus promoting job creation, economic
growth, and poverty reduction;

•

promote exchange rate stability and an open system of international payments; and

•

Lend countries foreign exchange when needed, on a temporary basis and under
adequate safeguards, to help them address balance of payments problems.

How they do it
The IMF's main goal is to ensure the stability of the international monetary and financial
system. It helps resolve crises, and works with its member countries to promote growth and
alleviate poverty. It has three main tools at its disposal to carry out its mandate: surveillance,
technical assistance and training, and lending. These functions are underpinned by the IMF's
research and statistics.
Surveillance:
The IMF promotes economic stability and global growth by encouraging countries to adopt
sound economic and financial policies. To do this, it regularly monitors global, regional, and
national economic developments. It also seeks to assess the impact of the policies of
individual countries on other economies.
This process of monitoring and discussing countries’ economic and financial policies is
known as bilateral surveillance. On a regular basis—usually once each year—the IMF
conducts in depth appraisals of each member country's economic situation. It discusses with
the country's authorities the policies that are most conducive to a stable and prosperous
economy. Consistent with the decision on bilateral surveillance adopted in June 2007, the
main focus of the discussions is whether there are risks to the economy’s domestic and
external stability that would argue for adjustments in economic or financial policies.
Technical assistance and training:

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IMF offers technical assistance and training to help member countries strengthen their
capacity to design and implement effective policies. Technical assistance is offered in
several areas, including fiscal policy, monetary and exchange rate policies, banking and
financial system supervision and regulation, and statistics.

The IMF provides technical assistance and training mainly in four areas:
•

Monetary and financial policies (monetary policy instruments, banking system
supervision and restructuring, foreign management and operations, clearing
settlement systems for payments, and structural development of central banks)

•

Fiscal policy and management (tax and customs policies and administration, budget
formulation, expenditure management, design of social safety nets, and management
of domestic and foreign debt)

•

Compilation, management, dissemination, and improvement of statistical data

•

Economic and financial legislation.

Lending
In the event that member countries experience difficulties financing their balance of
payments, the IMF is also a fund that can be tapped to facilitate recovery. A policy program
supported by financing is designed by the national authorities in close cooperation with the
IMF. Continued financial support is conditional on the effective implementation of this
program.
The IMF also provides low-income countries with loans at a concessional interest rate
through the Poverty Reduction and Growth Facility (PRGF) and the Exogenous Shocks
Facility (ESF).
Research and data
Supporting all three of these activities is the IMF's economic and financial research and
statistics. In recent years, the IMF has applied both its surveillance and technical assistance
work to the development of standards and codes of good practice in its areas of
responsibility, and to the strengthening of financial sectors. These are part of the IMF's
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continuing efforts to strengthen the international financial system and improve its ability to
prevent and resolve crises.

4. SPECIAL DRAWING RIGHTS (SDR):
The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate
system. A country participating in this system needed official reserves—government or
central bank holdings of gold and widely accepted foreign currencies—that could be used to
purchase the domestic currency in foreign exchange markets, as required maintaining its
exchange rate. But the international supply of two key reserve assets—gold and the U.S.
dollar—proved inadequate for supporting the expansion of world trade and financial
development that was taking place. Therefore, the international community decided to create
a new international reserve asset under the auspices of the IMF.
However, only a few years later, the Bretton Woods system collapsed and the major
currencies shifted to a floating exchange rate regime. In addition, the growth in international
capital markets facilitated borrowing by creditworthy governments. Both of these
developments lessened the need for SDRs.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the
freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in
exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges
between members; and second, by the IMF designating members with strong external
positions to purchase SDRs from members with weak external positions. In addition to its
role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and
some other international organizations.

Basket of currencies determines the value of the SDR
The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—
which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton
Woods system in 1973, however, the SDR was redefined as a basket of currencies, today
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consisting of the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollarequivalent of the SDR is posted daily on the IMF’s website. It is calculated as the sum of
specific amounts of the four basket currencies valued in U.S. dollars, on the basis of
exchange rates quoted at noon each day in the London market. The basket composition is
reviewed every five years by the Executive Board to ensure that it reflects the relative
importance of currencies in the world's trading and financial systems.

The SDR interest rate
The SDR interest rate provides the basis for calculating the interest charged to members on
regular (non-concessional) IMF loans, the interest paid to members on their SDR holdings
and charged on their SDR allocations, and the interest paid to members on a portion of their
quota subscriptions. The SDR interest rate is determined weekly and is based on a weighted
average of representative interest rates on short-term debt in the money markets.

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5. CURRENT AGENDA’S OF IMF:
Tackling current challenges
The IMF is helping many emerging market countries tackle the problems brought on by the
devastating global economic crisis. Its lending to low-income countries has also been
stepped up, as these countries start to feel the effects of the crisis. And it is providing policy
advice to advanced countries, for instance on how to address problems in their financing and
banking sectors, and how to design effective stimulus packages. As part of its response, the
IMF has already more than doubled its financial assistance to low-income countries, with
new IMF concessional lending commitments to low-income countries through mid-July
2009 reaching $2.9 billion compared with $1.5 billion for the whole of 2008.
As the global economy continues to struggle in 2009, and with both trade and capital flows
plummeting, the IMF is foreseeing mounting problems for many countries. The Fund is
therefore seeking to add to its resources, and has already negotiated borrowing agreements
with a number of countries. The Fund has already made good progress toward its target of
$250 billion in bilateral government loans as part of moves to triple the IMF’s lendable
resources to $750 billion. Agreements are already in place with Japan ($100 billion), Canada
($10 billion), and Norway ($4.5 billion), and a number of other countries have committed
funds either through loans or the purchase of IMF notes.
In addition, the Fund is closely tracking economic and financial developments worldwide so
that it can provide policymakers with the latest forecasts and analysis of developments in
financial markets. And it is engaging with the Group of 20 (G-20) leading economies and
other stakeholders on issues related to the evolution of the international financial system.
Currently IMF main Agenda’s are:

Emergency lending to emerging markets

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Emerging market countries are facing increasing difficulties around the world because of the
spreading global economic crisis, with demand falling for their exports, investment
slumping, and cross-border lending drying up. A growing number of emerging economies
have found room for policy manoeuvre becoming increasingly limited, and large-scale
official support has been needed from bilateral and multilateral sources.
Since 2008, the IMF has committed more than $160 billion in lending to a number of
countries affected by the crisis, including Belarus, Hungary, Iceland, Latvia, Pakistan,
Poland, Romania, Serbia, Sri Lanka, and Ukraine. It announced a precautionary loan for El
Salvador and an IMF team has also been in negotiations with Turkey.

Helping low-income countries fight the crisis
The global economic crisis is threatening to undermine recent economic gains and to create a
humanitarian crisis in the world’s poorest countries. In response, the IMF has stepped up
lending to low-income countries to combat the impact of the global recession with a new
framework for loans to the world’s poorest nations, including increased resources, a
doubling of borrowing limits, zero interest rates until the end of 2011, and new lending
instruments that offer more flexible terms. Most low-income countries escaped the early
phases of the global crisis, which began in the financial sectors of advanced economies. But
it is now hitting them hard, mainly through trade, as financial problems in advanced
countries trigger recessions that dampen demand for imports from low-income countries.
In addition, more than $18 billion of a planned $250 billion allocation of IMF Special
Drawing Rights (SDRs) will go to low-income countries. These countries can benefit by
either counting the SDRs as extra assets in their reserves, or selling their SDRs for hard
currency to meet balance of payments needs.

Reforming the international financial system
The global economic crisis has sparked a rethinking of how the international financial
system is structured. The IMF is assisting the G-20 industrialized and emerging economies
with recommendations to reshape the system of international regulation and governance. To
a large extent, global efforts thus far have been focused on the crisis at hand, but reforms are
in progress with a view toward the post-crisis world.

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As input into the reform process, the IMF published a comprehensive study of the causes of
the global financial crisis. The study takes stock of the initial lessons learnt from the crisis
and presses for a worldwide rethink of how to handle systemic risk management.
Although economic and financial sector policies will remain primarily the business of
national governments, ongoing changes to the global financial architecture—including to the
IMF—can reduce the frequency and depth of future crises. Additional changes could also
include addressing some of the shortcomings of the decision-making structure of the G-20 by
allowing greater scope for joint decision making on a wider set of international economic
and financial issues, with the IMF in its newly expanded role as a central player.

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6. THE IMF AND ITS CRITICS:
Over time, the IMF has been subject to a range of criticisms, generally focused on the
conditions of its loans. The IMF has also been criticised for its lack of accountability and
willingness to lend to countries with bad human rights record. Two criticisms from
economists have been that financial aid is always bound to so-called "Conditionalities",
including Structural Adjustment Programs (SAP). It is claimed that Conditionalities
(economic performance targets established as a precondition for IMF loans) retard social
stability and hence inhibit the stated goals of the IMF, while Structural Adjustment Programs
lead to an increase in poverty in recipient countries. Many Criticisms of IMF include:

1. Conditions of Loans:
On giving loans to countries, the IMF makes the loan conditional on the
implementation of certain economic policies. These policies tend to involve:
•

Reducing government borrowing - Higher taxes and lower spending

•

Higher interest rates to stabilize the currency.

•

Allow failing firms to go bankrupt.

•

Structural

adjustment.

Privatization,

deregulation,

reducing

corruption

and

bureaucracy.
The problem is that these policies of structural adjustment and macroeconomic
intervention make the situation worse.
•

For example, in the Asian crisis of 1997, many countries such as Indonesia, Malaysia
and Thailand were required by IMF to pursue tight monetary policy (higher interest
rates) and tight fiscal policy to reduce the budget deficit and strengthen exchange

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rates. However, these policies caused a minor slowdown to turn into a serious
recession with mass unemployment.
•

In 2001, Argentina was forced into a similar policy of fiscal restraint. This led to a
decline in investment in public services which arguably damaged the economy.

2. Exchange Rate Reforms:
When the IMF intervened in Kenya in the 1990s, they made the Central bank remove
controls over flows of capital. The consensus was that this decision made it easier for
corrupt politicians to transfer money out of the economy (known as the Goldman
scandal). Critics argue this is another example of how the IMF failed to understand
the dynamics of the country that they were dealing with - insisting on blanket
reforms.

The economist Joseph Stieglitz has criticised the more monetarist approach of the
IMF in recent years. He argues it is failing to take the best policy to improve the
welfare of developing countries saying the IMF "was not participating in a
conspiracy, but it was reflecting the interests and ideology of the Western financial
community."

3. Devaluations
In earlier days, the IMF have been criticised for allowing inflationary devaluations.

4. Neo Liberal Criticisms
There is also criticism of neo liberal policies such as privatisation. Arguably these
free market policies were not always suitable for the situation of the country. For
example, privatisation can create lead to the creation of private monopolies who
exploit consumers.

5. Free Market Criticisms of IMF
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As well as being criticised for implementing 'free market reforms' other cities the
IMF for being too interventionist. Believers in free markets argue that it is better to
let capital markets operate without attempts at intervention. They argue attempts to
influence exchange rates only make things worse - it is better to allow currencies to
reach their market level.
•

There is also a criticism that bailout countries with large debt create moral hazard.
Because of the possibility of getting bailed out it encourages people to borrow more.

6. Lack of Transparency and involvement:
The IMF have been criticised for imposing policy with little or no consultation with
affected countries.
Jeffrey Sachs, the head of the Harvard Institute for International Development said:

"In Korea the IMF insisted that all presidential candidates immediately "endorse" an
agreement which they had no part in drafting or negotiating, and no time to
understand. The situation is out of hand...It defies logic to believe the small group of
1,000 economists on 19th Street in Washington should dictate the economic
conditions of life to 75 developing countries with around 1.4 billion people."

7. Supporting Military dictatorships:
The IMF have been criticised for supporting military dictatorships in Brazil and
Argentina, such as Castillo Branco in 1960s received IMF funds denied to other
countries.

Response to Criticism of IMF
•

Crisis Always lead to some Difficulties:
Because the IMF deal with economic crisis, whatever policy they offer, there is
likely to be difficulties. It is not possible to deal with a balance of payments without
some painful readjustment.

•

IMF has had Some Successes:

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The Failures of the IMF tend to be widely publicised. But, its successes less so. Also
criticism tends to focus on short term problems and ignores longer term view
•

Confidence:
The fact there is a lender of last resort provides an important confidence boost for
investors. This is important during current financial turmoil.

•

Countries are not Obliged to take an IMF loan:
It is countries that approach the IMF for a loan. The fact so many take loans
suggests there must be at least some benefits of the IMF.

•

IMF Easy target:
Sometimes countries may want to undertake painful short term adjustment but there
is a lack of political will. An IMF intervention enables the government to secure a
loan and then pass the blame on to the IMF for the difficulties.
Overall, the IMF success record is perceived as limited. While it was created to help
stabilize the global economy, since 1980 critics claim over 100 countries (or
reputedly most of the Fund's membership) have experienced a banking collapse that
they claim have reduced GDP by four percent or more, far more than at any time in
Post-Depression history. The considerable delay in the IMF's response to any crisis,
and the fact that it tends to only respond to them (or even create them) rather than
prevent them, has led many economists to argue for reform. In 2006, an IMF reform
agenda called the Medium Term Strategy was widely endorsed by the institution's
member countries. The agenda includes changes in IMF governance to enhance the
role of developing countries in the institution's decision-making process and steps to
deepen the effectiveness of its core mandate, which is known as economic
surveillance or helping member countries adopt macroeconomic policies that will
sustain global growth and reduce poverty. On June 15, 2007, the Executive Board of
the IMF adopted the 2007 Decision on Bilateral Surveillance, a landmark measure
that replaced a 30-year-old decision of the Fund's member countries on how the IMF
should analyze economic outcomes at the country level.

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7. IMPACT OF IMF ON VARIOUS FACTORS:
The IMF policies and rules have an impact on some factors like access to food, environment,
public health etc.:
Impact on access to food
A number of civil society organizations have criticized the IMF's policies for their impact on
people's access to food, particularly in developing countries. In October 2008, former US
President Bill Clinton joined this chorus in a speech to the United Nations World Food Day,
which criticized the World Bank and IMF for their policies on food and agriculture.
Impact on public health
In 2008, a study by analysts from Cambridge and Yale University’s published on the openaccess Public Library of Science concluded that strict conditions on the international loans
by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health
care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis
deaths rose by 16.6%.
In 2009, a book by Rick Rowden titled, The Deadly Ideas of Neoliberalism: How the IMF
has Undermined Public Health and the Fight Against Aids, claimed that the IMF's
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monetarist approach towards prioritizing price stability (low inflation) and fiscal restraint
(low budget deficits) was unnecessarily restrictive and has prevented developing countries
from being able to scale up long-term public investment as a percent of GDP in the
underlying public health infrastructure. The book claimed the consequences have been
chronically underfunded public health systems, leading to dilapidated health infrastructure,
inadequate numbers of health personnel, and demoralizing working conditions that have
fuelled the "push factors" driving the brain drain of nurses migrating from poor countries to
rich ones, all of which has undermined public health systems and the fight against
HIV/AIDS in developing countries.
Impact on environment
IMF policies have been repeatedly criticized for making it difficult for indebted countries to
avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal and forestdestroying lumber and agriculture projects. Ecuador for example had to defy IMF advice
repeatedly in order to pursue the protection of its rain forests, though paradoxically this need
was cited in IMF argument to support that country. The IMF acknowledged this paradox in a
March 2010 staff position report which proposed the IMF Green Fund, a mechanism to issue
Special Drawing Rights directly to pay for climate harm prevention and potentially other
ecological protection as pursued generally by other environmental finance.
Criticism from free-market advocates
Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of
supply-side economics generally find themselves in open disagreement with the IMF. The
IMF frequently advocates currency devaluation, criticized by proponents of supply-side
economics as inflationary. Secondly they link higher taxes under "austerity programmes"
with economic contraction.
Currency devaluation is recommended by the IMF to the governments of poor nations with
struggling economies. Some economists claim these IMF policies are destructive to
economic prosperity.
Complaints have also been directed toward the International Monetary Fund gold reserve
being undervalued. At its inception in 1945, the IMF pegged gold at US$35 per Troy ounce
of gold. In 1973, the administration of US President Richard Nixon lifted the fixed asset
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value of gold in favour of a world market price. This need to lift the fixed asset value of gold
had largely come about because Petrodollars outside the United States were worth more than
could be backed by the gold at Fort Knox under the fixed exchange rate system. Following
this, the fixed exchange rates of currencies tied to gold were switched to a floating rate, also
based on market price and exchange. The fixed rate system had only served to limit the
nominal amount of assistance the organization could provide to debt-ridden countries.
In the media
Life and Debt, a documentary film, deals with the IMF's policies' influence on Jamaica and
its economy from a critical point of view. The Debt of Dictators explores the lending of
billions of dollars by the IMF, World Bank multinational banks and other international
financial institutions to brutal dictators throughout the world.

8. INDIA AND THE IMF:
IMF Survey: India: Rapid Growth with Promising Medium-term Prospects
With robust growth spurring elevated levels of inflation, India should speed up its return to
pre-crisis monetary and fiscal policies to keep the economy in check, suggests the IMF in its
annual assessment of one of the world’s fastest growing economies.
In its report on the Indian economy—known as the Article IV consultation—IMF
economists said they expect the South Asian country to grow above trend this year, with
high levels of growth continuing over the medium term “We expect real GDP to grow 8¾
percent in 2010/11, with robust growth supported by high investment in infrastructure and
productivity gains,” said the IMF’s mission chief for India, Masahiko Takeda.
India weathered the recent global financial crisis well, and since mid-2009 domestic demand
has powered a vigorous recovery. The country’s growth rate remains among the strongest in
the world.
Toward a more normal policy stance

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In its report, the IMF backed the authorities’ policy of exiting from the stimulus
implemented in the past two years. But this exit strategy remains incomplete. Given the high
level of government debt, existing strong domestic demand, and large capital inflows, IMF
economists said that fiscal policy is the preferred method for tightening. The IMF also
supported the objective to raise public investment, especially in infrastructure, and to
improve social outcomes. The challenge will be to make savings elsewhere to meet these
objectives while remaining on the consolidation path.
Tackling inflation
The IMF report also recommends further tightening monetary policy to meet the authorities’
inflation objectives and anchor inflation expectations.
With little or no spare capacity in the economy, coupled with the threat of rising food prices,
inflation is currently elevated in the range of 8½—10½ percent. Inflation is expected to come
down slowly as last year’s high food prices caused by poor rainfall drop out of the inflation
calculation, but underlying price pressures are still strong, say IMF economists. Over the last
year, the authorities have raised policy rates and the cash reserve requirement, but further
increases in policy rates would help bring real short-term interest rates in line with historical
norms, and help contain inflation, they add.

Capital inflows fund current account deficit
The current account deficit is projected to reach 3.3 percent of GDP in 2010/11 and 3.5
percent next year, say the economists in their report. The deficit has so far been financed
mainly by foreign direct investment and equity inflows, but the authorities need to keep an
eye on the level of the current account deficit. As the deficit rises, so does the potential
impact of a sudden stop or reversal of capital flows. Another risk is that the scale of the
inflows could exceed India’s capacity to absorb them.
In this event, IMF economists suggest that exchange rate appreciation should remain the first
line of defence. If appreciation becomes too large, intervention in the foreign exchange
market or macro prudential measures could also be taken.
Meeting infrastructure targets

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Infrastructure investment has grown rapidly in India over the past few years, and the
authorities plan to double the money spent on this sector from $500 billion in the five years
ending 2011/12 to $1 trillion in the following half a decade. Private participation is expected
to account for half of the total.
Increased infrastructure spending should sustain higher growth, but there are several
obstacles to achieving set targets. These include availability of financing, land acquisition,
multiple clearances, capacity constraints, and governance issues along with various sectorspecific concerns.
The IMF believes structural reforms in these areas are needed to lower the cost of
infrastructure, encourage private investment, and allow more efficient use of public
resources.

9. IMF & GLOBALIZATION:
Globalization encompasses three institutions: global financial markets and transnational
companies, national governments linked to each other in economic and military alliances led
by the US, and rising “global governments” such as World Trade Organization (WTO), IMF,
and World Bank. Charles Derber argues in his book People Before Profit, "These interacting
institutions create a new global power system where sovereignty is globalized, taking power
and constitutional authority away from nations and giving it to global markets and
international bodies." Titus Alexander argues that this system institutionalises global
inequality between western countries and the Majority World in a form of global apartheid,
in which the IMF is a key pillar.[60]
The establishment of globalized economic institutions has been both a symptom of and a
stimulus for globalization. The development of the World Bank, the IMF,Regional
development banks such as the European Bank for Reconstruction and
Development (EBRD), and more recently, multilateral trade institutions such as the WTO
indicates the trend away from the dominance of the state as the exclusive unit of analysis in
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international affairs. Globalization has thus been transformative in terms of a
reconceptualizing of state sovereignty.
Following U.S. President Bill Clinton's administration’s aggressive
financial deregulation campaign in the 1990s, globalization leaders overturned long-standing
restrictions by governments that limited foreign ownership of their banks, deregulated
currency exchange, and eliminated restrictions on how quickly money could be withdrawn
by foreign investors.

10. CONCLUSION:
The IMF collaborates with the World Bank, the regional development banks, the World
Trade Organization (WTO), UN agencies, and other international bodies to work globally.

 IMF makes resources of the Fund available to members. Foster economic growth
and high levels of employment.

 IMF promotes international monetary cooperation, expansion and balanced growth of
international trade.

 The IMF works to foster global growth and economic stability. It provides policy
advice and financing to members in economic difficulties and also works with
developing nations to help them achieve macroeconomic stability and reduce
poverty.
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 The suggestion could be that IMF should deeply study the economic condition of the
countries and should design and implement the best policy to handle the economic
difficulties. IMF should not force the counties to adopt the policies offered by him.
IMF must involve the affected country to while decision or policy making process.

10. BIBLIOGRAPHY:

 http://www.imf.org/external/
 http://www.google.com
 http://en.wikipedia.org/wiki/International_Monetary_Fund
 http://business.mapsofindia.com/finance-ministry/imf.html
 http://www.britannica.com/EBchecked/topic
 International Marketing By
>Sak Onkvisit
>John J. Shaw

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