International Monetary Fund

Successes of IMF

Hong Kong, Singapore, South Korea and Taiwan which have all been opened up to trade for the past 4 decades and citizens now live above the $1 a day poverty line due to the assistance attained by the IMF. Countries can ultimately choose as to whether or not they want the loan - Sovereignty of states is not undermined, rather they are offered a means of avoiding complete economic collapse.

International Monetary Fund's aims and purposes

The IMF is one of the International Financial Institutions which was found in 1945 in Bretton Woods in order to deal with the Great Depression and the aftermath of WW2. It aims to work to foster global monetary co-operation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world

What is the IMF's main function

The primary function is to maintain exchange rate stability by giving short-term loans to countries with balance of payment problems caused by trade deficits or heavy loans repayments.

Criticisms of IMF

Voting Procedure discriminates against poorer countries. Vote distribution linked to contribution to IMF fund. US has 18% of vote and EU has 31% so the majority goes to 10% of membership. SAPs are conditions to loans, dictate how the loan must be used undermining the states' sovereignty - based on 'Washington Consensus'; capitalist bottom down approach. High interest rates traps nations in a vicious cycle of poverty as the bulk of their GDP is used to pay back the interest. SAPs can lead to liberalising of economies too quickly - 1980's Argentina industry declined by 11%. Too interventionalist as it tried to influence exchange rates whereas it may be better to allow an economy to reach its own market level than to be liberalised too quickly and lead to a rise in unemployment.